China to join an elite club

As we come to the end of the week, G10 markets are rather quiet with Thanksgiving bloat making itself felt at Friday’s open. With little to focus on within developed economies, most currency pairs are happily trading sideways. Next week is a very interesting one from a currency perspective.

Continue reading

Osborne uses some slack to smooth the path

Yesterday’s Comprehensive Spending Review and Autumn Statement from Chancellor George Osborne was a non-event for currency markets. Osborne’s ability to be able to smooth out spending cuts in the short term whilst still maintaining projections of a budget surplus in 2019/20 has come from a forecasted improvement in tax receipts through the coming years.

Continue reading

Only one story dominated markets yesterday and it wasn’t the pontificating of Monetary Policy Committee members on interest rates and the state of the UK economy. The news that a Russian jet had been downed by Turkish forces set markets on edge and hyped up fears that the mishmash of coalition forces, the Free Syrian Army and the Russians are not able to bring about a sufficient level of coordinated violence against ISIS with a disparate command and control structure.

Continue reading

This weekend was certainly the quietest in a while with little market-moving news.

That lack of news has been echoed through the overnight session and as we open up in Europe a very familiar sight is on show. The US dollar is running higher across the board as investors and traders – who had let the currency weaken towards the end of last week – now choose to pick up the Greenback.

Continue reading


Lost ground last week as the ECB reaffirmed the possibility of further stimulus at the upcoming December meeting and the FOMC Meeting Minutes showed division on a number of issues among members. The week began with the rate selling off on Monday after ECB President Draghi stated that, “If we conclude that the balance of risks to our medium-term price stability objective is skewed to the downside, we will act by using all the instruments available within our mandate”. Monday data had Eurozone Final CPI increase +0.1% y/y compared to 0.0% expected, while the U.S. Empire State Manufacturing Index printed at -10.7 versus -5.3 anticipated. The pair extended its losses on Tuesday despite German ZEW Economic Sentiment printing at 10.4 versus expectation of 6.7, nevertheless, Eurozone ZEW Economic Sentiment printed at 28.3 compared to an expected reading of 35.2. Tuesday’s U.S. numbers had CPI and Core CPI, which both increased +0.2% m/m, in line with expectations.
Continue reading

Hiking into a period of calm

The dollar sell off that was expected following Wednesday’s Federal Reserve minutes continued yesterday and through the Asian session overnight. This is not a sudden fearful jettisoning of the dollar as a result of collapsing inflation or interest rate expectations but more of a slimming of the positioning that has so marked currency markets for months now.

Continue reading

Asia’s wealthy, anxious as many of their local currencies depreciate, are increasingly lured by the resilience of the Australian dollar, says UBS, the world’s largest private bank.

The Aussie strengthened against all but one of 12 major Asian counterparts since September 30 on signs the RBA won’t cut its benchmark interest rate beyond its record-low 2 per cent amid a revival in the jobs market. China’s slowing economy and slumping commodity prices have also weighed on the region’s currencies.

“The interest in the Aussie dollar has picked up again recently because it is more or less stabilising at $US70¢, $US71¢,” said Kelvin Tay, regional chief investment officer at UBS’s wealth management business in Singapore. “As an alternative to the local currencies in the region, it’s not too bad to consider the Aussie.”

Australia’s dollar reached a six-year low of $US68.96¢ in September before trading at $US71.11¢ in Sydney Thursday morning. The median estimate in a Bloomberg analyst survey projects the currency will weaken to $US68¢ by June. The currency has dropped more than 30 per cent against the greenback since policy makers started cutting rates in November 2011.

“There could be some downside risk to $US68¢, but anywhere at $US70¢ or slightly below, that’s a pretty attractive level to get into,” Tay said. “$US70¢ is a very strong support level.”

Tables have turned

UBS closed a bearish position last month for its clients betting on the Aussie’s decline versus the pound, Mr Tay said.

It’s a complete reversal from the start of the year when UBS noted many of its wealthiest clients in the region had abandoned the Aussie amid record-low yields and sustained declines as the nation struggled with the end of the mining boom. The RBA cut rates for four years, shrinking the yield advantage the nation’s 10-year bonds offer over US Treasuries to less than a quarter of its 2.8 percentage-point spread in February 2008.

RBA Governor Glenn Stevens kept interest rates unchanged for a sixth month on Melbourne Cup day. A report last week showed the nation’s jobless rate unexpectedly fell in October, while minutes of the November 3 policy meeting released on Tuesday showed the central bank forecast growth would strengthen gradually.

Singapore’s dollar will probably weaken against its Australian counterpart on speculation the Monetary Authority of Singapore might cut rates at its next policy review in April, while the RBA remains on hold in the next quarter, Tay said.

“The question that clients always have is: Asian currencies have weakened so much. Are we near the bottom or should we actually hold back and then after that buy our local currencies back?” Tay said. “Our answer to them is you need to diversify.”


Dovish hike is coming

The US dollar is on the back foot this morning as markets have begun to look past what will take place at the Federal Reserve’s meeting on December 16th and have now moved to focus on the shift in policy that will occur in the coming years i.e. how quickly subsequent rate rises are also added to the pot.

Continue reading

USDCAD Overnight Range 1.33300-1.3345

USDCAD went for a little ride higher in early New York trading, supported by hawkish (as expected) comments from Richmond Fed president Jeffrey Lacker in pre-FOMC minutes release, position jockeying.

