Australia

June 20, 2011 By Vantage FX

The Greek situation remains the talk of the currency markets as Euro-zone finance ministers continue negotiations late into the Sunday evening. Alan Greenspan warned that a default by Greece would more than likely drag the U.S economy into recession, his comments although likely to be correct have not had such an effect as the German Chancellor Merkel said she’s willing to compromise on demands for bondholders to carry the burden and asks instead for purely a voluntary participation by private creditors.

The AUDUSD was one of the biggest beneficiaries of the Merkel confidences and we have seen it turn from a low of below the 1.05 level to finish the Fridays session above the1.0610 level. On the open of the Australia equity market on Monday we are seeing levels of 1.0610.

Gold has held its ground over the last week and ranged traded between levels of 1,528 to 1,554. Silver has been tracking Gold and closed the week down 0.5%. Traders will be concentrating on three major points in the markets this week.

1) The outlook for global growth

2) Chinese range of data out this week

3) The handling of Greece debt

INDICES
	Last Traded	Change %
SPI 200	4482	+0.07
S&P500 Index	1262.5	-0.28
Dow Jones Indus. Avg	11908	-0..25
FTSE 100 Index	5667	+0.04

COMMODITIES
	Last Traded
Gold	1538
Oil (Nymex)	36.06

CURRENCIES
	Last Traded
AUDUSD	1.0604
EURUSD	1.4279
GBPUSD	1.6167
USDJPY	80.09

Filed Under: June Tagged With: Alan Greenspan, AUDUSD, Australia, bondholders, Chinese data, currency markets, currency trading, equity market, euro zone, Finance Ministers, Foreign Exchange, forex, forex market wrap, German Chancellor Merkel, global growth outlook, Gold, Greece, Greek debt, market wrap, Merkel, recession, silver, US Economy, vantage fx

A Risk Averse Market | May 30, 2011

May 30, 2011 By Vantage FX

Commodity again is continuing on its bull course with Gold and Copper

US ended modestly higher by the close of Friday but still down fourth week in a row with SP500 traded at 1331.11, a 0.41% up. The US market is pre-emptively trading towards a further Feds interjection. Given the all low than expected data released in the last couple of trading sessions, there is should be a hint that the Feds will continue its zero interest policy to the allow the economy room to breathe, hence weakening the USD even further.

The weakness in US Dollar helped most of USD denominated currencies: AUDUSD, GBPUSD and EURUSD all edged higher by the close of Friday. However, the upside trading looked to have been light with lack of conviction by volumes. AUDUSD was trading well clear above the 1.07 level with the expectation from China to release strong trade balance numbers.

Commodity again is continuing on its bull course with Gold and Copper in particular both looks to surge over the next couple of trading days. This is on the back of China is about to release its trade balance with the expectation that their imports will be much higher than expected, hence may send some good news to their trading partners, especially Australia.

European markets also edged higher between 0.7 to 1% with the help of strong commodity as well as Basel III capital requirements looks to be less stringent. However, the upside volumes looks to be less convicted as euro zone debt crisis remain uncertain. Greece’s debt is now currently standing at approximately 330B euros and a very small chance to pass the fiscal target as its hope for surviving going into default does not look promising. The greys of uncertainties will likely continue for the next week or so until IMF and ECB officials iron the structure of Greek’s debt going forward.

INDICES
	Last Traded	Change %
SPI 200 Futures	4684	0.51
S&P500 Index	1331.10	0.41
S&P500 Futures	1330	0.038
Dow Jones Indus. Avg	12441.58	0.31
FTSE 100 Index	5938.87	0.69

COMMODITIES
	Last Traded	Change %
Gold	1538.3	0.07
Oil (Nymex)	100.58	0.100

CURRENCIES
	Last Traded	Change %
AUDUSD	1.0708	0.103
EURUSD	1.4290	0.042
GBPUSD	1.6490	0.116
USDJPY	80.83	-0.049

