Beta 2 Forex News, Jovi Overo, Beta 2 Ltd, Tuesday September 6 2011

US traders will return from their Labor Day holiday to find the state of markets in turmoil. A combination of the euro zone debt crisis and the slowing of the global economy are pressuring risky assets. With the US stock markets closed on Monday the S&P 500 looks to gap significantly lower upon Tuesday’s opening bell. As noted in yesterday’s daily analysis, US investors will be looking to both the President and the Fed for policy responses to stop the bleeding.

President Obama will speak on Thursday and will provide support with a fiscal response, most likely proposing an extension of the payroll savings tax cut, prolonged unemployment benefits, and a program to support employment with infrastructure development. The wild card remains the monetary policy response from the Fed. Economists continue to debate the merits of rolling the Fed’s short term debt it holds on its balance sheet into longer term Treasuries. Barring any significant fallout in the equity markets, QE3 remains relevant, just not for the September Fed meeting.

US data will be released today with the ISM services PMI due out at 14:00 GMT. The survey is expected to show continued weakness in the services sector though forecasts keep the data well above the 50 boom/bust level. The survey will be watched closely as it is considered a leading indicator in contrast to last week’s non-farm payrolls report which is a lagging indicator.

Prior to the European open the EUR/USD has made a push below the 1.4050 support level. Market positioning is directionless according to the most recent CFTC data.The next support for the EUR/USD is found at the 200-day moving average at 1.4010. However, the real test will be the long term trend line from May 2010 which comes in at 1.3975.

European equities were hit on Monday though one has to point out the light volumes due to the Labor Day holiday in the US. Nevertheless, the German DAX finished the day down by a whopping -5.28% and the London FTSE 100 was lower by -3.58%. French banks were hit hard as US money markets continue to pull their funding.

A rumour of an Italian ratings downgrade was also spreading and the source appears to be the Société Générale Rates Strategy team who noted the possibility in their daily note on Monday morning. Comments from Mario Draghi, the Italian who is set to take over the helm of the ECB on October 31st was quoted in the wires as saying the ECB buying of Italian bonds is temporary and is not a substitute for fundamental budgetary discipline. Italian 10-year bond yields are up to 5.58%, above the 5% yield the ECB has tried to maintain. The Italian parliament is attempting to pass budget reforms with an aim to balance the budget by 2013 with EUR 14 bn in cuts and an additional EUR 6 bn in new taxes.

Greek bond yields continue to come under pressure with the 2-year rising to a record 50.37%. The Greek 5-year CDS also stands at a record 2493 bp. A default of Greece is at risk once again which could bring about additional pressure on the EUR and European equities.

The EUR/CHF is trading back near the 1.10 level after almost touching 1.20, a truly a remarkable move. The SNB risks losing both its hard fought gains in the pair as well as the central bank’s credibility should the SNB not step into the market to stop the appreciation of the CHF.

The RBA agreed to hold its benchmark rate steady at 4.75% in light of the increasing risks to the European and US economies. Uncertainty in the global economy may only be temporary and the RBA maintained hawkish tone as inflation remains elevated and economic growth continues to increase due to higher commodity prices. On Monday company operating profits in Q2 rose 6.7% compared to a -2.2% decline in Q1.

On the other hand it appears the RBA is weighing heavily the global economic situation versus its own sovereign factors. The RBA may be leaving the door open to a holding period should the economies of Europe and the US continue to underperform.

The downturn in risk sentiment has left the AUD susceptible and the AUD/USD has sold off since Thursday’s high of 1.0763. Support for the pair stands at the mid-August low of 1.0315. As mentioned in yesterday’s daily analysis, traders should keep eyeing the AUD/NZD as the pair is encroaching on the neckline from a bullish head and shoulders pattern.

Spot gold prices climbed to a new record high this morning as risk sentiment hit the wall following yesterday’s European equity losses. Risky assets were down across the board with higher yielding currencies and commodities all taking a hit. Traders have been eager to move into gold as systematic threats continue to plague the euro zone and the possibility of an additional round of monetary policy easing has kept traders from moving into the USD as typically occurs during periods of low risk sentiment.

The price of gold has recovered all of its losses from late August following the raising of margin requirements in a number of international exchanges. With the rebound in the price to a new all-time high this leaves the big round number of $2,000 as the next potential resistance. To the downside the August 25th low of $1,702.50 will serve as support.

