QE Expanded by £25 billion and Sterling Rises – Why?
Currencies Direct Reviews QE Moves and US Non-farm Payroll
6, November 2009
The Monetary Policy Committee voted as expected to leave interest rates unchanged at 0.5%. However Quantitative Easing was expanded by £25 billion to take the programme to £200 billion of money created to buy debt. This was less than many expected and in the accompanying statement the Bank of England were slightly more upbeat on a pick up in economic activity and the market has taken the perception that we will now see at the very least a pause in the programme.
This changes the perception towards exit strategies and to a more hawkish tone…this has given sterling a boost even in the light of the decision to expand QE. The market is looking forward and the prospect of the next quarter showing the UK economy returning to growth and the halting of further QE. The markets however remain very fickle and this sentiment could change very quickly.
Yesterday UK manufacturing rose 1.7% above expectations and Industrial Production climbed, again supportive of the sentiment that the worst is behind us.
Today we have the Non-farm payroll report from the US. This is a huge number for the markets and the general assumption is that if the number is above expectations then the USD could weaken further and vice versa. Expect volatility between 12-2 pm on the back of this. EUR/USD is looking to push back over the 1.50 level and GBP/USD is looking to break beyond 1.66. The recent Euro strength against the USD has tempered sterling gains against the euro.
Report by Phil McHugh
Currencies Direct is a leading commercial foreign exchange company with offices in the UK, Australia and Spain and has offices across 5 continents. Currencies Direct’s head office and global trading centre is based in the City of London.
The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
Compiled by Tom Nadir.
You can view a new trading video here, with my compliments.
BoE Rate Decision Eagerly Awaited
Currencies Direct Reviews – Bonfire Day in the UK!
5, November 2009
Today at midday the MPC will announce the decision on interest rates and Quantitative Easing. Interest rates are almost certain to remain on hold at 0.5% with the decision on QE to take the spotlight. As today has drawn closer the expectation has escalated that the Bank of England will expand, the question is if they do by how much? The argument is that if they are going to expand then why not do £50 billion rather than £25 billion.
The reasons for expanding are very apparent. The recent dire GDP number, rising unemployment, dire public finances and banks that are still not passing on this increased liquidity. On the other hand most major economies are now looking at exit strategies from unconventional measures and there is a danger that over cooking QE could stoke inflation and lead to an inflationary problem and sharp interest rate increases to combat this.
At the same time there are whispers that the Q3 GDP will be revised upwards and that Q4 GDP will show an exit from recession and a slow recovery for the UK. So the arguments and the significance of today’s decision are evident. The BoE are walking a fine tightrope and they do not want to topple either way and obviously stay on track in controlling inflation.
The implications for the currency markets today are high. Volatility will be severe with the decision at midday followed by the European Central Bank decision at 12:45. If QE is expanded then this should lead to a sterling sell off, if they do not then we could see a sterling rally. The ECB are not likely to throw in any surprises today holding rates at 1% and giving little away in relation to monetary policy measures.
Last night the Federal Reserve maintained their rates and offered up no surprises with the statement to maintain “exceptionally low levels for an extended period”. They were slightly more optimistic than previously but nothing close to hawkish. The reaction therefore was to sell USD and an initial surge pushed GBP/USD towards 1.66 and EUR/USD towards 1.49 before fading in later trading.
One eye would have been on today’s central bank decision suppressing the appetite of the dollar sellers. Hold on to your hats today!
Report by Phil McHugh
Currencies Direct is a leading commercial foreign exchange company with offices in the UK, Australia and Spain and has offices across 5 continents. Currencies Direct’s head office and global trading centre is based in the City of London.
The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
Compiled by Tom Nadir.
You can view a new trading video here, with my compliments.
Huge Decision Looms for Bank of England
Currencies Direct Reviews Bank of England’s Upcoming Decision
4, November 2009
Tomorrow the MPC will meet for their monthly meeting but this time around the implications are huge. The decision on whether to pump billions more into the economy or hold fire has caused widespread debate with increasingly confusing economic signals adding to the issue.
The problem for the MPC is that it does not want to not do enough especially with the prospect of unemployment pushing past the 3 million mark. Data released overnight showed that UK Nationwide Consumer Confidence remained unchanged from September. The pound has surprisingly rallied against the USD and EUR with a good day for equities helping to boost the risk on trade. The USD and JPY fell yesterday and the pound was a major beneficiary of this weakness.
Supporting sterling this morning is economic data that UK PMI for services was up to 56.9 from 55.3 in September. Another good number from the UK. Could sterling be building up for another fall? We will see tomorrow!
