The Forex Daily Digest – October 26, 2009
The USD continued its winning streak against the JPY and gained on the GBP and other major currencies as U.S. equities declined on Friday, taking the steam out of investors who had been running toward riskier assets. The USD also rose for a third straight day against the EUR, which hit a 14-month high earlier in the week. The USD may remain under pressure as the Federal Reserve lags behind other central banks in increasing borrowing costs.
An assortment of positive euro zone data increased hopes of a robust recovery in Europe but experts remained cautious and Britain shocked financial markets by failing to creep out of recession in the third quarter. The U.K. economy contracted by 0.4 percent compared with the previous three months, devastating expectations of an end to the downturn and instead making its recession the longest on record.
U.S. Federal Reserve Chairman Ben Bernanke said the central bank would conduct more comprehensive reviews of banks and demand more reporting as part of efforts to tighten oversight following a damaging financial meltdown. In his most detailed description of the Fed's role in the aftermath of the crisis, Bernanke, speaking at a Boston Fed conference, renewed support for the creation of a systemic risk oversight council.
Alan Blinder, economics professor at Princeton University and former Fed official, said in a paper prepared for delivery at the Boston Fed's economic conference in Cape Cod that the concept of markets being able to regulate themselves should be jettisoned after "perhaps the greatest financial crisis the world has ever known." Blinder said it was inevitable in a massive economy like the U.S. that some financial firms would always be too big or too interconnected, to fail without sending shock-waves through markets and the economy.
The CAD weakened for a second day after Bank of Canada Governor Mark Carney warned about the currency’s excessive strength, encouraging investors to look elsewhere for higher yield. Carney said yesterday that investors lost their “focus” on the central bank’s commitment to meet a 2 percent inflation target, and said action to weaken the Canadian dollar is an “option.”
The USD may extend losses after weakening beyond $1.50 per euro for the first time in 14 months as evidence of a global economic recovery increased demand for riskier assets at the expense of the dollar. Sterling rose to a five-week high last week after Bank of England Governor Mervyn King wrote in a newspaper opinion piece that stated “it would be wise” to take into account the prospect of higher interest rates. European Central Bank President Jean-Claude Trichet said this week that “excessive volatility” in currencies is “bad” for economic development.
The JPY dropped to a two-month low against the EUR as improved corporate earnings drove stocks higher, adding to evidence of a global economic recovery and fueling demand for higher-yielding currencies. The JPY headed for a weekly decline versus 13 of its 16 most-traded counterparts. The JPY headed for a third weekly drop against the AUD and NZD as investors speculated the South Pacific nations will increase interest rates faster than other developed countries.
On the U.S. economic calendar this week is the September Durable Goods report, the Case-Schiller Home Price Index, October Consumer Confidence, New Home Sales for September, advanced Q3 GDP, Personal Income and Spending, PCE Prices, the Chicago PMI, revised University of Michigan Consumer Sentiment for October and the Q3 Employment Cost Index.
Some of the major earnings this week include BP Plc, Verizon, Honda Motor Corp, Conoco-Phillips, General Dynamics, Visa, BE Aerospace, E*TRADE Financial, TD Ameritrade, Office Depot, OfficeMax, Valero Energy, Coca-Cola Enterprises, GlaxoSmithKline, Barrick Gold, Colgate-Palmolive, Motorola, Deutsche Bank, Exxon Mobil, Chevron, Sony, Procter & Gamble and Sprint-Nextel.
Happy Trading,
James Dicks
An assortment of positive euro zone data increased hopes of a robust recovery in Europe but experts remained cautious and Britain shocked financial markets by failing to creep out of recession in the third quarter. The U.K. economy contracted by 0.4 percent compared with the previous three months, devastating expectations of an end to the downturn and instead making its recession the longest on record.
U.S. Federal Reserve Chairman Ben Bernanke said the central bank would conduct more comprehensive reviews of banks and demand more reporting as part of efforts to tighten oversight following a damaging financial meltdown. In his most detailed description of the Fed's role in the aftermath of the crisis, Bernanke, speaking at a Boston Fed conference, renewed support for the creation of a systemic risk oversight council.
Alan Blinder, economics professor at Princeton University and former Fed official, said in a paper prepared for delivery at the Boston Fed's economic conference in Cape Cod that the concept of markets being able to regulate themselves should be jettisoned after "perhaps the greatest financial crisis the world has ever known." Blinder said it was inevitable in a massive economy like the U.S. that some financial firms would always be too big or too interconnected, to fail without sending shock-waves through markets and the economy.
The CAD weakened for a second day after Bank of Canada Governor Mark Carney warned about the currency’s excessive strength, encouraging investors to look elsewhere for higher yield. Carney said yesterday that investors lost their “focus” on the central bank’s commitment to meet a 2 percent inflation target, and said action to weaken the Canadian dollar is an “option.”
The USD may extend losses after weakening beyond $1.50 per euro for the first time in 14 months as evidence of a global economic recovery increased demand for riskier assets at the expense of the dollar. Sterling rose to a five-week high last week after Bank of England Governor Mervyn King wrote in a newspaper opinion piece that stated “it would be wise” to take into account the prospect of higher interest rates. European Central Bank President Jean-Claude Trichet said this week that “excessive volatility” in currencies is “bad” for economic development.
The JPY dropped to a two-month low against the EUR as improved corporate earnings drove stocks higher, adding to evidence of a global economic recovery and fueling demand for higher-yielding currencies. The JPY headed for a weekly decline versus 13 of its 16 most-traded counterparts. The JPY headed for a third weekly drop against the AUD and NZD as investors speculated the South Pacific nations will increase interest rates faster than other developed countries.
On the U.S. economic calendar this week is the September Durable Goods report, the Case-Schiller Home Price Index, October Consumer Confidence, New Home Sales for September, advanced Q3 GDP, Personal Income and Spending, PCE Prices, the Chicago PMI, revised University of Michigan Consumer Sentiment for October and the Q3 Employment Cost Index.
Some of the major earnings this week include BP Plc, Verizon, Honda Motor Corp, Conoco-Phillips, General Dynamics, Visa, BE Aerospace, E*TRADE Financial, TD Ameritrade, Office Depot, OfficeMax, Valero Energy, Coca-Cola Enterprises, GlaxoSmithKline, Barrick Gold, Colgate-Palmolive, Motorola, Deutsche Bank, Exxon Mobil, Chevron, Sony, Procter & Gamble and Sprint-Nextel.
Happy Trading,
James Dicks
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