Jovi Overo

 

 

Beta 2 Forex News, Jovi Overo, Beta 2 Ltd, Tuesday August 9 2011

The US dollar (USD) was seen struggling to hold its value yesterday amid severe market pessimism due to a downgrade of US debt by S&P’s ratings agency. The value of safe-haven assets like the Swiss franc (CHF) and Japanese yen (JPY) have been buoyed by a shift away from higher yielding assets, though the CHF has seen only mild gains and the JPY was brought to bear by an intervention by Japan’s central bank. The greenback appears to be holding strength despite the downgrade as it remains a central store of value for most investors.

China unleashed a lengthy diatribe against the US on Monday during the emergency G20 summit as a reaction to S&P’s historic move. The talk was aimed at the loss of value China foresees as impending due to what it viewed as fiscal irresponsibility on the part of Congressional leadership. Moody’s Investor Services, however, did defend the AAA rating of US debt yesterday, attempting to forestall a sharper decline on Wall Street and justify the USD and US Treasury notes as stable stores of value in this shaky global market.

With a heavy news day expected today, traders are sure to see heightened volatility with potentially wide swings in value from the plummeting stock market. The US economy will be publishing several reports on productivity, labour costs, and the latest decision on short-term interest rates, known as the Federal Funds Rate. The Federal Funds Rate announcement will be of prime importance today considering its timing in relation to these other historic events. How the Fed portrays itself this week may be key to determining the USD’s value in the weeks and months ahead.

The British pound (GBP) has been seen trading with largely bullish results so far this week as traders assess the risk sentiment across the region. The Cable was seen trading bullish in late trading as shifts away from the greenback, due to uncertainty surrounding US markets after an historic downgrade by S&P of US debt led many to favour sterling in early week trades.

News of debt contagion spreading across the euro zone, however, has also led several economists to worry that a toppling of consumer confidence may be up next. Whether Britain is affected by this regional tug is a matter for speculation at the moment, but one trader should bear in mind considering the wide spill-over effect running through global markets this week. Should today’s reports on industrial and manufacturing output indicate a downturn in productivity, and thus growth, there is a chance that traders will take the news to mean the pound sterling could meet resistance in the near future.

On tap today, traders will witness the release of a highly significant monthly report on manufacturing production in Great Britain at 9:30 GMT, concurrent with the nations less important industrial production and trade balance data. Should the figures reveal stagnation in manufacturing and industry growth, we could see heftier flights to safety in the days and weeks ahead. This would likely push the value of the GBP lower over the long-haul as traders continue to flee risk in larger numbers.

The Australian dollar (AUD) was trading mostly weaker versus its currency counterparts yesterday after data releases have begun to shift traders back into safety. The Aussie has been losing momentum these past few weeks as risk aversion becomes predominant in the global market. Fears emanating from the recent downgrade of US debt have made the forex market jittery so far this week, leading many to seek safety.

This movement has gouged the AUD against all of its currency rivals, especially against safe-havens like the Swiss franc (CHF) and Japanese yen (JPY). With further housing reports getting released this morning, forex traders are highly likely to see heavy movement by the Aussie in today’s trading hours. News out of China today is also expected to hike volatility throughout the Pacific countries of Japan, New Zealand and Australia. Pacific traders should be cautious in today’s trading.

Crude Oil prices dropped sharply Monday as sentiment appeared to favour a massive downturn in global stocks following a downgrade of US debt by S&P’s ratings agency this weekend. Data releases out of Europe and the US last week are still driving many investors back into safe-haven assets, but dominating sentiment this week has been the debt downgrade in the US, widening bond yields in Spain and Italy, and a sharp decline in stocks and futures as a result of portfolio shifts and pessimistic forecasts.

An expected dip in dollar values due to market outlook has caused oil futures to plummet, driving many investors away from such physical assets. Should Crude Oil sentiment continue to flop this week, oil prices may fall well into $80 price range. Traders appear weary of the value of oil as its volatility has increased these past several trading weeks. Should the stock market fail to find support in the days ahead, oil futures will likely remain bearish, pulling prices lower over the next few days.

Jovi Overo

 

 

Beta 2 Forex News, Jovi Overo,Beta 2 Ltd, Tuesday August 2 2011

The US dollar (USD) was seen decreasing late yesterday. The greenback had found moderate strength in the morning hours, but soon pared its gains after discrepant details about the recent debt deal were released by the White House and Congress. The value of safe-haven assets like the Swiss franc (CHF) and Japanese yen (JPY) have been buoyed by a shift away from higher yielding assets. The dollar saw significant losses to both in late trading yesterday and appears poised to take further losses this week.

News of the deal to lift the debt ceiling in the US has so far inched traders into a position of market uncertainty, which has dropped the value of the USD. With the economies of Europe and the US posting little positive news on yesterday’s calendar, the amount of pessimism surrounding the forex market, particularly in the fragile United States and euro zone, appears to have grown, further dampening the strength of the EUR, GBP, and AUD.