Filed Under: May Tagged With: AUDUSD, Australia, Basel III, Bullish, China, commodities, copper, currencies, currency trading, debt crisis, Dow Jones Indus. Avg, ECB, Euro, euro zone, european debt, European market, European session, Euros, EURUSD, Fed, fiscal target, Foreign Exchange, forex, forex market wrap, FTSE 100 Index, GBPUSD, Gold, Greece, IMF, Imports, indices, interest policy, market wrap, Oil, oil (nymex), S&P500, S&P500 Futures, S&P500 Index, SPI 200 Futures, Trade Balance, US Dollar, US market, US session, USD, USDJPY, vantage fx, volume, zero interest

De-Leveraging Time | May 26, 2011

May 26, 2011 By Vantage FX

MT4 Chart for GBPUSD

A mixed bag of numbers were released in UK overnight, which gave the markets a boost with GDP came in as expected at 0.5% and 1.8% for QoQ and YoY respectively. Exports up at 2.3% (higher than analyst expectation) where as imports fell to 2.3%, which was less than expected at -0.7%. Moreover, government spending is high and private consumption was low (there is no surprise there).These numbers somewhat sent good news into the markets and fuelled GBPUSD to rallied over 100 points. Despite the numbers were not that strong, however, it did not surprised the market which is a good thing given all the uncertainties that Europe is currently enduring.

Commodities rallied again for a second day, Nymex breached the 101 level where as Gold continued to steady itself back to 1550 level (which could easily be the next stop). The movements are becoming clearer by the day, sending a signal into the markets that these two are on a one way street. Oil is becoming a scarce commodity as mentioned in the last two reports that OPEC is running out of its reserves trying to fill the gap that Libya caused. Gold is now back to “defensive” category as Europe trying to outline its austerity measure for Greece.

Strong commodities allowed AUDUSD and AUDJPY to regained all of its losses incurred during its trading hour due to the stream of bad news. Trading back at 1.0550 and 86.50 levels respectively.

Australia downgraded its banks, media sector and especially its market targets by 8%, this was followed by China had some downgrades on its own, in particular growth. These downgrades are forcing the markets to put back the bear hat. However, let’s not forget that this is not all entirely bad news as the markets looks to tighten both fiscal and monetary policies (across Asia and Europe) because there is capacity.

INDICES
	Last Traded	Previous Close	Change %	Net Change
SPI 200 Futures	4629	4589	0.872	40
S&P500 Index	1320.47	1316.28	0.318	4.19
S&P500 Futures	1317.25	1316.5	0.057	0.75
Dow Jones Indus. Avg	12394.66	12356.21	0.311	38.45
FTSE 100 Index	5870.14	5858.41	0.200	11.73
Volatility Index	17.07	17.82	-4.209	-0.75

COMMODITIES
	Last Traded	Previous Close	Change %	Net Change
Gold	1527.5	1527.8	-0.020	-0.3
Oil (Nymex)	101.47	101.32	0.148	0.15

CURRENCIES
	Last Traded	Previous Close	Change %	Net Change
AUDUSD	1.053	1.0532	-0.019	-0.0002
EURUSD	1.4086	1.4088	-0.014	-0.0002
GBPUSD	1.6289	1.6274	0.092	0.0015
USDJPY	82.01	81.97	-0.049	0.04

Filed Under: May Tagged With: Asia, AUDJPY, AUDUSD, austerity measures, Australia, bank downgrades, bearish, China, commodities, currency trading, Dow Jones Indus. Avg, downgrades, Europe, EURUSD, Exports, fiscal policy, Foreign Exchange, forex, forex market wrap, FTSE 100 Index, GBPUSD, GDP, Gold, government spending, Greece, Imports, Libya, market wrap, media sector, monetary policy, Nymex, Oil, oil (nymex), OPEC, private consumption, QoQ, S&P500 Futures, S&P500 Index, SPI 200 Futures, UK, USDJPY, vantage fx, volatility index, YoY

A Tenuous Market… | May 25, 2011

May 25, 2011 By Vantage FX

Chart for Gold (XAUUSD)

US market overnight tracked sideways as they tentatively waited for some sort of resolution in the European region. SP500 attempted to rally after the open within the interval of 40 minutes. However, it was not long until it slowly headed south and traded within a 6 points range for the remaining of the session.

