Forex Market Pulse From QE2 To G20 Summit

Last week's US Federal Reserve announced an additional $600 billion in asset purchases to support the economy, but as discussed earlier, with the size and scope of the move already priced in, the dollar has managed to stabilize over the past few days, particularly against the euro. Volatility in the currency markets have become a focal point of foreign policy, with many nations seen as deliberately weakening their currencies to give their exporters a competitive advantage.

G20 Summit: As G20 heads of state meet outside Seoul South Korea from November 12-14 where President Obama is likely to be told that the Fed action was an effort to weaken the dollar to boost exports, analysts feel that most global leaders have their work cut out for on the one hand the Germans and the Chinese are complaining about the Fed's quantitative easing while the US, Canadians, Europeans are all complaining about under valued Asian currencies on the other. World Bank President Zoellich meanwhile thinks its a great time establish a new global currency agreement based to some extent on gold. The French want to orchestrate a new global accord during their reign as G20 chairman in 2011. Although President Obama is likely to stress the need for Asia, led by China, to appreciate their currencies, analysts believe that Obama will have the advantage of history over the past four decades where the US readily comes across as more of a free trading entity than the newly developed nations from which he will be receiving criticism.


Correlating Currencies and Inflation: Although the Fed appears to have succeeded in stabilizing market implied inflation expectations higher, this has been accompanied by a markedly weaker US dollar in recent times. Faced with a strong disinflationary trend, it seems that the Fed would want to keep inflationary expectations anchored at higher levels, but there are concerns that once deflationary expectations get entrenched, consumers postpone their consumption plans while businesses refrain from investing. Moreover, given the side-effect of the weaker dollar, the Fed’s strategy has run into international resistance with the G20 statement noting “advanced economies with reserve currencies” promoting excessively volatile capital flows. Meanwhile analysts at BNP Paribas believe that with an arguably stretched short USD position prone to covering, the appropriate strategy would be to shift to funding long Asian FX plays in GBP instead of the USD.

ETFs Investment Options For The US Dollar include:

PowerShares DB USD Index (UDN): The Index is a rules-based index composed solely of short USDX futures contracts. The USDX futures contract is designed to replicate the performance of being short the US Dollar against the following currencies: Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc.

Expense Ratio: 0.40%

PowerShares DB USD Index Bullish (UUP): The Index is a rules-based index composed solely of long USDX futures contracts. The USDX futures contract is designed to replicate the performance of being long the US Dollar against the following currencies: Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc.

Expense Ratio: 0.50%


EUR: The euro weakened for a second day as concern that governments in the region will struggle to pay their debt increased before Ireland opens its books to European Union officials. Analysts at Capital Markets believe that the problems in Europe are starting to rear their ugly head again and some feel this could be just the tip of the iceberg for the euro. The euro fell 0.9 percent to $1.3905 in New York from $1.4032 on Nov. 5. It reached $1.4282 on Nov. 4, the highest since Jan. 20. It dropped as much as 1.2 percent versus Japan’s yen, matching the drop on Oct. 29, before trading at 112.85 yen, down 1 percent from 114.03 on Nov. 5.


EUR Data: Economic sentiment in the Eurozone surprised analysts in October by rising while consumer sentiment was steady at its highest level since January 2008. Industrial orders beat expectations in August with robust gains of 5.3% m/m and 24.4% y/y. The upward spike was led by capital goods that are often a barometer for rising overall orders in the coming months.



Euro ETFs To Watch Out For:

Rydex CurrencyShares Euro Currency Trust (FXE): The EUR/USD exchange rate is a foreign exchange spot rate that measures the relative values of two currencies, the euro and the U.S. dollar.

FXE Tracks: Euro Index. Expense Ratio: 0.40%

Short Euro ETFs

ProShares UltraShort Euro (EUO): ProShares UltraShort Euro seeks daily investment results, before fees and expenses, that correspond to twice (200%) the inverse (opposite) of the daily performance of the U.S. Dollar price of the Euro.

EUO Tracks: Euro (-200%) Index. Expense Ratio: 0.95%

Market Vectors-Double Short Euro ETN (DRR): As the Index is two-times leveraged, for every 1% weakening of the euro relative to the U.S. dollar, the level of the Index will generally increase by 2%, while for every 1% strengthening of the euro relative to the U.S. dollar, the Index will generally decrease by 2%.