With a heavy news day expected today, however, traders are sure to see a return of portfolio adjustment as volatility becomes elevated. The US economy will be publishing several minor reports on personal income and spending levels for American consumers. Should today’s news disappoint, there is a possibility that more investment will get pushed towards the safety of the Swissie and yen, driving USD values lower in the process. Traders will also want to keep an eye on Swiss economic news as it may also impact risk sentiment heavily during the morning sessions.

The Swiss franc (CHF) has been seen trading with largely bullish results so far this week as traders assess the risk sentiment across the region. Against the US dollar (USD) the Swissie was seen trading bullish in late trading as shifts away from the greenback, due to uncertainty about a recent deal struck over the debt ceiling in the United States, caused a stir in the foreign exchange market.

News of debt contagion spreading across the euro zone also has several economists worried that a toppling of consumer confidence may be up next. Whether Switzerland is affected by this regional tug is a matter for speculation at the moment, however. Should today’s reports on retail sales indicate a downturn in spending, and thus sentiment, there is a chance that traders will take the news to mean the Swiss franc will meet resistance in the near future.

On tap today, traders will witness the release of a highly significant report on retail sales in Switzerland at 8:15 GMT. At 8:30 GMT, the organization known as SVME will be publishing its recent findings on Switzerland’s PMI. Should the figures reveal stagnation in consumer spending and inflationary growth, we could see heftier flights to safety in the days and weeks ahead. This would likely push the value of the CHF higher over the long-haul as traders continue to flee risk in larger numbers.

The Australian dollar (AUD) was trading mostly weaker versus its currency counterparts yesterday after data releases have begun to shift traders back into safety. The Aussie has been losing momentum these past few weeks as risk aversion becomes predominant in the global market. Fears emanating from the current deal struck in Washington, DC regarding its debt ceiling has made the forex market jittery so far this week, leading many to seek safety.

This movement has gouged the AUD against all of its currency rivals, especially against safe-havens like the Swiss franc (CHF) and Japanese yen (JPY). With significant reports released this morning, forex traders are highly likely to see heavy movement by the Aussie in today’s trading hours. News out of China yesterday is also expected to hike volatility throughout the Pacific countries of Japan, New Zealand and Australia. Pacific traders should be cautious in today’s trading.

Crude Oil prices held steady Monday as sentiment appeared to favour a downturn in global stocks should the US debt ceiling agreement fail to produce the needed results to stave off a default. Data releases out of Europe and the US last week are still driving many investors back into safe-haven assets as many reports suggested a surprise downtick in growth among global industrial output and consumer spending.

An expected jump in dollar values due to this week’s risk averse environment has helped many investors ram up their short-taking positions on physical assets, but with the USD’s gains not materializing, sentiment appears to have the price of crude oil holding steady. Should Crude Oil sentiment continue to flatten this week, oil prices may reach a decision point which forces a wide swing by mid-week.

Jovi Overo

 

Beta 2 Forex News, Jovi Overo, Beta 2 Ltd Tuesday July 26 2011

The US dollar (USD) was seen decreasing yesterday as traders began to seek shelter following speculation that debt limit talks in the US may falter. The value of safe-haven assets like the Swiss franc (CHF) and Japanese yen (JPY) have been buoyed by a shift away from higher yielding assets, though the dollar has been skipped this time around due to the domestic nature of this risk aversion.

The news so far has inched traders into a position of market pessimism which has so far dropped the value of the USD as the other safe-haven currencies soar. With the economies of Europe and the US absent from yesterday’s calendar, little news emerged which put a dent in the amount of pessimism surrounding the forex market, particularly in the fragile United States and euro zone.

With a heavy news day expected today, however, traders are sure to see a return of portfolio adjustment as volatility becomes elevated. The US economy will be publishing two reports on housing and a measure of consumer confidence. Should today’s news disappoint, there is a possibility that more investment will get pushed towards the safety of the Swissie and yen, driving USD values lower in the process. Traders will also want to keep an eye on euro zone economic news as it may also impact risk sentiment heavily during the morning sessions.

The euro (EUR) has been seen trading with mixed results so far this week as traders assess the risk sentiment across the region. Against the US dollar (USD) the euro was seen trading bullish in late trading as shifts away from the greenback, due to uncertainty about a possible failure to lift the US debt ceiling, caused a stir in the foreign exchange market.

News of debt contagion spreading across the euro zone also has several economists worried that a toppling of consumer confidence may be up next, followed by additional ratings downgrades that lead into an ever deepening spiral of debt and default. Rising inflation poses a threat in this scenario and the euro zone faces the debacle of lifting interest rates to quell inflation, but gouge their ability to pay off debt; or hold rates steady to allow for more growth while inflation takes off.

