OCT 3
ISM Non-Manufacturing (SEP) (10:00 EST; 14:00 GMT)
Expected: 54.6
Previous: 55.8
How Will The Markets React?
Conditions in the US non-manufacturing sectors – which account for approximately 70 percent of total economic activity in the country and include retail, services, and finance – are anticipated to have deteriorated during September, as the Institute for Supply Management index is estimated to fall to 54.6 from 55.8. The highest readings we’ve seen in the non-manufacturing report have consistently been in the ‘prices paid’ component, which has only underpinned Federal Reserve Bank inflation hawks’ concerns. However, the price index is expected to ease back for the third consecutive month in September, supporting broad market speculation of additional rate cuts by the central bank throughout the rest of the year. Furthermore, the ‘employment’ component unexpectedly plummeted down through the 50 level in August to 47.9 – marking a contraction – which was followed by a dismal non-farm payrolls report just a few days later. As a result, traders will be watching this component once again, as another reading below 50 would bode very ill for this Friday’s NFP report (October 5th), especially as the US financial and housing sectors are likely to have racked up substantial job losses during the month. As a result, now that the Federal Reserve has finally started to note major downside risks to growth and has stopped focusing on inflation, signs that the labor force is diminishing could lead markets to ramp up speculation of a 25 basis point rate cut in October. Additionally, softer spending in the non-manufacturing sectors could be an early signal of diminishing consumption growth in the US, upping the ante for an all-out economic recession.
Is a US recession inevitable? Vote and discuss in the DailyFX Forum
Bonds – 10-Year Treasury Note Futures
Treasury note futures remain contained to an ascending channel, possibly aiming to target the 109-28 level, and the release of ISM non-manufacturing on Wednesday may only boost the contracts as the figure could prove to be even worse than expected. Furthermore, US equity markets could continue to ease back from the recent record highs, bolstering the case for Treasury gains. However, if we see equities rocket higher once again, the contract could start to ease back towards trendline support at 109-04.
FX – EUR/USD
EUR/USD has finally started to ease back from its record highs – though they are still a stone’s throw away – as the pace of the pair’s rally slows. The broad weakness of the US dollar hasn’t received any help from economic data as home sales, labor market, consumer confidence, and inflation reports all proved to be softer-than-expected. The greenback may face another round of disappointing news as the ISM non-manufacturing index is scheduled to be released on Wednesday. The index is expected to ease back, but traders should keep an eye on the employment component, which may be useful in gauging the result of this Friday’s labor market data. However, the actual impact of ISM non-manufacturing on EUR/USD may be limited as traders will be anxiously awaiting the non-farm payrolls report at the end of the week. Nevertheless, if pending home sales are worse than expected, EUR/USD would target the recent record high if 1.4284. However, if the release of the non-manufacturing sector data proves to be surprisingly positive, traders may start to speculate that the retail and services sectors continue to fare well despite the economic slowdown, which could help send EUR/USD down to test 1.4110/20, with sharper declines taking aim on 1.4070.
Equities – Dow Jones Industrial Average
The Dow Jones Industrial Average backed off from Monday’s record high of 14,115.51, though price simply consolidated within a tight 100 point range. With major market-moving data scheduled to be released on Friday (non-farm payrolls report), US equities will likely stick to range trading. There is little consensus on whether the stock market rally will continue to plow on as investors ramp up speculation of another FOMC rate cut in October, or if things will take a grim turn as traders realize that the central bank’s policy actions may not be enough to halt an all-out recession. Nevertheless, if Wednesday’s ISM non-manufacturing figure weakens more than expected, the Dow could return its focus on a break below 14,000. On the other hand, “irrational exuberance” may continue to rule, and if the data is actually somewhat optimistic or simply in line with expectations, the equity index could hold aloft and continue its trek towards 14,200.
Wednesday, October 3, 2007
US Fed: One and Done?US Fed: One and Done?
Written by Terri Belkas, Currency Analyst
With the FOMC’s next rate decision looming on October 31st, the markets are anxiously wondering if the central bank will cut rates again. Given the Dow’s rapid ascent to fresh record highs, it appears that equity investors are betting the bank that they will indeed cut again. Nevertheless, it’s the US Dollar that stands to benefit the most if the FOMC decides to leave rates unchanged, as the currency recently hit fresh 15-year lows on a trade-weighted basis. While core inflation may have moderated, rising costs for volatile items such as food and energy create the risk of surging price pressures. As a result, the FOMC is in a precarious position: will they ignore inflation risks and move to support the US equity markets with a rate cut?
This Week In Central Bank Speak:
US Fed: One and Done?
ECB: With EUR/USD Above 1.40, Can the ECB Afford to Hike?
Yield Spread Analysis 09/25 – 10/02
Over the course of last week, a spate of dour economic news led government bonds to work their way higher and sending long-term yields plummeting. Meanwhile, short-term yields slowly eased back, as traders bet that they would not encounter policy moves by any of the major central banks. In fact, despite broadly dismal fundamental data out of the US, the nation’s yield curve actually flattened out somewhat as investors started to bet that the FOMC will not be as aggressive in cutting rates during the month of October.