DRR Tracks: Double Short Euro Index. Expense Ratio: 0.65%

Long Euro ETFs

ProShares Ultra Euro (ULE): ProShares Ultra Euro seeks daily investment results, before fees and expenses, that correspond to twice (200%) the U.S. Dollar price of the Euro.

ULE Tracks: Euro (200%) Index. Expense Ratio: 0.95%

Market Vectors-Double Long Euro ETN (URR): As the Index is two-times leveraged, for every 1% strengthening of the euro relative to the U.S. dollar, the level of the Index will generally increase by 2%, while for every 1% weakening of the euro relative to the U.S. dollar, the Index will generally decrease by 2%.

URR Tracks: Double Long Euro Index. Expense Ratio: 0.65%


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Forex Market Pulse: Euro's Surge, QE2, And the Next Direction of USD

By world market pulse team on November 03,2010

Most of the world currency markets are brimming with speculation over US Congress election results and QE2 grabbing the most attention. While the US dollar was unable to sustain its gains from the previous session Thursday morning, coming under pressure ahead of the latest word on the US jobs market, the euro on the other hand snapped back against the dollar on Thursday, as better-than-forecast economic data from the Euro zone raised speculation that central bankers in Brussels will begin to normalize interest rates rather than ease further. The mid-term election results are likely to be overshadowed by the FOMC where speculation that the Fed will announce USD500bn of asset purchases Wednesday has intensified, but analysts at BNP Paribas believe that with investors increasingly expecting a month-by-month approach to the implementation, a more gradual approach would be consistent with the G20 meeting, where negotiations appear to be ongoing.

Next direction of USD?
USD: The dollar has been unable to sustain its gains from the previous session coming under modest pressure ahead of the latest word on the US jobs market. The Fed meets today, November 3, and is reportedly set to embark on a series of gradual asset purchases totaling a few "hundred billion" dollars. In 2009, the Fed snapped up around $2 trillion in an effort to spur the economy. Still, currency experts feel that the dollar is relatively stable amid growing speculation that the size and scope of the Federal Reserve's anticipated bond purchase program is likely to be smaller than its first round of quantitative easing. Certain analysts and economists believe QE2 may contribute, at the cost of bringing down the USD almost 20% over a period of time, to triggering US exports and helping the economy etc. even though it will cause a disaster to the world currency status of the USD. While this may be gradual, the scene does not look very likely. We believe the USD may remain strong.

US Data Analysis: Initial US jobless claims fell to 434,000 from the previous week's revised figure of 455,000. The decrease surprised economists, who had expected claims to edge up to 458,000 from the 452,000 originally reported for the previous week. While there were no special factors cited for the decline in claims, analysts at Deutsche Bank are hesitant to read too much into the data, and the four-week moving average is still consistent with job growth of around 100k per month. Continuing claims registered a more robust decline of 122k to 4356k for the week of October 16, the lowest since November 22, 2008.

Correlating Currencies and Inflation: Although the Fed appears to have succeeded in stabilizing market implied inflation expectations higher, this has been accompanied by a markedly weaker US dollar in recent times. Faced with a strong disinflationary trend, it seems that the Fed would want to keep inflationary expectations anchored at higher levels, but there are concerns that once deflationary expectations get entrenched, consumers postpone their consumption plans while businesses refrain from investing. Moreover, given the side-effect of the weaker dollar, the Fed’s strategy has run into international resistance with the G20 statement noting “advanced economies with reserve currencies” promoting excessively volatile capital flows.

Meanwhile analysts at BNP Paribas believe that with an arguably stretched short USD position prone to covering, the appropriate strategy would be to shift to funding long Asian FX plays in GBP instead of the USD.

ETFs Investment Options For The US Dollar include:

PowerShares DB USD Index (UDN): The Index is a rules-based index composed solely of short USDX futures contracts. The USDX futures contract is designed to replicate the performance of being short the US Dollar against the following currencies: Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc.

Expense Ratio: 0.40%

PowerShares DB USD Index Bullish (UUP): The Index is a rules-based index composed solely of long USDX futures contracts. The USDX futures contract is designed to replicate the performance of being long the US Dollar against the following currencies: Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc.