On tap today, traders will witness the release of a moderately significant report on consumer confidence in Germany. At 7:00 GMT, the organization known as GfK will be publishing its consumer climate reports for Germany. Should the figures reveal stagnation in consumer and business optimism, we could see heftier flights to safety in the days and weeks ahead. This would likely push the value of the EUR lower over the long-haul as traders continue to flee risk in larger numbers.

The Australian dollar (AUD) was trading mostly weaker versus its currency counterparts yesterday after data releases have begun to shift traders back into safety. The Aussie has been losing momentum these past few weeks as risk aversion becomes predominant in the global market. Fears of a debt contagion spreading from Greece to Italy now factor greatly into global risk assessment, as does the current deficit talks in the US to lift the national debt ceiling.

 

This movement has gouged the AUD against all of its currency rivals, especially against safe-havens like the US dollar (USD) and Japanese yen (JPY). With Australia’s central bank governor Glenn Stevens giving a speech at the Anika Foundation later today, there is a chance that speculators will pick up on several cues to adjust their positions in regard to the Aussie and its linked interest rates. Being tied to commodity prices could also help lift the AUD in the near future as oil prices soar, but general risk aversion is likely to push the currency lower as traders flee risk.

Crude Oil prices held steady Monday as sentiment appeared to favour a downturn in global stocks should the US fail to lift its debt ceiling by August 2. Data releases out of Europe and the US last week are still driving many investors back into safe-haven assets as many reports suggested a surprise downtick in growth among global industrial output and consumer spending.

An expected jump in dollar values due to this week’s risk averse environment has helped many investors ram up their short-taking positions on physical assets, but with the USD’s gains not materializing, sentiment appears to have the price of crude oil holding steady. Should Crude Oil sentiment continue to flatten this week, oil prices may reach a decision point which forces a wide swing by mid-week.

Jovi Overo

 

 

Beta 2 Forex News, Jovi Overo, Beta 2 Ltd, Friday July 15 2011

The US dollar was seen trading higher yesterday as traders began to revaluate the recent dip in USD values from statements the Fed may institute another round of quantitative easing. The EUR/USD was seen meeting resistance near 1.4100 yesterday and plummeted towards 1.4055 in late trading. Commentary from Fed Chairman Ben Bernanke revealed the sentiment that the Fed may not yet be ready to undergo additional easing as conditions were not dire enough to warrant such an implementation.

The series of PPI and retail sales data released yesterday painted a relatively weak picture for the US economy’s growth; but growth is shown to be occurring nevertheless. Both reports saw variance between the nominal reading and their partnered core data. Nominal PPI shrank by 0.4% while the core reading witnessed a 0.3% expansion. Likewise, the nominal reading on retail sales witnessed 0.1% growth whereas the core reading saw 0% change from the previous month.

With a moderately heavy US news day expected Friday, dollar traders should be anticipating some exciting currency movements brought about by heightened liquidity. Beginning at 13:30 GMT, the US will be releasing its nominal and core CPI figures to fill in the consumer side of its inflationary reports this week. Shortly thereafter it will publish its Empire State Manufacturing Index, its Capacity Utilization Rate, Industrial Production, and Preliminary University of Michigan (UoM) Consumer Sentiment and Inflation Expectations reports.

The euro was seen trading lower yesterday in light of statements suggesting a wait-and-see approach adopted by the US Federal Reserve regarding another round of quantitative easing. Following yesterday’s CPI reports in the euro zone, traders appeared more concentrated on news out of the US to determine values, and we’ve seen a retracement of the USD versus its primary currency counterparts as a result of this sentiment.

While interest rate differentials between the US and Europe came into view this past week, the higher yielding assets like the GBP and EUR appear positioned to lose significant value as traders choose to focus on growth concerns and sovereign debt. The growth in risk aversion may have many investors choosing to store their value in lower yielding currencies, like the USD and JPY.

As for Friday, the euro looks to be anticipating an evaluation of its recent downturn against the other major currencies with mild bias to the downside. The euro zone will be publishing a few economic events on today’s calendar. Traders should try and follow the significant publication emanating from the US economy today, however, as a heavy string of reports is expected this afternoon.

The Japanese yen (JPY) was seen trading higher versus most other currencies yesterday after news began to shift many traders back into safe-haven assets. The yen has been a top performer these past several months considering many traders bank on the Japanese carry trade during times of intense risk appetite and move towards the JPY in times of risk aversion, making it an appealing currency in these recent times of ominous reports.

