The Forex Daily Digest – January 26, 2010
The USD increased to its highest in more than a month on news that China wanted to limit bank lending and that Japan's debt rating is in jeopardy, drawing investors to the relative safe-haven of the USD. The USD also experienced gains after the U.S. Case-Shiller home price index fell 0.2% in November compared with October on a not seasonally adjusted basis, underlining risks to the U.S. recovery. The USD also increased following news reports that President Obama will propose a spending freeze for some federal departments.
The USD is positioned to fall against its major counterparts on prospects the Federal Reserve will keep its target lending rate near zero to spur growth. The Federal Reserve is forecast to keep its key overnight rate in a range between zero and 0.25 percent tomorrow.
Analysts believe the JPY may extend its drop against all of its most-traded counterparts on speculation Federal Reserve Chairman Bernanke will be confirmed for a second term, reviving demand for higher-yielding assets. The JPY also fell against the EUR after sources said the Bank of Japan is prepared to consider expanding an emergency-loan program for banks.
Republican Senator John McCain said this week that he will vote against the nomination of Chairman Bernanke to serve another term as chairman of the U.S. Federal Reserve. Meantime, the White House said that reappointing Ben Bernanke to a second term as chairman of the Fed is important to calming the concerns of investors and financial markets.
The GBP lost versus the USD and gilts rose after a report showed the U.K. economy grew less than forecast in the fourth quarter, even as it exited its longest recession on record. The report is released as the Bank of England finishes its 200- billion-pound asset-purchase program before deciding whether to extend it at the bank’s next meeting on Feb. 4th.
The CAD weakened the most since October as uncertainty over U.S. banking regulations, China’s monetary policy and Greece’s finances dulled investors’ appetite for higher-yielding assets. The CAD fell versus most of its major counterparts as stocks tumbled and crude oil, the nation’s biggest export, dropped. The Bank of Canada kept interest rates at a record low and repeated concern that the currency’s strength is hampering the nation’s economy.
Bill Gross, manager of the PIMCO bond fund said that investors should avoid Britain and move away from the debt of other G7 nations as heavy borrowing threatens to curb growth, and shift assets to Asia and developing countries. He said that the G7 nations have "lost their position as drivers of the global economy" and will most likely stumble for years to come from the effects of increasing debt. Gross said that Germany seems to be the safest, most liquid sovereign debt alternative, but he also said he would prefer to invest in Canada where the liquidity and yield is sufficient.
On the U.S. economic calendar Wednesday look for December New Home Sales, Crude Inventories, and the FOMC Rate Decision. Scheduled earnings include Boeing, Caterpillar, ConocoPhillips, General Dynamics, UAL Corp, Netflix, Tractor Supply, and Piper Jaffray.
Happy trading,
James Dicks
The USD is positioned to fall against its major counterparts on prospects the Federal Reserve will keep its target lending rate near zero to spur growth. The Federal Reserve is forecast to keep its key overnight rate in a range between zero and 0.25 percent tomorrow.
Analysts believe the JPY may extend its drop against all of its most-traded counterparts on speculation Federal Reserve Chairman Bernanke will be confirmed for a second term, reviving demand for higher-yielding assets. The JPY also fell against the EUR after sources said the Bank of Japan is prepared to consider expanding an emergency-loan program for banks.
Republican Senator John McCain said this week that he will vote against the nomination of Chairman Bernanke to serve another term as chairman of the U.S. Federal Reserve. Meantime, the White House said that reappointing Ben Bernanke to a second term as chairman of the Fed is important to calming the concerns of investors and financial markets.
The GBP lost versus the USD and gilts rose after a report showed the U.K. economy grew less than forecast in the fourth quarter, even as it exited its longest recession on record. The report is released as the Bank of England finishes its 200- billion-pound asset-purchase program before deciding whether to extend it at the bank’s next meeting on Feb. 4th.
The CAD weakened the most since October as uncertainty over U.S. banking regulations, China’s monetary policy and Greece’s finances dulled investors’ appetite for higher-yielding assets. The CAD fell versus most of its major counterparts as stocks tumbled and crude oil, the nation’s biggest export, dropped. The Bank of Canada kept interest rates at a record low and repeated concern that the currency’s strength is hampering the nation’s economy.
Bill Gross, manager of the PIMCO bond fund said that investors should avoid Britain and move away from the debt of other G7 nations as heavy borrowing threatens to curb growth, and shift assets to Asia and developing countries. He said that the G7 nations have "lost their position as drivers of the global economy" and will most likely stumble for years to come from the effects of increasing debt. Gross said that Germany seems to be the safest, most liquid sovereign debt alternative, but he also said he would prefer to invest in Canada where the liquidity and yield is sufficient.
On the U.S. economic calendar Wednesday look for December New Home Sales, Crude Inventories, and the FOMC Rate Decision. Scheduled earnings include Boeing, Caterpillar, ConocoPhillips, General Dynamics, UAL Corp, Netflix, Tractor Supply, and Piper Jaffray.
Happy trading,
James Dicks
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