Expense Ratio: 0.50%

EUR: The euro, meanwhile, snapped back against the dollar after better than forecast economic data from the Eurozone raised speculation that central bankers in Brussels will begin to normalize interest rates rather than ease further. Economic confidence in the 16 countries that use the euro rose to its highest level in nearly three years during October, the European Commission said on Thursday. The euro rose to $1.3910 versus the greenback, paring most of this week's losses. With the advance, the euro moved back towards a recent 8-month high near $1.4150.

EUR Data Analysis: The European Central Bank lowered interest rates to a record low one percent during the throes of the worst recession in decades, but has resisted additional rate cuts despite a sluggish economy. Analysts at Deutsche Bank have meanwhile suggested that the euro is still in a correction mode and may remain so while the EU summit is in session. Good support entered yesterday only at 1.3610.

Euro ETFs To Watch Out For:

Rydex CurrencyShares Euro Currency Trust (FXE): The EUR/USD exchange rate is a foreign exchange spot rate that measures the relative values of two currencies, the euro and the U.S. dollar.

FXE Tracks: Euro Index. Expense Ratio: 0.40%

Short Euro ETFs

ProShares UltraShort Euro (EUO): ProShares UltraShort Euro seeks daily investment results, before fees and expenses, that correspond to twice (200%) the inverse (opposite) of the daily performance of the U.S. Dollar price of the Euro.

EUO Tracks: Euro (-200%) Index. Expense Ratio: 0.95%

Market Vectors-Double Short Euro ETN (DRR): As the Index is two-times leveraged, for every 1% weakening of the euro relative to the U.S. dollar, the level of the Index will generally increase by 2%, while for every 1% strengthening of the euro relative to the U.S. dollar, the Index will generally decrease by 2%.

DRR Tracks: Double Short Euro Index. Expense Ratio: 0.65%

Long Euro ETFs

ProShares Ultra Euro (ULE): ProShares Ultra Euro seeks daily investment results, before fees and expenses, that correspond to twice (200%) the U.S. Dollar price of the Euro.

ULE Tracks: Euro (200%) Index. Expense Ratio: 0.95%

Market Vectors-Double Long Euro ETN (URR): As the Index is two-times leveraged, for every 1% strengthening of the euro relative to the U.S. dollar, the level of the Index will generally increase by 2%, while for every 1% weakening of the euro relative to the U.S. dollar, the Index will generally decrease by 2%.

URR Tracks: Double Long Euro Index. Expense Ratio: 0.65%

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World Market Forex Pulse: Exploring Dollar's Drop And Euro's Surge

By world market pulse team on October 29,2010


Most of the world currency markets is brimming with activity as speculation over QE2 grabbing most attention. While the US dollar was unable to sustain its gains from the previous session Thursday morning coming under pressure ahead of the latest word on the US jobs market, the euro on the other hand snapped back against the dollar on Thursday, as better-than-forecast economic data from the Euro zone raised speculation that central bankers in Brussels will begin to normalize interest rates rather than ease further.

USD: The dollar has been unable to sustain its gains from the previous session coming under modest pressure ahead of the latest word on the US jobs market. The Fed meets on November 3 and is reportedly set to embark on a series of gradual asset purchases totaling a few hundred billion dollars. In 2009, the Fed snapped up around $2 trillion in an effort to spur the economy. Still currency experts feel that the dollar is relatively stable amid growing speculation that the size and scope of the Federal Reserve's anticipated bond purchase program is likely to be smaller than its first round of quantitative easing.

US Data Analysis: Initial US jobless claims fell to 434,000 from the previous week's revised figure of 455,000. The decrease surprised economists, who had expected claims to edge up to 458,000 from the 452,000 originally reported for the previous week. While there were no special factors cited for the decline in claims, analysts at Deutsche Bank are hesitant to read too much into the data, and the four-week moving average is still consistent with job growth of around 100k per month. Continuing claims registered a more robust decline of 122k to 4356k for the week of October 16, the lowest since November 22, 2008.


EUR: The euro meanwhile snapped back against the dollar after better than forecast economic data from the Euro zone raised speculation that central bankers in Brussels will begin to normalize interest rates rather than ease further. Economic confidence in the 16 countries that use the euro rose to its highest level in nearly three years during October, the European Commission said on Thursday. The euro rose to $1.3910 versus the greenback, paring most of this week's losses. With the advance, the euro moved back towards a recent 8-month high near $1.4150.