Tonight we have the interest rate decision from the US FOMC and the rates look almost certain to be kept on hold. The market will gauge the Fed’s tone regarding existing and possible future policy. In the past the Fed have continued to use the statement “for an extended period” in describing how long rates will remain at very low levels. If this phrase is removed or toned down then the USD should strengthen due to the potential of interest rate increases being more imminent. Also from the US we have ISM services today which will be a key number in monitoring the economic recovery.
In other news poor retail sales data from Australia undermined the AUD slightly as the rest of the commodity currencies gained. Retail Sales came in at minus 0.2% a surprise number especially as Australia have recently upgraded their outlook.
Report by Phil McHugh
Currencies Direct is a leading commercial foreign exchange company with offices in the UK, Australia and Spain and has offices across 5 continents. Currencies Direct’s head office and global trading centre is based in the City of London.
The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
Compiled by Tom Nadir.
You can view a new trading video here, with my compliments.
Where Next for the Pound?
Currencies Direct Reviews the Beleaguered Pound
2, November 2009
Yesterday the pound slowly filtered lower as the markets digested the uncertainty surrounding the Bank of England rate decision and the upheaval of the UK banking sector. Against the USD, the pound initially started well before retreating a cent overnight to 1.6290. Against the euro it failed to hold the 1.11 retreating to 1.1050. GBP/JPY has now fallen to 146.75 as the market loses confidence in sterling. The question is will this continue and if so to what extent?
The main issues for the pound are recurring themes, namely further expansion of QE by up to £50 billion on Thursday and the UK’s dire public finances. 1.60 against the USD and 1.10 against the euroare key levels for sterling to hold this week.
Into the mix we also have the changes to the UK banking sector. Lloyds banking group plans to raise £21 billion to avoid government majority control. RBS group said it will sell its insurance division and some branches as it agreed to take an additional £25.5 billion from the government to covet the title of the most expensive bailout in the world. Chairman of the FSA Lord Turner has stated in the Telegraph that splitting the banking sector could create more risk, exactly what they are trying to avoid. He added that dividing the “casinos” from retail banks is too simplistic a solution. This debate, uncertainty and change to the banking sector could start to weigh on the pound in the short term.
Moving away from the UK we have seen a decent run of economic data around the globe as the drive to recovery continues. In the US yesterday we saw ISM manufacturing, pending home sales and construction spending all beating expectations. This produced a push higher on the risk trade and led to initial USD weakness with EUR/USD pushing towards 1.48 and GBP/USD holding above 1.64. This faded in later trading as sterling started to suffer. The better than expected US data will raise the prospects of a good payroll number on Friday.
Australia raised interest rates by 25 basis points as expected. Recent positives in Australia had created a call for a rise of 50 basis points and his may explain the weakness in the AUD after the decision.
Report by Phil McHugh
Currencies Direct is a leading commercial foreign exchange company with offices in the UK, Australia and Spain and has offices across 5 continents. Currencies Direct’s head office and global trading centre is based in the City of London.
The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
Compiled by Tom Nadir.
You can view a new trading video here, with my compliments.
QE- Will They Expand?
Currencies Direct Reviews – QE
2, November 2009
A milestone week for the markets this week with lots of data to look out for both here and across the pond. For sterling the main focus is undoubtedly centered upon the Bank of England meeting with the decision announced on Thursday at midday. The opinions on what will happen have been variant and this underlines the uncertainty surrounding the decision. I am favouring a £25 billion expansion at the moment.
Other factors that will affect sterling are reports that Gordon Brown is set to announce new “fiscal stimulus” in the autumn pre-budget statement and the restructuring of the UK banking sector. These two facets are likely to lead to change and uncertainty which is never good for the currency.
Today in the US we have the ISM manufacturing report which is expected to show a further expansion and on Wednesday the Federal Reserve will provide feedback on the economy and feedback on initiatives in process. On Friday we have the big number which is the non-farm payroll report which will be key to the future direction for the markets.
Also this week we have interest rate decisions from the European Central Bank, Reserve Bank of Australia to really ramp up the volatility stakes.
Some positive signs over the weekend that the Global economy is slowly on the mend, well at least in Asia. China’s October PMI rose to 55.2 from 54.3 in September and there was news the country had created 7.57 new jobs in the first 8 months of the year. Meanwhile Australia has upgraded it’s economic outlook and Australian house prices rose 4.2% in the third quarter. This could seal a 50 basis point rate rise this week from the RBA.