The “fear” sentiment largely driven by the downgrade of Greek’s debt as well as S&P also set the Italian credit rating from stable to negative. Markets in the last 48 hours looked at Treasuries, USD and commodities for some salvations. This explains why gold and oil (back up above the 100 level) slowly creeping north, coupled with the fact that Goldman upgraded from bearish to bullish view (as the market is embracing the loss in Libyan’s oil production and OPEC lack of interjection). Hence, allowing AUDUSD to hold its 1c gain after the dip to 1.0480.

FTSE and DAX continued to displayed weakness and this is no surprise. Both tried to convert themselves to a “bid” market, however, ended at previous day lows of 5850 and 7150 respectively. Apart from Greece is now looking to default just around the corner (as its current supply can only last to July 2011), sentiment was not helped when PMI in Eurozone pulled back to the mid 50s level, slender the market conditions even further.

PBOC has explicitly made it clear that they will tighten their monetary policy in the short term. This has created a very “restrictive nature” in the market and had the Shanghai composite down 0.28%, which is holding a 3% down from Monday. Goldman downgraded their 2011 GDP to 9.4% from 10%. Furthermore, across the emerging markets realm, the respective regulator bodies are now on the “rate hike” band wagon, fighting inflationary pressure (so too is RBA).

AUDUSD currently range trading at present and the last 3 sessions has proven that. Partly because of China tightening policy view as Australia has great leverage in that nation, as well as RBA consistently promulgates that it must raise the rate soon to curb inflation.

INDICES
	Last Traded	Previous Close	Change %	Net Change
SPI 200 Futures	4633	4630	0.065	3
S&P500 Index	1316.28	1317.37	-0.083	-1.09
S&P500 Futures	1313	1313.5	-0.038	-0.5
Dow Jones Indus. Avg	12356.21	12381.26	-0.202	-25.05
FTSE 100 Index	5858.41	5835.89	0.386	22.52
Volatility Index	17.82	18.27	-2.463	-0.45

COMMODITIES
	Last Traded	Previous Close	Change %	Net Change
Gold	1525.4	1523.3	0.138	2.1
Oil (Nymex)	99.19	99.59	-0.402	-0.40001

CURRENCIES
	Last Traded	Previous Close	Change %	Net Change
AUDUSD	1.0555	1.0559	-0.038	-0.0004
EURUSD	1.4096	1.41	-0.028	-0.0004
GBPUSD	1.6178	1.6181	-0.019	-0.0003
USDJPY	82.04	81.95	-0.110	0.09

Filed Under: May Tagged With: AUDUSD, Australia, bearish, Bullish, China, commodities, Credit Rating, currency trading, DAX, Dow Jones Indus. Avg, Europe, Eurozone, EURUSD, Foreign Exchange, forex, forex market wrap, FTSE, FTSE100 Index, GBPUSD, GDP, Gold, Goldman, Greece, Greek debt, inflation, inflationary pressure, Libya, market wrap, monetary policy, Nymex, Oil, OPEC, PBOC, PMI, rate hike, RBA, S&P500, S&P500 Futures, S&P500 Index, Shanghai composite, sovereign downgrade, SPI 200 Futures, tightening policy, treasuries, US Dollar, US market, USD, USDJPY, vantage fx, volatility index, XAUUSD

European Woes Continue | May 24, 2011

May 24, 2011 By Vantage FX

Overnight Summary:

SPI ↓ 0.62%
Dow Jones ↓ 1.1%
S&P500 ↓ 1.2%
FTSE100 ↓ 1.9%
Gold ↑ 0.4%
Oil ↓ 2.4%
Vix ↑ 4.8%

EURUSD broke two months low of 1.40 on the back of ongoing concerns for the European debt crisis.

Markets across the globe were gloomy overnight with the key theme being “European Debt Crisis”. The situation has gone from bad to worse.

EURUSD broke two months low of 1.40 on the back of ongoing concerns for the European debt crisis. The weak sentiment was caused by the protagonist GREECE as Europe struggles with restructuring Greek’s debt, and possibly its peripheral nations (Spain, Ireland and Portugal). This debt issue has placed tremendous amount of pressures on Banks in Europe.

ECB is also struggling to accept the extension of Greek debt maturities as they have recently learnt that there may be “hidden debt”. Greek’s credit rating has been downgraded to junk bond status as Greek officials met and discussed new austerity program. This may include spending cuts and government selling their state assets at discounted value.