EUR Data Analysis: The European Central Bank lowered interest rates to a record low one percent during the throes of the worst recession in decades, but has resisted additional rate cuts despite a sluggish economy. Analysts at Deutsche Bank have meanwhile suggested that the euro is still in a correction mode and may remain so while the EU summit is in session. Good support enters today only at 1.3610.



Euro ETFs To Watch Out For:

Rydex CurrencyShares Euro Currency Trust (FXE): The EUR/USD exchange rate is a foreign exchange spot rate that measures the relative values of two currencies, the euro and the U.S. dollar.

FXE Tracks: Euro Index. Expense Ratio: 0.40%

Short Euro ETFs

ProShares UltraShort Euro (EUO): ProShares UltraShort Euro seeks daily investment results, before fees and expenses, that correspond to twice (200%) the inverse (opposite) of the daily performance of the U.S. Dollar price of the Euro.

EUO Tracks: Euro (-200%) Index. Expense Ratio: 0.95%

Market Vectors-Double Short Euro ETN (DRR): As the Index is two-times leveraged, for every 1% weakening of the euro relative to the U.S. dollar, the level of the Index will generally increase by 2%, while for every 1% strengthening of the euro relative to the U.S. dollar, the Index will generally decrease by 2%.

DRR Tracks: Double Short Euro Index. Expense Ratio: 0.65%

Long Euro ETFs

ProShares Ultra Euro (ULE): ProShares Ultra Euro seeks daily investment results, before fees and expenses, that correspond to twice (200%) the U.S. Dollar price of the Euro.

ULE Tracks: Euro (200%) Index. Expense Ratio: 0.95%

Market Vectors-Double Long Euro ETN (URR): As the Index is two-times leveraged, for every 1% strengthening of the euro relative to the U.S. dollar, the level of the Index will generally increase by 2%, while for every 1% weakening of the euro relative to the U.S. dollar, the Index will generally decrease by 2%.

URR Tracks: Double Long Euro Index. Expense Ratio: 0.65%

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World Market Pulse Forex Update: Analyzing The G20 Sound Bites

By world market pulse team on October 25,2010

World currency markets have been largely sluggish in the past week. As the November date of the FOMC draws ever nearer, there has been a wait and watch situation developing especially about the level of any stimulus especially in light of some of US Treasury Secretary Tim Geithner’s recent comments with respect to the major currency pairs.

Meanwhile the market sentiment turned out to be correct regarding the G20 finance ministers and central bankers meeting in South Korea as the meet failed to achieve anything of note apart from a few sound bites about monitoring the situation, and urging countries not to use their currencies as weapons of devaluation. Although the G20 meet made all the sound notes, analysts feel that it is unlikely to reverse the overall pressure on the US dollar as it continues to remain under pressure.

USD And Q3 GDP:

After the G20 meet failed to set any market tone, all eyes are now focussed on the coming week which can is a critical week for both the dollar as well as the pound as traders are keeping a close watch over the release of Q3 GDP figures for evidence of economic deterioration and the increased likelihood of further stimulus. Meanwhile the US dollar is continuing to show signs of a possible rebound as it continues to hold above key trend line support. The release of Q3 GDP on Friday where a figure of 2.2% is expected will in all likelihood be a key indicator of what sort of measures the Fed may embark on at the conclusion of its next meeting on November 3rd.

GBP: The pound is also set for a key week with the release on Tuesday of Q3 GDP where expectations are for a slip back to a figure of 0.4% which would be a shot in the arm for the dovish camp in the Bank of England’s monetary policy committee (MPC) for a further round of quantitative easing (QE) into the UK economy, and send the pound lower. The pound is currently trading near trend line support at 77.80 from its all-time lows on its trade weighted index at 73.05, set in early 2009. A break below this level could well target further sterling weakness in the near term. A break of this trend line could well target further sterling weakness towards this years low’s at 76.10.