Report by Phil McHugh
Currencies Direct is a leading commercial foreign exchange company with offices in the UK, Australia and Spain and has offices across 5 continents. Currencies Direct’s head office and global trading centre is based in the City of London.
The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
Compiled by Tom Nadir.
You can view a new trading video here, with my compliments.
The Pound Charges Higher …
Currencies Direct Review of The Pound
30, October 2009
The beleaguered pound was in demand yesterday reaching a six week high verses the euro and holding its own against the stronger USD due to a combination of short covering and negative Euro sentiment on the back of the recent slide in global equity markets. Stronger than expected UK mortgage approval data also added to reasons to buy sterling with mortgage approvals numbering 56,215 in September, up from 52,970 in August and better than the increase of 54,000 forecast.
There was however a cloud on the horizon in the shape of the M4 money supply data although the headline M4 grew by 0.8% in September taking the annual rate of growth to 11.6% the BOE’s preferred measure which excludes some non-bank financial intermediaries fell 0.9% on the month and declined at an annualized rate of 1.7%. So while there continues to be encouraging signs of recovery coming from the housing market the money supply figures will surely support the case for more QE next week.
Later in the day US Q3 GDP recorded a rise of 3.5% in line with expectations and the biggest quarterly increase since the third quarter of 2007. The last time GDP was in positive territory was during the second quarter of 2008. The figures show that the recovery was broad based with consumer spending, which makes up more than two thirds of economic activity increased by a healthy 3.2% compared to a fall of 0.9% in the previous three months. Residential investment which was the catalyst for the downturn jumped 23% contributing to GDP for the first time since 2005.
But don’t get too carried away it must be noted that the key drivers for both consumer spending and residential investment has been massive US government stimulus packages totaling some US$1.7trn, which have already or will come to an end eventually i.e. Cash for Clunkers. Business inventories declined at a slower pace this quarter falling by US$131bn compared to US$160bn last quarter. In a separate report weekly jobless claims fell by a modest 1,000 last week to 530,000 encouraging but with the weekly average running well above 500k it does not bode well for the Non Farm Payrolls data due next week.
Markets took heart from all this positive US data and as risk aversion abated, equity and commodity prices responded positively oh and the dollar got sold. As mentioned yesterday all eyes and hears will now turn towards the round of central bank policy meetings taking place next week for direction.
Other key data will be the forward looking Chicago PMI and University of Michigan confidence index. The Chicago PMI is expected to rise back to 50 this month after falling to 46 in September while the University of Michigan confidence index is forecast to remain little changed form the 69.4 reading in September.
Report from Tom Nadir
Currencies Direct is a leading commercial foreign exchange company with offices in the UK, Australia and Spain and has offices across 5 continents. Currencies Direct’s head office and global trading centre is based in the City of London.
The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
Compiled by Tom Nadir.
You can view a new trading video here, with my compliments.
MarketClub’s Free Email Trading Course
MarketClub President introduces his Free e-Mail Trading Course
My Guest Blogger today is Adam Hewison of INO and MarketClub
29, October 2009
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First of all Tom, I want to thank you for having me as a guest today!
My name is Adam Hewison. You might want to Google Me to confirm what I am about to share with you.
There are plenty of people out there that create “exclusive email courses” with little or no credentials to actually backup their teachings. So, I think it’s right that I share a little bit about myself with you before we even start.
I was a former floor trader on the IMM, IOM, NYFE and LIFFE as well as a risk manager of a large, multinational corporation in Geneva, Switzerland. I also have written books on forex trading and trend following. In 1995, I founded INO.com and later co-founded MarketClub. I’ve been in the trading biz for over three decades and have seen it all. I created this course as a way to give back and share trading tips and techniques that I still use in my trading today.
In my Free Mini Email Course, I will show and explain the tools and strategies you need to increase your success rate in the marketplace.
(1) The importance of psychology in price movement
(2) How to spot mega trends
(3) Understanding of technical price objectives
(4) How to picture price objectives
(5) How to trade with moving averages
(6) How to use point and figure trading techniques
(7) How to use the RSI indicator
(8) How to correctly use stochastics in your trading
(9) How to use the ADX indicator to capture trends
(10) How to capitalize on natural market cycles.
Plus, you will you will learn all about fibonacci retracements, MACD, Bollinger Bands and much more.
Every success,
Adam Hewison
President, INO.com & Co-Creator, MarketClub
================================================
Thanks Adam. I am sure you enjoyed Adam’s article, now enjoy the free e-mail course.
Just fill out the form and you can get started right away.
Good trading,
Tom.
