Wednesday, September 7, 2011

FOREXYARD: Forex News Blog

FOREXYARD: Forex News Blog

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Swedish Riksbank Expected to Cut Rates in 2012

Posted: 06 Sep 2011 06:45 AM PDT

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Abandoning previous plans for continuous interest rate hikes through 2011, the Swedish Riksbank now appears to be expected to slash rates at least twice in 2012. Citing weakened global growth and poor recoveries in Europe and the United States, officials at Nordea Bank AB claim that Swedish exports will simply be too far diminished to warrant the previously anticipated rate hikes.

Expected this Friday, the Riksbank is due to announce its latest decision on interest rates, but with little optimism emerging from its southerly neighbors, and with exports to the euro zone plummeting from 7.8% to 4.1%, the forecast 25 base point hike may get delayed.

The impact this is having on the Swedish krona (SEK) is still getting priced in, but traders are beginning to see some depreciatory ticks favoring a return to safety by investors. The International Monetary Fund (IMF) noted that the global economy is entering a "dangerous new phase" which could see the global recovery pushed off track by a European debt crisis run amok and persistent unemployment and stagnation in the US.

This is impacting the Scandinavian countries, which saw solid growth over the past two years, and may end up pulling the regional kroner (SEK, NOK, and DKK) off their current bullish channels and into downward trends. Friday's rate announcement by the Riksbank, therefore, may be more important for speculators than previously assumed.

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Bank of Canada Forecast to ‘Play it Safe’ with Rates

Posted: 06 Sep 2011 06:39 AM PDT

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Interest rate decisions have traders agog this week, with an above average number of such releases expected in the three days ahead. Canada's rate decision is something for traders to particularly keep an eye on. Though fundamentals have been mixed in the Canadian economy, many expect a downgrade of growth outlook in Canada which could result in an interest rate slash in the next few months.

The Bank of Canada (BOC) is expected to play it safe this week with a holding of its rates at the current level of 1.00%. Speculators, however, will want to pay particularly close attention to the subsequent announcement by BOC Governor Mark Carney which is expected by some to reveal hints at future cuts due to growth outlook changes. The news could rock the Canadian dollar (CAD) and push its value significantly lower over the coming weeks.

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EUR Edging Lower, Interest Rates Eyed

Posted: 06 Sep 2011 06:35 AM PDT

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The onset of euro (EUR) weakness these past few days has generated some calls for the European Central Bank (ECB) to take action and intentionally depreciate its currency's value. The euro zone has been struggling to stay afloat with financial uncertainty wracking its periphery and several economists believe an interest rate cut could help alleviate some of the pressure.

The ECB is scheduled to publish its latest interest rate decision, known as the Minimum Bid Rate, this Thursday at 12:45 GMT. Forecasters are expecting the bank to hold rates at 1.50%, but speculators appear to be raising their voices in a bid to change the picture of the region's economy, which appears bleaker by the day.

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Australia Leaves Rates at 4.75%, Citing Weakened Global Outlook

Posted: 06 Sep 2011 06:31 AM PDT

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The Reserve Bank of Australia (RBA) left its interest rate benchmark unchanged at 4.75% this morning, citing concerns of weakened international growth. Australia has left rates unchanged since last November and many economists had been hinting that a "wait-and-see" approach was in play among Australian policymakers.

Australia's economic growth outlook remains within its current uptrend, but RBA Governor Glenn Stevens noted that the trend may slump somewhat if international growth continues to get subdued. A less certain picture of what the next six months may entail has made Australia's, as well as a few other nations', central bank wary of hawkish policies.

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Markets Temporarily Cheer SNB Move to Peg the CHF

Posted: 06 Sep 2011 05:37 AM PDT

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The markets reacted positively to the move by the SNB to peg the CHF to the EUR at a rate of 1.20 EUR. In addition to the EUR/CHF making a dramatic climb higher European equities have come off of their lows. However, the momentum the EUR saw following the announcement was short lived.

The SNB will be in for a long fight versus the market as it has pledged to maintain the EUR/CHF exchange rate above the 1.20 floor via purchasing, "foreign currency in unlimited quantities". According to BNY Mellon's Simon Derrick, now the SNB has to figure out what it will do with all those euros it will buy as it has previously pledged to purchase only German and French sovereign debt. This makes one wonder, how does the SNB really feel about peripheral Europe?

Initially markets cheered the move to peg the CHF to the EUR with European equities moving higher. Both the AUD and EUR came off of their recent lows against the dollar. However, the chummy mood did not last long and while European equities remain in the black the EUR/USD has lost most of its gains after reaching as high as 1.4280 and closing the weekend opening gap. Now the pair stands below the 1.4080 level at print time. It appears that periphery concerns of Greece and Italy continue to weigh on the EUR. It will be interesting to see how the CHF peg will stand up should the euro zone continue to hound both Europe and now the SND which has practically ceded control of its monetary policy to the ECB.

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