Dow Jones had the highest one day fall in almost two months with Volatility Index traded above the 20 level. This weakness also sent the yield on 10 year bonds as low as 3.11%

Asia was also weak with China’s manufacturing index fell to a ten month low and the their market closed down 3%. Aussie Market also wore the bear hat with heavy selling lead by the Financial sector.

Risk was taken off and diversed at the same time on the commodity front as Oil capitulated and gold marched north. This sent the AUDUSD lower breaching the 1.05 level. This long view on gold is reflecting the markets taking gold as defensive as more woes on USD weakness. This looks to continue at least in the short term as Feds continues to face funding pressure.

Filed Under: May Tagged With: Asia, austerity measures, Australia, bear, bearish, bonds, China Manufacturing Index, currency trading, Dow Jones, ECB, Europe, European Banks, european debt crisis, EURUSD, Financial Sector, Foreign Exchange, forex, forex market wrap, FTSE100, Gold, Greece, Greek credit rating, Ireland, junk bond status, market wrap, Oil, Portugal, S&P500, Spain, SPI, vantage fx, volatility index, yield

Housing Jitters Extend The Dow’s Losing Streak | May 18, 2011

May 18, 2011 By Vantage FX

Swiss Franc recommenced its long term trend, with the greenback weakening against the safe haven currency

Good morning. Equity markets were mixed on Tuesday, with the major indices experiencing heightened volatility. Opening weaker, traders shifted from currencies and treasuries to equities late in the session. On the economic front, Housing Starts and Building Permits fell short of initial estimates with 523,000 for HS recorded. Building Permits were forecast to reach 590,000 for the April period. The figure was however significantly lower with 551,000 recorded. Across the atlantic, EU officials commented on the Greek debt situation, with Jean Claude Juncker noting the importance of economic stabilisation in the region. He did not rule out the potential for debt refinancing as Greece continues to struggle with the current austerity package. The market is eagerly watching the situation in Portugal and speculating over the economic impact the crisis is having on the small country.

On the equity market front, the S&P500 finished the session flat at 1329. Computer and Technology manufacturer Dell posted a significant rise in profits for the period, with the company recorded a net income of $945 million. This translated into a 134% rise in income. In other corporate news, HP posted a slight increase in profits for the period. The report however fell short of initial forecasts, pushing the stock 7% lower.

On the currency front, the Japanese Yen weakened against the greenback with markets factoring in a possible easing of monetary policy. Citing extended economic pressure from natural disasters and sluggish growth, the Bank of Japan was confident that long term deflation could be alleviated. This had the reverse effect on the pair, with traders moving out of the low yield currency and shifting into the riskier assets. Markets also eyed the potential for further debt worries in Europe and the impact this would have on the yen. The USDJPY traded at 81.36. Aussie dollar consolidated on Tuesday, with the currency reacting to further speculation over interest rates in Australia. The RBA have recently been analysing the housing and retail sales data, with the market cautious over the short term impact of a drop in property prices. Noosa, the Sunshine and Gold Coasts in Queensland have begun to show signs of weakness in the sector, with a significant contraction in housing prices. This could translate into a fall in the currency. The AUDUSD traded at 1.06225. Strong surge in the Euro on Tuesday, with interest rate speculation driving gains. The announcement that British inflation rose during the period, translated into a cross regional currency push. Economists expect a similar scenario in the Euro zone. Debt concerns were eased during the session, as Greece reaffirmed that they would be able to cover their short term debt obligations. Traders continue to be sceptical. The EURUSD traded late in the day at 1.4234.