Looking ahead, government bond traders will be watching the ECB and BOE meetings on Thursday. While neither bank is expected to hike, any commentary from ECB President Trichet during his press conference signaling whether or not they will hike before year could send the fixed income, forex, and equity markets reeling. Meanwhile, the BOE does not typically issue policy statements after their meetings, but since they did during their September meeting, markets will be looking for a repeat as well as clues into the bank’s next move.
With the FOMC’s next rate decision looming on October 31st, the markets are anxiously wondering if the central bank will cut rates again. Given the Dow’s rapid ascent to fresh record highs, it appears that equity investors are betting the bank that they will indeed cut again. Nevertheless, it’s the US Dollar that stands to benefit the most if the FOMC decides to leave rates unchanged, as the currency recently hit fresh 15-year lows on a trade-weighted basis. While core inflation may have moderated, rising costs for volatile items such as food and energy create the risk of surging price pressures. As a result, the FOMC is in a precarious position: will they ignore inflation risks and move to support the US equity markets with a rate cut?
This Week In Central Bank Speak:
US Fed: One and Done?
ECB: With EUR/USD Above 1.40, Can the ECB Afford to Hike?
Yield Spread Analysis 09/25 – 10/02
Over the course of last week, a spate of dour economic news led government bonds to work their way higher and sending long-term yields plummeting. Meanwhile, short-term yields slowly eased back, as traders bet that they would not encounter policy moves by any of the major central banks. In fact, despite broadly dismal fundamental data out of the US, the nation’s yield curve actually flattened out somewhat as investors started to bet that the FOMC will not be as aggressive in cutting rates during the month of October.
Looking ahead, government bond traders will be watching the ECB and BOE meetings on Thursday. While neither bank is expected to hike, any commentary from ECB President Trichet during his press conference signaling whether or not they will hike before year could send the fixed income, forex, and equity markets reeling. Meanwhile, the BOE does not typically issue policy statements after their meetings, but since they did during their September meeting, markets will be looking for a repeat as well as clues into the bank’s next move.
Australian Dollar Reaches Record High
The Australian Dollar recently touched a 20-year high against the USD, having risen 15% in the last month alone. In fact, the currency has proved to be one of the top performers against the USD in 2007, having benefited from continued weakness in the US economy. It has also been one of the chief beneficiaries of the Yen carry trade, in which investors have sold Yen in favor of higher-yielding currencies, which also include the Swiss Franc and New Zealand Dollar. Meanwhile, Australia's economy is surging, as Chinese demand for raw materials is unabated. Many analysts are asserting that the Australian Dollar can go no higher, citing technical factors. However, there seems to be just as many analysts who expect the AUD to test the outer limits of parity with the USD. The Sydney Morning Herald reports:
The chief equities economist at CommSec, Craig James, said the dollar was now likely to enter the “nervous nineties.”
The chief equities economist at CommSec, Craig James, said the dollar was now likely to enter the “nervous nineties.”
Global forex volume surges
The Bank of International Settlements just released the results from its first survey of Central Banks in over three years, and the results were startling. Forex volume rose 71% to $3.2 trillion per day, cementing the status of forex as the world's largest market. Trading in forex derivatives also surged, to an average of over $2 trillion per day. While the role of the USD has slipped somewhat, it remains the world's reserve currency as evidenced by the fact that it represents over 40% of all forex volume. FinFacts reports:
"A significant expansion in the activity of investor groups including hedge funds" as well as individual investors also contributed to the increase."
"A significant expansion in the activity of investor groups including hedge funds" as well as individual investors also contributed to the increase."
Bank of UK to lower rates
The Central Bank of the UK will likely lower interest rates at its next meeting, following the lead of the Fed. The most recent British economic data indicated that inflation has fallen to its lowest level in over a year. Moreover, UK (and European for that matter) monetary policy prioritizes price stability over employment, by unofficially targeting an inflation benchmark. Thus, without regard to economic growth, the Bank of UK will adjust interest rates accordingly. While the Pound-Dollar exchange rate is less sensitive to relative interest rates, the Pound has already fallen against the Euro, since the two countries compete over foreign capital. Bloomberg News reports:
"The move down is probably going to continue. Sterling will remain under pressure. If any major central bank is going to emulate the Fed and cut rates, it's going to be the BOE.''
"The move down is probably going to continue. Sterling will remain under pressure. If any major central bank is going to emulate the Fed and cut rates, it's going to be the BOE.''
Fed Chiefs Act Alike in Crisis
Alan Greenspan, former President of America's Federal Reserve Bank, gained notoriety as well as universal trust based on his perceived ability to conduct monetary policy in exactly the way that the US economy demanded. It was initially thought that his successor, Ben Bernanke, who has been in office for over a year, would have a more difficult time facilitating economic growth and avoiding recession because his primary goal was to control inflation. In practice, however, the two leaders have conducted monetary policy in much the same way, balancing the dual risks of inflation and unemployment. Thus, even though inflation remains above the Fed's comfort zone, Bernanke engineered a 50 basis point rate cut at the last meeting of the Fed in order to avoid economic recession. However, whether the Fed will prioritize unemployment (rate cuts) or inflation (rate hikes) is anyone's guess. Dollar bulls will no doubt be watching with bated breath, praying that he prioritizes inflation. The New York Times reports:
“Where Greenspan had to hold off raising rates when the economy was strong. Bernanke's challenge will be to hold off cutting rates when the economy slows down.”
