FOREXYARD: Forex News Blog

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• NFP Reveals Zero Change in US Employment
• Swiss Full-Time Employment Drops in Q2
• Capital Expenditures in Japan on the Decline
• FX Fundamental Weekly Preview – Central Bank Meetings Galore
• Brazil Unexpectedly Slashes Interest Rates
• US Non-Farm Wages Increasing
• Swiss Purchasing Managers More Optimistic; Retail Sales Data Disagrees
• Australian Spending Data Surprises Investors
• US Employment Data Spurs Risk Aversion
• Canadian GDP Returns to Growth

NFP Reveals Zero Change in US Employment Posted: 02 Sep 2011 06:41 AM PDT This afternoon's Non-Farm Payrolls (NFP) data was shocking to forex traders at the time of its publication. Expectations had priced in a growth of roughly 74,000 jobs, down from last month's 117,000. The actual figure was a big fat doughnut hole in employment change across the United States. The report revealed zero change in jobs for the past month. That is: no growth, no contraction (i.e. stagnation). Investors were clamoring for safety – thereby driving the USD higher – after the news was published and political pundits are beginning to crawl out of the woodwork chastising President Obama for pushing back his jobs plan speech after a dispute with House Speaker John Boehner (R-OH) after its timing was found to coincide with televised debates between Republican presidential hopefuls. Read more forex trading news on our forex blog.

Swiss Full-Time Employment Drops in Q2 Posted: 02 Sep 2011 06:35 AM PDT A quarterly report from the Federal Statistics Office in Switzerland noted a rapid decline in full-time employees working in the Swiss economy. First quarter data had full-time employment at 4.11M, and expectations were for zero change in that figure for the second quarter. The results were harrowing. A decline from last quarter's 4.11M to a second quarter reading of 2.77M revealed a sizeable dip in employment across the Swiss economy. The data has so far tangled the Swiss franc (CHF) up in a foray for direction, marring its growth with visible swings of value today. Employment tends to be one of the strongest corollaries to a nation's economic growth, making this figure ominous in its implications for the next few months in Switzerland. Read more forex trading news on our forex blog.

Capital Expenditures in Japan on the Decline Posted: 02 Sep 2011 06:31 AM PDT Japanese businesses appear to have downsized their level of investment. A report out this morning from the Japanese Ministry of Finance found that capital expenditures by private businesses declined 7.8% in the second quarter. The report is presented in an annualized format, but covers an entire quarter. There was an expectation of 1.1% growth in this figure, making the actual results all the more detrimental. This decline poses an ominous challenge to the Japanese economy as business capital expenditures represent a sizeable portion of domestic investment. The reverberations may put a significant dent in Japan's GDP growth over a longer period. Read more forex trading news on our forex blog.

FX Fundamental Weekly Preview – Central Bank Meetings Galore Posted: 02 Sep 2011 05:21 AM PDT The shortened week in the US will not deter central bank interest rate decisions from the ECB, BOE, BOJ, RBA, and BOC. All eyes will be focused on the ECB press conference as Jean-Claude Trichet will likely be asked to clarify his comments from last Monday which he gave before the European Parliament. Additional questions remain as to the circumstances surrounding the Troika's early departure from Athens today. Trichet suggested inflationary pressures in the euro zone may be declining and this week's sharp drop in the value of the EUR/CHF may be a result of market players taking a second look at the next expected ECB interest rate increase which is forecasted to come in Q4 after Mario Draghi takes over the helm of the ECB. Perhaps the ECB would do well to take a page from Brazil's playbook by backpedaling away from the ultra-hawkish monetary policy stance the ECB has worked so diligently to frame in investors' minds. An interest rate reduction could go a long way toward supporting the sluggish rates of growth in in Europe. Trichet will also be questioned on the scaling back of the ECB's bond purchases to EUR 6.651 bn, its smallest amount yet since the ECB began buying Italian and Spanish debt. Additional central bank meetings will take place throughout the week but it may be the SNB which highlights the week as investors seem intent on testing the resolve of the Swiss central bank to weaken the CHF given the 1% decline in the EUR/CHF today. Today's non-farm payrolls report takes extra importance to cement or dispel hopes of QE3. A release below expectations of +74K will likely fuel additional speculation in the forex trading blog community. With the winding down of the summer vacation season liquidity should return to normal levels next week as forex trading desks will begin to operate with a full staff. Read more forex trading news on our forex blog.

