Archive for Bernanke

Euro To Dollar – Weekly Outlook 9th March 2009

Monday, March 9th, 2009

The fundamental news for the euro dollar gets underway on Tuesday, with virtually no news of any significance being released today, either in the US or in Europe, with markets still absorbing the NFP figures on Friday, showing that over 8% of the workforce is now unemployed, the worst situation for employment for over 25 years. Under normal circumstances these figures would be considered shocking, but it is a sign of the times  that the markets simply absorbed the figures, and moved on!

The only item on Tuesday that is likely to have any significant impact is a speech by FED reserve chairman Ben Bernanke ( yes him again!) who is due to deliver a speech titled “Financial Reform to Address Systemic Risk” at the Council on Foreign Relations, in Washington DC. As usual, there will be a question and answer session immediately afterwards, which is likely to be when we see volatility in the markets, as unscripted questions often lead to revealing answers. As the head of the central bank, which controls short term interest rates, he has more influence over the nation’s currency value than any other person, and both traders and markets scrutinize his public engagements as they are often used to drop subtle clues regarding future monetary policy. Whether this has the same relevance at the moment is debatable, as the economy and economic news is on the front page every day, so any comments may carry less weight with so much ongoing analysis anyway.

There are several news items due for release on Wednesday, but none are likely to have any significant impact on the euro dollar, and these are all covered for you in the economic calendar, with the daily updates on the latest currency news TV channel.

The big news items on Thursday are in the US, with several important sets of data being released simultaneously, namely Core Retail Sales, Retail Sales and Unemployment Claims. Core Retail Sales measures the change in the total value of sales at the retail level, excluding cars, and if the numbers are better than forecast then this is generally good for the home currency, in this case the US dollar. As car sales normally account for around 20% of retail sales they tend to distort the underlying trend, but in the current economy where auto sales have fallen off a cliff recently, this may have less of an effect, reducing the impact of these numbers. The forecast is -0.1% against a previous of 0.9%. The Retail Sales figures include sales across all sectors, and the forecast is for -0.5% against a previous of 1.0% last time. Finally we have Unemployment Claims, indicating the  number of people who have filed for unemployment insurance on the week – again some horrible figures are likley at around 640,000, but given the fact that we have just seen the NFP figures on Friday, these are unlikely to come as a great surprise or to have any dramatic effect on the market.

Friday 13th, sees the US Trade Balance first, followed by the UoM sentiment indicator 90 minutes later.The US Trade Balance measures the difference in value between imported and exported goods and services during the reported month. A positive number indicates that more goods and services were exported than imported and the forecast is for -38.4B against a previous of -39.9B. If the actual is better than forecast then this is generally perceived as good for the US currency, but as always we do have to remember that with so much bad news about, any data is all relative at the moment! The week rounds of with the University of Michigan report, which is a sentiment survey of aro Bernanke, und 500 consumers which asks respondents to rate the relative level of current and future economic conditions. Financial confidence is a leading indicator of consumer spending, which accounts for a majority of overall economic activity. The forecast is 49.9 against a previous of 56.3.

As always all the news is covered for you on the live economic calendar, with the live news feed providing the latest information. The fundamental news releases are also covered daily in the latest currency news video which is updated three times a day. Finally if you are looking for help in finding or choosing an ECN broker, please just follow the link for more details. All the latest prices are now available on the live currency charts.

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 To Dollar – 18th February 2009

Wednesday, February 18th, 2009

Risk aversion is keeping the euro under pressure against the euro to dollar today, and strategists expected the euro to soon revisit its October lows of 1.2330, and as I suggested yesterday, we could see a move lower to 1.18 in the next few months. The main fundamental news today is in the US with no data scheduled for Europe, and the highlight of the day will be Bernanke due to speak about Fed’s lending programs and its balance sheet at the National Press Club, in Washington DC. As I mentioned in my weekly roundup, the most interesting part of the event, is not the speech itself, but the questions and answers that follow, which often provide a greater insight into the FED’s views, as the answers are unscripted and therefore cannot be prepared in advance. This can often provide some clues, carefully removed from a scripted speech, and hence the reason we often see volatility in the markets, once the Q & A session starts. This is followed by the minutes of the most recent FOMC meeting, which provides an insight into the economic conditions that influenced their vote on where to set interest rates ( if any were needed!)