It was difficult to get excited about FX markets overnight, so no one did. Instead they read/watched updates on the hunt for terrorists in Paris which proved to be a successful venture.
Continue reading

Paris overshadows everything

Friday’s events in Paris have thrown a lot into sharp focus. The airwaves and front pages of our national dialogue are set to remain tuned to the prospects of fear, suspicion and, perhaps, retaliation, but for now we must continue to remember those who perished on Friday night while simply trying to enjoy a night with friends and family.

Continue reading

Gained a fraction last week as ECB President Mario Draghi acknowledged the chance of further stimulus in December and as the Greenback consolidated at a slightly lower level after last week’s positive employment numbers. The rate began the week on a positive note, gaining a fraction on Monday in the absence of any significant economic data out of either economy. The pair then made its weekly low of 1.0673 on Tuesday after comments from ECB governing council member Erkki Liikanen, who said that the governing council “is willing and able to act by using all the instruments available within its mandate if warranted in order to maintain an appropriate degree of monetary accommodation.”
Continue reading

Sterling has managed to retrace its Quarterly Inflation Report losses in the past week despite a poor wage number in its most recent report of the jobs market.

Unemployment as a measure continued its recent declines to 5.3% – the lowest level since May 2008 – but wages, on which so much depends heading into 2016, saw their growth slow.

The actual internals of the UK jobs market remains strong and I’m pretty comfortable in our belief that what little slack is left in the UK economy will be taken up within the first six months of 2016 as GDP continues to expand.

The fall in pay is a concern, however, and will certainly add fuel to the fire that GDP slowed through the third quarter of this year. In the short term, and certainly between now and the first Bank of England rate rise – whenever that may be – wages are being used by macroeconomists as a good proxy for future inflation and spending growth. With low inflation from a strong pound and a weak oil price, wages can start an inflationary move higher through 2016 – or that is the hope anyway.

There was nothing in this release that makes me want to change our thoughts of a change in interest rates at the May Monetary Policy Committee meeting but a continuation of a soft wage pattern will have a delaying effect.

Unfortunately, the effects of what happened in Paris last Friday night are set to loom over the UK in the short term as well. It is not insensible to think that the events of November 13th will see a shift in opinion polls on the EU referendum and therefore could see a delay to any vote in 2016 by Cameron if he feels that he is fighting a losing battle.

That being said, there is an argument to suggest that the EU may feel the need to allow Cameron further concessions on Britain’s membership of the European Union at a time where stability and cohesion is valued increasingly more.

Pricing the risk of the European referendum is a thankless task at the moment. It is an obvious weight on sterling over the next two years but assigning that to the price is almost impossible in the short term.

The uncertainty has started to bleed through to options markets with the cost of protecting against sterling downside increasingly becoming more expensive. The Bank of England’s dovishness within its Quarterly Inflation Report started the decline but the referendum will continue it. Of course, without a date for the actual referendum there will be a general increased cost of protecting against sterling downside. Once a date is announced, hedges set up for after that date will become more expensive.

For now sterling remains the slave of two masters; higher employment and increasing wages that will stoke the flames of the economy and should lead to a tightening of monetary policy from the Bank of England will have to battle against fiscal tightening from the Conservative government in the form of spending cuts. The referendum will only weigh further.

Have a great week.


This article is brought to you by WorldFirst.

To register with World First for your foreign exchange requirements click on the World First logo below;

Dropped sharply last week as the ECB gave indications of further easing and the United States reported a better than expected Non-Farm Payrolls number. The NFP number drove expectations of a Fed December rate hike up to 70% on Fed Funds rate futures. The week began on a soft note, with the pair declining off its weekly high of 1.1052 on Monday after Spanish Manufacturing PMI printed at 51.3 compared to an expected reading of 51.9, also, U.S. ISM Manufacturing PMI printed at 50.1, in line with expectations. The rate extended its loss on Tuesday despite U.S. Factory Orders, which declined -1.0% m/m versus -0.8% expected and after comments from ECB President Draghi, who stated, “the degree of monetary policy accommodation will need to be re-examined at the Governing Council”s December meeting,” adding that, “The Governing Council is willing and able to act by using all the instruments available within its mandate if warranted in order to maintain an appropriate degree of monetary accommodation.”.
Continue reading

Lost a fraction last week as the FOMC released a more hawkish than expected statement and with mixed economic numbers out of both economies. The week began with the pair gaining on Monday after German Ifo Business Climate edged expectations printing at 108.2 compared to 108.1 forecast, also, U.S. New Home Sales declined to an annualized 468K versus 546K expected. The rate then lost a fraction on Tuesday despite U.S. Core Durable Goods Orders, which declined -0.4% m/m compared to an expected flat reading, while Durable Goods Orders fell -1.2% m/m versus -1.1% anticipated. On Wednesday, the pair tumbled, making both its weekly high of 1.1095 and its weekly low of 1.0896 after the FOMC left its benchmark Fed Funds Rate at the historical low of 0<0.25% as widely anticipated.
Continue reading

Declined sharply last week after the ECB left rates unchanged, and despite mostly positive economic numbers out of the Eurozone. The week began with the pair losing a fraction on Monday in the absence of any significant data out of either economy. The rate then made its weekly high of 1.1386 on Tuesday after U.S. Building Permits printed at 1.10M compared to 1.16M expected, but Housing Starts expanded to 1.21M versus 1.14M expected. On Wednesday, the pair consolidated at a slightly lower level ahead of the ECB rate decision.
Continue reading

We make it Easy to Compare the Exchange Rates & Fees of Banks and Online Currency Exchange & Payment Providers.