World Market Pulse Euro Update: Traders are likely to remain in a Euro Bullish mode despite the firming up of the US dollar amid Improved Home Builder Confidence even as EUR together with Scandinavian currencies under performed the rest of G10 at the start of the week after investors sought to take profit on their USD-short positions. EU’s Economic and Monetary Commissioner Olli Rehn has meanwhile indicated that the currencies will feature prominently on the agenda after Eurogroup’s Chairman Juncker had said that there has been too much volatility between the main global currencies.

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World Market Pulse Forex Update: Analyzing G20 Sound Bites

By world market pulse team on October 25,2010

World currency markets have been largely sluggish in the past week. As the November date of the FOMC draws ever nearer, there has been a wait and watch situation developing especially about the level of any stimulus especially in light of some of US Treasury Secretary Tim Geithner’s recent comments with respect to the major currency pairs.

Meanwhile the market sentiment turned out to be correct regarding the G20 finance ministers and central bankers meeting in South Korea as the meet failed to achieve anything of note apart from a few sound bites about monitoring the situation, and urging countries not to use their currencies as weapons of devaluation. Although the G20 meet made all the sound notes, analysts feel that it is unlikely to reverse the overall pressure on the US dollar as it continues to remain under pressure.

USD and Q3 GDP:

After the G20 meet failed to set any market tone, all eyes are now focussed on the coming week which can is a critical week for both the dollar as well as the pound as traders are keeping a close watch over the release of Q3 GDP figures for evidence of economic deterioration and the increased likelihood of further stimulus. Meanwhile the US dollar is continuing to show signs of a possible rebound as it continues to hold above key trend line support. The release of Q3 GDP on Friday where a figure of 2.2% is expected will in all likelihood be a key indicator of what sort of measures the Fed may embark on at the conclusion of its next meeting on November 3rd.

GBP: The pound is also set for a key week with the release on Tuesday of Q3 GDP where expectations are for a slip back to a figure of 0.4% which would be a shot in the arm for the dovish camp in the Bank of England’s monetary policy committee (MPC) for a further round of quantitative easing (QE) into the UK economy, and send the pound lower. The pound is currently trading near trend line support at 77.80 from its all-time lows on its trade weighted index at 73.05, set in early 2009. A break below this level could well target further sterling weakness in the near term. A break of this trend line could well target further sterling weakness towards this years low’s at 76.10.

World Market Pulse Euro Update: Traders are likely to remain in a euro bullish mode despite the firming up of the US dollar amid Improved Home Builder Confidence even as EUR together with Scandinavian currencies under performed the rest of G10 at the start of the week after investors sought to take profit on their USD-short positions. EU’s Economic and Monetary Commissioner Olli Rehn has meanwhile indicated that the currencies will feature prominently on the agenda after Eurogroup’s Chairman Juncker had said that there has been too much volatility between the main global currencies.

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World Market Pulse FX Update: Dollar Drive Amid Housing Data And Geithner Remarks

By world market pulse team on October 19,2010


The US dollar had its worst month since May 2009 against a basket of currencies. In fact for the last six weeks the US dollar has slid lower relentlessly on speculation that the Federal Reserve would embark on a further stimulus program to liven up the flagging US economy. In fact the US dollar index despite making new 8 month lows actually finished the day higher than when it started after the Fed chairman Bernanke's speech on Friday underlined the inevitability of such a move in the near future. The Dollar index however lost some ground towards the end of the day as doubts remained about the scale and the extent of any easing at next months Fed meeting. The US dollar did however gain some late support from some comments by US Treasury Secretary Tim Geithner, who stated in Paolo Alto that the US would not seek to devalue the dollar saying, "It is not a viable, feasible strategy and we will not engage in it.”

Low US Industrial Production: Meanwhile a worse then expected US industrial production figures for September at -0.2% against an expectation of a 0.2% gain, seems to reinforce the case for additional stimulus measures and saw the US dollar slide back from the highs of the day, especially against the euro as 10 year bond yields closed in the single currency’s favor for the first time in 10 months

Improved Home Builder Confidence: The dollar improved across the board following today’s improvement in the housing market survey. All three of the HMI’s components registered gains in October. The index of current sales conditions improved by 3 points to 16, the index for sales expectations for the next 6-months rose 5 points to 23 and the index gauging traffic of prospective buyers rose 2 points to 11. The improved data gave investors an excuse to lay off the buck as it briefly put into question the extent of Fed easing.

