FX & General Econonmic Reports

  • skintagainnow
  • 10/10/08 31/05/09
  • a depositor
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Posted: Wed, 04/03/2009 - 14:09

I subscribe to a FX bulletin (as reproduced below), my deposit was due to transferred to Euro's.

Not really thought of it before but as these bulletins come out every few days, if the level of interest from the group is sufficient I can reproduce here - not only does it highlight currency fluctuations but also gives a valuable summarized insight into general economic data - what our beloved leaders are doing / or not.

If the interest is only for a limited number of you let me know and I can forward, instead of increasing the traffic here on the site.

Market Update 4th March 2009

The Pound declined against the Dollar for the second consecutive day yesterday, dropping under the support at $1.4000, before finding resistance at $1.4150 by the close of trading last night. The UK currency also traded at close to a two-week low versus the Euro, amid speculation that the Bank of England will cut interest rates on Thursday and increase money supply through the purchase of corporate bonds.

Reports yesterday suggested that the Treasury would give the Bank of England the go ahead to implement quantitative easing measures, ahead of the monthly announcement and there will be speculation that the MPC will move quickly to a policy of directly boosting money supply.

The Chancellor of the Exchequer Alistair Darling also gave an indication yesterday that the Central Bank will start printing money this week in an effort to bolster the economy, as interest rate cuts lose their potency. The Bank have been given the authority to use as much as £200 billion for the purchase of government securities and other toxic assets.

The Pound remained under pressure against a basket of currencies amid suggestions that policy adjustment will become more expansionary in the UK compared to the Euro-zone and that has pushed Sterling towards a two-week low of 1.1100 versus the Euro. The BoE will probably cut rates by a further 50 basis points on Thursday and may announce some method of quantitative easing, while the market remains uncertain on what the ECB will do.

However, the Pound may rebound against the Euro once the interest rate announcements are out of the way, particularly considering the downside pressures within the Euro-zone and the escalating pessimism over the chances of an economic recovery. The Pound may even breach the 1.1602 level against the Euro, which would represent a 50% retracement of the downside move between 1.3000 and 1.02006, the December 30th low.

UK stocks declined for a third straight day, with the benchmark FTSE 100 Index extending its six year low, amid concerns that banks may have to raise more capital as the recession deepens. Barclays Bank Plc and the Lloyds Banking Group Plc slumped at least 6% on the session, after the Fed Chairman Ben Bernanke said that the banking system has not yet stabilised and policy makers may need to inject further capital, beyond the $700 billion already approved.

The correlation between the Pound and the stock market has become increasingly prevalent in recent months and the UK currency continued to decline against the Dollar yesterday, as the extended drop in the FTSE spurred demand for havens.

In terms of economic data, UK manufacturing contracted for a 10th consecutive month in February, while consumer lending rose at the slowest pace since records began in 1993. A separate report from the Confederation of British Industry showed that the building industry is contracting at the fastest pace in 12-years, as the Treasury's plan to provide finances to £13 billion of government sponsored building projects stalled, due to the lack of bank finance.

Elsewhere, a report from the Nationwide Building Society showed that UK consumer confidence remained close to the lowest level in at least four years in February. The index of sentiment rose to a reading of 43 from 41 the previous month, as the recession worsened and forced companies to shed jobs.

The Euro rose higher against the Dollar in early trade yesterday, peaking close to resistance at $1.2680, before drifting weaker later in the session. Following the Australian Reserve Bank's decision to keep interest rates on hold, there was increased speculation that the ECB would resist an aggressive policy easing on Thursday, helping to rekindle some appetite for the single currency.

However, the tentative increase in the Euro quickly faded as confidence remained weak and the single currency may struggle to stem the losses against the Pound, as stock markets rebound from the recent lows. In terms of economic data, European retail sales are expected to fall 2.1% year-on-year in January, consumer spending waned and unemployment rose in all of the major economies.

