ISM Services Gauge in U.S

The Institute for Supply Management’s index of U.S. non-manufacturing businesses, which covers about 90 percent of the economy, rose to 54.7 in November from the prior month’s 54.2, the Tempe, Arizona-based group said today.  ISM! Readings above 50 signal expansion, and estimates ranged from 51 to 54.7. The ISM services survey covers industries ranging from utilities and retailing to housing, health care and finance.

Daily Morning Report 04/12/2012 | Forex Trading Analysis

The Australian Dollar rallied versus the U.S. Dollar as the Reserve Bank of Australia cut the benchmark lending rate by 25 basis points to 3.00 percent which was in-line with market expectations of a 90 percent probability that the RBA would cut the cost of capital today.

Forex Bulletproof 2.0 Patented Striker Technology! The global PMI release period was off to a good start, with outperformance in Asia and mostly floundering in Europe. US failed to hold its own, with its equivalent to the PMI, the ISM Manufacturing index, falling back into contraction, to its lowest official reading of the year. Just when US economic data was turning higher, it now appears to be backpedalling.

Greece offered to buy back as much as 10-billion Euros of bonds issued in a restructuring earlier this year, as an attempt to cut its debt load. The government said they will buy back bonds in a so called Dutch auction, and the government is willing to pay an average maximum purchase price of 34.1% for bonds maturing from 2023 to 2042. 

ECB and BoE are widely expected to maintain their current policy Forex Bulletproof 2.0 Patented Striker Technology! in December, we anticipate the Governing Council to strike a more dovish tone for monetary policy as the deepening recession in the euro-area threatens price stability. ECB President Mario Draghi may show a greater willingness to ease monetary policy further. BoE appears to be slowly moving away from its easing cycle as inflation stubbornly holds above the 2% target.

Daily Afternoon Report 29/11/2012 | Forex Trading Analysis

The U.S. dollar was broadly lower against the other major currencies on Thursday, as hopes for headway in tackling the U.S. fiscal cliff dampened safe haven demand for the greenback ahead of U.S. data on third quarter growth later in the session.

Meanwhile, the euro hit fresh session highs against the U.S. Click Here! dollar on Thursday, after official data showed that the U.S. economy grew at a faster rate than initially estimated during the third quarter of 2012, as export figures were revised up.

As the Commerce Department said, gross domestic product expanded by 2.7% in the three months to September, up from a preliminary estimate of 2.0%, but below expectations for growth of 2.8%.

Separately, the U.S. Department of Labor said the number of individuals filing for initial jobless benefits last week fell 393,000 from 416,000 the previous week, slightly less than expectations for a decline to 390,000.

Elsewhere Europe, Italy saw borrowing costs fall sharply at an auction of five and 10-year government bonds on Thursday, with the yield on 10-year bonds down to 4.45%, a two year low and the yield on five-year bonds falling to 3.23%, also a two-year low.

In addition to that, official data showed that the German unemployment rate remained unchanged at 6.9% in November as the number of unemployed people rose by 5,000, better than expectations for an increase of 15,000.

In other news, the Bank of England warned earlier that U.K. banks may not have enough capital put aside to insulate them from future financial market shocks.

Finally, the yen remained under pressure amid expectations that upcoming elections on December 16 will result in growing political pressure on the Bank of Japan to implement more aggressive monetary easing measures.

Later Thursday, German Bundesbank President is due to speak at the Christian Democratic Union Economics Council in Berlin.

Click Here!

Daily Afternoon Report 28/11/2012 | Forex Trading Analysis

Greece bailout agreement, most of the responding chatter has already been exhausted, and we have been left in today’s European session without a major fundamental story to guide trading. Data showing U.S. consumer confidence at a four-year high also provided a modest boost for the dollar, though a looming budget crisis tempered optimism about the American economy and kept dollar gains in check.

The agreement to provide aid for Greece did not help the market sentiment. In fact, that agreement may fail as the International Monetary Fund did not accept its terms. The inability of the US politicians to find a compromise and avoid the fiscal cliff did not help traders’ confidence either.

The Australian dollar fell against the Japanese yen and the US dollar yesterday and remained soft today. Like its Canadian counterpart, the Aussie managed to strengthen versus the euro.