The JPY was in a position to make solid gains yesterday after Federal Reserve Board Chairman Ben Bernanke commented that the US central bank would delay undertaking another round of easing. Moves toward riskier currencies, however, failed to materialize as a string of industrial output and inflationary reports in the euro zone have pushed many investors away from the region and into safe haven assets. As such, traders appear to be anticipating a mild uptick in the JPY prior to this week’s close.

Crude Oil prices dipped yesterday, reaching as low as $95.60 in late trading. Interest rate differentials have dropped from sight while industrial output and inflationary data revealed mild weakness in Europe and this has so far led several large investors and analysts to consider a shift away from the EUR and physical assets in exchange for the safety of the USD and JPY.

As investors sought safety, the value of crude oil, which has been seen holding steady most of the week, dipped to a weekly low of $95.60 a barrel. A sudden jump in dollar values due to this week’s risk sensitive environment has helped many investors move hesitantly away from assets like oil. Should Crude Oil sentiment hold steady this week, oil prices may continue to take losses going into the week’s final hours.

Jovi Overo

 

 

Beta 2 Ltd, Jovi Overo, Beta 2 Ltd, Friday July 8 2011

With the European Central Bank (ECB) hiking interest rates, and private sector employment rising in the US, the value of the USD appears to be taking a dive as riskier currencies like the EUR jumped in yesterday’s afternoon and evening sessions. The US dollar was seen decreasing yesterday as traders began to seek riskier assets following statements by the ECB’s Trichet that Portugal was not in as bad a shape as assumed, and debt and inflation would be taken care of throughout the euro zone.

The EUR/USD was seen moving towards 1.4370 yesterday while the GBP/USD levelled off near 1.6015. An uptick in US private sector employment yesterday added to the risk-taking sentiment by most investors. Should today’s Non-Farm Payroll (NFP) data continue this trend of optimism, we may see the greenback taking severe losses against its rivals as traders seek out higher yields.

Most significant on today’s calendar will be the US publication of its Non-Farm Payrolls (NFP) data. Should today’s news foreshadow a modest growth in the largest economy’s employment sector, an assessment that seemed nigh impossible just days ago, there is a possibility that more investment will get pushed towards the higher yielding EUR, driving USD values lower.

The euro (EUR) was seen trading bullish yesterday after an announced increase to its regional Minimum Bid Rate by 25 basis points to 1.50%. The statement released shortly after the release gave cause for optimism among investors as ECB President Jean-Claude Trichet hinted that the region’s debt concerns were not as dire as many had assumed; specifically mentioning woes regarding Portugal and its recent ratings downgrade by Moody’s.

The EUR/USD was seen moving strongly bullish yesterday as a result of the risk taking sentiment that arose from the rate adjustment. The price moved from its recent low of 1.4250 to as high as 1.4375 before levelling off mildly. The EUR saw similar gains between 0.2% and 0.6% against its other currency rivals.

Europe’s economic calendar today will be significantly lighter than it has been of late. A string of reports on German and French trade and budget balances, respectively, will get published early in the morning. An Italian industrial production figure will be then released shortly thereafter. Most serious investors are focusing their attention on the American release of Non-Farm Payrolls, the most impactful news event affecting this week’s economy.

The Australian economy released strongly bullish news yesterday morning with the publication of an employment indicator that showed the economy adding over 23,000 jobs over the past month. Despite a rate hike in China pulling strongly down on the value of the Aussie Wednesday and Thursday, this morning’s movement appears to favour stronger risk seeking behaviour among investors and yesterday’s surprisingly high growth in Australian employment has many traders moving back towards the Australian dollar (AUD).

Weakening commodity prices may still pull on the nation’s economic growth and the AUD’s meteoric rise has gouged Australia’s exports. While the downturn may look dismal from afar, runaway inflation caused by the Aussie’s rise was expected to cut into the country’s growth projection eventually. As traders adjust their portfolios and risk assessment for the Land Down Under, the possibility exists for a solid uptick later in the year. For now, heightened risk taking is pushing the value of the Aussie higher and today’s US NFP data will either confirm or deny this new momentum.

Crude Oil prices found solid support Thursday, moving towards $100 a barrel in late trading as sentiment appeared to favour a mild growth in global industry alongside a potential uptick in demand for the black gold. Data releases out of the UK and Europe yesterday were driving many investors back into riskier assets as most reports suggested growth among the major industrial nations of the West would be on the rise. If proven accurate, the new outlook would have oil prices rising back into a bullish channel as demand increased.

As investors seek risk, the value of crude oil, which was seen fluctuating wildly all week, may in fact rise to a weekly high above $100 a barrel before today’s close. A sudden drop in dollar values due to this week’s sudden return to risk is expected to drive many investors into higher investments on physical assets; driving oil prices even higher. Should Crude Oil sentiment hold steady today, oil prices may see another meteoric rise similar to the spike that occurred in 2008 just before the global economy crashed.