Filed Under: May Tagged With: AUDUSD, Aussie Dollar, austerity measures, Australia, Bank of Japan, british inflation, Building Permits, currencies, currency market, currency trading, deflation, Dell, equities, equity market, EU, Euro, euro zone, EURUSD, Foreign Exchange, forex, forex market wrap, Gold Coast, Greece, Greek debt, greenback, housing data, Housing Starts, HP, interest rates, Jean Claude Juncker, market wrap, monetary policy, Noosa, Portugal, Queensland, RBA, Retail Sales Data, S&P500, Sunshine Coast, treasuries, USDJPY, vantage fx, volatility, Yen, yield

Mixed GDP and Initial Claims Figures Spur Volatility | April 29, 2011

April 29, 2011 By Vantage FX

Gold rallied, with traders eyeing safe haven assets

Good morning. Equity markets finished the Thursday session on a positive note with mixed economic drivers. GDP Data released during the day highlighted inconsistency in forecasting with 1.8% recorded for Q1. The market had factored in 1.7%. Initial Claims figures however rose for the period, with 429,000 recorded. This was well above initial estimates of 390,000. A surprising economic announcement was that of Pending Home Sales, with 5.1% posted in March. Economists highlighted that the result was a key driver in trader and market sentiment. Tomorrow’s economic data includes Personal Income, Personal Spending, and Chicago PMI. In other news, Japanese Central Bank Governor commented on the proposed increase in stimulatory measures. Rejecting the possibility of further measures to combat slow economic growth, the Bank of Japan cited the potential for a slingshot recovery scenario. Industrial Output posted its worst over fall, during the session.

On the equity market front, the Dow Jones rose 72 points to close at 12763. Software / Technology giant Microsoft reported a strong rise in earnings for the quarter with net income rising about $5.1 billion. Buoyant demand in the xbox business unit, was cited as a key contributing factor. In other corporate news, Motorola closed 2% higher, with the market reacting to encouraging earnings news.

On the currency front, the Aussie Dollar continued on its strong trend, with the currency breaking through 1.09. Trading at 1.0894, late in the session the currency took a breather ahead of GDP data. Commodity movements were contained early in the day, before a late rally in base metals and Gold. Oil contracted, pushing the greenback higher. Reacting to yesterday’s inflation forecast in Australia, economists began factoring in an early rise in rates. Volatile session for the Japanese Yen on Thursday, with economic uncertainty pushing the greenback in and out of positive territory. Key GDP data released during the day also painted a mixed picture with 1.8% recorded. This was slightly above initial forecasts, however the GDP deflator fell shy of the 2.4% expected. Markets also reacted to a rise in Initial Claims with 429,000 posted for the period. The Japanese Yen firmed on safe haven buying later in the session. The USDJPY traded at 81.55. EURUSD weakened considerably against the greenback on Thursday, with the currency touching 1.4793. Market fears that Spain could be the next country to receive an emergency bailout, plagued the currency late in the day. Portugal originally noted during the debt crisis, that they would not require the EU’s helping hand. The adjustment in sentiment and a rise in debt borrowing costs pressured the Portuguese economy, forcing the country to receive an EU package. Jitters over the crisis continued to force the Euro into a downward trend.

Filed Under: April Tagged With: Aussie Dollar, Australia, Bank of Japan, base metals, borrowing costs, Chicago PMI, commodities, currency market, currency trading, Dow Jones, equity market, EU, Euro, EURUSD, Foreign Exchange, forex, forex market wrap, GDP, GDP Deflator, Gold, greenback, industrial output, inflation, Initial Claims, Japanese Central Bank, market wrap, microsoft, Motorola, Oil, Pending Home Sales, Personal Income, Personal Spending, Portugal, Q1, Spain, USDJPY, vantage fx, XBOX, Yen

Housing Starts and Building Permits Top Estimates | April 20, 2011

April 20, 2011 By Vantage FX

EURAUD rallied off the back of heightened risk appetite during the tuesday session

Good morning. Equity and Commodity markets rebounded on Tuesday with Housing Starts and Building Permits contributing to gains. Reporting 549,000 new Housing Starts in March, the market had initial forecast 520,000 for the period. Building Permits also outperformed with 594,000 recorded. Economists were happy with the relevant gains in the sector, with the stimulatory measures highlighted as key growth contributors. Important Existing Home Sales and Crude Inventories are released on Wednesday. Across the pond, the European car industry took an unexpected turn, with car registrations falling in Greece, Italy and the UK. The 5% reduction translated into further economic woes in the region. Recent debt refinancing concerns have influenced trading conditions in the local equity and currency markets. In Australia, the Reserve Bank released its headline comments with Officials highlighting that rates should at 4.75%, as this fell in line with the central banks long term monetary and inflationary strategy.