“Where Greenspan had to hold off raising rates when the economy was strong. Bernanke's challenge will be to hold off cutting rates when the economy slows down.”
FXCM offers Fractional Pip Pricing
Forex Capital Markets LLC, the largest Forex Dealer Member, recently announced that it would begin offering so-called “Fractional Pip Pricing” in an effort to reduce the bid-ask spreads it offers customers. Previously, most, if not all forex brokers that cater to retail forex investors, quoted forex rates out to four decimal places (i.e. 1.4101 USD/Euro). However, due to its strong liquidity relationships with banks that facilitate forex trading, FXCM has negotiated tighter bid-ask spreads for its customers, which will enable it to quote exchange rates to five decimal places (i.e. 1.41007 USD/Euro. While FXCM expects to narrow spreads further in the future, it remains to be seen whether the competition will follow suit.
Adjusting to Life at Parity
Over the last five years, the Canadian Dollar has slowly climbed to parity against the USD, finally reaching the mythical 1:1 exchange rate last week. Canadian shoppers and American tourists have taken notice, gradually adjusting their behavior in accordance wit their changing purchasing power. For many Canadians, this has translated into more frequent shopping trips across the border, whether for gasoline or for clothing. For Americans, this has resulted in a decline in the number of tourists visiting Canada. It is also slowly redefining the US-Canada trade dynamic. However, as Canada has become the United States’ largest supplier of oil, it is likely Canada that will benefit most in this relationship. The New York Times reports:
The weakness of the American dollar worries some Canadian investors as well as businesses that rely on American customers.
The weakness of the American dollar worries some Canadian investors as well as businesses that rely on American customers.
The Yen Also Rises
The Japanese Yen is finally appreciating, though how long the upward streak will last is anyone’s guess. These days, the Yen rises and falls on the whims of carry traders. However, the enemy of the carry trade is volatility and the Fed’s lowering of US interest rates injected enough uncertainty into the markets to send carry traders slowly towards the exit. As a result, currencies such as the Australian Dollar and New Zealand Kiwi, long popular with in carry trading circles, were quickly dumped as traders bought Yen to cover their positions. Whether the Yen can sustain its momentum depends primarily on the Central Bank of Japan. Bloomberg News reports:
Carry trades utilizing the New Zealand dollar lost 1.9 percent today, according to data compiled by Bloomberg, after gaining 2.3 percent so far this week as the Federal Reserve reduced the U.S. rate a half percentage point to 4.75 percent.
Carry trades utilizing the New Zealand dollar lost 1.9 percent today, according to data compiled by Bloomberg, after gaining 2.3 percent so far this week as the Federal Reserve reduced the U.S. rate a half percentage point to 4.75 percent.
Saturday, September 8, 2007
EU Commissioner Almunia: Econ Fundamentals Still Good -2-
EU Commissioner Almunia: Econ Fundamentals Still Good -2-
Almunia said he hoped that the impact on growth this year "will not be seriously affected."
However, "If tightening credit goes beyond a certain limit, it will have consequences over the medium term," Almunia said, adding that he was referring to "2008 and beyond."
Almunia noted that the credit jitters were "not a surprise" as the European Central Bank President Jean-Claude Trichet had been warning that risk appeared to be mispriced since very early this year.
The impact of tighter credit - short-term interest rates are up around 60 basis points over the past two months - and possible dents to confidence have "still to be measured," he said.
The cause of the current liquidity crunch - distrust between banks that may be exposed to complex debt-linked derivatives - means there is a "need to look at supervision instruments," he said.
E.U. authorities will also need to look at the "function of rating agencies," he added. Policies to better protect investors in an era of increasingly sophisticated products are also in order, he said.
Almunia also expressed confidence European economies could withstand a U.S. economic slowdown. The direct impact of such a slowdown "is not as big as some think," he said.
Europe, and the 13-member euro zone, can achieve "sustained growth based on internal demand," he said.
Strong demand from emerging markets is also a plus, he added.
He also said he didn't expect domestic demand from Spain - which has contributed a third of euro-zone demand growth in recent years despite accounting for only around a tenth of its economic size - to falter.
Spain has a house price and construction boom, as well as a current account deficit, far larger than that of the U.S.
Recent data show Spanish internal demand "continues to be in a good mood," he said. "So even if the Spanish housing sector is decelerating, I don't expect a major impact. I really don't," said Almunia, a Spaniard himself.
He also said that Tuesday's interim forecasts would, when released, cast light on how the E.U. expects German domestic demand to evolve. German private consumption has lagged dramatically since 2000, although there has been a rebound in investments in the past 12 to 18 months, he said.
Almunia also said he hoped that Italy would exit from the E.C.'s excessive deficit procedure early next year.
He said that politicians in Rome would have to exercise "extreme care ... not to worsen the fiscal position" amid doubts about the effects of the current market turbulence.
