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- Sweden Expected to Hold Interest Rates at 2% in 2012
- Euro Zone ZEW Reports Worse than Forecast
- Chinese Retail Sales and Industrial Production Bullish
- A Sustained EUR Bounce?
| Sweden Expected to Hold Interest Rates at 2% in 2012 Posted: 18 Oct 2011 07:26 AM PDT
Statements being released from within the upper echelons of the Riksbank are now pointing to a possibility that interest rates will be held steady for the majority of next year. Sweden's economy, which rebounded stronger and faster than most others during the recession, is now being affected by regional and global downturns in a variety of sectors. The opinion of an interest rate freeze next year came after money market participants were surveyed by a commission sponsored by the bank. The Riksbank held rates at 2% last month despite being expected to increase them each month in 2011. Tightening financials and weakened demand for Swedish goods has put a damper on those plans of increasing rates through this year. The downturn in exports from Swedish companies was also viewed as severe enough o hamper any possibility of an increase in the near future. So long as fundamentals remain weak, the Swedish economy isn't likely to put further limitations on growth and checks on inflation. Read more forex trading news on our forex blog. |
| Euro Zone ZEW Reports Worse than Forecast Posted: 18 Oct 2011 07:18 AM PDT
Today's ZEW reports on Germany and the broader euro zone's economic confidence revealed plummeting numbers this month. Both figures were forecast to show mildly worsening data, though not nearly as deep as the actual figures came. The German report, which tends to have a sharper impact than the broader reading, revealed a moderate downturn from last month's reading of negative 43.3 to negative 48.3. The broader report, however, revealed a deeper decline, pushing to a negative 51.2. Both reports imply an impending decline in EUR values. Read more forex trading news on our forex blog. |
| Chinese Retail Sales and Industrial Production Bullish Posted: 18 Oct 2011 07:00 AM PDT
This morning's publication from China regarding its retail sales and industrial production revealed an expanding economy. Both figures relate to separate realms of economic activity, but both witnessed an increase of similar size this month. Industrial production in China was expected to rise approximately 13.5%, year-on-year. The actual results showed a 13.8% increase instead. Retail sales, likewise, showed a year-on-year rise to 17.7%, beating expectations for a 17.1% increase. Both figures should help the CNY hold ground today. Read more forex trading news on our forex blog. |
| Posted: 18 Oct 2011 06:25 AM PDT
A vacation allows for one to take a step back from the grind of the markets while taking a look at the larger picture. The October bounce in the values of the EUR and the S&P 500 look positive. Though a solution to the European fiscal difficulties remains elusive, a coordinated resolution from the October 23rd euro zone summit could help to sustain the recent bounce higher in the EUR and other risky assets. In early Asian trading China posted lower than expected GDP at 9.1% on forecasts of a 9.2% increase. While it is a sharp drop off from the previous release of 9.5% the Q3 GDP data strengthens the soft landing theory for the Chinese economy, the engine of the world's economic growth. French bond spreads have continued to move higher with a potential negative outlook by Moody's if costs rise for bank bailouts or additional Greek bailout funds are needed. A loss of France's top credit rating would have knock on effects for the EFSF as the program which would likely lose its AAA rating in toe France is the second largest contributor to the EFSF behind Germany. As such spreads between French and German 10-year bonds have climbed to a 16-year high. Both the German ZEW and the European ZEW economic sentiment surveys were weaker than expected which has contributed to USD strength going into the North American open. Market participants are building expectations for a bit of closure coming from the October 23rd euro zone summit with a possible write down of Greek debt in the range of 50-60%, the potential to leverage EFSF funds, and bank recapitalization. CFTC data ending on October 11th shows EUR shorts have decreased their positioning and the potential remains for additional short covering should the news flow turn EUR positive (see chart below). US monetary policy may also prove to be USD negative with potential for QE3 but I will save that discussion for later with additional entries in the forex blog. Given the fundamental news flow from today's Chinese GDP data, expectations of some sort of agreement to be hashed out in Europe on October 23rd, and market positioning, the EUR could be poised to move higher. Initial resistance for the EUR/USD is found at the weekly high which coincides with the 50-day moving average at 1.3910 and a retracement target at 1.4015. The previously broken trend line from May 2010 beckons as resistance at 1.4175. Should more downside price action be seen in the EUR/USD pair, then the 20-day moving average could come into play at 1.3550.
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