Category: Daily Look

Mo’ Dollars, Mo’ Problems



In 1971, U.S. Secretary of the Treasury John Connally told a group of visiting finance ministers; “the dollar is our currency, but it’s your problem”.
It’s 2015, and his words remain accurate – exchange rates across the planet are plumbing multi-year lows today as interest differentials shift further in the dollar’s favour. While the Federal Reserve debates the timing of its first post-crisis rate hike, central banks elsewhere are pursuing completely divergent objectives – in the last month, Albania, Canada, Denmark, Egypt, India, Pakistan, Peru, Romania, Singapore, Switzerland, Turkey, Uzbekistan, and the Euro area have all eased monetary policy. Russia joined the parade overnight, dropping benchmark rates by 200 basis points in an attempt to stabilize growth.
After this morning’s lower-than-forecast, but generally positive fourth quarter US gross domestic product number, this trend is likely to continue. The world’s largest economy expanded by an annualized 2.6% over the period – versus forecasts around 3%, while personal consumption rose 4.3% against an expected 4%. The fact that the US consumer remains undaunted by global weakness will support Janet Yellen’s plans to tighten later this year, and is boosting the dollar against most of the majors.
While the euro and yen trade in consolidative ranges, the Aussie is down sharply, with traders betting that policymakers will cut benchmark rates when the Reserve Bank of Australia meets next week. Futures traders are now pricing in a more than 70% chance that the benchmark will be slashed. The Lucky Country is seeing its fortunes shift as falling commodity prices expose the cracks in an over-leveraged economy.
The Canadian dollar managed to stabilize a bit in overnight markets after we spread a rumor that Apple was preparing to buy the country, but the effect wore off when Statistics Canada released numbers showing that the economy shrank 0.2% month-over-month in November. Participants expecting a flat reading were disappointed when manufacturing output posted its sharpest monthly drop in at least six years, while mining, oil, and gas extraction industries continued to shrink. This result will almost certainly add to expectations of another central bank rate cut by March, and the currency is getting absolutely clobbered as we go to pixels.
It may be Friday, but it’s not time to head to the pub just yet. Currency markets are particularly vulnerable to movement today, with month-end portfolio rebalancing efforts well underway.  Reversals are quite possible as the clock ticks down, so stay frosty. And warm.

In our latest podcast, we do a Fed rundown analyze the Greek elections and discuss the suffering Aussie

Download it directly here.

Subscribe to our iTunes page

This week in the markets: Greek elections set the eurozone on edge

This week in the markets: Greek elections set the eurozone on edge

EUR/USD fell to an eleven year low this week, not only because of the ECB’s pledge to begin a huge quantitative easing programme but also following the weekend’s Greek elections. Anti-austerity party Syriza were voted in, putting further downward pressure on the single currency. With this victory there are growing fears that that Greek bail-out

EURUSD, USDJPY, GBPUSD TA & Pivot Points – Jan. 30 2015

EURUSD, USDJPY, GBPUSD TA & Pivot Points – Jan. 30 2015

EURUSD Daily Pivots R3 1.1476 R2 1.1421 R1 1.137 Pivot 1.1315 S1 1.1264 S2 1.1209 S3 1.1158   EURUSD was weaker yesterday but managed to continue staying above its lows, giving the possible hints that further upside, to testing 1.14 levels cannot be ruled out. Currently, price action has managed to break above the adjusted

Talks betweek Greece and the Eurogroup

Talks betweek Greece and the Eurogroup

We reach the end of what has been a pretty dramatic month for FX and not just because of developments on the Swissie. Whilst over-shadowed, other central banks have also been driving FX rates; not only the ECB, but also in Canada and New Zealand. We’ve got more to come, today from Russia and next

FOMC calls for patience

FOMC calls for patience

Last night’s FOMC turned out to be rather a non-event in the end although going into the meeting a degree of bearishness was expected and this didn’t materialise. The word “patience”, which has now become the new “extended period”, remained and despite inflation continuing to plunge on the back of lower oil prices, the Fed’s

EURUSD, GBPUSD, USDJPY Pivot Points, TA – Jan. 29 2015

EURUSD, GBPUSD, USDJPY Pivot Points, TA – Jan. 29 2015

EURUSD Daily Pivots R3 1.146 R2 1.1421 R1 1.1354 Pivot 1.1314 S1 1.1247 S2 1.1207 S3 1.1104   EURUSD closed lower yesterday after breaking out from the rising trend line. However, price action is currently aiming to reach for the daily pivot level. If price reverses from the pivot point, we could expect to see

All eyes on FOMC meeting

All eyes on FOMC meeting

Financial markets have settled themselves but we’ve seen some abnormal moves recently with the first being the bounce in the euro following the Greek General Election results and then yesterday the US dollar reacted strangely to better than expected consumer confidence seeing a bout of profit taking. Many were blaming the poor durable goods data

Euro recovers

Euro recovers

In Greece, it was a case of Syriza came, they won, they formed a coalition and the Eurozone did not fall apart at the seams. This was most apparent on the single currency, which quickly recovered from the overnight lows and sustained most of the subsequent gains. This was not a sign that the single

EUR/USD, USD/JPY, GBP/USD Pivot Points, TA – Jan. 27 2015

EUR/USD, USD/JPY, GBP/USD Pivot Points, TA – Jan. 27 2015

EURUSD Daily Pivots R3 1.1519 R2 1.1407 R1 1.1322 Pivot 1.121 S1 1.1125 S2 1.1013 S3 1.0928   EURUSD managed to close higher yesterday from the lows of 1.109. However today needs to follow through higher in order to continue/confirm the move to the upside. Immediate resistance comes in at 1.154 and as long as

EURUSD, GBPUSD, USDJPY Pivot Points, TA – Jan. 26 2015

EURUSD, GBPUSD, USDJPY Pivot Points, TA – Jan. 26 2015

EURUSD Daily Pivots R3 1.1609 R2 1.1491 R1 1.135 Pivot 1.1232 S1 1.1090 S2 1.0972 S3 1.0831   EURUSD dipped lower below 1.14 as noted in Friday’s analysis. With the weekend Gap now being filled, EURUSD could continue to dip further with the falling trend line likely to come in as the only support level.