Archive for February 2009

Euro Dollar Fundamental News – 27th February 2009

Friday, February 27th, 2009

As equity markets extend their short term rally, and the currency markets continue to exhibit abnormal behaviour across all the majors and some of the crosses, today’s lack of news is hardly likely to help! The professional traders that I speak to on a daily basis are increasingly standing back from the euro to dollar market, which continues to move in an unpredictable way intra day, yet consolidating all the while into a falling wedge, or sideways pennant, depending on your viewpoint and timescale. With little news out today of any significance we can expect more of the same, particularly with the weekend ahead and traders ( such as there are ) squaring off positions. Trading volumes are often thin on a Friday adding to the volatility in the markets.

So far this morning in Europe we have had the German Preliminary CPI data ( which came in at 0.6% against a forecast of 0.3% ), the European CPI figures for both Core ( 1.6% against a forecast of 1.8%), General CPI ( bang on forecast at 1.1%), and finally the Unemployment Rate which came in at slightly over forecast at 8.2% ( forecast 8.1%). With a mixture of good and bad figures here, the euro to dollar initially fell, and has since rallied slightly to it’s current level of 1.2658.

The only significant fundamental news out today is in the US at 1.30 UK time, and these are the Preliminary GDP figures. These are prepared by the Bureau of Economic Analysis and measure the annualized change in the value of all goods and services produced by the economy. If the actual is better than forecast then this is generally good for the US dollar. The numbers are released quarterly, about 60 days after the end of the period, and whilst it is a quarterly report, it is actually provided in an annualized format. In other words the data sets are multiplied by  four. As you may know, there are three versions of GDP released a month apart, namely the Advance, the Preliminary, and the Final. The Advance release is the earliest and thus tends to have the most impact, but even so these figures will move the currency once released as they provide a broad measure of economic activity and the primary gauge of the nation’s health ( or not in this case!)

Euro Dollar Fundamentals – 25th February 2009

Wednesday, February 25th, 2009

Well – strange how such a small word as ‘if’ can have such a huge impact on the markets! It never ceases to amaze me how the markets react to statements from people such as Bernanke, but there we are – I did warn you yesterday that this man has the power to move the markets and we certainly saw it yesterday with big falls in both spot gold and spot silver, as the equities markets reacted positively to the news and rebounded higher during the trading session. The reaction on the euro dollar was the reverse of what one would expect as a positive view from the Fed would normally create dollar strength, not dollar weakness, particularly when combined with all the other ‘good news’ stories of Clinton’s visit to China and the rousing speech from President Obhama. The euro dollar pair is in a very volatile and dangerous range at the moment, moving in a very random way, and in common with many other currency pairs at the moment, they seem to be trading independently of events and correlation to other pairs, making trading almost impossible, and in many ways a complete lottery.

Today sees yet another speech from Bernanke, this time  testifying on the semi-annual monetary policy report before the House Financial Services Committee, in Washington DC. As with yesterdays meeting the session is split into two parts – first he reads a prepared statement, a text version of which is made available on the Fed’s website at the start, followed by the  committee holding a question and answer session. Since the questions are not known beforehand they can make for some unscripted moments that lead to heavy market volatility. After yesterday I hesitate to suggest which way the market will move based on any words he may or may not use!!  This will no doubt overshadow the Existing Home Sales figures which are due out at the same time, but my advice holds – I would look elsewhere for trading opportunities and leave the euro to dollar until some stability returns to the pair.

Euro Dollar News Today – Bernanke Speaks!

Tuesday, February 24th, 2009

After a very quite day on the fundamental news front, which was in complete contrast to the euro dollar price which moved over a wide range of 250 pips and was extremely volatile, today we start with the German IFO numbers which have just been released. Just to recap for you, this is a composite index based on surveyed manufacturers, builders, wholesalers, and retailers and is a highly respected survey, due to it’s large sample size and historic correlation with German and wider Eurozone economic conditions. The figures this morning came in at 82.6 against a forecast of 83.2 but so far this has had little effect in the market with price moving sideways on the news. This is generally considered to be a leading indicator of economic health with a survey size of around 7000.