Jovi Overo

(more at Beta 2)

Beta 2 Forex News, Lane Clark, Beta 2 Ltd, Monday June 27 2011

The combination of Europe’s sovereign debt crisis and growing global recovery concerns has weighed further on risk appetite over recent days. Overnight, the EUR fell to near 1.41, not helped by comments from a Greek deputy who claimed that parts of the austerity package may not pass when Parliament votes over the next couple of days. This followed a suggestion on Friday that more members of Greek PM Papandreou’s Pasok party are likely to oppose the austerity package when the vote is taken on Wednesday. Hawkish rhetoric from the ECB’s Gonzalez Paramo on Friday also weighed on the euro – indeed, hawkish pronouncements on policy these days actually seem to engender a negative response, and understandably so. Surely, the ECB cannot be serious about hiking rates next month against the backdrop of Europe’s debt crisis? To make matters worse, Italian bank shares were pummeled on Friday after Moody’s suggestion yesterday that they were vulnerable should Italy’s credit rating be cut.

In the forex market, it is the dollar that has benefitted as investors seek to avoid risk. The dollar index is not far away from the critical 76.0 level which, if it manages to break through, would be extremely positive from a technical perspective. Repatriation by US investors ahead of the end of the half-year has also contributed to the dollar’s firmer tone in recent days. Against the backdrop of this heightened defensiveness by investors, the high-beta currencies continue to struggle; for instance, the Aussie has finally snapped the 1.05-1.10 trading band overnight, falling to 1.0425. Stocks continue to swoon, with the major Asian bourses down by around 1% overnight. Commodities are also suffering, especially oil, with the price of Brent crude declining another 2% overnight to below $104 a barrel. Just two weeks ago, Brent crude was trading at $120. Fixed income is attracting more money as investors reduce risk – the 10yr US treasury yield is now just 2.85%, down nearly 100bp from the high reached back in February.

Beta 2 Forex News, Jovi Overo, Beta 2 Ltd, Tuesday June 14 2011

The US dollar was seen in decline in late trading yesterday as low market liquidity combined with a positive industrial production figure in Italy to generate an uptick in euro values. With most of Europe coming back online today following yesterday’s hiatus, traders appear anxious to evaluate the value of the region’s currencies after last week’s muted response to hints at a future rate hike by the ECB.

The US economy was also largely absent yesterday, with only a minor speech by President Barack Obama about the economy at lighting manufacturer, Cree Inc., in Durham, NC. The impending vote on patent reform in the US Congress has been hyped recently with national politicians harkening towards a strengthening of the US manufacturing and industrial innovation sectors via revisions to patent law which would make it easier for firms to obtain licenses and protection for their products.

With today’s retail sales and PPI figures impending, many analysts are trying to evaluate what impact the data will have on this upcoming vote. The need for patent reform has been a leading issue in many areas of the US economy and both sides of the House and Senate appear poised to favour the agenda item. A bipartisan agreement could boost confidence and lift the USD in the short- to mid-term.

The British pound (GBP) was seen trading with mixed results yesterday, ahead of today’s news. The UK Office for National Statistics is due to release several significant data reports today; most impactful will be the 9:30 GMT publication of the CPI and RPI inflationary figures.

While the pound was seen climbing sharply against the euro and US dollar yesterday, it appears to have touched a record low against the Swiss franc and was trading sideways versus the Japanese yen. Safe-haven currencies are on the rise lately, and even the relatively stronger pound wasn’t immune to downfalls against these dominating currencies.

A recent report by the Confederation of British Industry (CBI) highlighted the structural weaknesses found in the UK economy, focusing intently on the labour market.

The report directed attention to a weakness in the British labour market that masked by astounding growth during the years prior to the financial meltdown of 2007-08. These structural weaknesses are not likely to abate this year, and the CBI is forecasting a growth in unemployment through the remainder of 2011 which will likely drag on the pound as the months progress.

The Japanese yen has been trading higher against most of its currency rivals recently as investors move toward safety. Japan’s economy has published several positive figures over the last week, much of which has helped establish the yen’s recent bullishness. With today’s rate statement affecting JPY values, traders are likely to see heightened volatility as the day moves ahead.

While the yen suffers from its own economic concerns, particularly downturns in manufacturing and industrial output, shifts in consumer sentiment have helped lift yen values against a number of its rivals. The allure of buying the JPY has also gained from an increased focus on interest rate differentials and carry-trades. Many nations are beginning to lift interest rates, making a carry-trade with the JPY more enticing. Traders appear to be expecting a strengthening JPY this week.

