Thread: Finexo Forex Updates

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G20 - This is Starting to Get Interesting

The story just keeps getting better. When we last left of, yesterday, we spoke about the decision by the US President, Barack Obama, to ask the Chairman of General Motors to step down. Yesterday, we heard more – as the president gave Chrysler 30 days to fix itself and headless GM 60 days, before deciding if he wanted to give them more money. This news sent stocks tumbling and sent the dollar soaring as risk appetite waned and a flight to safety ensued. “Safety” is not what I would call the US Dollar at this point in time, however this is what analysts have been saying.

Anyway, the pending G20 conference, just 2 days away, is turning out to be a pivotal moment in the lefe of this economic crisis. Growing dissent over the British and American calls for increased spending along with an enormous rally in London is already making things interesting. Take for instance the German Chancellor, Angela Merkel, who is on the record over the weekend as saying that a global new deal is not possible if those behind it do not have their own house in order. This is a nice way of saying “fix your own problems before you dictate to me how to fix mine.”

Forex Online: Finexo Market Analysis

USD

The US Dollar rose sharply on Monday as investor sentiment towards an economic recovery turned negative. As stock markets fell, investors took their money and fled back to the safe-haven, greenback. Things turned around quickly on hopes of an economic recovery after billionaire investor George Soros was quoted as saying that the "banking system as a whole is basically insolvent" which echoed the feelings of many analysts who question the use of government funds to sustain dying companies. Mr. Soros also said that the US economy in particular was in for a "long lasting slowdown" and was pessimistic over the potential for a turnaround this year and perhaps not even next.

At 9PM GMT, the USD was trading up .7% to the Euro to 1.3408, up .9% to the GBP to 1.4741, up.7% to the Canadian Dollar to 1.2381, up .25% to the Aussie to .7133 and up .5% to the Swiss Franc to 1.1366.

YEN

The Japanese Yen was volatile today as investors were caught trying to figure out what to do with the currency of the worlds second largest economy. Fears about a prolonged global slowdown would normally drive the safe-haven Yen up, however the Japanese currency is so tied to the global economy through trade and manufacturing that many are questioning the viability of the currency in the long term. To meet this point, the Yen hit two distinct milestones today.

As of 9:30PM GMT, the Yen was trading down 3/4% to the US Dollar to 101.05, it went as low as 101.45, the lowest point it had been against the dollar in half a year. The move above 101.00 Yen is technically significant with a major psychological significance as well. The Euro rose to the strongest level in over five months to the Yen when it hit 137.43 earlier Monday, at last check the Euro had fallen off that level but was up .3% to 135.67. We highlight the EUR.JPY in our chart below.

Something To Think About

The US spending of late has reached 12.5 Trillion Dollars, almost 100% of the US GDP. Basic economic theory holds that spending over 30% of GDP can spur inflation - with anything over 50% bringing about hyper-inflation - think Zimbabwe.

In his comments on Monday, George Soros said that he also believed there will be a strong move to replace the US Dollar as the global reserve currency. He said it was reasonable to assume the International Monetary Fund's Special Drawing Rights (SDR's) will be the reserve of the future. This move will come as massive government debt becomes a detractor for the US Dollar.

Read this full Market Analysis at: http://www.finexo.com/marketReview

USD

In a pattern that has not been seen as of late, the US Dollar rose in conjunction with the US Stock markets. Traders outside of Europe and American took the opportunity to help rally the dollar Friday on news that American bank Wells Fargo, recipient of 25 Billion Dollars of federal aid last year, was predicting a 3 Billion Dollar profit in the first quarter of 2009. Trading was light as American and European centers were closed for the Good Friday Holiday. The news from the US bank was a welcomed sign as the banking sector woes have been at the heart of the recession, causing banks to hold up lending. It is hoped that if true, this signals the turning point in the economy, although many analysts are still skeptical.

Also, US unemployment slowed according to a weekly survey; however the rate of decline still suggests that the bottom has not yet been reached in the overall job-loss situation. As well, the US lawmakers involved in monetary policy warned that the US is at risk of an inflationary surge if it does not "slow down on the spending" and that regardless of this, the US is likely to see a further slide into the recession later on this year.

At the close, the dollar was up .12% to the Yen to 100.35, keeping above the 100 Yen mark for a third straight session. The dollar also closed up slightly to the Euro to 1.3186, up .04% to the Canadian Dollar to 1.2265, down a fraction to the British Pound to 1.4464 and down .15% to the Australian Dollar to .7203.