Moving to the US this afternoon we have the CB ( Conference Board) numbers which are another composite index, very similiar to the German IFO, and this time based on a survey of approximately 5000 households who are asked to rate the relative level of current and future economic conditions including labour availability, business conditions, and overall economic situation. If the number are better than expected then this is generally a good sign for the currency, in this case the US dollar, and the forecast for this afternoon is 35.5 against a previous of 37.7. These numbers are always released on the last Tuesday of each month, and if the actual is better than forecast then this is generally good for the home currency, in this case the US dollar.

At the same time that the above numbers are released, Fed Chairman Ben Bernanke will be starting to speak to the Senate Banking Committee, and one of the questions I am often asked is why should we care or indeed take any notice of what is being said – the simply answer is that like many other statements, it was is said at the Q & A sessions afterwards, and not what is actually said in the speech itself. Whilst a statement can be prepared in advance, answers to impromptu questions cannot, often revealing more in an off the cuff remark or in an unguarded moment. As Charmain of the Federal Reserve Bernanke ( whether you like it or not ) has more power to move the markets that virtually anyone else on the planet – so as traders we have to take note when he speaks! You may not agree with what he says, but rest assured the trading world will be watching and waiting .

Euro Dollar Fundamental Weekly News – 23rd February 2009

Monday, February 23rd, 2009

The week for the euro dollar currency pair starts very quietly with no economic news for either Europe or the US, with the only event this afternoon being a speech by FOMC member Dennis Lockhart, who is due to speak about the US economy at the Association for Financial Professionals Corporate Risk Forum, in Orlando. Audience questions are expected at the event. If the statement is more hawkish than expected then this will be good for the US dollar.

Tuesday sees the German IFO number released in the morning, followed by the CB Consumer Confidence numbers in the afternoon, and the day rounds off with a  speech by Federal Reserve  Chairman Bernanke. The German data is a level of a composite index based on surveyed manufacturers, builders, wholesalers, and retailers and is a highly respected survey, due to it’s large sample size and historic correlation with German and wider Eurozone economic conditions. It tends to create a significant market impact upon release, so watch for this tomorrow morning in the currency pair. If the actual is better than forecast then this will be good for the euro, with a forecast of 83.2 against 83.0 last time. This is generally considered to be a leading indicator of economic health – businesses react quickly to market conditions, and changes in their sentiment can be an early signal of future economic activity such as spending, hiring, and investment. The survey size is around 7000 thousand which is why it is so important. The CB ( Conference Board) data is another composite index like the German IFO, and is based on a survey of around 5000 households who are asked to rate the relative level of current and future economic conditions including labor availability, business conditions, and overall economic situation. Again if the number are better than expected then this is generally a good sign for the currency, in this case the US dollar. Finally on Tuesday we have Ben Bernanke speaking ( again!!) to the Senate Banking Committee – as with many other statements this is in twp parts – a pre-prepared speech followed by a question and answer session which is often when we see the reaction to any revealing insights into his thoughts on the economy.

Wednesday is mainly focused on new in the US. Bernanke is speaking again, this time to the House Financial Services Committee, and earlier we have the Exisiting Home Sales figures, with a forecast of 4.78M against a previous of 4.74M and is the number of homes sold in the previous month. If the actual is better than forecast then this will help the US dollar.