Currency Market Updates are compiled by Tom Nadir.
The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currency Market Updates cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
You can view new daily trading videos by clicking here, with my compliments, Tom.
Sterling Up But Why?
Currencies Direct Review – Sterling
29, October 2009
Sterling is rallying this morning in the markets against most of the major currencies except the Japanese Yen. This morning mortgage approvals in the UK hit its highest level for 18 months giving sterling a good start, however net lending rose by less than expected and yet sterling still rallies- the question is why?
With the Bank of England decision next week and recent reports and sentiment pointing towards an expansion of Quantitative Easing then you would think that sterling would be on the back foot. Against the euro, the pound has pushed through 1.11 and yesterday held firm against USD strength across the market to keep cable above 1.64.
It could be that the opinion of Goldman Sachs that sterling is undervalued is psychologically underpinning the pound. It also may be the case that the worst is now behind the UK economy and GDP in quarter 4 will finally show an exit from the recession and a start to prolonged albeit slow growth.
Next week will be telling and not for the first time what looks like a sterling rally could fall off a cliff after the BoE meeting.
The euro continues to lose ground against the USD pushing as low as 1.4680 before creeping back above 1.47. However German unemployment just released has come in better than expected- declining by 26k against an expected rise of 17k whilst the unemployment rate declined to 7.7% from 8.0%. This could offer the euro some relief after taking a hit over the last few days.
In other news the Royal Bank of New Zealand left interest rates unchanged at 2.5%. The Reserve Bank of Australia are widely expected to raise rates next week by 25 basis points. However, surprisingly the commodity/high yielders are on the back foot with ZAR, AUD, CAD and NZD all losing ground yesterday. This could signify less confidence in the markets and a potential turn from USD weakness.
Report by Phil McHugh
Currencies Direct is a leading commercial foreign exchange company with offices in the UK, Australia and Spain and has offices across 5 continents. Currencies Direct’s head office and global trading centre is based in the City of London.
The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
Compiled by Tom Nadir.
You can view a new trading video here, with my compliments.
MarketClub Reviews – The S&P and Gold in Video
Keep a Close Eye on the S&P 500 Index and Gold
28 October, 2009
A few days ago I suggested that the time was right to be cautious with the S&P 500. This short video strenghtens that view and I suggest you take a few minutes to watch it.
In this first trading video about the S&P index you will see particularly the MACD cross over indicating that the S&P has topped out for the time being.
I have another video for you too today. This one looks at the gold market. Spot gold may look a little shaky right now but we have seen this before. The underlying energy field in the market suggests that gold is still reaching for highs os 1200 or even up to 1300.
Watch this trading video closely and by using the tools we have available and reading the signals you can draw your own conclusions. Do you agree with the assessment?
As always, no sign up or registration is necessary to watch the S&P 500 video or the one revealing the gold market indicators..
Successful trading to you
Tom.
Compiled by Tom Nadir.
The contents of this report are for information purposes only.
Euro Fails to Recover Recent Losses
Currencies Direct Reviews the Euro
28, October 2009
Yesterday and overnight we had little movement in the markets comparative to what we have been used to. The euro remains on the back foot and has slipped further against the USD, JPY and the pound. Part of the euros weakness could be linked to the news that bank lending in the eurozone is continuing to contract and this could maintain low interest rates for some time as deflation fears kick in.
European stocks are also coming under selling pressure and overall this has heightened a move into risk aversion with the FTSE, the Dow and Oil dipping and leading to the USD gaining against the euro and the pound.
Today we do not have any major risk events in relation to economic data with tomorrow grabbing the attention in this regard with UK net lending and money supply; US GDP and jobless claims and German unemployment and eurozone consumer and economic confidence.
Later today we have Durable Goods and New Home Sales from the US, yesterday the Conference Board reported that US consumer confidence fell to 47.7 in October from 53.1 in September.
This weakness in confidence would have contributed to the move into risk aversion in the markets. Overnight we had some price action in the AUD after CPI data came in stronger than expected at 1% against a 0.8% forecast. This number in theory should have led to a stronger Aussie Dollar. After the news the AUD jumped higher but then gave up all its gains and weakened overall. It seems that a 50 basis point rate rise may not be set in stone and this is causing some unwinding and profit taking on the AUD.
Report by Phil McHugh
Currencies Direct is a leading commercial foreign exchange company with offices in the UK, Australia and Spain and has offices across 5 continents. Currencies Direct’s head office and global trading centre is based in the City of London.
The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
Compiled by Tom Nadir.
You can view a new trading video here, with my compliments.
