Fundamental Analysis 27 October 08
This document was uploaded by user and they confirmed that they have the permission to share it. If you are author or own the copyright of this book, please report to us by using this DMCA report form. Report DMCA
Overview
Download & View Fundamental Analysis 27 October 08 as PDF for free.
More details
- Words: 988
- Pages: 3
Analysis <27>: USD The USD finished Friday within a broad range much where it began, thus holding onto its significant gains made through the week against both the GBP and EUR. Investors once again seemed to focus much of their attention on the crisis of confidence internationally, which in turn has spurred on USD buying. The U.S. did release economic data on Friday with Existing Home Sales numbers, the figure of 5.18 million was a positive increase above the expected 4.93 million. Today the U.S. will release its New Homes Sales results, a number of 452K is estimated which would be below the previous report of 460K. The housing data usually is a big factor in daily trading upon its publication, but the currency markets are bound to cast this information aside and concentrate on the broad economic environment. As commodity prices continue to plummet and a genuine fear of recession casts its shadow, investors have had their nerves tested unrelentingly as the global financial problems have become more pronounced. The Federal Reserve is scheduled to meet this Wednesday regarding its interest rates. Investors are debating the merits of another interest rate cut by the Fed, with most of them believing that another rate cut will take place. If an interest rate cut takes place this week in the U.S. it is NOT likely to be a coordinated action like it was internationally a few weeks ago with all the central Banks. As a recession looms on the horizon worldwide, many countries are seeking a way to make their currencies worth less in order to spur exports and also make the borrowing of money cheaper for businesses. The problem now is that the central Banks appear to behind the curve and are being hampered by a cautious approach which appears to almost be one of paralysis. If the Federal Reserve moves to cut its interest rate this week it will not come as a great surprise, and then it will be up to their counterparts internationally to act. Global equity markets have tumbled in a breath taking fashion in October and governments which have focused on the problems of the banking sectors and credit quake will have to respond to the problems within the stock markets in some capacity. Look for the USD to most likely consolidate as investors wearily await the Federal Reserve’s decision this week. However, traders should keep in mind that the greenback’s momentum as a safe haven may continue to give solace to investors if the stock markets continue to deteriorate.
EUR The EUR managed to trade cautiously against the USD on Friday after losing a considerable amount of ground during the week. A large amount of PMI data was released on Friday throughout Europe and the reports were not positive. The German PMI Flash Manufacturing came in with a 43.3 number compared to an estimate of 46.0. The same French report came in with a 40.8 reading, lower than the expected 42.3. Topping off the negative publications from the same economic instrument was the broad European figure of 41.3, which was well below its anticipated mark too. Today the German Ifo Business Climate survey will be released and it is expected to be 91.2. Tomorrow the German Consumer Climate statistics will be due. Bearing this data in mind and the results from Friday, the European Union is clearly demonstrating that business sentiment is suffering and that worries about a recession and its consequences are weighing on the investment climate. The ECB is clearly in a position in which its monetary policy is coming into question. With an interest rate of 3.75% and the threat of inflation lessening by the day, it would seem clear that the European Central Bank will have to enact more interest rate cuts. Investors may have discounted that the ECB will act relatively soon already into the current price of the EUR. It will be an interesting week for the EUR as investors continue to come to grips with a nervous market sentiment.
GBP The Sterling found the going easier on Friday against the USD, but that result did not dampen the punches it took earlier in the week against the greenback. The Preliminary U.K. GDP on Friday showed a worse than feared result coming in with a minus -0.5% number compared to the forecasted minus -0.2%. Though it takes two consecutive quarters of contraction to indicate an official recession it appears that the U.K. is suffering the affects of poor sentiment already. The Bank of England like the ECB has a very high interest rate and most investors are clinging to the belief that the BoE will have to take action. The U.K. will see its Bank of England Financial Stability Report issued today and the news therein cannot be expected to be pleasant. Tomorrow on schedule is the CBI Realized Sales data. Today’s report from the BoE will most likely offer proof that the U.K. economy is under immense strain. Bad news should not surprise investors at this point, but traders should remain aware that it is sentiment that has spurred on much of the trading the past few weeks. The Sterling will continue to face volatility this week. JPY
The JPY continued its parade of bull sentiment on Friday and because of this has started to cause a great deal of concern within the Japanese government. The Nikkei stock market has dropped to almost a 23 year low in recent trading sessions and the economy of Japan is coming under a great amount of pressure. As carry traders have essentially run away from risk, the JPY has continued to gain rapidly as long time positions with emerging market currencies have been closed. The questions hanging over the major central banks and their monetary policy have also given impetus to the JPY.
