FOREXYARD: Forex News Blog

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• Russian Economy Ministry Downsizes Growth Forecast
• US Employment Data Spurs Risk Aversion
• Canadian GDP Returns to Growth
• EUR/CHF Slides on ECB Rates and German Data

Russian Economy Ministry Downsizes Growth Forecast Posted: 31 Aug 2011 09:12 AM PDT The Russian Economy Ministry recently announced that it has decided to decrease its growth outlook for the Russian domestic economy. Citing diminishing oil prices, weakened exports, and a global economic slowdown, Deputy Minister of Economic Development Andre Klepach now says that GDP growth is expected to come in near 4.1%, down from the 4.2% expected earlier this year. Economists also view the value of the Russian ruble (RUS) to be in decline, with some estimates predicting a 25% loss of value against the US dollar (USD) over the next three years. The Economy Ministry highlighted that its growth forecast for the RUS was also cut, expecting it to reach roughly 28.6 against the greenback as opposed to the 28.4 previously anticipated. A deficit in Russia's current account is also expected to arise in 2013, standing contrary to the surplus of 2011 and predicted surplus of 2012. Klepach did offer some conciliatory tones in stating that his ministry does not believe a double-dip global recession is impending, or even likely. But the general slow-down in growth among emerging economies like China and India, as well as those of Eastern Europe, does gouge many previous forecasts. Making Russia's economic outlook reflect this reality was only logical and should not alter investor portfolios in any major way.

US Employment Data Spurs Risk Aversion Posted: 31 Aug 2011 09:11 AM PDT News out of Automatic Data Processing, Inc. (ADP) today appears to have shifted a large number of investors back towards safe-haven assets. While private sector job growth has been on the rise for the past 14 months, the data is expressing an ominous trend that is approaching contraction. Stoking the flames this week was also a report which cited a 47% increase from this time last year in impending job cuts. Ahead of Friday's Non-Farm Payroll (NFP) release, this employment data may spook investors away from riskier assets, which have been seen rising this week. Employment is an important sector of the economy and any signal that it is approaching contraction – if not already there – will only heighten tensions that the economy is approaching a double-dip recession.

Canadian GDP Returns to Growth Posted: 31 Aug 2011 09:09 AM PDT Updated from the previous month's downturn in GDP data, the Canadian economy appears to have reentered expansion this month. Canada's release of GDP data is unique, however, in that it is published on a month-by-month basis instead of quarterly like other countries. A quarterly release is issued, but it is merely a summary of the monthly reports. Last month, the figure came in with a dismal reading showing a contraction taking place of roughly 0.3%. This month, though, the figure is back up to an expansionary reading of 0.2%. The Canadian dollar (CAD) doesn't appear heavily affected by the news thus far, but should see some volatility as the North American trading sessions get further underway.

EUR/CHF Slides on ECB Rates and German Data Posted: 31 Aug 2011 03:54 AM PDT The CHF was out in front of the EUR this morning as weak German unemployment data overshadowed positive retail sales numbers. At the same time market participants have begun to shift their expectations for ECB interest rate hikes. German retail sales numbers for July were unchanged though better than market forecasts for a decline of -1.5%. However, the report was overshadowed by the disappointing German unemployment change. The euro zone unemployment rate also unexpectedly ticked up to 10% from 9.9%. Euro zone CPI was in-line with consensus forecasts of 2.5% y/y. The combination of a slowdown in economic activity in the euro zone (German Q2 GDP rose by 0.1% while French GDP was flat) and Monday's comments by Trichet have market players adjusting their ECB interest rate expectations which has weighed on the EUR. According to Credit Suisse market expectations are for 15 bp of cuts within the next 12-months as opposed to 25 bp of rate hikes. The passage of the EFSF by the German cabinet did little to support the EUR. A vote will be sent to parliament to approve the right of the EFSF to buy bonds in the secondary market as well as the primary market, but only on the contingency to recognize cost efficiencies. The EFSF must be approved by all nations in the EMU for the EFSF to have legitimacy and herein lies the difficulty to get all in agreement. The EUR/CHF fell as low as 1.1630 after earlier in the week failing to make a push above the 1.20 level. Traders should recall it was at this level that the SNB was rumored to be contemplating a peg to the EUR to help counter CHF strength so a failure to close above this level is significant. Yesterday's doji candlestick also adds to the bearish picture. Support is found at the August 17th high of 1.1550 near the 55-day moving average. Resistance is located at this week's high near the 100-day moving average at 1.20. Traders should also be eyeing the 200-day moving average which has served as resistance in the past. Read more forex trading news on our forex blog.

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