On the equity market front, the Dow Jones closed 65 points higher with technology giant IBM announcing buoyant quarterly earnings. Reporting a 10% rise for the period, the company was confident in its 12 month outlook. Yahoo and Intel also exceeded estimates.

On the currency front, the Aussie dollar rallied against the greenback, with traders eyeing carry trade scenarios. After a disappointing previous session, traders covered short positions and increased their exposure to risk currencies. Rebounding Gold and Oil prices also helped push the Aussie dollar higher, with economists speculating over the impact of a surge in commodity values. The effect of the Chinese government’s announcement to raise bank reserve requirements also helped support the currency during the session. The AUDUSD traded at 1.0523. Risk appetite drove the Euro higher on Tuesday, with the currency touching 1.4343. PMI Data released during the session exceeded initial estimates with 57.8 recorded. Economists had factored in 57.1. Traders warmed to the results driving the price higher. Greek and Irish debt refinancing worries continue to plague the currency, however the markets have cited adequate risk controls that have been implemented by the EU and the ECB. Key US data released later in the day will confirm the trend. The Swiss Franc weakened against the US Dollar, with traders attracted to risk. Supporting the Euro during the day, economists moved away from the safe havens of the Japanese Yen and the Franc. The Switzerland Central Bank have watched recent developments in the currency and have noted the impact of the stronger pair on the economy. European PMI Data helped boost sentiment in the region, with the potential for a mid-term shift in currency demand. The USDCHF traded at 0.8993.

Filed Under: April Tagged With: AUDUSD, Aussie Dollar, Australia, Building Permits, Central Bank, Chinese Government, commodity market, commodity prices, Crude Inventories, currency trading, debt refinancing, Dow Jones, ECB, equity market, EU, Euro, European PMI, EURUSD, Existing Home Sales, Foreign Exchange, forex, franc, GBPUSD, Gold, Greece, greenback, Housing Starts, IBM, Intel, Italy, monetary strategy, Oil, PMI Data, Reserve Bank, stimulatory measures, Swiss Franc, Switzerland, UK, US Dollar, USDCAD, USDCHF, USDJPY, vantage fx, yahoo, Yen

US CPI Data Falls In Line With Estimates | April 18, 2011

April 18, 2011 By Vantage FX

Canadian Dollar reacted to strong Oil prices on Friday

Good morning. Equity and Commodity markets finished Friday on a positive note, with mixed economic data released in the US. Consumer Price Index figures fell in line with initial estimates with 0.5% recorded. Industrial Production exceeded forecasts by 0.2% to post 0.8% for March. The Federal Reserve was comfortable with Core CPI, as the measure fell slightly below the previous period recorded. Traders were comfortable with Consumer Sentiment figures which painted a positive economic picture. Across the Atlantic, Ireland received a sovereign downgrade from ratings company Moody’s. The country is now teetering on the investment grade level. Economic news released in the US this coming week includes NABHB Housing Market Index (market expects 17) on Monday, Housing Starts (market expects 520,000) and Building Permits (market expects 538,000) on Tuesday, Existing Home Sales (market expects 5 million) and Crude Inventories on Wednesday, Initial Claims (market expects 390,000), Continuing Claims (market expects 3.65 million) and Leading Indicators (market expects 0.2%) on Thursday.

On the equity market front, the Dow Jones closed 56 points higher, with the market reacting to subdued CPI data. Pharmaceutical company Merck confirmed that their dispute with Johnson and Johnson had finished. This spurred a 1.9% rise in the stock. Bank of America reported weaker than forecast quarterly earnings, with the company citing challenging trading conditions. The stock closed 2.3% lower.

On the currency front, the Canadian Dollar rallied against the greenback with commodity strength pushing the currency higher. Light Crude Oil rose 1.5% on Friday to close just below $110 a barrel. Trader speculation over the impact of firming prices on resource demand influenced market currency pair movements. Disappointing PPI and CPI data released also compounded movements in the US dollar. Closing the Friday session on a strong note, the Japanese Yen strengthened against the greenback in light of CPI data released. Falling in line with initial estimates, the market was cautious on holding US dollars. Fiscal reform details also emerged in Japan on Friday, impacting repatriation of the currency. Highlighting the long term rebuilding structure for the economy, the Finance Ministry noted an extension for disaster relief to $48 billion. This also had an impact on the daily currency movements. The USDJPY traded at 83.10. The Aussie Dollar rallied towards the close, with yield play driving gains. Trading at 1.0564, speculation that the RBA would raise rates further led to consistent buying pressure. Earlier in the session, the AUD weakened as fears that China would raise rates in light of inflationary pressure. This could lead to a contraction in resource demand from the region. Markets continue however to factor in higher yield differential between the US and Australia, which continues to support movements.