Oil prices dropped sharply this morning with the $97 price level approaching fast. Data releases out of China and the US today are driving many investors away from physical assets in expectations of a decline in growth among two of the world’s largest economies. The weakness of OPEC, revealed in last week’s meeting, also suggests that production output may become a more unilateral decision in the weeks ahead, possibly leading to boosts by Saudi Arabia and other Western allies.

The value of the US dollar versus the euro in recent trading has also dropped towards a six-day low of 1.4530, which has helped prevent oil prices from taking off after last week’s surprisingly unhinged OPEC meeting. With today’s steady sideways movement, traders appear likely to see oil reaching a decision point this week; which may have taken place yesterday. A test of this weekly low is expected over the next few days.

Jovi Overo

Market News, Jovi Overo, Beta 2 Ltd, Wednesday May 18 2011

The US dollar opened this week moderately stronger versus the euro Monday as traders continued last week’s shift into safer assets. As of late trading Monday, however, the EUR/USD pair shifted back into a bullish posture as traders turned their focus to the interest rate differentials between the Atlantic states. After briefly touching 1.4050, the pair found support and is currently moving towards 1.4300.

Soft economic data out of the American economy yesterday had many investors seeking market direction elsewhere. US housing and industrial figures for April came in lower than expectations and the capacity utilization rate was also in just below forecasts. Alternately, CPI figures from the euro zone Monday showed stable growth. This data together helped turn many investors’ attention back towards the interest rate differentials in the US and Europe, which caused a shift away from the greenback.

As for today, the euro zone will be absent as its ministers congregate for another meeting of the Economic and Financial Affairs Council (ECOFIN) in order to discuss the region’s finances. The US, on the other hand, is scheduled to release its crude oil inventory data and its Treasury currency report. If forex traders witness another day of soft data, the weakness of the USD in recent trading may become exacerbated as more traders shift into the higher yielding euro.

The euro rose versus the US dollar for the second consecutive day yesterday, with the pair’s price reaching near 1.4280 as of this morning. Soft data out of the American economy Monday and yesterday forced a revaluation by many investors who went long on the USD following the European Central Bank’s (ECB) cloudy rate statement two weeks back.

Yesterday’s significantly weaker fundamentals out of the American economy were only one part of the story, however. The euro zone published its consumer price index (CPI) inflationary reports which showed solid, stable growth, year-on-year. The core data also showed better growth than was expected. This combination of data from these two economic rivals generated a heightened intrigue in the comparative interest rates as risk sentiment got shifted. The result was for the interest rate bulls to outpace the debt woe bears in yesterday’s session, driving the EUR higher versus the USD.

As for today, the euro zone will be absent from the calendar as its ministers congregate for another meeting of the Economic and Financial Affairs Council (ECOFIN) in order to discuss the region’s finances. Hawkish statements could hint towards a tightening monetary policy in the near future, but traders should be wary of a return to risk aversion should the meeting produce less-than-stellar commentary. In the latter case, the EUR could see its bearishness return, especially since it has yet to outpace the strength of its regional rival, the Swiss franc (CHF).

The Japanese yen (JPY) has been trading with somewhat mixed results since early last week, with gains made against several currencies and losses elsewhere. After a week of ups and downs, the Japanese yen appears set to make gains today as investors seek safety from recent turmoil and as the Bank of Japan (BOJ) published several reports yesterday morning which could help the island economy make gains. The dominant stance of risk aversion overarching last week’s trading environment has many traders moving towards the yen against the higher yielding currencies like the euro and British pound.

The USD/JPY was seen trading somewhat higher this morning, finding support near 80.70 and moving up towards 80.90 at today’s opening Asian sessions. Japan’s core machinery orders report was published this morning and revealed a modest uptick which may help the island currency in today’s market hours. Market news released out of the US today will likely be the driving force behind JPY values, though, and traders would be wise to watch the US crude oil inventories report as its correlation to investment growth has gotten stronger lately.

Oil prices fell below $98 a barrel yesterday morning, surprisingly after the euro took off against its primary rival, the US dollar. US oil stockpiles rose over 3 million barrels for the second week in a row last week, and forecasts for today’s oil inventories report is for another increase of approximately 1.4 million barrels. The sudden plummeting value of the dollar had many analysts assuming that oil would find support in this morning’s trading, and so far we’ve seen some stability after yesterday’s plunge.

Whether oil traders decide to lift oil prices back from this recent plunge is yet to be determined, especially considering the strangeness of the inverse relationship to the USD yesterday. The greenback’s decline may have a delayed effect today and oil traders may see the price bouncing back if that is the case.