Brazil Unexpectedly Slashes Interest Rates Posted: 01 Sep 2011 08:30 AM PDT In an age where central bankers are attempting to increase transparency in the policy making decision process the Brazilian central bank gave a prime example of how not to conduct monetary policy communications when it unexpectedly slashed interest rates by 0.50%. Leading up to today's 50 bp interest rate cut the Central Bank of Brazil had increased interest rates in its last five consecutive meetings to a rate of 12.5%. The central bank cited the risks for lower potential growth in the global economy which could bring a bout of disinflationary forces. Copcom said the "moderate adjustment" in the interest rate is consistent with inflation expectations in 2012. When comparing today's move with those of the world's two leading central banks the Fed and the ECB the contrasts are startling. Central bank policy is sometimes compared to that of an aircraft carrier making a 180 degree turn rather than a two propeller speed boat. Wording is carefully chosen. Former Fed Chairman Alan Greenspan was famous for hour long speeches which could leave analysts guessing if the Fed chief's wording hinted at a hawkish or dovish monetary policy. Ben Bernanke learned the hard way early in his tenure as Fed Chairman when an off the cuff comment at a dinner to Maria Bartiromo caused the stock market to tumble once his comments were published. The ECB is famous for its traffic light system indicating its intention to adjust interest rates. In a day and age when the Federal Reserve Chairman has increased transparency by opening the floor to questions from reporters, how does the Central Bank of Brazil explain its preemptive strike in the currency war from a tightening cycle to a loose monetary stance without providing the markets with any warning? Both FX and rates traders will have to wait for the release of the central bank's meeting minutes to get a glimpse in the Copcom's thinking. Until then more volatility may be seen in both the yield curve and in the rate of the Brazilian real. A couple assumptions can be taken from this policy move; inflation expectations are declining in both developed economies (UK) and in the emerging economies (Brazil). Perhaps Brazil is betting on a global recession in which inflationary pressures play second fiddle to that of steady growth rates. Read more forex trading news on our forex blog.

US Non-Farm Wages Increasing Posted: 01 Sep 2011 08:16 AM PDT The American economy published two figures early Thursday afternoon which suggest working conditions and wages are on the rise at the start of the third quarter. The Bureau of Labor Statistics issued a revised version of its Non-Farm Productivity report which revealed a 0.7% decline in productivity, which is assumed to be equivalent to a similar increase in worker wages. Confirming this assumption was a second quarterly report, also revised, on Labor Unit Costs. The expectation was for a rise in labor cost of 2.3%, up from last quarter's 2.2%. The actual result revealed a 3.3% increase for the cost of labor, supporting the notion that wages are on the rise across the non-farm sector of the US economy. This is expected to translate into higher consumer spending and capital investments over the coming months, and may help the US dollar (USD) rise from heightened demand over the long-term. Read more forex trading news on our forex blog.

Swiss Purchasing Managers More Optimistic; Retail Sales Data Disagrees Posted: 01 Sep 2011 08:11 AM PDT The reading from this morning's SVME purchasing managers index (PMI) out of Switzerland underscored a moderate uptick in the level of economic optimism among purchasing managers. The forecast was for a dip from last month's 53.5 reading to 51.1. The actual results came in at 51.7, suggesting better conditions than were previously assumed. Data on retail sales from Switzerland, however, seemed to contradict the notion of healthy growth. Economists were expecting the retail sales report to dip from last month's reading of 7.9% growth, year-on-year, to 4.6% in the month of August. The actual results were far more dismal at 1.9%, suggesting an impending bearish turn for the Swiss franc (CHF) from decreased demand. Read more forex trading news on our forex blog.

Australian Spending Data Surprises Investors Posted: 01 Sep 2011 08:08 AM PDT Two reports this morning surprised investors with seemingly out of place optimism in the private expenditures sector of the Australian economy. At 2:30 GMT the Australian Bureau of Statistics issued two indicators that demonstrated a solid uptick in retail sales and private capital expenditures. The retail sales report was anticipated to see sluggish growth near 0.3%, but surprised traders with a relatively stronger 0.5% reading. Private capital expenditures, which report the quarterly change in new capital investment by private firms, revealed a healthy 4.9% growth in the second quarter. The figure was down from the first quarter's reading of 7.7%, but well above the forecast 4.1%, making it bullish yet ominous. Read more forex trading news on our forex blog.

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. Read more forex trading news on our forex blog.

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. Read more forex trading news on our forex blog.

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