Tuesday, 20 November 2012

Daily Morning Report 21/11/2012 | Forex Trading Analysis

The dollar strengthened against the world's major global currencies on Wednesday as investors remained camped out in the safe-haven currency awaiting word of progress over the U.S. fiscal cliff.
Investors were on edge due to uncertainty over the U.S. fiscal cliff, a combination of expiring tax breaks and inbound spending cuts converging at the same time after the end of this year. Earlier, Federal Reserve Chairman Ben Bernanke urged the White House and Congress to find a way to steer the U.S. economy away from the cliff, which fueled demand for the dollar.
The euro continued to weaken on reaction to a Moody's decision to downgrade France's sovereign ratings to Aa1 from Aaa. Meanwhile, in Europe, eurozone policymakers opened a meeting to discuss Greece's finances, with a EUR31.5 billion tranche of aid pending approval.
Eurozone finance ministers and senior International Monetary Fund officials ended a nearly 12-hour meeting with no agreement on how to bring Greece’s debt down to a sustainable level, and they failed to approve an overdue tranche of bailout loan money for the country despite a looming threat of bankruptcy.  The failure to approve immediate payment of a long-overdue E31.5 billion loan tranche to Greece came despite official acknowledgement from Jean-Claude Juncker, who chairs the Eurozone finance ministers’ group, that Greece had met all the conditions demanded of it. The 17 Eurozone finance ministers, together with the heads of the European Central Bank, International Monetary Fund and the EU’s Economic and Monetary Affairs Commissioner, Olli Rehn, discussed a package of options to reduce Greece’s national debt to 120% of GDP by 2020 – the benchmark for sustainability upheld by the IMF.

Elsewhere in the U.S., housing starts rose 3.6% in October to a seasonally adjusted annual rate of 894,000, the biggest gain in four years. The number of building permits issued in October fell 2.7% to a seasonally adjusted 866,000. Both figures beat expectations.
In other news, the Bank of Japan met earlier and left benchmark interest rates unchanged at 0.10%. The monetary authority also made no changes to the country's JPY91 trillion asset purchasing plan, though the yen weakened to a 7-month low against the greenback on Wednesday amid building market sentiment that looser policies are on the way after December's elections.

Japanese opposition leader Shinzo Abe may become the country's next prime minister during Dec. 16 elections. Abe has said he favors more aggressive monetary stimulus measures to jolt the Japanese economy.
Later Wednesday, the U.S. will release weekly government reports on initial jobless claims and crude oil inventories.  In addition, the University of Michigan is to release revised data on consumer sentiment and inflation expectations.

Daily Afternoon Report 20/11/2012 | Forex Trading Analysis

After another rally spiking to 1.2830 as the NY session opened, the EURUSD eased back to the 1.2800 psychological level. Fed's Lacker is in favour that the US Congress limits the central bank's credit policy and is against linking the policy to the unemployment rate. Also, Reuters reported that Italy may veto the EU budget if it goes against the country’s interests. The pair is currently trading sideways at 1.2800 after the release of weaker US building permits and better than expected housing starts.
Later Bernanke (FED) will speak and might 

Daily Morning Report 20/11/2012 | Forex Trading Analysis

The dollar strengthened against the world's major global currencies on Tuesday after Moody's stripped France of its triple-A rating, which wiped out appetite for risk.

Moody's Investors Service earlier said it had cut French sovereign ratings to Aaa1 from Aaa, which sent investors ditching the EUR/USD and commodities to digest the news, which made the dollar the perfect safe haven.
As Moody’s published earlier, “France's long-term economic growth outlook is negatively affected by multiple structural challenges, including its gradual, sustained loss of competitiveness and the long-standing rigidities of its labour, goods and service markets.” Furthermore,  “France's fiscal outlook is uncertain as a result of its deteriorating economic prospects, both in the short term due to subdued domestic and external demand, and in the longer term due to the structural rigidities noted above.”
The market kept an eye on the Bank of Japan, which was holding a monetary policy meeting later Tuesday.
The Bank of Japan may hold benchmark interest rates unchanged, though upcoming elections could see opposition leader Shinzo Abe become the next Prime Minister. Abe has called for more aggressive policy action and stimulus from the Bank of Japan.
In other news, foreign direct investment in China fell for the 11th time in 12 months as labour costs rose, a slowdown threatened to drag growth to a 13-year low and a territorial dispute with Japan weighed on trade.
Later Tuesday, the U.S. is to publish official data on building permits as well as data on housing starts, while, the U.S. Fed Chairman is due to deliver a speech titled "The Economic Recovery and Economic Policy" at the Economic Club of New York. Finally today, the Eurozone of finance ministers will hold talks in Brussels to discuss financial issues in the bloc.