Thursday is once again all about the US data in the afternoon ( UK time). First we have Core Durable Goods, which is the change in the total value of new purchase orders placed with manufacturers for durable goods, excluding transportation items.The Core data is therefore thought to be a better gauge of purchase order trends. If the actual is better than forecast this will be good for the US dollar. At the same time we have Unemployment Claims which is the number of people who have been added for the week to the unemployment register. The forecast is for 630,000 against a previous of 627,000, so the numbers are getting ever larger!  Later in the afternoon we have the New Homes Sales,which is the annualized number of new single-family homes that were sold during the previous month. The data tends to have more impact when it’s released ahead of Existing Home Sales because the reports are tightly correlated, but is generally considered to be a leading indicator since the effects can be felt throughout the economy. If home sales are strong then this can affect all industries and sectors from finance to retail sales.

Finally on Friday we have one of the big numbers – Preliminary GDP ( Gross Domestic Product) – which is guaranteed to move the currencies, and is the annualized change in the value of all goods and services produced by the economy. If the actual is better than forecast then this is good for the currency, in this case the US dollar as it is the broadest measure of economic activity, and is therefore considered an excellent gauge for the future.

Euro to USD – 20th February 2009

Friday, February 20th, 2009

This morning has seen a raft of economic data in Europe, but all the numbers tend to have a relatively muted impact on the market, so the euro has had little in the way of a reaction. All the data released this morning is interesting in that it is one of the few economic releases that is released early and are all called ‘Flash’  as the data is given to Thomson Reuters subscribers 2 minutes before the public release time listed on the calendar – early market reaction is usually a result of trades made by these subscribers. As far as the number are concerned, above 50.0 indicates industry expansion, below indicates contraction. The data is collected by a survey of the purchasing managers in various industries and is therefore considered to be a leading indicator. This mornings news covered the French and German index, and the euro strengthened against the US dollar on the results which were all came in much as expected, but all showing a further contraction in the economy.

This afternoon we move to the US for the Core CPI data,which measures the change in the price of goods and services purchased by consumers, excluding food and energy. Food and energy prices account for about a quarter of CPI, but they tend to be very volatile and distort the underlying trend so the FOMC usually pays the most attention to the Core data – and so should we!! If the numbers are better than forecast then this is generally a good sign for the currency, and the forecast this time is 0.1% against a previous of 0%. The CPI numbers are released at the same time, but have less of an impact for the reasons explained. Good luck and good trading and have a great weekend.

Euro To Dollar – 19th February 2009

Thursday, February 19th, 2009

All eyes today will be on the US for the fundamental news for the euro to dollar , with a raft of economic data, some of which is important, and some of which will have less of an impact on the markets. We start the session with the PPI ( Producer Price Index ) which provides a view on the change in the price of finished goods and services sold by producers. As such it tends to be a leading indicator as these price changes are generally passed on to the consumer. If the actual is better than forecast then this is generally seen as positive for the US dollar, with a forecast for this afternoon of 0.2% against a previous figure of -1.9%. At the same time, we also get the Unemployment Claims, which is the number of new claims for unemployment filed during the week, and whilst it is considered a lagging indicator, it can be one of the early signals to any reversal in the current downtrend. The forecast is for a slight fall from last time to 620,000 ( down by 3000).

These are the two most important releases, and the morning news then continues with Core PPI which is the same as the above but excludes energy and food, making the data slightly less important to the market. As with the PPI if the actual is better than forecast then this is generally seen as positive for the currency. To round of the economic data today we have the “Philly Fed Manufacturing Index” which is a ‘diffusion index’  based on surveyed manufacturers in Philadelphia. Above 0.0 indicates improving conditions, below indicates worsening conditions. This survey tends to have a relatively mild impact because it’s released a few days after the tightly correlated Empire State Manufacturing Index. The forecast is for -24.1 against a previous of -24.3.

The last piece of new today is the DOE Crude Oil Inventories which shows the change in the number of barrels of crude oil held in inventory by commercial firms during the past week. There is no consistent effect as the implications can be complex and far reaching.While this is a US indicator, it most affects the Canadian Dollar ( loonie)due to Canada’s sizable energy sector. For more news on the usd to cad please just follow the link here. For more news on the euro vs dollar just follow the link.