Saturday, September 10, 2011

FOREXYARD: Forex News Blog

FOREXYARD: Forex News Blog

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Obama Job Plan Focuses on Middle and Lower Class

Posted: 09 Sep 2011 06:55 AM PDT

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Thursday's job speech by US President Barack Obama is being called one of several defining moments of his presidency as the run-up to the 2012 presidential election gets underway. The focus of his new plan appeared to be three-fold, first was a repeated call for action by Congress, reflecting the impatient mood felt across America, with his repetitive statement for leaders to act "right away."

Secondly, and perhaps most important, was his overriding emphasis on lower and middle class jobs in areas such as construction and teaching. A harkening towards the days of President Abraham Lincoln was intoned with a comment that America was one nation of rugged individualism that worked best on cooperative efforts, with emphasis on the latter. Noting that America was falling behind China in the construction of national infrastructure such as airports, highways and high speed rail lines, President Obama stated that such projects needed to become a priority in the months and years ahead.

The third aspect was a compromising note on tax cuts which saw Obama proposing a heavy emphasis on tax cuts for the middle class and tax breaks for businesses hiring individuals who had been unemployed for more than six months. A call to lift the Bush-era tax cuts on the super-wealthy was put forth, with hominy paid to the notion of fairness.

Overall, Obama's speech seemed to begin slowly and reluctantly, with a sense of dragging on through his repeated calls for action, but it picked up towards the end as he tried to embody the message of past presidents. Whether successful or not will depend on the specifics of his plan and whether an agreement on it can be reached. Additionally, how financial markets have responded to this message appears mixed. With many other global factors coming into play, it is tough to tell what derives from Obama's message and what is occurring as a result of today's G7 Summit and other economic data releases.

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Canadian Employment Sees Sharp Contraction

Posted: 09 Sep 2011 06:51 AM PDT

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The data released by Statistics Canada this morning highlighted the first contraction in Canadian employment since March, underscoring the structural deficits emerging in many Western nations. A volatile shift towards safety is leading to rugged declines in manufacturing and industry worldwide which is beginning to drag heavily on employment numbers.

The focus on jobs in the United States was also brought sharply into view Thursday with President Obama's jobs speech in Washington, D.C. The data surrounding employment has drawn a bleak picture for future growth is measures are not taken to address the weaknesses in basic core jobs across many countries.

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British Inflation in Decline?

Posted: 09 Sep 2011 06:48 AM PDT

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The producer price index (PPI) input and output data was released by the UK's Office of National Statistics this morning and revealed a potential decline in the inflationary growth of raw materials. The price paid by manufacturers for the purchase of raw materials dropped 1.9% this month, lower than the forecast decline of 1.6%.

The input data translated to a slower increase in the price of goods sold by manufacturers as well. The percent change in output prices rose by only 0.1% this month instead of the expected 0.2% growth. The data signals a potential contraction in manufacturing growth which could translate into fewer jobs and a sluggish economy in Britain.

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FX Fundamental Weekly Preview – EUR Under Pressure with Absence of Policy Response from ECB

Posted: 09 Sep 2011 05:48 AM PDT

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Despite a heartfelt tangent by ECB President Jean-Claude Trichet during yesterday's ECB press conference investors only came away with a revised euro zone growth projection. A lack of a policy response to the European debt crisis and markets adjusting forecasts for the ECB tightening has the EUR coming under intense selling pressure. Given the EUR price action over the past two days we may assume that next week will continue to see increased volatility for the EUR both versus the USD and in the crosses.

The take away from yesterday's ECB press conference was the downgrade of euro zone growth and a lack of a policy response to the euro zone debt crisis. The lowering of growth forecasts is having an immediate impact on the EUR as market players adjust their expectations for the ECB rate tightening cycle.

An environment of heightened tensions in the euro zone can be inferred by the comments coming from the Eurocrats this week, in particular, comments to Dow Jones FX Trader from euro zone finance minister Jean-Claude Juncker who referred to the next tranche of aid, “Greece has to know that the disbursement should not be taken for granted–they have to deliver… I have the impression that things are not moving at the right speed–the results are not there." Greece will be hard pressed to meet its financial requirements as the austerity program is having a negative impact on the Greek economy which contracted -7.3% in Q2 and 8.1% in Q1. Next week the Troika is expected to return to Greece to finish its review Greece's progress implementing the agreed upon austerity measures in return for the original EUR 110 bn bailout. The risk is for additional volatility surrounding this event. Trichet's passionate response to a question concerning the working relationship between the ECB and Germany underscores this risk and the tensions surrounding the European debt crisis. Given the price action of the EUR both yesterday and today, it appears the tensions are coming to a head.

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