EUR

European central Bank President, Jean-Claude Trichet, said on Friday that the Central Bank still had room to introduce further cuts to its already record low 1.25% core interest rate. Mr. Trichet had also reaffirmed that in the May 7th meeting, a plan for "unconventional" fiscal policy will be revealed. The EU has been under pressure to join the US and Great Britain in a more aggressive monetary policy to stem the recession yet has not caved in as of yet. Disputes between Germany and France versus the other EU members regarding the monetary policy have garnered most of the headlines while the ECB has stuck to rate cuts alone.

At the close on Friday the Euro was up .11% to the Yen to 132.35, down .2% to the GBP to .899, down .06% to the Canadian Dollar to 1.6161, down .15% to the Swiss Franc to 1.521 and down .14% to the Aussie to 1.8301.

GBP

The Bank of England kept its more lending rate at .5% and declared that they are taking time to "allow for previous actions to take hold" before deciding upon any new rate cuts and other steps meant to increase money supply. Since the March 5th meeting in which the BOE announced a 75 Billion Pound purchase plan in which the Central Bank would buy government debt, only 26 Billion Pounds have been used. The BOE said it would take another 2 months to complete that program and that based on the results from this plan, a decision would be made as to further plans if necessary.

The Pound closed up .16% to the Yen to 147.22, up .11 to the Swiss Franc to 1.6947, down .6% to the Australian Dollar to 2.0284, down .2% to the New Zealand Dollar to 2.5142 and down a fraction to the Canadian Dollar to 1.7972.

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Broker Trading Update: EURO Is on Fire

Speaking in Tokyo, European Central Bank President, Jean-Claude Trichet did not disclose even a hint of what the ECB’s plans were for the future. Despite announcements that the Bank will be moving more aggressively in May, there has been no disclosure as to what this means. Trichet also seemed to lash out at Bank members who have openly disagreed with the ECB’s monetary policy warning that even the slightest of ambiguousness would prolong the return of “sustainable prosperity” to the Eurozone.

Trichet’s failure to clarify the ECB’s stance on interest rates and the Banks “unconventional” policy has frustrated investors and it has been showing in the performance of the Euro. Friday’s slide to a 1 month low against the US Dollar and the rough broker trading in the Euro overall the last few sessions highlight this frustration.

Adding to the plight of the Euro was an announcement from Moody’s that Ireland’s “AAA” rating for government debt will likely be cut if their growth potential and debt burden do not improve.

At the close on Friday daily FX updates, the Euro was down 1.07% to the USD to 130.43, down 1.18% to the Japanese Yen to 129.35, down .5% to the British Pound to .8813, down .78% to the Canadian Dollar to 1.5825, and down 1.62% to the Australian Dollar to 1.8055. The only highlight for the Euro Friday was against the Swiss Franc after the Swiss National Bank Chairman announced that the SNB would act swiftly should the Franc strengthen. This sent the Euro up ½% to 1.5199.

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USD

The Swine Flu outbreak that started in Mexico and has rapidly spread to places like Southern California, New York and even as far away as New Zealand helped the Dollar Monday as risk aversion set in. However in a turnaround, the Yen rallied to a one month high versus the dollar as investors looking to stem their exposure to risk sought safety in the Japanese currency in advance of the US Bank stress test results due out this week, GDP figures on Wednesday and the results of the two day Federal Reserve policy meeting which begins today.

At 11:00PM GMT, the Dollar was up 1.6% to the Euro to 1.3029, erasing all of Friday's gains the Euro had made. The Dollar was also up .14% to the Pound to 1.4654, up .7% tot he Canadian Dollar to 1.2178, 1.7% to the Australian Dollar to .711 and down .5% to the Yen to 96.75.

EUR

European Central Bank Member Nout Wellink was quoted on Monday as saying that the ECB should lower rates below 1% at their upcoming meeting late next week. In the other corner was Axel Weber, also a member of the central bank, saying that 1% is an appropriate target and anything lower would not be wise. It is widely expected that the ECB will lower rates by 25 basis points to 1%. The market has been waiting anxiously to see if the "unconventional" quantitive easing plan the ECB has touted will live up to expectations. Public disagreements between ECB members has been common as of late which has also unnerved Euro investors who are trying to find some sense of unity out of the body.