The Dollar remained resilient against the majors, despite the dismal tone of U.S economic data, which showed a further drop in pending home sales for the month of January. The raft of weakening economic reports is actually instilling more confidence in the Dollar, as fear grips the market and investors seek the security of U.S assets.

The Fed Chairman Ben Bernanke gave a testimony to the Senate yesterday and took a downbeat stance on the chances of a recovery, warning of the threat of stagflation if authorities do not act aggressively to stimulate the economy. Bernanke was also very critical of the developments and continued bailout of AIG, moved towards a political judgment on the banking situation.

Data Released 4th March

U.K 09:28 CIPS Services PMI (February)

EU 08:58 Composite PMI (February)

                         Services PMI                      

EU 10:00 Retail Sales (January)

U.S 13:15 ADP Employment Report (February)

U.S 15:00 Services ISM (February)

Overview

Sterling is once again struggling to hold the $1.40 level having dipped to $1.3997 in overnight trade. It has, however, made up some ground versus the euro as it too struggles versus the USD. This morning sees the release of the UK’s services PMI for February, which is unlikely to be good news for sterling. Canada cut interest rates by 0.50% to a record low of 0.50% yesterday, while at the same time signaling that it could move to quantitative easing measures in order to boost liquidity. The cut was in line with market expectations and brings to 4.00% the cumulative reduction in rates since December 2007.

As you are all probably aware the Bank of England and the European Central Bank will announce their position with regards to interest rates tomorrow, this will be followed by the press conference which will set the tone for further possible cuts by the ECB. This will be closely watch and markets will remain very volatile despite a 0.50% cut factored into the markets. Clients looking to minimise risk in the current market should strongly consider trading before tomorrow as we could a strong reaction with the Pound. I am available to contact on my direct line ********** if you wish to discuss your requirement further.

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GBP

  • Anonymous
  • Offline
  • Sun, 08/03/2009 - 00:41

I am a Forex analyst. We placed our money into Yen some while ago because I foresaw the strength of the Yen and also the weakness of the Pound. I don't use economics because it doesn't really work when forecasting. If economics worked then 2 years ago why did all economists say that the global economy was going to be great for years to come...

Anyway, I have always been targeting Q2 this year for a bounce in the Pound. There are some early signs that the next leg lower won't be my too much but recovery, when it comes should last a fair while. This timing tool has seen the Pound bounce substantially over the past 40 years...

With luck they'll set the exchange rates used for valuation close to the low... :)


FX & General Economic Report

  • skintagainnow
  • 10/10/08 31/05/09
  • a depositor
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  • Wed, 04/03/2009 - 14:24

Excuse the additional 'n' in Economic, typo and can't edit it ?


Market Update 05th March 2009

  • skintagainnow
  • 10/10/08 31/05/09
  • a depositor
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  • Thu, 05/03/2009 - 14:12

SgKZ, you don't have your contact enabled, so posted today's report? - I'll drop a line to ng see if I can start a group then just edit for each report - having a history as a "normal" post isn't going to help.

Market Update 05th March 2009

The Pound rose against the Euro and the Dollar yesterday, after UK stocks rebounded for the first time in four days, and a survey showed that UK consumer confidence rallied in February from the lowest in at least four years.

According to a report from the Nationwide Building Society, an index of sentiment increased to a reading of 43, from 41 in January, which was the worst set of results since the data was compiled in 2004.

The FTSE 100 Index rose from the lowest level since March 2003, led by a rebound in commodity producers, amid speculation that China will announce a fresh economic stimulus package. The revival in the stock market encouraged investors to buy into ‘riskier’ assets and dump the so called haven currencies like the U.S Dollar and Japanese Yen.

The Pound also advanced against the majority of the majors, following suggestions that the Bank of England will revive economic growth by cutting the benchmark lending rate to a new record low this lunchtime.

The Governor of the Bank of England Mervyn King is under pressure to spell out plans to revamp monetary policy and print money, as policy makers prepare to cut rates by a further 50 basis points to 0.50%, the lowest level since the Central Bank’s foundation in 1694.

