Dollar recoups some of its recent losses
19/12/08 00:25
The dollar recouped some of its recent losses against
the major currencies as oil fell to the lowest level
since 2004 and the credit outlook of a major US
corporate was downgraded. Investors shrugged off the
recent OPEC announcement to cut 2 mm barrels per day
and less demand pushed crude prices below $40, where
they stayed throughout the session. As the year-end
approaches, there is still no solution for the
automakers. The Bush administration said it continues
to work on a solution as the automakers have shut
down plants for now in efforts to conserve cash.
The US dollar has virtually collapsed since mid November, but we don't think USD weakness will last and expect a dollar comeback in 2009. With the current global financial crisis, global rates are converging towards zero with deflation risks looming. While carry may benefit on aggressive action in the short-term, we prefer to be long currencies which do well when global central bank rates move towards zero. Current account surpluses also provide a source of steady currency inflow. We believe investors will seek safety, liquidity and a store of value in such an environment and the USD and JPY meet those criteria. But the view can change in these uncertain times. I don't like that my next trip to Europe and that of the Monaco Grand Prix will, after fee's etc, will have me paying almost 2:1 on EUR/CAD, thus coffe and a croissant for 2 persons downstairs from the apartment will cost approximately $30 CAD. Or a round of 4 beers at the local pub on Grand Prix Wednesday will cost about $200. But its worth it, i guess.
The US dollar has virtually collapsed since mid November, but we don't think USD weakness will last and expect a dollar comeback in 2009. With the current global financial crisis, global rates are converging towards zero with deflation risks looming. While carry may benefit on aggressive action in the short-term, we prefer to be long currencies which do well when global central bank rates move towards zero. Current account surpluses also provide a source of steady currency inflow. We believe investors will seek safety, liquidity and a store of value in such an environment and the USD and JPY meet those criteria. But the view can change in these uncertain times. I don't like that my next trip to Europe and that of the Monaco Grand Prix will, after fee's etc, will have me paying almost 2:1 on EUR/CAD, thus coffe and a croissant for 2 persons downstairs from the apartment will cost approximately $30 CAD. Or a round of 4 beers at the local pub on Grand Prix Wednesday will cost about $200. But its worth it, i guess.
To put it in perspective... You can buy my course at
a firesale price and we only have 8 left. You get a
plethora of education for the cost of an average meal
during Monaco Grand Prix. When this product is gone,
we will reprice it on a new website, forthcoming.
Click here to buy...
http://www.chrislori.com/special-offer.html
After the recent FOMC decision, some think the BoJ might lower the rate to zero, with the market pricing in a 50% chance of a cut to zero. The BoJ has been hesitant about such a move but BoJ Governor Shirakawa did not rule it out. However, heading into the decision, consensus among the economists is for the BoJ to keep the official rate unchanged at 0.30%. With the rate close to zero already, UBS economists believe that given the current environment, the BoJ could return to quantitative easing. For now, though, the BoJ believes the cost to the financial system would be too high and has been discussing other policy alternatives, such as directly purchasing short-term corporate debt. In other news, the MoF's Nakagawa said he is "keenly watching" currency markets and has "the means" to limit the yen's advance. With the JPY belonging to the top five performers against the USD last month and the Japanese economy slowing rapidly, the comments aren't surprising. In the current environment, we think preference for a liquid store of wealth and safe returns will support the yen. While carry may benefit on aggressive action in the short term, we prefer to be long currencies which have the potential to do well when global rates move towards zero. The low-yielding safe-haven yen belongs in that camp. As a note of caution, the BOJ could intervene when markets are thin during the holiday. Yesterdays verbiage caused a short rally.
We have a new member with the most interesting name. This person goes by the name "aa" and is claimed to be from China, which is no surprise, because a two letter name is common in China. It is a pleasure to know that we can share our free information with people from all over the world. In the remote chance that the name "aa" is dodgy, and used to disguise their real identity, it is with integrity that I will inform you we have no intention of breaching our members personal space. We will not go to China, or wherever our members live, and track them down or ask for banking informatin or use your name for any purpose other than to share our free stuff with you. If you are on our opt-in mail list and ask us to stop, we will do so with pleasure. We are traders and have no time or interest in badgering people. Perhaps the name was submitted by a big celebrity disguising their name and is comtemplating a career change or just wants to learn the proper way to trade the fx market, now that i can understand.
EUR: At 82.6 (cons. 84.0, prior 85.8) the Ifo business climate survey, i told u to watch, for December was released well below expectations and showed weak conditions in the manufacturing sector. According to the Ifo institute the ECB should cut interest rates by a further 50bp at its January meeting and should consider additional policy steps, given the possibility of a further deepening recession. The Ifo readings for the current assessment and expectations also came in below expectations, continuing the downtrend, and the Ifo also said further stimulus is needed to support the German economy. Elsewhere, ECB Executive Board member Juergen Stark spoke of the importance of ensuring that governments´ stimulus programmes will not lead to rising inflation and said he sees no risk of deflation. The ECB also announced it was raising the emergency lending rate and lowering the overnight deposit rate in an effort to encourage banks to lend to each other, which was the cause for material reaction by the market. Retail traders will get caught and don't stand a chance if they don't understand these things. That's why you need to learn about this market from a professional, not a get rich quick scheme.