Some of the other potential catalysts that can act for a positive Dollar Index are discussed here.

A Case For A Positive US Data Triggering Dollar Index:

Linking Economic Data Release And USD

According to BNP Economic Research, US economists tend to react quickly to data releases. When data comes in weak, expectations are scaled back lower, increasing the chance of data exceeding expectations. Hence, the surprise indicator becomes very erratic. Hence, months of positive data surprises are often followed by a months with negative data surprises. Only, when there were severe growth deteriorations as in autumn 2006, summer 2008 and the May – July period of this year will the surprise indicator run negative readings for several months. US growth expectations have been scaled down suggesting that it will not take a lot to exceed low expectations.

ETFs Investment Options include

Rydex CurrencyShares Euro Currency Trust (FXE): The EUR/USD exchange rate is a foreign exchange spot rate that measures the relative values of two currencies, the euro and the U.S. dollar.

FXE Tracks: Euro Index. Expense Ratio: 0.40%

PowerShares DB USD Index (UDN): The Index is a rules-based index composed solely of short USDX futures contracts. The USDX futures contract is designed to replicate the performance of being short the US Dollar against the following currencies: Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc.

Expense Ratio: 0.40%

iPath GBP/USD Exchange Rate ETN (GBB): The GBP/USD exchange rate is a foreign exchange spot rate that measures the relative values of two currencies, the British pound and the U.S. dollar.

Expense Ratio: 0.40%

iPath EUR/USD Exchange Rate ETN (ERO): The EUR/USD exchange rate is a foreign exchange spot rate that measures the relative values of two currencies, the euro and the U.S. dollar.

Expense Ratio: 0.40%

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World Market Pulse FX Update: Analyzing SEK Amid Lower Growth Forecast

By world market pulse team on October 16,2010


With the Swedish government revising its growth forecasts for 2011 lower in the budget presented Tuesday, citing the risk of slower growth developing in the eurozone as a result of fiscal austerity, there is a growing concern to see which way the Sweedish currency goes with almost 40% of Sweden’s exports heading to the eurozone is a rising concern. However, despite the prospect of slower exports to the eurozone, the government is still forecasting growth of 3.7% in 2011 and 3.4% in 2012. Although this is a downward revision from the earlier forecast of 4.0% growth for 2011, the pace of growth forecast by the Swedish government would still far outpace the anticipate growth in much of the developed world.


SEK Negatives: The Swedish government's latest budget has proposed SEK13bn of tax cuts and spending, experts feel that it they are in line with expectations and indications given ahead of the elections, but could very well prove insufficient to keep the economy on track if developments fail to meet the governments optimistic assumptions. Although Analysts at BNP Paribas feel that investors would still have to look to the emerging markets in Asia and Latin America to find a faster pace of growth as Swedish government estimates are on the optimistic side with BNP Paribas experts forecasting growth in Sweden of just 2.9% in 2011.


SEK Positives: Swedish data has been robust and better than the market had hoped for and Swedish rate expectations have risen accordingly. Despite the Fed moving towards further policy accommodation there is no concern at the Riksbank. Although there are rising concerns over the international environment and the level of the SEK, on the positive side, Riksbank’s survey of Swedish companies have revealed that that most corporations expect the economic climate to continue to improve over the next six months with a broad up turn in activity expected.

Amid all the negatives, experts continue to believe that there is still plenty of scope for the SEK to rally as Sweden continues to out perform its peers and the Riksbank looks to normalize momentary policy. Testimony to the fact is that the Swedish equity market has continued to outperform with the OMXC up 14.5% year-to-data (eurostox is currently down 6.4% year-to-date).

SEK TWI and Swedish Retail sales


Source: Reuters Ecowin Pro. The SEK is expected to extend gains as the Swedish economy is set to continue to out perform with the Riksbank maintaining its policy of normalizing monetary conditions. The SEK is still a long way from being overvalued on many measures, suggesting that concerns by some members of the Riksbank regarding the level of the SEK are unjustified.


SEK Projections: Analysts at BNP Paribas have recommended using any near-term EURSEK corrective rebound into the 9.32/9.34 area to establish renewed bearish strategies targeting the 8.90 area as NOKSEK is also set to extend the major down trend towards the 1.0970 area.


