FOREXYARD: Forex News Blog | |
- Norway Pledges to Counter NOK Strength
- American Housing Growth on Target
- British Inflation Sign of Progress
- Euro Zone GDP Disappoints Dragging EUR Lower
- SNB Weighs Swiss Franc Peg or Price Target
| Norway Pledges to Counter NOK Strength Posted: 16 Aug 2011 06:21 AM PDT
Headline news in Scandinavia this week revealed a recent pledge by Norway's central bank to begin addressing its currency's unnatural rise in strength. The Norwegian krone (NOK) tends to track the value of crude oil in the market, but the past several weeks have seen a rising NOK despite falling oil prices. The result has been a gouging effect on the nation's exports. Some analysts see in the recent currency shifts a sudden disconnect emerging between the price of oil and the value of the krone. Though oil prices have slumped significantly these past few days, the NOK has so far risen over 12% against the US dollar (USD) since late last year and recently touched a 4-year peak versus its regional neighbor, the euro (EUR). A recent surge in the nation's budget surplus, and its still-AAA credit rating, have also driven many investors into the store of value its currency holds during a time of market turmoil. In order to stave off hastily-made interest rate hikes, Norway's Finance Minister, Sigbjoern Johnsen, stated his intention to begin adjusting the nation's fiscal policies in order to help lower the pressure being placed on the nation's currency, according to an article in Bloomberg. What impact this policy maneuver will ultimately have will depend on the size and scope of the intervention. Read more forex trading news on our forex blog. |
| American Housing Growth on Target Posted: 16 Aug 2011 06:16 AM PDT
Despite recent dips in the output of manufacturing and industrial production across key sectors of the American economy, the housing market does appear to be weathering the storm relatively better. Today's publication of two significant housing figures supports this notion. The US Census Bureau published its latest national findings on the issuance of building permits and the initiation of housing starts for the month of July. Forecasts for both figures were near 600,000. The actual results came almost perfectly in line with these expectations. The Building Permits report was 10,000 units below forecast, but this was not significant enough to warrant bearishness. American housing investments seem to be holding steady, and occasionally rising, despite rampant pessimism in the market. Read more forex trading news on our forex blog. |
| British Inflation Sign of Progress Posted: 16 Aug 2011 06:12 AM PDT
This morning's publication of British inflationary data has helped generate minor elements of market optimism towards the island nation's economy. Though the growth figures were only modestly above targets, the accelerating growth is a sign of future hikes in demand for the nation's currency, the pound (GBP). The consumer and retail price indices (CPI and RPI, respectively) were released Tuesday at 9:30 GMT by the Office of National Statistics in the UK. Though the RPI figure showed an expected 5% growth in retail price inflation, the CPI figure highlighted better-than-forecast growth of 4.4%. Both figures are presented in annualized format and seem to represent solid year-on-year growth for the British economy. Read more forex trading news on our forex blog. |
| Euro Zone GDP Disappoints Dragging EUR Lower Posted: 16 Aug 2011 05:04 AM PDT
Euro zone growth failed to meet economists' expectations with Germany, the economic engine of showing particular weakness. The disappointing GDP numbers dragged the euro lower as the Merkel-Sarkozy meeting draws near. EZ flash GDP for Q2 came in at 0.2%, below forecasts of 0.3%. Exports declined by 4.7% in June, highlighting the slowing of the European economy. More worrisome is the tepid growth found in Germany which has helped to lift the EZ from the 2008 recession. German GDP increased by only 0.1% after climbing 1.3% in Q1. On average German growth is near 0.3%. Keep in mind that France last week reported a flat Q2 GDP. The weak growth data does not bode well for the euro zone or the global economy. Going forward the austerity measures in Spain, Italy, Greece, and Portugal will do little to support increased growth in H2. Later today the Merkel-Sarkozy meeting is not expected to reach any breakthrough on the subject of Eurobonds and could intensify the euro negativity seen so far today. The EUR/USD is trading at its daily low near 1.4360 after failing to make additional gains above the falling trend line from the May and July highs. Initial support is found at 1.4330 followed by the hourly trend line at 1.4270. Resistance is located in a range from 1.4450-70, followed by 1.4540. Read more forex trading news on our forex blog. |
| SNB Weighs Swiss Franc Peg or Price Target Posted: 16 Aug 2011 02:09 AM PDT
The Swiss franc has come off of its lows versus the euro and the US dollar as Swiss interest rates have turned negative and the Swiss National Bank threatens a potential currency peg to the euro or a specific price target. This will be another attempt to stem the tide of a strengthening Swiss franc and potentially an opportunity to enter back into the EUR/CHF downtrend at better levels. Two weeks ago the SNB unveiled a program to weaken the surging Swiss franc which it considers "massively overvalued". The SNB is targeting a three-month Libor of 0.00-0.25% from 0.00-0.75%, effectively implementing a negative interest rate. The measures are designed to stem the flow of real money inflows and speculators betting on a rise in the value CHF. Negative interest rates are used to deter money managers seeking safe haven assets and short term deposits as a refuge. However, given the US credit rating downgrade and uncertainty in the euro zone, a negative interest rate may not be enough to deter real money inflows. The SNB is now contemplating additional measures, including a temporary peg of the Swiss franc to the euro or a target exchange rate level as another attempt to stave off CHF appreciation. But a targeted exchange rate would require intervention by the SNB, something that the bank will want to shy away from after racking up $21 bn in paper losses from the intervention. Should the SNB fail to implement further programs to weaken the CHF, a currency the OECD says is now 41% overvalued; the SNB could lose credibility in the market and be looked upon as a paper tiger. If the SNB implements a currency peg or a specific price (i.e. EUR/CHF 1.20), the initial market reaction may be for the CHF to sell-off, allowing speculators better levels at which to enter the long term trend. Following any appreciation in the pair there will likely be an attempt by the market and speculators to test the resolve of the SNB to hold the line in the sand. This will give traders a backstop as they know the most their position can go against them is the SNB price target. Read more forex trading news on our forex blog. |
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