USA: Number of unemployment benefit applications reduced by 44 thousand over a week

FOREX NEWS: According to the data released yesterday, number of unemployment benefit applications in the U.S. reduced by 44 thousand, to 434 thousand over a week.
 
 

Source: Liteforex.org rss feed

Euro/USD: Euro remains weak at the end of the week

Forex analytics: The pair EUR/USD continues to be traded downward At the Forex currency market on Friday morning, remaining at the lows of March. 
By 9.25 Moscow time the Euro is at 1.4220 against closing level of 1.4245 yesterday.
Investors are still apprehensive to revert to risk due to the instability at the global capital markets. The data on GDP in Eurozone will be made public today and investors expect the ...

Source: Liteforex.org rss feed

This Week in the USD: Housing, Manufacturing, and FOMC Minutes on Tap

Markets were volatile last week as investors became wary of risk once again. Commodities slid as did equities especially in Europe and North America as mostly favorable earnings failed to offset global growth worries and sovereign debt problems continued to roil the Euro-zone. The continuing Greek saga sent the EUR

Source: ActionForexall Rss Feed

This Week in the GBP: Inflation, Employment, BOE Meeting Minutes

The past two weeks have seen the Pound declining against the USD amid currency markets that are were looking for safety amid a correction/sell-off in commodities and some uncertainties for the global recovery. While the USD was generally well bid during these two weeks, the economic data from the UK

Source: ActionForexall Rss Feed

Fundamental Change or an Overdue Correction The Week in Review

An overbought market in commodities, an oversold dollar and concern that the US economy might be slowing brought the commodity market run to a crashing halt this week. Euro traders waited for the word from the ECB, when Jean Claude Trichet the ECB President indicated on Thursday that the central

USD started this short working week with decline in pairing with Rouble

Forex analytics:  With the start of the trading session at the MICEX currency section, the Russian Rouble rate continues to grow, the trend which was interrupted by the 1st of May celebrations amid consolidation of the European currency at the beginning of the week. However, pullback in oil prices prevents the Russian Rouble to grow more considerably.
Thus, trading session for the USD started at the level of ...

3 Top Themes This Week: Bernanke Green Lights "Risk On", AUD at Record Highs, ...

The historic FOMC decision and press conference came and went this week, for the most part we got the same statement as we had in March, with a slight more emphasis on inflation.

Fed Chairman's performance came through "dovish" as he reiterated the need to keep rates low. We did see

Pulsating Week Ends On High Note

Thursday's GDP report from the U.S. may have been disappointing on the face of it coming in at only 1.8 percent against 2 percent expected, but considering the components the headline figure distorts the views somewhat. Today, we end the week with a whole host of figures of which the

Pulsating Week Ends On High Note

Thursday's GDP report from the U.S. may have been disappointing on the face of it coming in at only 1.8 percent against 2 percent expected, but considering the components the headline figure distorts the views somewhat. Today, we end the week with a whole host of figures of which the

Central Bank Monitor: FOMC Minutes and BOE Inflation Report Hearings Last Week, Fed's Beige Book and ECB Decision Coming Up

Central bank activity for the major currencies was again rather sparse last week, with no major rate decisions coming out.

Central bank observers had to make do with the release of the FOMC minutes and the BOE Inflation Report hearings.

Furthermore, rather little was released in the way of significant economic data last week, since the week's trading sessions were shortened by the major U.S. Thanksgiving bank holiday observed on Thursday.

FOMC Minutes Show Fed's Approval of QE II

Last Tuesday, the U.S. Fed's Federal Open Market Committee released its minutes for their November meeting that was held on November 2^nd and 3^rd. The minutes offered some insight into the Fed's plans for Large Scale Asset Purchases or LSAPs, as well as indications of the Fed's economic projections and the prospects for future monetary policy.

In addition to the FOMC minutes, the Fed also released minutes from an October 15^th conference call where committee members discussed how to conduct further easing measures and the potential targeting of a term interest rate.

The minutes also showed that the most recent QE II package was approved by the committee with an almost unanimous vote of 10 to 1. Nevertheless, there was some disagreement on the amount of quantitative easing the economy would require to return to a reasonable level of growth. Despite that disagreement, the members felt that the advantages of the stimulus package would outweigh the drawbacks on balance.

Fed Also Downgrades Estimates for GDP Growth and Unemployment

The FOMC minutes also demonstrated that the Fed had downgraded its estimates for future unemployment, which is currently projected to fall within the 8.9% to 9.1% range for 2011. In addition, inflation is expected to rise in the near term but still forecast to stay below the 2% level.

Significantly, the committee also downwardly revised its growth estimate for the U.S. economy, and members now expect U.S. GDP to grow by 2.4% to 2.5% for 2010, 3.0% to 3.6% for 2011, 3.6% to 4.5% for 2012 and 3.5% to 4.6% for 2013.

Participating members also noted that real estate investment, manufacturing and trade indicators were also considerably weaker than expected and that the initial benefits from the first round of quantative easing measures were no longer providing what they deemed to be necessary support for the U.S. economy.

Finally, the minutes reflected that given the current state of the U.S. economy, the Fed's monetary policymakers do not currently see any kind of rate hike taking place until at least the fourth quarter of 2012.

Despite the less than positive economic outlook, most FOMC members continue to remain optimistic, although one member warned that Large Scale Asset Purchases could spark inflation and could therefore undermine the Fed's independence.

BOE Inflation Report Hearings

The Bank of England Governor and some MPC members participated in hearings on the BOE's quarterly Inflation Report on November 25^th of last week. The hearings were held before the British Parliament's Treasury Committee which basically reviews the MPC's and the BOE Governor's monetary policy approach toward fighting inflation.