Interest rates are going up, he added, noting that this makes coping with Italy's large public debt - around 106% of gross domestic product - an "even bigger challenges than a few months ago."
The current Italian government raised personal income taxes last year and is expected to bring the budget deficit below the euro zone's 3.0%-of-GDP limit this year. However, the fiscal reform is expected to push overall public spending above 50% of GDP next year, a level that has business leaders on a war footing and demanding tax cuts.
Numerous and rigid public-sector cost centers, including multiple layers of local administrations, along with squabbling political coalitions, mean "this country is ungovernable," said Luca Cordero di Montezemolo, president of Italy's Confindustria business lobby, who is calling for lower corporate tax rates.
"Resources are being used without thinking about investments," Montezemolo said earlier Saturday in Cernobbio.
Almunia said he hoped that the impact on growth this year "will not be seriously affected."
However, "If tightening credit goes beyond a certain limit, it will have consequences over the medium term," Almunia said, adding that he was referring to "2008 and beyond."
Almunia noted that the credit jitters were "not a surprise" as the European Central Bank President Jean-Claude Trichet had been warning that risk appeared to be mispriced since very early this year.
The impact of tighter credit - short-term interest rates are up around 60 basis points over the past two months - and possible dents to confidence have "still to be measured," he said.
The cause of the current liquidity crunch - distrust between banks that may be exposed to complex debt-linked derivatives - means there is a "need to look at supervision instruments," he said.
E.U. authorities will also need to look at the "function of rating agencies," he added. Policies to better protect investors in an era of increasingly sophisticated products are also in order, he said.
Almunia also expressed confidence European economies could withstand a U.S. economic slowdown. The direct impact of such a slowdown "is not as big as some think," he said.
Europe, and the 13-member euro zone, can achieve "sustained growth based on internal demand," he said.
Strong demand from emerging markets is also a plus, he added.
He also said he didn't expect domestic demand from Spain - which has contributed a third of euro-zone demand growth in recent years despite accounting for only around a tenth of its economic size - to falter.
Spain has a house price and construction boom, as well as a current account deficit, far larger than that of the U.S.
Recent data show Spanish internal demand "continues to be in a good mood," he said. "So even if the Spanish housing sector is decelerating, I don't expect a major impact. I really don't," said Almunia, a Spaniard himself.
He also said that Tuesday's interim forecasts would, when released, cast light on how the E.U. expects German domestic demand to evolve. German private consumption has lagged dramatically since 2000, although there has been a rebound in investments in the past 12 to 18 months, he said.
Almunia also said he hoped that Italy would exit from the E.C.'s excessive deficit procedure early next year.
He said that politicians in Rome would have to exercise "extreme care ... not to worsen the fiscal position" amid doubts about the effects of the current market turbulence.
Interest rates are going up, he added, noting that this makes coping with Italy's large public debt - around 106% of gross domestic product - an "even bigger challenges than a few months ago."
The current Italian government raised personal income taxes last year and is expected to bring the budget deficit below the euro zone's 3.0%-of-GDP limit this year. However, the fiscal reform is expected to push overall public spending above 50% of GDP next year, a level that has business leaders on a war footing and demanding tax cuts.
Numerous and rigid public-sector cost centers, including multiple layers of local administrations, along with squabbling political coalitions, mean "this country is ungovernable," said Luca Cordero di Montezemolo, president of Italy's Confindustria business lobby, who is calling for lower corporate tax rates.
"Resources are being used without thinking about investments," Montezemolo said earlier Saturday in Cernobbio.
EU Commissioner Almunia: Econ Fundamentals Still Good
European Commissioner for Economic and Monetary Affairs Joaquin Almunia on Saturday said that the fundamentals of the European Union economy are still good.
It is too early to tell what type of impact recent turbulence in short-term money markets has had, he added.
The European Commission is trying to "assess how big the downside risks are to its central scenario for growth, which continues to be good," Almunia said.
Almunia will present interim forecasts growth and inflation on Tuesday, Sept. 11
It is too early to tell what type of impact recent turbulence in short-term money markets has had, he added.
The European Commission is trying to "assess how big the downside risks are to its central scenario for growth, which continues to be good," Almunia said.
Almunia will present interim forecasts growth and inflation on Tuesday, Sept. 11
TFN NEWS BRIEFING: Macroeconomics highlights to 10:10 BST
WASHINGTON -- Federal Reserve reports on consumer credit for July, 3 p.m.;
Treasury bill auction, 2 p.m.
Treasury bill auction, 2 p.m.
Malaysia 2nd Fin Min: No Domestic Threats To GDP Target
After unveiling Malaysia's 2008 budget Friday, the government is confident that there are no domestic threats to its gross domestic product growth target, said its second finance minister at a briefing Saturday.
"There is no threat whatsoever to the growth target coming from the domestic sector," Nor Mohamed Yakcop told reporters.
Only the external environment remains an unknown, he said, referring to the ongoing U.S. subprime-market turmoil and accompanying credit crunch.
