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- Scandinavia Quiet ahead of Swedish Rate Announcement
- Aussie Slumps to 4-Day Low vs. USD
- S&P Spooks Market with Downgrade of US Outlook
| Scandinavia Quiet ahead of Swedish Rate Announcement Posted: 19 Apr 2011 08:10 AM PDT
The Scandinavian currencies have been trading mildly within the same trends which they possessed over the past week or more. The Swedish krona is still gaining on statements by the central government that it would raise taxes next year, continue to hike interest rates, and take measures to insure against detrimental risk taking; this has helped SEK remain bullish. However, it has been a quiet week for the economies of Scandinavia since last Tuesday. Sweden's announcement of these measures has been followed by zero significant news events out of the region. A variety of reports have attempted to analyze the correlation between surging oil prices and the value of the Norwegian krone (NOK), but Norway's relative strength in general may also be behind NOK's current bullish posture. Euro zone debt concerns have flared up and the change in risk appetite and outlook have begun to gouge SEK and NOK values, with both undergoing a dip in yesterday's trading following news that Greece may need debt restructuring. The downgrade of US long-term debt outlook by S&P's ratings agency is also fueling many of today's portfolio adjustments. The Swedish Riksbank is expected to release its interest rate decision tomorrow and traders will likely want to track what statements are released following the publication of their decision. Sweden, it should be recalled, has been proclaiming rather hawkish statements for some time now and most analysts are forecasting another 25 basis point increase in Sweden's short-term lending rates. This would move their national interest rate to 1.75%. Short of anything overly pessimistic arising out of the region, Sweden's krona should maintain its bullishness in the days ahead and traders will likely have the opportunity to gain big in tomorrow's trading if the Riksbank publishes another hawkish report. |
| Aussie Slumps to 4-Day Low vs. USD Posted: 19 Apr 2011 06:37 AM PDT
The Australian dollar (AUD) remains bullish in spite of monetary tightening in China. However, the concerns that restricted bank requirements for Chinese banks would impact its Pacific neighbors initially drove the Aussie to a 4-day low against the US dollar (USD). The Reserve Bank of Australia (RBA) will publish minutes from its April 5 policy meeting tomorrow but few investors expect any surprises given the nation's steady path of solid growth. Potential for a monetary policy tightening from the RBA has been speculated, but few expect such a move at this time, nor from its upcoming May 3 policy meeting. Australia's commodity-linked currency values also add explanatory weight to the AUD's resistance to bearishness. The market uncertainty brought on by S&P's downgrade of its US long-term outlook piled weight atop global stock markets, pushing many investors into the safety of physical assets like Gold, Silver and Crude Oil. Gold's rise towards $1500 per troy ounce means Australia's metal export market should be gaining in significant value, helping to support AUD values. Traders should expect to see a continuation of the AUD's bull run, regardless, it seems, of Chinese monetary policy moves and heightened bank restrictions on loans. The Aussie appears one of the safer investments in the forex market, also despite a recent 4-day low reached against one of its primary rivals, the USD. |
| S&P Spooks Market with Downgrade of US Outlook Posted: 19 Apr 2011 06:35 AM PDT
Standard and Poor's (S&P) rating agency downgraded its US long-term outlook from stable to negative today, citing indecisiveness among US policymakers as the main reason. The agency commented on how the downgrade was necessary considering that over two years have passed since the financial crisis hit, yet US policymakers remain in a stalemate about how to address the pitfalls that brought the crisis on in the first place. In response to the downgrade, the global stock market became spooked, undergoing a wild sell-off before calming down in later trading. The US dollar (USD) pared some of its recent gains against the euro (EUR) and British pound (GBP), with the former spiking up towards 1.4352 before easing back into its current price near 1.4280. The EUR/USD in particular was less affected by the news since the euro zone continues to struggle with its own debt concerns. Many reports on European financial struggles revolve around Spain and Portugal recently, yet Greece recently resurfaced as a growing problem that will need to be addressed once more. The S&P downgrade affirmed fears felt by many investors since 2008, primarily that the US will eventually lose its AAA rating and begin to lose eligibility for low interest loans and privileged status in global capital markets. Given the strength of the US economy over the past several decades, many are reluctant to undercut such a force, yet the fear that it will become necessary may become a significant driving force in the weeks ahead as spooked investors weigh the potential future reality. |
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