At 11:35 GMT, the Euro was down 2% to the Japanese Yen to 126.19, down 1.36 to the Sterling to .8897, down 1.1% to the Canadian Dollar to 1.5884 and down .12% to the Swiss Franc to 1.5065. The Euro was up 1/4% to the Australian Dollar to 1.8343.

MXN

At the heart of the flu epidemic is Mexico, which announced on Monday that out of 2,000 people thought to be infected with the mutated version of the Swine Flu, 150 people have died. We rarely focus on the Peso, however as this is a story that has made front page headlines across the globe, it is relevant here.

On Monday, the Mexican Peso fell over 5% to the US Dollar to 13.9945 and fell more than 3% to the Euro to 17.861, 4% to the GBP to 20.508 and 4.5% to the Canadian Dollar to 11.477.

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Market Daily FX Analysis

USD
As investors bought up European and American stocks the US Dollar suffered on Monday as risk appetite returned with a loud bang. Part of the reason for the lack of demand for the safe haven Dollar was a report out of China that showed a 9 month high in manufacturing activity and a 3.2% rise in US home sales. The theme of Monday seemed to be a fundamental shift in investor attitude as fears of a deepening recession retreated and the bulls came back – if only for a short while. Thursday the US government will release the results of the bank stress tests and already there is speculation that the results will not be received well. Wells Fargo and Citigroup, it is rumored, will require additional funding and Bank of America is denying that they will. In all, of the 18 banks surveyed, it is thought that nearly half of the banks will require more capitalization. If this turns out to be accurate, it is a sign that things might not be as rosy as investors feel they are today.
At 9:00PM GMT, the Dollar was down .93% to the Euro to 1.3392, down .3% to the Japanese Yen to 99 even, down .42% to the British Pound to 1.4982 down .75% to the Canadian Dollar to 1.1763, down 1.14% to the Australian Dollar to .7387, down .84% to the New Zealand Dollar to .5741 and down .75% to the Swiss Franc to .1271.
EUR
The Euro fell early on Monday as Axel Weber, a European Central Bank member said that Germany will not start to see economic growth until the second half of 2010. However after the news out of China and the US, the Euro recouped some of its losses. Investors still seem to be cautious on the Euro ahead of the ECB’s policy meeting. The ECB is expected to lower their core interst rate by 25 basis points to 1% and announce a quantative easing plan that includes the purchase of securities to stimulate growth and lending in the 16 country Eurozone. Until now, ECB members have been holding a public debate about how far to go with the stimulus plan and investors will find out who won.
At 9:30PM GMT, the Euro was up .83% to the Japanese Yen to 132.61, up .52% to the Pound to .8938, up .22% to the Canadian Dollar to 1.5762, up .16% to the Swiss Franc to 1.5096 and down .24% to the Australian Dollar to 1.8125.

USD

The US Dollar gained broadly on Monday after several down sessions towards the end of last week. Investors were digesting the US unemployment report which initially were seen to have come in better than expected, and the results of the stress test which showed that 10 major banks need to raise more capital in order to stave off insolvency. The risk rally that resulted from the seemingly positive numbers last week stalled after HSBC Bank said that while their first quarter profits were up, they would have been down had it not been for new reporting rules which allowed them to exclude certain investments. This brought a reality check to investors who were celebrating the end the recession.

At 11:00PM GMT, the Dollar was up .39% to the Euro to 1.358, down 1.12% to the Japanese Yen to 97.35, up .77% to the British Pound to 1.5114, up 1.4% to the Canadian Dollar to 1.1656, up 1.25% to the Australian Dollar to .7588 and up .4% to the Swiss Franc to 1.1091.

EUR

Data released Monday from France and Italy appeared to contradict sentiment that all is getting better in the Eurozone economy . Both countries reported that industrial production fell sharply and at a faster than expected rate. The news contradicted the belief that traders have had and what the European Central Bank President, Jean-Claude Trichet had said only three days ago that the Eurozone is showing signs of rebounding. More data releases this week in Europe and the US should do much to clarify the situation in the economy as we look at a return to trading on fundamentals.

At 11:15PM GMT, the Euro was down 1.46% to the Japanese Yen to 132/29, up .3% to the Pound to .8962, up 1.1% to the Canadian Dollar to 1.5843, up .95% to the Australian Dollar to 1.7905, and down .2% to the Swiss Franc to 1.5068.