The Malaysian government forecasts GDP growth at 6% for 2007, and a range of 6% to 6.5% for 2008, led by consumer spending and higher international demand for commodities, it said in its Economic Survey on Friday.
Its one percentage point cut in corporate tax to 25% in 2009 from 26% in 2008 will mean a 900 million Malaysian ringgit ($256.9 million) lossin tax revenue for the government, Nor Mohamed said, but the government is "confident" that higher tax revenue from company earnings growth - including that from state-owned oil and gas company Petroliam Nasional Bhd. - will keep its GDP growth target intact.
Also, there aren't any plans currently to raise domestic fuel prices in 2008, and interest rates "will continue to be accommodative for growth," Nor Mohamed said.
Malaysia has kept its key overnight policy rate at 3.50% so far this year, and has only two more monetary policy committee meetings remaining in 2007.
"We don't see a big gyration in interest rates at this point in time," Nor Mohamed said
"There is no threat whatsoever to the growth target coming from the domestic sector," Nor Mohamed Yakcop told reporters.
Only the external environment remains an unknown, he said, referring to the ongoing U.S. subprime-market turmoil and accompanying credit crunch.
The Malaysian government forecasts GDP growth at 6% for 2007, and a range of 6% to 6.5% for 2008, led by consumer spending and higher international demand for commodities, it said in its Economic Survey on Friday.
Its one percentage point cut in corporate tax to 25% in 2009 from 26% in 2008 will mean a 900 million Malaysian ringgit ($256.9 million) lossin tax revenue for the government, Nor Mohamed said, but the government is "confident" that higher tax revenue from company earnings growth - including that from state-owned oil and gas company Petroliam Nasional Bhd. - will keep its GDP growth target intact.
Also, there aren't any plans currently to raise domestic fuel prices in 2008, and interest rates "will continue to be accommodative for growth," Nor Mohamed said.
Malaysia has kept its key overnight policy rate at 3.50% so far this year, and has only two more monetary policy committee meetings remaining in 2007.
"We don't see a big gyration in interest rates at this point in time," Nor Mohamed said
Business Events for the Coming Week
WASHINGTON -- Federal Reserve reports on consumer credit for July, 3 p.m.; Treasury bill auction, 2 p.m.
TUESDAY, Sept. 11
WASHINGTON -- Commerce Department reports on international trade for July, 8:30 a.m.
WEDNESDAY, Sept. 12
Nothing scheduled.
THURSDAY, Sept. 13
WASHINGTON -- Labor Department reports on weekly jobless claims, 8:30 a.m.; Treasury reports on federal budget for August, 2 p.m.; Freddie Mac, the mortgage company, reports on mortgage rates.
FRIDAY, Sept. 14
WASHINGTON -- Commerce Department reports on retail sales for August, 8:30 a.m.; Commerce Department reports on current account, second quarter, 8:30 a.m.; Federal Reserve reports on industrial production for August, 9:15 a.m.; Commerce Department reports on business inventories for July, 10 a.m.
DETROIT -- United Auto Workers' national contracts with the Detroit Three domestic automakers expire.
TUESDAY, Sept. 11
WASHINGTON -- Commerce Department reports on international trade for July, 8:30 a.m.
WEDNESDAY, Sept. 12
Nothing scheduled.
THURSDAY, Sept. 13
WASHINGTON -- Labor Department reports on weekly jobless claims, 8:30 a.m.; Treasury reports on federal budget for August, 2 p.m.; Freddie Mac, the mortgage company, reports on mortgage rates.
FRIDAY, Sept. 14
WASHINGTON -- Commerce Department reports on retail sales for August, 8:30 a.m.; Commerce Department reports on current account, second quarter, 8:30 a.m.; Federal Reserve reports on industrial production for August, 9:15 a.m.; Commerce Department reports on business inventories for July, 10 a.m.
DETROIT -- United Auto Workers' national contracts with the Detroit Three domestic automakers expire.
AT A GLANCE: US Jobs Data Put Pressure On Fed To Cut Rates
AT A GLANCE: US Jobs Data Put Pressure On Fed To Cut Rates
THE EVENT
U.S. employment fell Friday for the first time in four years in August on steep drops in construction and manufacturing payrolls. Non-farm payrolls fell 4,000 in August, the first decline since August 2003, the Labor Department said. Economists had expected a gain of 112,000 payrolls. Previous reports were revised sharply lower. The unemployment rate was unchanged at 4.6%, as expected.
THE ANALYSIS
The report suggests that the housing recession is starting to grip the broader economy. It puts added pressure on Federal Reserve officials to aggressively cut interest rates, starting with its policy meeting on Sept. 18.
Financial markets expect a slew of fed funds rate cuts beyond this month - as much as 100 basis points in total by year end - to stem the recent credit crunch and its potential economic effect. That view seems supported by the jobs report.
Indeed, with job conditions clearly eroding, consumers risk losing a key source of support, though robust back-to-school sales reports and better-than-expected automobile sales for August suggest spending continues to grow. Consumer spending makes up two-thirds of economic output.