In his opening statement made before the Treasury Committee, BOE Governor Mervyn King commented that,

"there is no reason to expect that inflation will be significantly affected by further movements in the exchange rate, taxes or commodity prices."

He then concluded his opening statement by observing that,

"overall, a majority of the MPC have concluded that the risks are, at present, broadly balanced. But we all stand ready to adjust policy - in either direction - should the outlook for inflation demand it."

Furthermore, in his testimony before the Treasury Committee, King stated that the outlook for demand in the U.K. was considerably uncertain and that the BOE was therefore challenged in controlling inflation.

In addition, King said he sees U.K. GDP growth as coming out lower than the original MPC forecast.

Coming Up: ECB Decision and Fed's Beige Book

Next week's central bank activity has the U.S. Federal Reserve Bank releasing its Beige Book this coming Wednesday, December 1^st that is more formally known as the Summary of Commentary on Current Economic Conditions.

Released eight times per year, the Beige Book surveys anecdotal evidence from key business contacts, economists, market experts and bank officials from each of the 12 Federal Reserve districts about local economic conditions.

The FOMC uses this economic analysis to help them make their next monetary policy decision, although the FOMC also uses the Green Book and the Blue Book that are not made public and which are thought to be more influential on policy.

In addition, the ECB will be announcing its Minimum Bid Rate Decision and will hold its associated Press Conference on Thursday, December 2^nd. The European central bank is currently expected to leave rates unchanged at 1.00 percent for the eighteenth straight month.

Stocks End Another Week Higher. Oil rises.

Gold is continuing to fluctuate in the 1380-1390 area, while oil is rising in line with stock market sentiment. Although equities have run out of steam today, December has been a very good month on the whole, and the weakness of the day doesn`t have a lot of significance even in the context of the week.

Oil, in particular, seems to have found a strong basis justified by the uncertainties surrounding the global supply-demand picture, as well as the political tensions in the Middle East. What we understand from the Israeli`s Stuxnet operation is that they do not see inaction as an option, even though they are prepared to be creative in order to protect their somewhat lukewarm relationship with Washington under the Obama administration from further damage. They have bought some time by delaying t Iran`s nuclear enrichment program through highly creative means, while the sanctions contribute to the slowdown by reducing the regime`s field of maneuver. But none of these is a permanent solution, and sooner or later, barring a regime change, or perhaps a gigantic step forward in the Israeli-Palestinian peace process, the Israelis will have to confront the danger of a fully nuclear Iran, which, in fact we believe that they will refuse to accept and will respond to by resorting to some form of aggression in the end.

Naturally such prospects place a floor under the long-term price movements of the commodity. At the same time movements in the commodity complex are going to be dependent on the short term trends of the USD index for direction, and in that context, risk perceptions, and expectations of QE by the Federal Reserve are of paramount value. Our final assessment is that until the Chinese go bust, commodity prices will continue to move higher, and while the European situation may continue to create a lot of volatility now and then, prices are unlikely to be checked meaningfully as the whole world races to devalue national currencies in a shrinking global market.

The favorable outlook for commodities as an asset class is only slightly dependent on the role of supply-demand dynamics. Commentators like to stress that the tight supply of many different industrial goods and raw material is driving prices higher, but the very demand that is creating the tight supply situation is essentially dependent on the flow of credit from advanced nations, and their large speculators and investors, who are, ironically, the buyers of commodity futures on the notion that rising demand will stress  the supply side. The argument seems circular in many ways, and we believe that it is contradictory in essence. The opinions advanced in defense of the multiple bubbles in this sector are lacking in logical basis, and are only being listened to because the opposite case is neither pretty nor constructive for the long-term outlook. The idea that the authorities are building up bubbles of a size which will probably dwarf the subprime bubble once they explode, and is not very pleasant to listen to.

Gold is a commodity as well, and it is difficult it to expect to survive a lasting commodity crash when it does happen. Still, it could survive for a couple of quarters as speculators anticipate the total breakdown of the world`s financial structures, with trust in governments, politics, and trade partnerships rapidly evaporating. One can conceive of a situation in which the worst case scenario materializes and we see gold skyrocketing to extreme levels, but the more moderate, and still severely damaging outcome where a rapid readjustment of imbalances leads to cash squeezes, price controls, imposition of tariffs seems a lot more likelier. In this case, prices would be quickly targeted by international bodies and large owners of the metal in order to undermine trust in the metal, and to boost the profile of central bank issuances. Coupled with meaningful rises in interest rates, this would mean the end of the bull trend for gold, coinciding with a precipitous collapse of the global growth rate. But arguably, even that is less costly and dangerous than the wholesale breakdown of trust on an international basis.

For 2011, though, we suspect the main theme will be the Eurozone where authorities are committed to keeping their heads in the sand as long as an imminent default is not being expected by the markets. With elections, loan repayments, restructurings, and rating downgrades in store for much of the year, stocks and the Euro will have to battle a constant barrage of difficult news from the region if they manage to end the year in the black. That is possible, if only because of the Fed denying freedom of trade to one type of point of view makes it totally unwise to bet on a nominal fall in stock prices for quite a while. We know little about what will happen China or Korea, or the Eurozone, and the ECB`s future course is open to debate. But with the Fed, matters are simpler, and as long as the sovereign credit rating of the U.S. is not being questioned, the present posture is going to be maintained. That, naturally, means that the USD will remain under pressure during any selection of a one year period on the charts...