FOREXYARD: Forex News Blog | |
- Look to Go Long on Asia in May, Analysts Say
- Industry Expectations Slump, Along with GBP
- Swedish Krona Climbing as Riksbank Expected to Hike Rates All Year
- Dollar Selling Continues Before Fed Announcement
- Looking Towards British GDP Numbers and the Royal Wedding
- US Dollar Lower in Early Trading
| Look to Go Long on Asia in May, Analysts Say Posted: 26 Apr 2011 07:49 AM PDT
A climb in Asian currencies appears to be led by the soaring Singapore dollar (SGD), which reached a record last Friday, alongside a 13-year peak by the Malaysian ringgit, as many expect regional central banks to continue hiking rates to battle inflation, according to Bloomberg. The Bank of Thailand joined this trend last Wednesday with its sixth rate hike this year and expectations for further such tightening in the near future. The Bloomberg-JPMorgan Asia Dollar Index rose to its highest point since 1997 as investors bought far more stocks than they sold in the Asian economies of Thailand, India, South Korea and Taiwan. The Singapore dollar appears to have lost some steam as of this morning, but peaked last Friday at 1.2317 against the greenback, its highest mark since at least 1981. Many analysts are forecasting a continuation to the SGD's surge as the region makes continued gains from a recent boom in consumer confidence towards companies with large bases in the region. Alongside the SGD's ascent are the concurrent rises in Asian currencies such as China's yuan, Malaysia's ringgit, Thailand's baht, and the South Korean won. All of the aforementioned are in bullish channels against their Western counterparts with expectations for further monetary policy tightening in the months ahead which will no doubt fuel this rapid climb. Look to go long on Asia in the weeks ahead. |
| Industry Expectations Slump, Along with GBP Posted: 26 Apr 2011 07:48 AM PDT
The British pound remained within its latest bearish channel today with a downturn pushing the price towards 1.6450 against the US dollar. A number of catalysts are causing uncertainty in Britain, but today's main article is the sharp decline in industrial order expectations published by the Confederation of British Industry (CBI). The CBI report revealed a massive decline in industrial order bookings, which could be a sign that the sector is faltering immediately after publishing its fastest quarterly growth in 16 years, wrote The Guardian. This figure has befuddled many traders who were expecting sharp growth in British GDP this quarter. Ahead of this week's publication of UK GDP, though, many investors appear to be fleeing the pound, driving the currency into a bearish pattern against most of its rivals. A similar decline in the US-based Richmond Manufacturing Index also revealed a sharp decline in the industrial-manufacturing sector. The news had little impact on the US dollar in the short-run, but both figures, coupled with identical drops in Japanese output, portray a dismal picture for global industry. The impact of such a downturn may eventually pull down on a number of higher yielding currencies, but the safe haven USD and JPY tend to gain from such risk flight. As such, traders should anticipate a downturn in currencies like the EUR and GBP if global industry and manufacturing continue to falter. |
| Swedish Krona Climbing as Riksbank Expected to Hike Rates All Year Posted: 26 Apr 2011 07:10 AM PDT
Watching the steadily climbing value of the Swedish krona (SEK) has given many traders confidence in purchasing the Scandinavian unit. Moreover, statements made by the chief analyst at Danske Bank A/S in London, John Hydeskov, revealed the sentiment shared by many that the Riksbank is actually expected to hike rates at every meeting this year. The central bank of Sweden has held its rate forecast steady since last year, with targets at 2.5% by the beginning of next year and 3.2% at the start of 2013. The current rate of 1.75% was recently reached after the Riksbank hiked rates by 25 basis points at its last meeting. These assessments have helped push the krona to a two-and-a-half year high versus the US dollar, peaking at 6.1117. The SEK also pushed towards 8.8902 against the EUR, only a 0.3% climb since last week. The krona has also managed a 4.5% gain against a basket of its nine most-traded currency rivals, according to Bloomberg analysts. Riksbank Governor Stefan Ingves also affirmed last week that he can't rule out tightening monetary policy at every rate meeting this year. Many traders and currency analysts are calling for long positions on the SEK, giving impetus to the growth of the Scandinavian currency. In fact, outlook forecasts by the Swedish bank are revealing an acceleration of inflation that justifies their continuous tightening of monetary policy. With the krona in a bullish pattern for some time, and as a top performer among currencies so far this year, traders may be wise to continue shifting money into the value of the Scandinavian krona as it is expected to continue its rise for the foreseeable future. The Swedish currency has so far mirrored the movement by its Scandinavian neighbors, though their movement has been less pronounced than Sweden's. The Norwegian krone (NOK) has gained much from soaring oil prices given that its value is tied to the price of Crude Oil. Denmark's krone has also gained, but its proximity to the debt concerns of the euro zone have made it less attractive to many investors. |