MARKET REACTION
As stocks fell on fears of a recession Friday, Harley-Davidson plunged on a production pullback, Office Depot dropped on estimate reductions but VeriFone Holdings advanced on a strong outlook. The Dow Jones Industrial Average lost 249.97, or 1.9%, to 13113.38, as 29 of 30 members fell. For the week, the Dow lost 244.36, or 1.8%, its biggest weekly drop since the end of July. The Nasdaq Composite Index fell 48.62, or 1.9%, to 2565.70. For the week, the Nasdaq lost 30.66, or 1.2%, its first drop in three weeks. The Standard & Poor's 500 Index fell 25, or 1.7%, to 1453.55. For the week, the S&P 500 fell 20.44, or 1.4%, its biggest weekly decline in a month.
A far weaker-than-expected U.S. August employment report sent Treasury prices - and expectations for a fed funds rate cut - sharply higher Friday. The 10-year yield fell below its one-year low of 4.44%. At 3 p.m. EDT, the 10-year yield was 4.37%. The two-year yield also fell below its key 4% level, ending at a two-year low level of 3.90%.
The dollar fell sharply Friday as a dismal U.S. employment report for August set the stage for cuts in U.S. interest rates and touched off an across-the-board sell-off of the U.S. currency. Late afternoon, the euro was at $1.3769 up from $1.3686 late Thursday, while the dollar was at Y113.37, down from Y115.36, according to EBS. The euro was at Y156.10, down from Y157.93 late Thursday. The U.K. pound was at $2.0279, up from $2.0233, while the dollar was quoted at CHF1.1876, down from CHF1.2014 late Thursday.
WHAT THEY SAID
=NEWSWIRES SURVEY:Fed To Ease 3 Times, To 4.50% Yr-End
Wall Street banks have ratcheted up again the amount of Federal Reserve easing they expect in coming months, with the central bank now seen cutting rates at each of its three remaining 2007 meetings. Amid a sharp crunch in credit markets and following Friday's negative August nonfarm payrolls report, economists are almost unanimous in seeing a rate cut at the upcoming Sept. 18 Federal Open Market Committee, with six of the dealer banks surveyed calling for a cut of as much as 50 basis points.
US Stocks Outlook: Jobs Data A Tipping Point?
U.S. stocks were down more than 250 points Friday as the first reported contraction in the job market in four years suggested that what began as a financial and housing-market crisis may be eating into economic growth.
Treasury Secretary Henry Paulson said the data weren't a total surprise. "The economy will continue to grow in the second half of the year," he said. "I believe we will work our way through (the credit situation) because it is against the backdrop of a very strong U.S. economy."
Edward Lazear, chairman of President George W. Bush's Council of Economic Advisers, said, "We're still confident we're going to see high growth for the next year and for the next few months as well."
Ian Shepherdson, chief U.S. economist at High Frequency Economics, said in a research note, "One number is not a trend but this will scare the Fed. They will ease 25 (basis points on Sept. 18) but should ease 50."
Ian Morris, senior economist at HSBC, said, "I think in the context of stresses in financial markets, this weak (jobs) report has significantly solidified our expectations for a 50 basis points rate cut at the Sept. 18 meeting."
Currency traders will be keeping close watch on the Y114 mark, according to Andrew Chaveriat, foreign exchange technical analyst at BNP Paribas. "It might be psychologically important to see how we close (Friday). We might see some damage if we close below Y114."
For Kenneth Kim, Fed economist at Stone & McCarthy, the data do "increase the risk of recession. Just yesterday, Atlanta Fed's (Dennis) Lockhart said that he's not yet seeing any spillover into the broader economy. That view is going to have to change."
For Torsten Slok, senior economist at Deustche Bank in New York, "the very worrying observation today is that the (jobs) numbers already were lower in June and July, so it looks like the economy shifted downgear before the credit crisis" intensified.
THE EVENT
U.S. employment fell Friday for the first time in four years in August on steep drops in construction and manufacturing payrolls. Non-farm payrolls fell 4,000 in August, the first decline since August 2003, the Labor Department said. Economists had expected a gain of 112,000 payrolls. Previous reports were revised sharply lower. The unemployment rate was unchanged at 4.6%, as expected.
THE ANALYSIS
The report suggests that the housing recession is starting to grip the broader economy. It puts added pressure on Federal Reserve officials to aggressively cut interest rates, starting with its policy meeting on Sept. 18.
Financial markets expect a slew of fed funds rate cuts beyond this month - as much as 100 basis points in total by year end - to stem the recent credit crunch and its potential economic effect. That view seems supported by the jobs report.
Indeed, with job conditions clearly eroding, consumers risk losing a key source of support, though robust back-to-school sales reports and better-than-expected automobile sales for August suggest spending continues to grow. Consumer spending makes up two-thirds of economic output.
MARKET REACTION
As stocks fell on fears of a recession Friday, Harley-Davidson plunged on a production pullback, Office Depot dropped on estimate reductions but VeriFone Holdings advanced on a strong outlook. The Dow Jones Industrial Average lost 249.97, or 1.9%, to 13113.38, as 29 of 30 members fell. For the week, the Dow lost 244.36, or 1.8%, its biggest weekly drop since the end of July. The Nasdaq Composite Index fell 48.62, or 1.9%, to 2565.70. For the week, the Nasdaq lost 30.66, or 1.2%, its first drop in three weeks. The Standard & Poor's 500 Index fell 25, or 1.7%, to 1453.55. For the week, the S&P 500 fell 20.44, or 1.4%, its biggest weekly decline in a month.
