Forex market analysis

One Day, Two Rates

Tuesday, 02 March 2010 00:00

In Thursday market eyes will focus both on the EU and UK rate decisions. Both the Euro and the Sterling have been under strong selling pressure lately the Euro pressed down by the Greek debt issue and the Sterling by the looming political instability. The selling pressure on the Euro eased somewhat in recent hours after meetings between EU representatives on the Greek issue spurred rumors an agreement might be at hand providing support for euro to hold above the 1.35. Trade for the Sterling however remained nervous. The cable fell below the 1.5$ support against the Dollar and reached close to a one year low against the Yen as fears over UK political stability curbed bets on fiscal diceplin and triggered crowded short selling on the sterling.

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Nonfarm payrolls around the corner

Tuesday, 02 March 2010 00:00

US nonfarm payrolls and unemployment is due on Friday, the FX market is currently pricing a loss of 50K jobs with consensus bets on a 9.8% of unemployment. Although the market’s main focus is currently on the Greek debt issue nonfarm payrolls is known as a market moving even. Why? Historically after recessions the Fed tends to wait for unemployment to go in the “right” direction before moving into higher rates. Inflation in the US still looks rather remote and the Fed continues to pledge for rates to stay at record lows. However the Fed is also keen to exit emergency liquidity facilities. Not so long ago the Fed raised the discount lending rate for banks to 0.75% and announced it will end MBS(Mortgage securities) purchases which it currently holds more than 1 Trillion to support mortgages. Such actions by the Fed signal the Fed is determined to curb excess liquidity causing an effective tightening. Although squeezing out excess liquidity does not have the same effect on markets as raising the benchmark rate it certainly has a strong impact on Dollar sentiment.

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Weekly Market Review for March 1st, 2010

Sunday, 28 February 2010 11:25

The markets continued to gyrate this week, as investors remained fearful of issues related to European debt, specifically the debt related to Greece and Spain. The Euro after facing heaving selling pressure mid week was able to bounce and finish up the week with a slight gain. The S&P 500 Index also faced a large push to the downside but managed to climb higher to finish the week with a small loss. With all the gyration in the market, the S&P 500 Index is having a difficult time with strong resistance - the 50 day moving average.

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Yen and Dollar gain as Forex unrest dominates

Thursday, 25 February 2010 00:00

Nervousness in the Forex market resumed as dented US home sales and the Fed’s exit scheme weighed on the Fed’s pledge to low rates. Yesterday the Fed Chairman Ben Bernanke gave his Semi-Annual testimony to Congress. The Fed chairman outlined the move last week to raise the discount rate to 0.75% was strictly a move towards normality and does not pose a preliminary move towards a hike of the benchmark rate. The Fed chairman reiterated the benchmark rate will be low for an extended period stressing that the US job market remains extremely fragile and acts as a lager on the US economy. The Fed chairman emphasized the importance of the housing market as US banks hold a substantial exposure to the market. However the chairman gently avoided reference to the weak housing figures as to prevent fears over the Feds intention to exit the Mortgage debt market.

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