| Dollar Selling Continues Before Fed Announcement Posted: 26 Apr 2011 05:40 AM PDT
Traders continue to sell the US dollar and a surprising bid for the Swiss franc was noted with the USD/CHF falling to a new all-time low. During the New York trading session US consumer confidence numbers will be released with positioning already being laid out prior to the Fed's first news conference following an interest rate decision. At lunchtime in London the euro was stronger despite higher than expected deficits in Greece. Eurostat released a report showing an EU wide budget gap of 6.0% of GDP that was down from 6.3% from the previous year. However, Greece's budget deficit was 10.5% of GDP on expectations for a decline to 9.6% from the previous year when the budget deficit soared to 15.4% of GDP. Despite the news the EUR/USD managed to climb to week's high of 1.4650 before trading back to 1.4616. A target for the EUR/USD remains at the 2009 high at 1.5140. The Swiss franc rose to a new high versus the dollar as the trend of a weak dollar continues and lower bourses in Asia helped increase demand for the safe haven franc. The USD/CHF touched a low of 0.8744 before pulling back to 0.8773. The gains in the franc are surprising given that European bourses are trading higher today by almost 0.5%. Typically the Swiss franc serves as a safe haven bid in times of higher risk aversion. One explanation may be the overall dollar weakness as well as traders' expectations for the SNB to avoid further intervention attempts such as last year's failed dollar buying program. This afternoon the Conference Board will release its US consumer confidence numbers which are expected to show a slight increase in US consumer sentiment. An uptick in the numbers would be a positive for the dollar which has had little positive news to stem the across the board selling the dollar has faced. Also today the Fed FOMC begins its meeting with an interest rate announcement due tomorrow followed by its first press conference. The Fed is expected to hold US interest rates steady and to continue on its path for a full implementation of QEII. |
| Looking Towards British GDP Numbers and the Royal Wedding Posted: 26 Apr 2011 03:46 AM PDT
While UK consumers may focus more on the British royal wedding coverage, economists and FX traders will be looking towards the release of the UK Q1 GDP data. Previously in Q4 2010 the UK economy contracted by -0.5%. Some economists have speculated that the major cause for the decline in growth was due to one-off factors such as inclement weather. Recent data releases show the UK economy may be stronger than expected. Last month's retail sales data were stronger, rising 0.2%. Not all of the reports out of the UK are as rosy as the royal wedding coverage. Today UK CBI Industrial sales came in well below expectations at -11 on a forecast of 4. The report did show some signs of improvement in the manufacturing sector and higher exports. The wild card for UK growth will be the increase in crude oil prices. While no significant slowdown in global economic growth is expected at current oil prices, an increase towards $150 a barrel would significantly dampen growth expectations. The UK GDP outcome should have an impact on the Bank of England's decision of when to increase interest rates. Despite consistent inflationary pressures above the 4% target the BOE strives to achieve, the Monetary Policy Committee has refrained from raising interest rates in order to allow the British economy to recovery before shutting off the loose monetary policy. A threat to British economic growth may be a premature increase to the interest rate before the British economy has gained steam. Last quarter's contraction in GDP allowed the bank some breathing room to hold rates steady. Positive growth numbers may force the hand of the BOE to raise interest rates potentially in May or June. The pound has been bid as a weak US dollar supports further gains in the GBP/USD, though less so today than its European counterpart after the weak CBI sales. Last week the pair stalled at the 1.6600 level and is currently consolidating with support at 1.6420 and 1.6180. Strong GDP numbers should bring further bids to Cable with a target at the 2009 high at 1.7040. The EUR/GBP is stronger today after the weak CBI sales and the euro remains well bid. Initial resistance is last week's high/today's high of 0.8875, followed by 0.8940 off of the October 2010 high. A breach here would then target the March 2010 high at 0.9100. |
| US Dollar Lower in Early Trading Posted: 26 Apr 2011 12:24 AM PDT
The dollar is off in early European trading as markets return to normal liquidity levels following an end of the long Easter holiday. Traders may be looking to capitalize on the consolidation period that followed the past two days of trading, continuing to push the greenback lower as the FOMC meeting approaches on Wednesday. Today's Market Events: GBP – CBI Industrial Order Expectations – 10:00 GMT USD – CB Consumer Confidence – 14:00 GMT |
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