Currency Market Updates

10th Federal Reserve Open Market Committee Minutes Released

1, September, 2010

Listen to the full report from Tim Lewis on the podcast >>>>>>>>>>>>>>>>>>>>>

The highlight overnight was the release of the minutes from the August 10th Federal Reserve Open Market Committee meeting. Some Federal Reserve officials were concerned that a decision to keep securities holdings unchanged would inadvertently signal an intention to resume large-scale asset purchases.

Also, a few policy makers said the economic effects of the decision “would be quite small,” but at the same time, some officials saw “increased downside risks to the outlook for both growth and inflation” and voiced concern that further shocks would cause “significant slowing in growth”.

The debate shows the challenge Fed Chairman Ben S. Bernanke may face in achieving consensus for any additional monetary stimulus to reverse a slowdown in growth and reduce joblessness more quickly. In a speech last week, Bernanke said “Policy makers haven’t agreed on specific criteria or triggers for further action”.


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Time To Speculate in Stocks

Today’s guest article is from Bob Prechter of Elliott Wave International.

It starts: “Perhaps the number one precaution to take at the start of a deflationary crash is to make sure that your investment capital is not invested “long” in stocks, stock mutual funds, stock index futures, stock options or any other equity-based investment or speculation. That advice alone should be worth the time you spent to read this book.”

3 Reasons Now is Not the Time to Speculate in Stocks
Sometimes the investment weather forces you to ‘buy a coat,’ says Robert Prechter
By Elliott Wave International

When it’s sunny, you head outside without a thought, but when it’s rainy, you look for your umbrella. When the markets are trending up, you don’t worry about your investments much, but when the markets turn bearish … what do you do? Read more.

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Gold Market Shines As Dow, S&P And Nasdaq Fall

27, August 2010

Global markets are in the doldrums and with decreased trading volumes and a lack of positive data there has been little to prevent a downward path this week. The Dow is down 2.23% on the week and just over 6% on the month, slipping below the critical 10,000 level (closing yesterday at 9,985). S&P 500 and Nasdaq have followed suit heading into the end of the month 6.7% and 6% down on the month.

In the UK the FTSE clawed back from the 6 week low of 5070 seen on Wednesday but is still 3.50% down on the month. In Asia, the Nikkei and Hang Seng haven’t bucked the global trend also down 5.5% and 2% on the month.

Yesterday the Labor Department in the States reported a reduction in new U.S claims for unemployment benefits. Initial claims for state unemployment benefits fell 31,000 to a seasonally adjusted 473,000, below market expectations for a drop to 490,000.

However this figure did little to support the dollar as firstly the claimant’s number still remains high and there is still a real concern about the recovery of the States after the horrendous week it has had. Many economists also look at the four week average price of initial claims which is viewed as a better gauge of employment trends; this figure was up slightly by 3,250 from 486,750.

Despite the onslaught of poor data Germany continues to shine as German consumer morale increased for the third month running, hitting its highest level since last October. German CPI data is also due out this morning and if it follows the positive trend we may seen the reading come out ahead of expectations however seasonal trends suggest August CPI readings are usually low.

In Euro trading news, money supply growth held steady in July as loans to the private sector steepened. The Conference Board’s leading economic index for the Eurozone (which is used to identify turning points in the business cycle of the Euro Zone) rose by 1% to 112.5 in July. The European Central bank reported loans to the private sector grew at a annual rate of 0.9% up from 0.5% rise in June.

Today should be an interesting day with GDP readings from the UK and US coupled with Bernanke speaking this afternoon. UK GDP Q2 2nd release is expected to be unchanged at 1.1% and US GDP Q2 2nd release is expected to be revised down slightly to 1.3%. This afternoon all eyes will turn to Bernanke who is speaking at a conference at 3pm (GMT) at the Economic Symposium in Jackson Hole, Kansas.

It is anticipated that Bernanke will revise down the US 2nd quarter economic growth figure at this annual conference. The recent flow of disappointing data from the States has fuelled fears of a double dip recession. Finally, the gold market news: Gold has edged higher this week to current levels of 1236 per ounce (Gold has surged this month as investors seek safe havens and is up 4.80% on the month).

Report by Philip Ryan

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Hindenburg Omen: The Feared Technical Indicator

The Hindenburg Omen — Omen-ous or Not?

Elliott Wave International Chief Market Analyst Steve Hochberg Sheds Light on a Feared Technical Indicator
By Elliott Wave International

Last week’s volatile market action coincided with a technical signal called the Hindenburg Omen whereby a relatively high number of new highs and lows in individual stocks occur at the same time. This indicator instantly gained an enormous amount of media attention. In this interview, Steve Hochberg, EWI’s Chief Market Analyst shares his perspective on this indicator and the “re-emergence” of technical analysis. Read more.

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Euro Trading News: Euro Falling Against The Dollar

23, August 2010

Reports today suggest the forex market analysts are the most pessimistic on the Pound since May 2009, predicting the Chancellor’s cuts will eat into economic growth, the already soft economic recovery is forecast to slow causing Sterling to fall back against both the Dollar and Euro. Median estimates suggest the Pound will drop 8 per cent against the Euro by year end as the recent bullish UK data starts to deteriorate.

The US Dollar rose sharply on Friday against the Euro, Sterling, Aussie and Candian dollar on the back of risk aversion, while safe haven currencies such as CHF and the YEN strengthened against the dollar.

The Fed is perceived by the markets to be in a holding pattern until further directional economic data is released. Weakness in global equities carried through to European markets sending major indices lower while US stocks are lower as the sell off continued. The current lack of Tier 1 economic data out of the US is putting the focus on the equity markets.

The Euro fell against a basket of currencies on Friday and remains on the defensive this morning as comments by a senior ECB official fuelled expectations for liquidity to remain a concern for the single currency. ECB Governing Council member Axel Weber told Bloomberg in an interview published on Friday it would be “wise” to extend unlimited liquidity to banks past the end of 2010.

The Euro was further hit after the US Federal Reserve said the US and global economic recovery was losing steam, striking a nerve with investors. The euro zone is seeing an increasing split not only in banking but in the economy in general. While the euro zone economy improved in the second quarter with Germany setting the tone, southern Europe recorded much more muted growth. Market analysts believe the ECB may have little option but to keep flooding the money market with cash to help banks and governments in the EU.

The Euro zone economy will remain under the spotlight today with the release of the flash August euro zone PMI’s which are expected to fall back from 56.7 in July to 55.5. In the US the focus will be on the release of housing and labour market figures. On Friday of this week the focus will be on the UK with the release of Q2 GDP growth figures.

Report by Alistair Cotton

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