Daily Afternoon Report 27/11/2012 | Forex Trading Analysis

The Europe we saw at the beginning of today’s session was very different than the Europe of yesterday, at least from a trader’s perspective. Euro-zone leaders came to an agreement on Greece that lowered interest rates, returned some of the money made off of previous loans, and setup the release of the next 34.4 billion Euro aid tranche in December. The Euro has now erased all of the gains following the Greece announcement and is trading slight above 1.2950 against the US Dollar in currency markets.

UK gross domestic product for Q3 confirmed 1.0% economic expansion over the quarter, as the Olympics and previous quarter’s Jubilee holiday gave the UK a one-time spike in growth. Office for National Statistics’ release, output in production industries rose by only 0.9%, down from a previously estimated 1.1%. Service industry was confirmed to have seen a 1.3% rise in output.

The US Dollar rose a bit when Fed member Fisher said during a speech in Berlin that he advocates setting limits to QE as soon as the next meeting. Fisher said that the US’s biggest problem is unemployment and that inflation is under control in the US. 

Daily Afternoon Report 22/11/2012

  The euro was trading close to a three-week high against the U.S. dollar on Thursday, as improved manufacturing data from China and the euro zone and hopes for a deal on an aid payment for Greece supported demand for the single currency.

  After the data of German Flash Manufacturing PMI were released the single currency found support. Germany’s manufacturing purchasing managers’ index rose to 46.8 in November, up from 46.0 in October and better than forecasts for a reading of 45.9. Germany’s services PMI came in at 48.0, below expectations for a reading of 48.5. The euro zone’s manufacturing PMI rose to 46.2 this month from 45.4 in October, above expectations for a reading of 45.6. The euro zone’s services PMI declined to 45.7, from 46.0 in October, compared to expectations for a reading of 46.1.

  The euro was also supported after German Chancellor Angela Merkel said an agreement to unlock a delayed bailout installment for Greece was still possible when euro zone finance ministers resume talks on Monday. Today Spain successful auctioned EUR3.38 billion of three and five-year bonds at lower yields than previously, easing pressure on Madrid to seek a bailout.

The data came after a report earlier showed that China’s preliminary HSBC manufacturing PMI rose to 50.4 in November, up from a final reading of 49.5 in October. The data eased concerns over a slowdown in the world’s largest economy.

  Trade volumes are expected to remain low on Thursday, with US markets closed for the Thanksgiving holiday.

END) Dow Jones Newswires May 31, 2012 22:19 ET (02:19 GMT)

0219 GMT [Dow Jones] Korea government bonds are higher, helped by continued risk aversion amid worries over the euro zone debt crisis, while data tips weaker growth in China and the U.S. "Yields of local bonds, like those on U.S. Treasurys, are already trading at very low levels, but there is no clear momentum yet to revive risk appetite in the market," says Kim Se-hun, a fixed-income analyst at Daishin Securities. "The bullish run for local bonds is expected to continue in June. The three-year yield may fall near the BOK's policy rate of 3.25%" in the near term, he adds. The three-year yield is down 2 bps at 3.30%, the five-year yield is down 3 bps at 3.40% and the one-year yield is down 4 bps at 3.65%. Lead June bond futures are up nine ticks at 104.74. 

Daily Forex Brief London: Thursday 24th May 2012

Europe's impossible dream

Probably not by accident, yesterday's Brussels dinner party of EU leaders ended too late for the European press to pass judgement. There was a weight of expectations, which was largely misplaced given this was an informal meeting to pave the way for the main summit of leaders at the end of next month. The same differences remain on common bonds and the financial transaction tax (UK opposing) and more subtle differences on the growth agenda. Of course, everyone would like more growth but delivering it alongside a program of continued austerity is naturally a different matter and, for now, it remains the impossible dream for European leaders and a balance which Europe (and indeed others) has yet to achieve. In the FX markets, after the push lower through the 1.26 level into the European close yesterday, EUR/USD has held steady overnight, but activity elsewhere shows that dollar-dominance remains the underlying theme.

Daily Forex Brief London: Wednesday 23rd May 2012

Dollar dominance returns

The dollar index made a new high for the year yesterday, 3.8% higher than the level seen at the start of the month. This follows on from two sessions of downward pressure on the dollar, which was more down to the extent of short positioning on some of currencies under pressure for most of the month. As we start the European session, EUR/USD itself is not that far off the lows for the year at 1.2624 as EU leaders meet for an informal summit in Brussels. Germany is looking increasingly isolated with its austerity - with no Plan B stance - and continues to rule out any sort of common debt for the eurozone. This summit is designed to shape the plans around the next formal summit at the end of June, so don't expect any major statements, but the surrounding comments will be key in shaping the debate ahead of that meeting. For now, currencies look set to reflect the theme of dollar dominance once again, with stock markets seen heading lower in Europe after the recent breather.

