Forex Crunch » RBA

RBA stays its hand

Yohay — Tue, 07 Feb 2012 09:42:15 +0000

Australia’s central bank sprang a big surprise when it decided to leave the official cash rate unchanged at 4.25% overnight. The statement accompanying the announcement suggested that growth remained close to trend and that underlying inflation was currently around 2.5%, in the middle of the 2-3% target band.

That said, a closer examination of the statement reveals that the RBA is still disposed towards further easing. Global growth expectations for this year have been revised lower, labour market conditions down under are soft, and inflation is expected to decline further over coming months. As the statement confirms:”Should demand conditions weaken materially, the inflation outlook would provide scope for easier monetary policy”. Video:

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Australian Dollar Recovers From Rate Cut

Yohay — Tue, 06 Dec 2011 11:28:30 +0000

The RBA cut the interest rate in Australia by 0.25% to 4.25%, in a move that was widely expected. This is the second cut in a row. Glenn Stevens and his colleagues cut the rates from 4.75% to 4.50% on November 1st.

The Aussie took a dive following this move, but it found support and bounced back up. Update.

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New European Governments Provide No Remedy

Yohay — Wed, 16 Nov 2011 09:06:51 +0000

New governments are put in place, but it is becoming clear that it this will not help. The foundations and the basic expectation of creating growth with austerity are the problem here.

Christopher Vecchio, a currency analyst with DailyFx.com discusses the European debt crisis, the impact of a possible failure of the US “Super Committee” to reach a deal on markets, the sensitive situation of the British pound and more.

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Greece aims to shoot itself in the foot

Yohay — Tue, 01 Nov 2011 12:41:57 +0000

Last week’s EU agreement was just about holding together until last night, when Greece threw in the curve-ball of announcing a referendum on the deal. Many Greeks feel that the option of full default, letting the bond-holders take the full hit is better than the restructuring currently being negotiated and the years of austerity currently planned.

But this puts the troika in a difficult position. Having just agreed the latest EUR 5.8bn loan instalment, it is now faced with the position of lending further money to a country that could potentially renege on the conditions of all the outstanding lending. Greece has EUR 8.2bn of maturing debt in December and EUR 15.1bn in Q1 next year. It would be totally irresponsible for the EU and IMF to disburse any more money to Greece whilst the potential for a rejection of the new EU/IMF deal is possible.

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The day of reckoning

Yohay — Fri, 02 Sep 2011 07:58:04 +0000

There’s a frustration on the part of some market participants that there is always such a strong focus on the US employment report, given that the labour market is a lagging indicator of economic fortunes. Nevertheless, the fact that the labour market has been lagging the recovery of the past two years has been the primary issue, with total employment still way below the pre-recession peak of 2008 and the participation rate (those in work or looking) still on a declining trend.

For an economy that desperately needs tax revenues and consumers to spend (out of income, rather than borrowing), this has been a thorn in the side of the recovery to date. Furthermore, today’s anticipated 68k gain on headline payrolls falls far short of that required to account for the growth in the labour force. A negative headline number will once again increase speculation that the US economy is headed for another recession.

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Jackson Hole – Get Ready for a Disappointment

Yohay — Tue, 23 Aug 2011 16:19:06 +0000

Expectations are quite high from Bernanke’s speech at Jackson Hole, and this may end in a disappointment. David Song of DailyFx discusses this important event, as well as other topics: What will happen in currency markets if we enter a recession, what is expecting us with central bank movements and more, in an interview.

David Song studied macroeconomic policies under a visiting scholar at the Federal Reserve Bank of St. Louis while attending the Zicklin School of Business at Baruch College, and graduated with a Bachelor of Business Administration degree majoring in finance. During his undergraduate program, David acquired a strong understanding of technical analysis from a former-president of the Market Technicians Association, and incorporates both fundamentals and technicals in his analysis. After starting at DailyFX, David authors the daily briefings for the U.S. Open as well as the Trading the News report.

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ECB puts the pedal to the metal

Yohay — Mon, 08 Aug 2011 07:45:51 +0000

A measure of just how wrong the ECB has got things is the fact that it released a statement last night, just three days after its governing council meeting. In welcoming “the announcements made by the governments in Italy and Spain concerning new measures and reforms”, together with its commitment to “actively impllement its Securities Markets Programme”, the ECB looks set to start buying more bonds today, including Italian and Spanish debt.

The justification from the ECB is to “help restore a better transmission of monetary policy decisions… and therefore ensure price stability in the euro area”, a similar arguement being offered for the liquidity expansion of Thursday. Whilst welcome, the actions further highlight the absurdity of the ECB’s policy of tightenign rates both in April and even more so in June. The ECB is fighting a fire that only last month it was throwing fuel onto.

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Hope keeps the boat afloat

Yohay — Wed, 20 Jul 2011 07:53:19 +0000

There are two hopes that are underpinning markets right now. The first is that we are on a home straight on the US debt ceiling negotiations, with a new bi-partisan deal on the table. The second is that EU leaders, at their summit tomorrow, will start to pull together to ensure a credible second bail-out for Greece.

It’s not an easy feeling though, which partly explains why institutional cash holdings are so high at present; there’s just too much uncertainty out there, much of it caused by politicians. That said, we’ve seen some return of risk appetite in the past 24 hours, the CHF losing some ground (albeit from still lofty levels) and the Aussie regaining some of its resolve. For now though, the euro is unable to show its usual resilience, with too much hanging on tomorrow’s summit.

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Bernanke fails to feed markets

Yohay — Wed, 08 Jun 2011 07:57:32 +0000

It was clear that after the recent run of soft data, some were desperate for Fed Chairman Bernanke to drop hints about further QE when he spoke yesterday. As it was, whilst he was fairly cautious on the economic outlook (describing the recovery as “frustratingly slow”), he didn’t throw out any bones for commodity, FX or equity markets to latch onto. Bernanke is all too aware of the self-fulfilling momentum that could build around expectations for further QE and at this point in time, he does not want to light the touch-paper under further commodity and equity markets. Nevertheless, he did underline the fact that “accommodative monetary policies are still needed”. For now, it’s the right approach but, behind closed doors the Fed is likely looking into the merits of further QE at least.

Guest post by FXPro

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Emerging curriencies in the ascendency

Yohay — Tue, 07 Jun 2011 08:12:32 +0000

What’s been noticeable over the past week is the weight on developed market currencies. Emerging currencies put in their best performance last week for over a month, as the US and Europe were weighed down by concerns on both growth and also debt. Currency markets are very short-termist, but sometimes the divide between emerging market economies and the rest can start to look quite stark. The IMF sees government debt in developed markets rising every year for the next five years, whereas for emerging and developing economies, the opposite is true. Furthermore, the UK and US especially are still grappling with still excessively high levels of household debt. FX markets can forget this but, over the past week, have woken up to the fact that the road to recovery for many developed markets still has a long way to go and that the risks of further recessions are not to be sniffed at.

Guest post by FXPro

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