Jovi Overo

Market News, Jovi Overo, Beta 2 Ltd, Thursday April 28 2011

The US dollar took a beating yesterday following statements from the Federal Open Market Committee (FOMC) that removed any doubt on the persistence of record low interest rates. According to the FOMC report and subsequent statement by Federal Reserve Board Chairman Ben Bernanke, inflation is on track to healthy growth and the energy prices should stabilize and decline in the months ahead, which convinced the Fed to hold rates steady for the foreseeable future. The result has been a broad sell-off of the USD as investors took the statement as a sign that the greenback would not be finding support anytime soon.

The US dollar took a dive yesterday following statements from the Federal Open Market Committee (FOMC) that removed any doubt on American interest rates in the near future. The record low interest rates will persist for the foreseeable future, according to the FOMC report and subsequent statement. Federal Reserve Board Chairman Ben Bernanke reiterated this sentiment in his remarks given shortly after the official statement was announced.

As a result, traders who had been hesitant to short the greenback found in the FOMC statement and monetary policy sentiment a reason to push hard against the greenback, pummeling the currency to new lows. The EUR/USD rose to a two-and-a-half year high after the statement, reaching towards 1.4865, a price unseen since December 2009. The GBP/USD witnessed a similar spike, climbing to a November 2009 high of 1.6726.

With today’s Advance GDP figures being published at 13:30 GMT, traders may find additional reasons to dump the USD in exchange for higher yielding currencies. The continuation of record low rates fuels this investment shift as well. Today’s GDP may show the US economy slowing somewhat, with expectations for only a 1.9% quarter-on-quarter growth, down from last quarter’s 3.1%. There does not appear to be any reason to resist the bear session on the USD during the remainder of the week.

The euro gained in yesterday’s trading following statements by the US Federal Open Market Committee (FOMC) regarding US monetary policy. The statement affirmed the notion that the Fed would hold interest rates at their record low for the foreseeable future, driving traders away from the greenback en masse and into higher yielding assets.

The EUR posted gains against all of its rivals immediately following the statement. Troubling for the euro zone, however, was a lower-than-forecast release of regional industrial orders. The figure revealed a growing weakness among industry that has stricken Great Britain, Japan and parts of the United States over the past two months. Ascendant oil prices are playing their part in deterring exports, but a general sluggishness also appears present in the market recently. Should global industry falter further, a second recession may occur, largely driven by sky-rocketing energy costs.

As for the remainder of this week, the euro looks to be gaining against the greenback as traders find additional reasons to pull out of their dollar positions in exchange for higher yields. France will be publishing its consumer spending report at 7:45 GMT and may also reveal a slowdown in growth, linked with the faltering industrial sector in the euro zone. Germany may also show a small decline in its employment sector. These factors, however, will likely be outweighed by the shift in sentiment towards the buck after yesterday’s FOMC statement.

The JPY lost ground against almost all of its rivals yesterday. An S&P downgrade of Japan’s debt outlook from stable to negative has caused a shift away from the island economy in the short- to mid-term. The USD/JPY, however, was trading lower as investors fled the greenback after the Fed’s monetary policy statements yesterday afternoon. After reaching upwards of 82.75, the pair quickly dropped to a daily low of 81.61 before stabilizing.

This morning’s sharp downturn in industrial production, linked with similar downturns in Great Britain, Europe and the United States, also played a role in pushing the dollar/yen back to its current consolidation level. While the yen suffers from its own economic concerns, dollar bears outpaced the yen’s in this morning’s trading hours, helping to lift the yen despite its dire economic standing. The pair also looks to be continuing this movement for the foreseeable future given the shift in sentiment away from the US dollar.

Oil prices ended yesterday trading slightly higher on the day after statements by the US Federal Reserve affirmed the continuation of record low interest rates. As investors bailed out of their long positions with the USD, oil prices found support, pushing the commodity back towards $113 a barrel with a closing price of $112.76.

Combative remarks have been tossed about lately by politicians and business leaders searching for blame on the recent spike in energy costs. Gas prices in the United States are approaching nominal highs, causing stirs and outrage by US consumers. The high transportation costs for exporting nations are also feeling the pinch as global industry appears to have begun faltering. The reasons for industry short falls may be tied with high oil prices, but could also be due to an atmosphere of pessimism towards growth in the near-term, analysts have said.

As for today, crude oil traders may want to consider that commodities, which are linked to the value of the US dollar, are likely going to receive a boost in the immediate future due to yesterday’s monetary policy statements. Hawkish statements about economic growth may suffice to hold prices stable between $112 and $115, but many speculators are beginning to anticipate another bull run in commodity prices and traders would be wise to watch for the bounce after the price corrects from yesterday’s movement.

Jovi Overo