Daily Forex Brief London: Tuesday 22nd May 2012

All about positioning

The price action seen on both Friday and also yesterday reflects the fact that, it's all about positioning in the FX markets for the moment. This has been most evident on the euro, not only in the weekly CFTC data which is reflecting a record amount of speculative shorts, but also in the price action. The single currency has pulled away from a threatened break of the year's low, not that surprising after a run which saw EUR/USD up on only two of the last fourteen trading days. The Aussie has also corrected from the recent lows, partially reversing a downtrend of similar style as seen in EUR/USD. Even though the relationship between the two has broken down a little of late, stocks also look set for a second day of gains after the recent down-run. The underlying themes remain in place, namely continued concerns surrounding Greece and the other peripheral eurozone nations, so the current correction should not be aligned with a perception that things are improving underneath, because they are not.

Daily Forex Brief London: Monday 21st May 2012

Here we go again

It's Monday and the shifting sands of the European mindset are moving (not for the first time) towards the issuance of common bonds as a means of overcoming the sovereign crisis. This is one of the changes in momentum that has emerged from the weekend's meeting of G8 leaders, together with giving the EFSF the ability to re-capitalise banks. It's a sign that there is stronger desire to see an alternative to the hard-line German stance of austerity, with few after-thoughts. Furthermore, the German Chancellor will find it increasingly difficult to resist this shift, especially when it is being endorsed at the international level. The wider issue is that at no point have European leaders really seized the initiative on the crisis, compromising by doing just as much as they believe necessary to stop things getting worse, rather than going all in to turn things around. Imagine where we would be if Greece had restructured its debt back in May 2010, a decent firewall was set-up and a shift towards common bonds was put into train. Most likely, we'd be in a better place than we are now. The single currency recovered on Friday, despite the weaker tone to stocks. This is partly a function of the extent of the short-positioning that has built up in the single currency, which could mean that a push below the year's low at 1.2724 could prove a little tougher than some expect.

Daily Forex Brief London: Thursday 17th May 2012

Europe must decide urgently

Nearly five years into the global credit crunch, you get a feeling for when something has reached the point of no return, when no amount of reassurance, promises or policies will fight the tide of markets. This is not to define markets as pure 'speculators', rather rational individuals and entities that are removing deposits from Greek banks, reducing their exposures to all types of market risk and doing their best not to be crushed by a moving train that is Greece. As well as reports of large-scale withdrawals from Greek banks, we have had (unconfirmed and then denied) reports that the ECB is also refusing liquidity requests from Greek banks, pushing them to the Greek central bank because of the lack of recapitalisation undertaken. We've seen sharp increases in forward Libor-OIS spreads, the measure of interbank liquidity risk that was so watched during the early days of the crisis. From being taboo in official circles, a Greek exit is now more openly discussed rather than dismissed outright. At the same time, after two years of fire-fighting the Greek and wider sovereign crises, there are no policy responses that can credibly stem the tide. We've had two large scale EU/IMF rescue packages, a tortuous 'voluntary' private sector-restructuring and vast lending form the ECB (with ever lower collateral standards applied). The more credible response now from the authorities would be measures to stem contagion elsewhere, particularly with respect to bank deposits in other eurozone countries now that permitted cross-border lending between deposit-guarantee schemes will not be workable. Contagion remains the biggest single risk, given that a Greek exit will mean that what was previously presented as irreversible and unthinkable will have become reality. This is where efforts now need to be focused otherwise the single currency will be left horribly exposed by a Greek exit. Furthermore, all efforts to 'save' Greece from here on in will have been wasted and at the cost of failing to deal with the contagion issue. Policy-makers face a critical choice over coming days. Let's hope they choose the right track.