The Treasury will also give the Bank the authority to create money and pump it into the economy, as the government struggles to rescue the economy shrinking by the most in almost thirty years.

The Chancellor Alistair Darling has said this week that the Bank of England has the necessary “levers” and may decide to use them over the next month. While the Treasury are expected to publish its formal approval of the Bank’s plan to print money today, when it releases Darling’s correspondence with Mervyn King.

The focus will fall on the accompanying statement, where policy makers may signal that they’re ready to buy government bonds and toxic debt as part of quantitative easing measures.

The Bank of England have been forced to look at less conventional techniques to bolster the economy, after record low interest rates lose its potency, and the Pound may continue to make gains, amid speculation that the increase in capital will spur an economy recovery.

The Prime Minister Gordon Brown was in the U.S yesterday to address Congress and he urged governments around the world to support their economies by cutting borrowing costs towards zero, while raising fiscal spending, saying that Britain and the U.S cannot act alone.

Elsewhere, investors have been encouraged to buy Sterling against the Japanese Yen, amid signs that the UK recession is unlikely to deepen further, while the Pound is heading for its third weekly gain after data revealed that UK service sector growth fell less than initial forecasts.

The Euro fell against the Pound yesterday, slipping back towards the support at 1.1270 last night, while the single currency also lost ground against the Dollar, amid speculation that the ECB President Jean-Claude Trichet will lower the key interest rate today.

Trichet has signalled on numerous occasions that the Central Bank will cut interest rates in March but the focus will inevitably fall on the accompanying statement, where policy makers may signal that further rate reductions will be needed to curb the worsening recession.

The Euro is poised to record a fourth weekly decline against the Dollar, as a raft of weakening economic reports show that the economy shrank by the most in at least 13-years in the revised estimate for the fourth quarter.

In the build up to the announcement, German retail sales unexpectedly declined in January, amid suggestions that consumers are becoming increasingly concerned over the security of their jobs and subsequently reined in spending.

Germany is battling the worst recession since the Second World War and the International Monetary Fund expects the economy to contract 2.5% this year, as unemployment rises for the fourth consecutive month in February.

Data Released 5th March

U.K 12:00 BoE Rate Announcement

EU 10:00 Gross Domestic Product (Revised Q4)

EU 12:45 ECB Rate Announcement

EU 13:30 ECB Press Conference

U.S 13:30 Weekly Jobless Claims (w/e 28th February)

U.S 13:30 Non Farm Productivity (Q4 Revised)

  • Labour Costs

U.S 15:00 Factory Orders (January)

Overview

Over the last few weeks, with the release of a series of economic indicators for the euro-zone, something has become very clear. Europe is in the worst recession since the inception of the euro as an accounting currency on January 1999. European stock markets have been selling off and the euro economy contracted by a record 1.5 percent in the fourth quarter of 2008, the third straight quarterly contraction, according to estimates published by the Eurostat.

Sterling is also on edge this morning as it awaits the BoE’s policy announcement at noon. Rates could be cut by up to 0.50%, with the central bank also expected to announce that it is moving to quantitative easing measures in a bid to improve liquidity conditions. Some better than expected data provided a temporary boost yesterday but downside risks remain, particularly versus the USD.

Clients who wish to hold out to see whether the rate will deteriorate further are strongly advised to consider placing an upper stop order in the market to protect against a potential upside recovery.


Took me a while to work out

  • SgKZ
  • 10/10/08 31/05/09
  • a depositor
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  • Fri, 06/03/2009 - 09:30

Took me a while to work out where to 'enable' it. It has been done now. It is very kind of you to send this on. Please don't feel under any obligation. If it becomes to burdensome then I won't be complaining!

Thanks again skint.


I found it pretty useful.

  • SgKZ
  • 10/10/08 31/05/09
  • a depositor
  • Offline
  • Wed, 04/03/2009 - 17:11

I found it pretty useful. Thanks for posting it.