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Tracing Job Data's Impact On Dollar Index And Forex Trends

By world market pulse team on October 09,2010

As if the business services firm ADP's latest installment of its National Employment Report, indicating that the situation for private employment in the U.S. took a turn for the worse in September was not bad enough, the dollar fell across the board as investors dumped the dollar for higher yielding and more lucrative currencies.

The ADP reported a loss of 39,000 jobs in the private sector against expectations of new job creation of 50,000. Although most optimists were surprised by the results, ADP said there was no clear momentum in employment as of now. Although its hard to please everyone, most analysts agree that ADP numbers are one of the best single predictors of the official payrolls number, even if there have been a handful of bad misses.

Most analysts believe that it would take a payrolls reading bigger than +150k to get the market to think the Fed would reconsider QE2 and even with neutral numbers, it is likely the market will hold and the USD is most likely to continue breaking through to new levels of weakness like 1.40 or higher in EURUSD. With a negative ADP outlook, the dollar index fell to its lowest levels since January at 77.619 from 77.811 while the euro hit a fresh 8-month high at 1.3918. Despite concerns over the Eurozone sovereign debt re- igniting, most analysts believe that the dollar might just continue its ongoing fall against the Euro.

For more Forex Currency Trends and research articles visit http://Worldmarketpulse.com

US Policy And The Weakening USD:

Given the recent USD weakening and unilateral actions on exchange rates, discussions between the G20 Deputy Finance Ministers and G7 Finance Ministers/Central Bank Governors are likely to feature currency games much more prominently than in the past couple of years. There is a deep concern that the US is likely to receive a strong degree of criticism for effectively ‘debasing’ the dollar via extremely accommodative monetary policy. Experts also feel that despite the criticism, the US government or Fed will not change course and if comments on the sidelines of the meetings foster expectation for action, eventual disappointment should only reinforce downward pressure upon USD.


Forex Trends Update: Goldman Sachs Global Economic report has meanwhile revised the majority of its FX forecasts to reflect broad dollar depreciation and it revised its euro forecasts to hit a whopping $1.55 in the next 12-months. Meanwhile, the pound hit a new 2-month high at 1.5938, while the CAD breached a new 5-month high at 1.0083, as it nears dollar parity. The riskier currencies also took advantage over its higher yields over the plummeting buck as the Australian Dollar hit a fresh 2-year high at 0.9781 while the New Zealand Dollar also hit a new 1-year high at 0.7537.

For more Forex Currency Trends and research articles visit http://Worldmarketpulse.com

Is Global Currency War A Clear Advantage To The Chinese Yuan?

By world market pulse team on October 09,2010

As the global economies, business and market trends change momentum towards the east, the relationship between a country's economy and its currency is getting much more complicated as governments across the globe are assuming a bigger role in propping up the financial system and encouraging economic growth. What started as a small echo with allegations on China to knowingly undervalue its currency has now grown into a currency war after the Japanese government's intervention in the currency markets by weakening the Yen for the first time in six years while the counter strike from the Dollar came when the FED announced the readiness to introduce a new round of quantitative easing to boost the economy. Such has been the impact of the recent currency games that IMF chief Dominique Strauss-Kahn has now joined those warning that governments are risking a currency war if they try to manipulate exchange rates to solve domestic problems.

Experts meanwhile feel that if the currency games continue for a long term, investor confidence in international currencies could break down to such an extent that it could lead to sharp changes in the near future. A few forex experts and analysts have expressed concern that Chinese Yuan could very well emerge as the next preferred currency of global trade as and when the dust settles down from the current tit for tat mechanism. If investor confidence is shaken up badly by the prolonged currency tug of war, the absence of any other credible alternative to the US dollar as the reserve currency of choice might just work in favor of the Chinese Yuan.

According to Joseph Yam, a former chief executive of the Hong Kong Monetary Authority, the yuan should become fully convertible, the domestic debt market in China should acquire depth, and a robust financial infrastructure should be put in place if the Chinese Yuan has to emerge as the preferred choice of the investors in the near future.

China and Hong Kong had earlier agreed to loosen rules regulating trading of the yuan in the territory in July, tweaking rules to allow the sale of yuan-denominated financial products and giving companies greater access to yuan funds. Much of the trade settlement business came from companies looking to re-denominate to yuan away from the US dollar, which most companies operating in China use to pay and issue invoices.