Daily Forex Brief London: Wednesday 16th May 2012

Dollar soars after Greek talks fail

News that ongoing talks amongst politicians in Greece have failed to come up with a coalition government and that new elections will need to be called, has triggered renewed fears that a Greek exit from the eurozone might not be too far away. In response, risk assets are again on the defensive with both traders and investors seeking sanctuary in the US dollar. Overnight, the dollar index stopped just short of its highest level for the year, reaching 81.45. The euro was singled out for especially harsh treatment, falling to 1.27; EUR/GBP dropped to 0.7960, a 3½ year low. Bond yields amongst Europe's southern fiscal miscreants surged once more; the Italian 10yr yield has reached 6.0% for the first time since the end of January. Latam currencies were also savaged; the Mexican peso for instance has dropped 6% against the dollar in just the past two weeks while the BRL is down more than 4%. Likewise, commodities fell hard – the gold price has opened up in London this morning down near USD 1,530 an ounce while WTI is close to USD 92 a barrel. Asian equities have been buffeted; the Kospi and Hang Seng fell 3%. There is very little prospect of the Greek uncertainty ending any time soon. The Greek President has been alerted by the head of the central bank that depositors are increasingly anxious about the safety of their savings and are pulling money out of local banks. Clearly, Greek citizens are not sufficiently reassured by the deposit guarantee scheme which exists in the country. It supposedly guarantees individual deposits with any bank or financial institution up to EUR 100K. The Greek deposit guarantee scheme can also (supposedly) borrow from other schemes around Europe in the event that it has insufficient available funding. No doubt the likes of Germany et al would be aghast if Greece were to put in such a request. Nevertheless, the risk of a significant bank run in Greece is now very real.

Daily Forex Brief London: Tuesday 15th May 2012

Another bad hair day

Yet another bad hair day for risk assets yesterday amidst continuing concerns over a myriad of issues, including the unstable political situation in Greece and ongoing question marks around whether it will remain in the eurozone, the dire state of Spanish banking and sovereign finances, and a sense that the losses registered by the CIO unit at JPMorgan could turn out to be much greater than already disclosed. Also contributing to the uncertain mood was Moody's announcement that it was downgrading 26 Italian banks and worries over whether Greece will pay the holders of a EUR 436m floating rate note which matures today. Gold, a traditional safe-haven in times of distress, has lost its lustre, falling to its lowest level for the year at USD 1.550 an ounce (more on gold below). Instead, it is the greenback that is the preferred destination of those fleeing risk, with the dollar index already up by 2% so far this month. For the dollar bulls, should we see a sustained break of the mid-January high of 81.50 (in the dollar index) then this would provide further encouragement. Indeed, it could justifiably be argued that, against the backdrop of dreadful financial and economic conditions in large parts of Europe, and with China in the midst of a very bumpy landing, the dollar really ought to be performing better than it has done. Another currency that continues to attract buying interest is the pound, with cable steadfast at around the 1.61 level and EUR/GBP now comfortably under 0.80. The single currency fell to 1.2815 overnight, but it has been a remarkably measured sell-off rather than blind panic. Even for the Aussie, which has been under sustained fire all month, the decline through parity was not one of capitulation, notwithstanding the evident determination over recent weeks of traders to eliminate their long positions.

Daily Forex Brief London: Friday 11th May 2012

More dark clouds over Spain

The week is ending in a similar fashion to which it began, namely with markets broadly in retreat from risk. There's little reason to feel that today will be much different. The focus is on Spain and its expected announcement of just how bad the government believes the bad loans situation is for the banking sector there. Meanwhile, Greece is still trying to stitch together a government from the results of the weekend's election. But the verdict in markets for the week as a whole has been a distinct lack of belief in the course that is being taken in Europe, with regards to France and its intended push for growth, together with Greece and its appetite for continued austerity as well as Spain's banking situation. Overnight, we've also seen slightly softer than expected retail sales and production data in China, although inflation was broadly as expected at 3.4%.

Daily Forex Brief London: Friday 4th May 2012

Caution ahead of payrolls

Markets face up to the US jobs data today in tentative mood, Asian stocks having softened by the greatest degree in nearly two weeks overnight and the past two days having seen high-beta currencies, such as the Aussie and Korean won the weakest performers of the majors. The recent trend in jobless claims, together with the ADP data earlier in the week, have tempered expectations of a strong set of numbers, with the market looking for a 160k gain in headline payrolls following the softer 120k increase seen in March. Nevertheless, in the wider picture, expectations of further QE from the Fed have also been cut back, so it would take a pretty weak payrolls number to shift this expectation and knock the dollar from its relatively steady tone of the past month.