Written by: Robert Petrucci, Chief Commodity Expert and Forex Analyst
EUR The EUR managed to trade cautiously against the USD on Friday after losing a considerable amount of ground during the week. A large amount of PMI data was released on Friday throughout Europe and the reports were not positive. The German PMI Flash Manufacturing came in with a 43.3 number compared to an estimate of 46.0. The same French report came in with a 40.8 reading, lower than the expected 42.3. Topping off the negative publications from the same economic instrument was the broad European figure of 41.3, which was well below its anticipated mark too. Today the German Ifo Business Climate survey will be released and it is expected to be 91.2. Tomorrow the German Consumer Climate statistics will be due. Bearing this data in mind and the results from Friday, the European Union is clearly demonstrating that business sentiment is suffering and that worries about a recession and its consequences are weighing on the investment climate. The ECB is clearly in a position in which its monetary policy is coming into question. With an interest rate of 3.75% and the threat of inflation lessening by the day, it would seem clear that the European Central Bank will have to enact more interest rate cuts. Investors may have discounted that the ECB will act relatively soon already into the current price of the EUR. It will be an interesting week for the EUR as investors continue to come to grips with a nervous market sentiment.
GBP The Sterling found the going easier on Friday against the USD, but that result did not dampen the punches it took earlier in the week against the greenback. The Preliminary U.K. GDP on Friday showed a worse than feared result coming in with a minus -0.5% number compared to the forecasted minus -0.2%. Though it takes two consecutive quarters of contraction to indicate an official recession it appears that the U.K. is suffering the affects of poor sentiment already. The Bank of England like the ECB has a very high interest rate and most investors are clinging to the belief that the BoE will have to take action. The U.K. will see its Bank of England Financial Stability Report issued today and the news therein cannot be expected to be pleasant. Tomorrow on schedule is the CBI Realized Sales data. Today’s report from the BoE will most likely offer proof that the U.K. economy is under immense strain. Bad news should not surprise investors at this point, but traders should remain aware that it is sentiment that has spurred on much of the trading the past few weeks. The Sterling will continue to face volatility this week. JPY
The JPY continued its parade of bull sentiment on Friday and because of this has started to cause a great deal of concern within the Japanese government. The Nikkei stock market has dropped to almost a 23 year low in recent trading sessions and the economy of Japan is coming under a great amount of pressure. As carry traders have essentially run away from risk, the JPY has continued to gain rapidly as long time positions with emerging market currencies have been closed. The questions hanging over the major central banks and their monetary policy have also given impetus to the JPY.
Written by: Robert Petrucci, Chief Commodity Expert and Forex Analyst
Related Documents
Fundamental Analysis 27 October 08
November 2019 9
Fundamental Analysis 24 October 08
November 2019 11
Fundamental Analysis 31 October 08
November 2019 11
Fundamental Analysis 17 October 08
November 2019 9
Fundamental Analysis 16 October 08
November 2019 13
Fundamental Analysis 30 October 08
November 2019 13More Documents from "Robert Petrucci"
Fundamental Analysis 6 November 08
November 2019 14
Fundamental Analysis 28 October 08
November 2019 12
Fundamental Analysis 23 October 08
November 2019 10
Fundamental Analysis 29 October 08
November 2019 13
Fundamental Analysis 5 November 08
November 2019 10