Although skeptics have questioned an such possibility because China as of now runs a balance-of-payment surplus by keeping its currency artificially pegged might find it extremely difficult to take the yuan global without changing its export focus but Guonan Ma, senior economist at the Bank for International Settlements believes that it isn’t entirely necessary for the yuan to become fully convertible for it to be gradually internationalized. There is another argument saying that if China can work its way around the problem by building good institutions, established rule of law, property rights, good corporate governance with long-term bond markets and stringent regulations

Meanwhile China’s central bank, the People’s Bank of China, has already been trying to do by establishing currency swap agreements with central banks around the world.

The depreciation of the Yuan compared to the Dollar has already caused a growing tension between The U.S and China in recent weeks. The U.S is blaming the cheap Yuan for its economic issues and even financial sanctions against China have been on the cards. If these two giant economies are starting to threaten each other, the impact on the ever-slowing recovery could be enormous.

Reality Of The Chinese Currency Drama: China, from its earliest civilizations has always been a clever economy and it's certain that it would not enter into an economic suicide by blindly imitating the west. It is also quite clear that the Chinese government would not allow their currency to go down with the dollar ship as most of the export dependent companies of China which form big chunk of current Chinese economy may lose steam as most of them work on very thin margins. Although economists continue to be skeptical about the goodness of the Chinese currency moves, there is no doubt that China is ready to resume greater flexibility with its yuan.

Political Complications: Although financial analysts are divided over the issue, most political observers have been quite unanimous in saying that whether the yuan becomes more international if at all, politicians and Chinese policymakers are likely to loose their degree of freedom, as there would be deep international repercussions of their policy measures.

Whatever might be the case, most economists are of the view that the rise of the Yuan or renminbi is desperately needed as a multipolar system actually helps in stabilizing the international monetary system.

For more Forex Currency Trends and research articles visit http://Worldmarketpulse.com

World Market Pulse Forex Update: Analyzing G20 Sound Bites

World currency markets have been largely sluggish in the past week. As the November date of the FOMC draws ever nearer, there has been a wait and watch situation developing especially about the level of any stimulus especially in light of some of US Treasury Secretary Tim Geithner’s recent comments with respect to the major currency pairs.

Meanwhile the market sentiment turned out to be correct regarding the G20 finance ministers and central bankers meeting in South Korea as the meet failed to achieve anything of note apart from a few sound bites about monitoring the situation, and urging countries not to use their currencies as weapons of devaluation. Although the G20 meet made all the sound notes, analysts feel that it is unlikely to reverse the overall pressure on the US dollar as it continues to remain under pressure.

USD and Q3 GDP:

After the G20 meet failed to set any market tone, all eyes are now focussed on the coming week which can is a critical week for both the dollar as well as the pound as traders are keeping a close watch over the release of Q3 GDP figures for evidence of economic deterioration and the increased likelihood of further stimulus. Meanwhile the US dollar is continuing to show signs of a possible rebound as it continues to hold above key trend line support. The release of Q3 GDP on Friday where a figure of 2.2% is expected will in all likelihood be a key indicator of what sort of measures the Fed may embark on at the conclusion of its next meeting on November 3rd.

GBP: The pound is also set for a key week with the release on Tuesday of Q3 GDP where expectations are for a slip back to a figure of 0.4% which would be a shot in the arm for the dovish camp in the Bank of England’s monetary policy committee (MPC) for a further round of quantitative easing (QE) into the UK economy, and send the pound lower. The pound is currently trading near trend line support at 77.80 from its all-time lows on its trade weighted index at 73.05, set in early 2009. A break below this level could well target further sterling weakness in the near term. A break of this trend line could well target further sterling weakness towards this years low’s at 76.10.

World Market Pulse Euro Update: Traders are likely to remain in a euro bullish mode despite the firming up of the US dollar amid Improved Home Builder Confidence even as EUR together with Scandinavian currencies under performed the rest of G10 at the start of the week after investors sought to take profit on their USD-short positions. EU’s Economic and Monetary Commissioner Olli Rehn has meanwhile indicated that the currencies will feature prominently on the agenda after Eurogroup’s Chairman Juncker had said that there has been too much volatility between the main global currencies.