Daily Forex Brief London: Thursday 3rd May 2012

A dark and dismal Europe

A swathe of dismal economic news cast a long shadow across Europe yesterday, beating the single currency lower by nearly 1%. The manufacturing PMIs in the periphery for April were uniformly dreadful, Spain down to 43.6 and Italy to 43.8 (from 47.9 in March). For the latter, the new order balance saw the biggest monthly decline for three years, from 45.7 to 39.2, suggesting that there's not much on the horizon to turn around the fortunes of the manufacturing sector anytime soon. There was also a modest downward revision to the provisional PMI readings for both France and Germany, by 0.4 and 0.1 respectively, to 46.9 and 46.2. As if that wasn't bad enough, the unemployment rate in Italy jumped to a 12yr high of 9.8% in March (9.4% was expected), Germany recorded the largest monthly increase in unemployment (19k) for nearly two years, and the unemployment rate for the euro-area rose to a 15yr high. Today's ECB meeting is therefore extremely timely. At the very least, with recession deepening in a number of Eurozone economies, Mario Draghi and his men must be considering how they can ease financial conditions further. With the US recovery looking more assured these days, it is no wonder that the single currency took yesterday's smorgasbord of shocking news rather badly. It was also worth noting the response of peripheral bond markets to this darker economic landscape – bond yields rose markedly in both Italy and Spain, while the spread to Bunds at the long end widened by around 15bp. Both the dollar and the yen gained from this renewed burst of risk avoidance, while the Aussie dipped back to 1.03.

Daily Forex Brief London: Wednesday 2nd May 2012

A trans-Atlantic good-news story

Genuinely positive stories on the economic front are relatively rare these days, with no fewer than ten of the EU's 27 economies in recession and Australia's central bank forced to cut rates by 50bp yesterday in part because the non-mining economy is contracting. Thankfully, both Germany and America continue to defy the global gloom. In the US, the manufacturing sector is expanding at a respectable pace, propelled by solid growth of both domestic and export orders. Strong automobile-demand is making a significant contribution to the upturn in manufacturing – auto sales in the first quarter were the highest for four years and auto production accounted for roughly one-half of the growth in GDP in Q1. In response to this latest batch of healthy data, the Dow Jones index last night reached its highest level since the end of 2007. Over in Europe, the German labour market continues to forge ahead, with employment up another 37K in March, the 25th consecutive MoM gain. Currencies remain generally becalmed although, with a myriad of important economic releases due over coming days, we can expect volatility to increase. Friday's payrolls figures are critical following last month's disappointment.

Daily Forex Brief London: Monday 30th April 2012

The dollar's gentle descent

It has been exceedingly gradual, but the dollar has been drifting downwards over the past two weeks. Not that we are talking about a big move mind you – the dollar index is down by roughly 1.5% over that time. That said, some of the major dollar crosses are at levels not witnessed for some time – cable for instance reached a 7mth high at just under 1.63 overnight. Indeed, the pound has been something of a revelation so far this year, despite the fact that the economy is apparently back in recession. Clearly sterling is attracting flows from a number of different sources. Just imagine how well the currency might be doing if the economy was actually registering the kind of growth that America is experiencing. The Japanese yen is also faring quite well, after a torrid period in February and the first half of March. Even the beleaguered Aussie has perked up, despite mounting speculation that the RBA will cut rates by 50bp by mid-year. All things considered, it has been an indifferent first four months of the year for the dollar, which is slightly surprising as the economy looks better than most, corporate earnings are healthy and the Fed has backed away from implementing further QE after Operation Twist finishes next month. Part of the explanation is that there has been a slight improvement in risk appetite recently. For now, some of the high-beta currencies such as the Kiwi and the ZAR are attracting interest, while sterling retains a very healthy bid.

Daily Forex Brief London: Friday 27th April 2012

Japan goes further

It seems like some time ago now that Japan threw everything, including the kitchen sink, at the deflation problem. Now they are ripping out the plumbing and anything else they can find to try and escape the deflationary slump which the economy has been suffering from for the best part of the past fourteen years. The latest meeting has seen the Bank of Japan expand its asset purchase-program by a further JPY 10trln (to JPY 40trln). It also chose to extend the maturity of both government and corporate bonds to be purchased under their QE program. It now has an inflation target of 1%, which it remains confident of reaching "in the medium to long term", but that is a long time in central banking terms and markets hold little faith in such a forecast, largely through the bitter experience of recent years (and not only in Japan).