A far weaker-than-expected U.S. August employment report sent Treasury prices - and expectations for a fed funds rate cut - sharply higher Friday. The 10-year yield fell below its one-year low of 4.44%. At 3 p.m. EDT, the 10-year yield was 4.37%. The two-year yield also fell below its key 4% level, ending at a two-year low level of 3.90%.
The dollar fell sharply Friday as a dismal U.S. employment report for August set the stage for cuts in U.S. interest rates and touched off an across-the-board sell-off of the U.S. currency. Late afternoon, the euro was at $1.3769 up from $1.3686 late Thursday, while the dollar was at Y113.37, down from Y115.36, according to EBS. The euro was at Y156.10, down from Y157.93 late Thursday. The U.K. pound was at $2.0279, up from $2.0233, while the dollar was quoted at CHF1.1876, down from CHF1.2014 late Thursday.
WHAT THEY SAID
=NEWSWIRES SURVEY:Fed To Ease 3 Times, To 4.50% Yr-End
Wall Street banks have ratcheted up again the amount of Federal Reserve easing they expect in coming months, with the central bank now seen cutting rates at each of its three remaining 2007 meetings. Amid a sharp crunch in credit markets and following Friday's negative August nonfarm payrolls report, economists are almost unanimous in seeing a rate cut at the upcoming Sept. 18 Federal Open Market Committee, with six of the dealer banks surveyed calling for a cut of as much as 50 basis points.
US Stocks Outlook: Jobs Data A Tipping Point?
U.S. stocks were down more than 250 points Friday as the first reported contraction in the job market in four years suggested that what began as a financial and housing-market crisis may be eating into economic growth.
Treasury Secretary Henry Paulson said the data weren't a total surprise. "The economy will continue to grow in the second half of the year," he said. "I believe we will work our way through (the credit situation) because it is against the backdrop of a very strong U.S. economy."
Edward Lazear, chairman of President George W. Bush's Council of Economic Advisers, said, "We're still confident we're going to see high growth for the next year and for the next few months as well."
Ian Shepherdson, chief U.S. economist at High Frequency Economics, said in a research note, "One number is not a trend but this will scare the Fed. They will ease 25 (basis points on Sept. 18) but should ease 50."
Ian Morris, senior economist at HSBC, said, "I think in the context of stresses in financial markets, this weak (jobs) report has significantly solidified our expectations for a 50 basis points rate cut at the Sept. 18 meeting."
Currency traders will be keeping close watch on the Y114 mark, according to Andrew Chaveriat, foreign exchange technical analyst at BNP Paribas. "It might be psychologically important to see how we close (Friday). We might see some damage if we close below Y114."
For Kenneth Kim, Fed economist at Stone & McCarthy, the data do "increase the risk of recession. Just yesterday, Atlanta Fed's (Dennis) Lockhart said that he's not yet seeing any spillover into the broader economy. That view is going to have to change."
For Torsten Slok, senior economist at Deustche Bank in New York, "the very worrying observation today is that the (jobs) numbers already were lower in June and July, so it looks like the economy shifted downgear before the credit crisis" intensified.
Consumers hold key to economy's future
American consumers hold the key to whether the unexpected drop in August employment signals either a continuation of a gentle slowdown or a tumble into outright recession for the U.S. economy.
The question is whether, after years of spending, we're spooked enough now to lock up our credit cards.
A net decline of 4,000 jobs reported by the Labor Department Friday caps a summer of worrisome economic news -- soaring mortgage foreclosures, declining housing prices, credit tightening and wild stock market swings. Throughout it, though, consumer spending has remained a bright spot.
Now the picture is turning decidedly mixed. While many corporations continue to report strong earnings and predict solid growth for the year, companies from Apple to Office Depot to Harley Davidson have signaled their concerns about consumer spending.
Consumers, whose spending accounts for roughly 70 percent of the economy, have already started pulling back, said Joel L. Naroff, president and chief economist at Naroff Economic Advisors. If the pullback accelerates "it almost sets off a domino effect. Businesses, which are increasingly uncertain in their spending decisions, could say, 'Why spend into a recession?' Then you've created one."
Apple Inc. cut the price on its 8-gigabyte iPhone to $399 from $599 on Wednesday and later offered $100 store credits after complaints from buyers who earlier had paid the higher price. A day later, Kellwood Co., whose clothing brands and licenses include Phat Farm, Calvin Klein and Sag Harbor, lowered its 2007 earnings guidance due to a downturn in consumer spending.
Hovnanian Enterprises Inc., a luxury homebuilder that reported its fourth consecutive quarterly loss this week, is taking an unusal approach: It's slashing prices for three days beginning Sept. 14 in each of its 449 communities nationwide to trim excess inventory.