Filed Under: April Tagged With: AUD, Aussie Dollar, Australia, Bank of America, Building Permits, canadian dollar, China, commodity market, Consumer Price Index, consumer sentiment, Continuing Claims, Core CPI, CPI, Crude Inventories, currency market, currency trading, Dow Jones, equity market, Existing Home Sales, Federal Reserve, Finance Ministry, fiscal reform, Foreign Exchange, forex, forex market wrap, greenback, Housing Market Index, Housing Starts, Industrial Production, inflationary pressure, Initial Claims, Ireland, Japan, Johnson & Johnson, Leading Indicators, Light Crude Oil, market wrap, Merck, Moody's, NABHB, PPI, RBA, repatriation, sovereign downgrade, US, US Dollar, USDJPY, vantage fx, Yen, yield play

Euro Zone Inflation Fears Mount | April 6, 2011

April 6, 2011 By Vantage FX

Canadian dollar strengthened as precious base metals prices rose.

Good morning. Equity markets reacted to inflation fears with the major indices flat for much of the session. Light Crude Oil came under selling pressure with supply fears easing in Libya and the Middle East. Gold received a boost from inflation speculation in Europe, US and the UK. China announced that it would raise its benchmark rate by 25 basis points. This did not coincide with expectations. The market had factored in the potential for a tightening in policy midyear. European Central Bank leader Trichet hinted at the potential for interest rate rises in the next month, as inflation poses a risk on growth. The RBA left rates on hold in Australia. Bernanke announced that the $600 billion bond buying program would be completed by June. Highlighting the effectiveness of the stimulatory exercise, the Fed Chief was conscious of rising cost pressures. Limited economic news to be released in the US on Wednesday with Crude Inventories and the Mortgage Index the key data sets.

On the equity market front, the S&P500 closed the session flat with mixed corporate leads. American Airlines announced that carrying capacities had risen by 0.8%. This had little effect on the share price. Commodities giant Newmont Mining, finished the session on a strong note with buoyant gold prices contributing to gains.

On the currency front, the Dollar continued to rally against the Japanese Yen with traders eyeing comments from the US Central Bank. Bernanke in his speech highlighted the growing global concern of inflation, and the potential for a tightening in monetary policy. Rising oil prices have led to heightened degrees of money in the system. Stimulatory measures imposed by the US over the last couple of years had also contributed to the rise in overall CPI. Traders bought the greenback to gain exposure to yield. The USDJPY traded at 84.82. Reacting to Bernanke’s comments, the Aussie dollar weakened against the greenback, as traders eyed yield adjustment. Keeping rates on hold, the Reserve Bank governor noted the possibility of a tightening in monetary policy towards the end of 2011. A softening in housing growth, and consumer sentiment led to the decision to keep rates at 4.75%. Disappointed with the news offshore traders looked for potential yield in the US dollar, Pound and Euro. China raised rates by 25 basis points, shocking markets. This also impacted the Aussie in trade. The AUDUSD traded at 1.03307.

Filed Under: April Tagged With: American Airlines, AUDUSD, Aussie, Aussie Dollar, Australia, benchmark rate, Bernanke, bond purchasing, China, consumer sentiment, CPI, Crude Inventories, currency market, currency trading, dollar, ECB, equity market, Euro, Europe, european central bank, Fed Chief, Foreign Exchange, forex, forex market wrap, Gold, greenback, indices, inflation, interest rate, Libya, Light Crude Oil, market wrap, Middle East, monetary policy, Mortgage Index, Newmont Mining, oil prices, pound, RBA, Reserve Bank, S&P500, stimulatory measures, Trichet, UK, US, US Central Bank, US Dollar, USDJPY, vantage fx, Yen, yield