Retail sales were 0.3%m/m (cons -0.6%, prior -0.1%). The retail data comes on the back of dovish BoE minutes and soft labour market data, and we expect further economic weakness in the UK. While fiscal and monetary stimulus will likely help combat the slowdown, we still target GBPUSD lower in 3m to 1.45.
Bank lending in Canada remains a concern, as Finance Minister Flaherty said he will meet with BoC Governor Carney in January in an effort to encourage more lending. Flaherty also revised the government's growth forecast and now sees a contracting economy in 2009. Lower crude prices and the poor economic outlook will weigh on the CAD and we forecast 1.3 in 3 months.
The NZ Treasury semi-annual outlook was released overnight. As openly flagged, and hence widely anticipated, the Treasury cut its GDP growth forecasts, with the March 2010 year bearing the brunt (1.8% down to 0.8%) but 2011 only trimmed (3.3% to 2.9%). These are now in line with UBS' own growth forecasts and the consensus (latest NZIER survey). In other news a net 35.0% of respondents to the NBNZ Business Outlook in November expect general business conditions to deteriorate over the coming year (i.e. 8ppts better than in November). However, firms' own activity expectations deteriorated again with a net 21.5% of firms expecting worse times for their own business over the year ahead, versus a net 14.1% pessimism in November. This has now surpassed the previous record low seen in April 1988.
Ref: UBS
Chris Lori
CTA
After the recent FOMC decision, some think the BoJ might lower the rate to zero, with the market pricing in a 50% chance of a cut to zero. The BoJ has been hesitant about such a move but BoJ Governor Shirakawa did not rule it out. However, heading into the decision, consensus among the economists is for the BoJ to keep the official rate unchanged at 0.30%. With the rate close to zero already, UBS economists believe that given the current environment, the BoJ could return to quantitative easing. For now, though, the BoJ believes the cost to the financial system would be too high and has been discussing other policy alternatives, such as directly purchasing short-term corporate debt. In other news, the MoF's Nakagawa said he is "keenly watching" currency markets and has "the means" to limit the yen's advance. With the JPY belonging to the top five performers against the USD last month and the Japanese economy slowing rapidly, the comments aren't surprising. In the current environment, we think preference for a liquid store of wealth and safe returns will support the yen. While carry may benefit on aggressive action in the short term, we prefer to be long currencies which have the potential to do well when global rates move towards zero. The low-yielding safe-haven yen belongs in that camp. As a note of caution, the BOJ could intervene when markets are thin during the holiday. Yesterdays verbiage caused a short rally.
We have a new member with the most interesting name. This person goes by the name "aa" and is claimed to be from China, which is no surprise, because a two letter name is common in China. It is a pleasure to know that we can share our free information with people from all over the world. In the remote chance that the name "aa" is dodgy, and used to disguise their real identity, it is with integrity that I will inform you we have no intention of breaching our members personal space. We will not go to China, or wherever our members live, and track them down or ask for banking informatin or use your name for any purpose other than to share our free stuff with you. If you are on our opt-in mail list and ask us to stop, we will do so with pleasure. We are traders and have no time or interest in badgering people. Perhaps the name was submitted by a big celebrity disguising their name and is comtemplating a career change or just wants to learn the proper way to trade the fx market, now that i can understand.
EUR: At 82.6 (cons. 84.0, prior 85.8) the Ifo business climate survey, i told u to watch, for December was released well below expectations and showed weak conditions in the manufacturing sector. According to the Ifo institute the ECB should cut interest rates by a further 50bp at its January meeting and should consider additional policy steps, given the possibility of a further deepening recession. The Ifo readings for the current assessment and expectations also came in below expectations, continuing the downtrend, and the Ifo also said further stimulus is needed to support the German economy. Elsewhere, ECB Executive Board member Juergen Stark spoke of the importance of ensuring that governments´ stimulus programmes will not lead to rising inflation and said he sees no risk of deflation. The ECB also announced it was raising the emergency lending rate and lowering the overnight deposit rate in an effort to encourage banks to lend to each other, which was the cause for material reaction by the market. Retail traders will get caught and don't stand a chance if they don't understand these things. That's why you need to learn about this market from a professional, not a get rich quick scheme.
Retail sales were 0.3%m/m (cons -0.6%, prior -0.1%). The retail data comes on the back of dovish BoE minutes and soft labour market data, and we expect further economic weakness in the UK. While fiscal and monetary stimulus will likely help combat the slowdown, we still target GBPUSD lower in 3m to 1.45.
Bank lending in Canada remains a concern, as Finance Minister Flaherty said he will meet with BoC Governor Carney in January in an effort to encourage more lending. Flaherty also revised the government's growth forecast and now sees a contracting economy in 2009. Lower crude prices and the poor economic outlook will weigh on the CAD and we forecast 1.3 in 3 months.
The NZ Treasury semi-annual outlook was released overnight. As openly flagged, and hence widely anticipated, the Treasury cut its GDP growth forecasts, with the March 2010 year bearing the brunt (1.8% down to 0.8%) but 2011 only trimmed (3.3% to 2.9%). These are now in line with UBS' own growth forecasts and the consensus (latest NZIER survey). In other news a net 35.0% of respondents to the NBNZ Business Outlook in November expect general business conditions to deteriorate over the coming year (i.e. 8ppts better than in November). However, firms' own activity expectations deteriorated again with a net 21.5% of firms expecting worse times for their own business over the year ahead, versus a net 14.1% pessimism in November. This has now surpassed the previous record low seen in April 1988.
Ref: UBS
Chris Lori
CTA