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Finexo Summaries of Online Forex Market

USD

The US Dollar fell on Friday across the board to its lowest level of 2009 after concerns emerged over the US’s “AAA” sovereign credit rating from both Moody’s and Standard and Poor’s. The drop in the Dollar, which was the largest in nearly two months, came after S&P announced they were reviewing the sovereign credit rating of England due to soaring fiscal deficits. With the US running a debt of 1.5 Trillion and a deficit of nearly 12 Trillion, investors feared the US might be next.

At the close of Daily FX market, the US Dollar was down .77% to the Euro to 1.3996, down .6% versus the British Pound to 1.5934, down 1.5% against the Canadian Dollar to 1.1193, down .8% to the Swiss Franc to 1.0851, down .57% to the Australian Dollar to .7825, and down 1.51% to the New Zealand Dollar to .62.

JPY

Japanese Finance Minister Kaoru Yosana said on Friday that intervention by the Central Bank into the currency markets was not a consideration at this time. There has been much fear as of late that one of the schemes the BOJ would use to shore up the ailing currency would be to purchase Yen en masse, however minister Yosana’s remarks soothed those fears and helped the Yen rebound a bit although it was down to most of the majors.

At Friday’s close, the Yen was trading up .4% to the US Dollar to 94.76 after hitting 93.86 earlier in the session. The Yen fell 1% to the British Pound to 151.01 and .95% to the Australian Dollar to 74.17. The Yen was also down 1.15% to the Euro to 132.67.

GBP

The news in the Forex online update of the S&P downgrade did more to hurt the Dollar than it did the Pound which rebounded on Friday following the announcement. The Pound hit is highest mark against the USD since November of 2008 climbing above 1.59 and was on target for a 4.7% increase for the week – its best showing since February.

EUR

Eurogroup Chairman, Jean-Claude Juncker said in an Interview on Friday that a continued rise in the value of the Euro would only serve to hurt economic recovery in the Eurozone. Mr. Juncker also made a point to tell the Reuters reporter that a recovery is still quite a while a way. Despite this, the Euro had a mixed session but was up to most of the Majors.

Also, on Saturday European Central Bank President Jean-Claude Trichet said that allowing more inflation by injecting money into the economy and driving up national debts will not help the economy recover any quicker. The comments came during a speech in Rome to an audience at the G30 bankers and academics and were taken as a direct swipe to the US and British governments who have made it a policy to inflate the economy in order to stimulate growth.

** The US and British markets will be closed today, Monday, the 25th of May, for national holidays.

USD
The US Dollar index hit a five month Low on Friday after concerns regarding the US’s ability to fund their 1.8 Trillion Dollar budget deficit reemerged. The worries caused the yield on the 10 Year US Treasury Note (T-Note) to rise to its highest level since 2004 and brought the dollar down. Analysts and traders fear that the rising deficit and overall debt load that the US is carrying will force it to inflate the Dollar by printing money and once a program of cognitive inflation is implemented it can be difficult to control. Some US government consultants have argued that a 6% inflation level over a 10 year period will help erase the debt, however once implemented, it can be challenging to limit to a specific level.
The Dollars problems were heightened late in the trading session after word emerged that US automaker General Motors will file for bankruptcy on Monday after it failed to negotiate a settlement with bondholders. Based on its commitments, the US government will take a 70% stake in the carmaker having already invested 20 Billion Dollars.
At the close the Dollar traded down 1.9% to the Japanese Yen to 95.31, down 1.53% to the Sterling to 1.6187, down over 2% to the Canadian Dollar to 1.0909, down 2/15% to the Australian Dollar to .8008, down .16% to the Swiss Franc to 1.0668 and down 2.8% to the New Zealand Dollar to .6403.
EUR
The European Union unveiled a plan to shore up their financial markets in the wake of the credit and financial crisis that has plagued the Eurozone and the world. The plan will tighten the control that the EU had on the markets and is intended to prevent the scenario in which governments will be forced to “bailout” banks that have been caught up in bad investments. The Euro gained on Friday as a result of this and also benefitted from the flight from the Dollar as well.
At the close on Friday the Euro was up 1.54% to the Dollar to 1.4158 after hitting a 6 month high of 1.4168 about an hour before the close. The Euro also rose versus the Sterling by .05% to .8744. The Euro was down a fraction .07% to the Yen to 134.97, and down .5% to the Canadian Dollar to 1.5449 and .8% to the Australian Dollar to 1.7675 as investors went for the higher yielding currencies.