Earlier in the day we have the Building Permit figures which are likley to show a fall from last month of around 30,000 to 520,000 – again this is hardly a surprise as this provides evidence of a further slowing in the already weak economy. If the actual is better then forecast then this could lift the US dollar against the Euro. The US dollar is now seens as a safe-haven currency, having entered an upward trend, with  investors’ needs for such currencies increasing as rating agencies recently are increasingly warning of the exposure of major European banks to emerging markets.

Euro To Dollar – February 16th 2009

Monday, February 16th, 2009

The week starts with a public holiday in the US for presidents day, so little to report in either Europe or the US today for the euro dollar pair, as the G7 finance ministers wend their weary way home after a hard weekend of work in Rome! ( some slightly the worse for wear if the reports are to be believed with the Japanese minister blaming his medicine and its reaction with the alcohol!). If you would like to see all the data due for release this week then please just follow the link here to the weekly economic calendar.

Tuesday sees two important news releases for the euro to dollar pair with the German ZEW figures in the morning, followed by the TIC Long Term Purchases in the US in the afternoon.The first is a survey of about 350 German institutional investors and analysts which asks respondents to rate the relative 6-month economic outlook for Germany. A number above zero indicates optimism and below is pessimism with the forecast being -26.5 against a previous of -31.0 so a slight improvement in sentiment. If the actual is better than the forecast then this is generally good for the currency, in this case the euro. The afternoon see the TIC ( Treasury International Capital) figures which represent the difference in value between foreign long-term securities purchased by US citizens and US long-term securities purchased by foreigners during the reported period, and you might well ask why these numbers are important! The simple explanation is that this data represents the balance of domestic and foreign investment – let me give an example which I hope will clarify the situation. If foreigners purchased $100 billion in US stocks and bonds, and the US purchased $30 billion in foreign stocks and bonds,then the net reading would be 70.0B. The market impact tends to be significant but this does vary from month to month. The forecast this time is for +20.0B against a previous of -21.7B. If the numbers are better than forecast then this is generally good for the home currency – the US dollar.

Wednesday is all about the US data, with none in Europe, and we start with the Building Permits in the morning, followed by the speech by Bernanke in the afternoon and the release of the FOMC meeting minutes. The Building Permits provide an excellent gauge of future construction activity because obtaining a permit is among the first steps in constructing a new building, which in turn has a knock on effect into the broader economy. Whilst this is a monthly set of data it is in fact reported on an annualized basis with the forecast for this month being 0.52M against a previous of 0.55M. If the numbers are better then expected then this is a good signal for the US currency. This is followed by Bernanke, who is due to speak about the FED’s lending programs and its balance sheet at the National Press Club, in Washington DC. Audience questions are expected and it is during this session that we can expect some volatility as unscripted replies can often provide better clues than pre-prepared speeches. If the tone of the speech is more hawkish then this is generally good for the US dollar. Finally the day rounds off with the FOMC meeting minutes which provide a detailed record of the FOMC’s most recent meeting, providing in-depth insights into the economic conditions that influenced their vote on where to set interest rates.

Again on Thursday we have very little news in Europe, with the main numbers coming in the US with the PPI data and Unemployment Claims. The PPI numbers represent the change in the price of finished goods and services sold by producers, but they tend to have more impact when  released ahead of the CPI data because the reports are tightly correlated. The forecast is for +0.2% against a previous of -1.9% and if the actual is better than forecast this is generally good for the US dollar. It is considered a leading indicator of consumer inflation and can have a serious impact on the currency once released. At the same time we have the weekly Unemployment figures which is the number of people who have registered for Unemployment insurance. This is generally considered a lagging indicator and the forecast is 620,000 against a previous of 623,000 last week.

Finally on Friday the week rounds off for the euro to dollar with the several sets of data in Europe, which will have a minor effect on the Euro, whilst in the US in the afternoon we have one of the big numbers – Core CPI month on month. This number is the change in the price of goods and services purchased by consumers, excluding food and energy. The reason it is so important is that  food and energy prices account for about a quarter of CPI, but they tend to be very volatile and distort the underlying trend, and as a result the FOMC pays the most attention to the Core data, as do traders! The forecast this time is 0.1% against a previous of -0.7%, and if the numbers are better than expected then this is generally good for the home currency, in this case the US dollar.