Harley Davidson Inc. joined the parade Friday, reducing its forecast for yearly earnings. Chief Executive Jim Ziemer cited a "difficult time for the U.S. consumer" in explaining why he's throttling back shipments of new motorcycles to dealers.
Barbara Nell, manager of The Daisy Shop on Oak in Chicago, a designer resale shop where a Chanel suit can cost $1,200, said her customers have been merely browsing since the beginning of August. High-end Oak Street, around the corner from Chicago's Magnificent Mile "is very quiet" with lots of empty stores, she said.
But Marci Kessler, owner of DoubleTake Consignment Boutique in Short Hills, N.J., said business has been brisker than usual lately, with gently used Hermes handbags selling at close to retail prices and Manolo Blahnik shoes moving quickly.
National retail chains are seeing the same push-pull on outlook.
While Office Depot Inc.'s chief financial officer said Thursday that small businesses are slowing their spending, hurt by the sagging housing market, the CEO of competitor Staples Inc. said Wednesday he hasn't seen small businesses pull back, although he said consumer spending was a worry.
Parsing the jobs numbers brings the same mixed picture.
Those who are forecasting a sharp economic slowdown point to numbers showing some industries are contracting dramatically. The manufacturing industry has lost 215,000 jobs over the past year. Construction employment has fallen by 96,000 since its peak in September 2006, and more cuts are likely as both residential and commercial building have hit the wall of tighter and more expensive borrowing costs.
Analysts who argue for calm say the details of the jobs picture are nuanced. They note, for example, that the Labor Department showed a good bit of the job weakness was in the government sector, which showed a net decline of 28,000 jobs in August. In contrast, private-sector employers added 24,000 jobs.
"Given how resilient this economy has been in the past two years, with record high oil and gasoline prices and 17 straight rate hikes by the Fed, it's way too premature to bet on a recession," said Bernard Baumohl, author of "The Secrets of Economic Indicators" and executive director of The Economic Outlook Group in Princeton Junction, N.J.
Bolstering that view is 25-year old Natalia Garzon, who works as an account executive at public relations firm Ruder Finn Inc. in New York and recently replaced both her original iPod and her three-year-old iBook.
"I love to shop," she said. "It's bad. It's to the point where I haven't paid off my bills in full in ... forever."
The question is whether, after years of spending, we're spooked enough now to lock up our credit cards.
A net decline of 4,000 jobs reported by the Labor Department Friday caps a summer of worrisome economic news -- soaring mortgage foreclosures, declining housing prices, credit tightening and wild stock market swings. Throughout it, though, consumer spending has remained a bright spot.
Now the picture is turning decidedly mixed. While many corporations continue to report strong earnings and predict solid growth for the year, companies from Apple to Office Depot to Harley Davidson have signaled their concerns about consumer spending.
Consumers, whose spending accounts for roughly 70 percent of the economy, have already started pulling back, said Joel L. Naroff, president and chief economist at Naroff Economic Advisors. If the pullback accelerates "it almost sets off a domino effect. Businesses, which are increasingly uncertain in their spending decisions, could say, 'Why spend into a recession?' Then you've created one."
Apple Inc. cut the price on its 8-gigabyte iPhone to $399 from $599 on Wednesday and later offered $100 store credits after complaints from buyers who earlier had paid the higher price. A day later, Kellwood Co., whose clothing brands and licenses include Phat Farm, Calvin Klein and Sag Harbor, lowered its 2007 earnings guidance due to a downturn in consumer spending.
Hovnanian Enterprises Inc., a luxury homebuilder that reported its fourth consecutive quarterly loss this week, is taking an unusal approach: It's slashing prices for three days beginning Sept. 14 in each of its 449 communities nationwide to trim excess inventory.
Harley Davidson Inc. joined the parade Friday, reducing its forecast for yearly earnings. Chief Executive Jim Ziemer cited a "difficult time for the U.S. consumer" in explaining why he's throttling back shipments of new motorcycles to dealers.
Barbara Nell, manager of The Daisy Shop on Oak in Chicago, a designer resale shop where a Chanel suit can cost $1,200, said her customers have been merely browsing since the beginning of August. High-end Oak Street, around the corner from Chicago's Magnificent Mile "is very quiet" with lots of empty stores, she said.
But Marci Kessler, owner of DoubleTake Consignment Boutique in Short Hills, N.J., said business has been brisker than usual lately, with gently used Hermes handbags selling at close to retail prices and Manolo Blahnik shoes moving quickly.
National retail chains are seeing the same push-pull on outlook.
While Office Depot Inc.'s chief financial officer said Thursday that small businesses are slowing their spending, hurt by the sagging housing market, the CEO of competitor Staples Inc. said Wednesday he hasn't seen small businesses pull back, although he said consumer spending was a worry.
Parsing the jobs numbers brings the same mixed picture.
Those who are forecasting a sharp economic slowdown point to numbers showing some industries are contracting dramatically. The manufacturing industry has lost 215,000 jobs over the past year. Construction employment has fallen by 96,000 since its peak in September 2006, and more cuts are likely as both residential and commercial building have hit the wall of tighter and more expensive borrowing costs.
Analysts who argue for calm say the details of the jobs picture are nuanced. They note, for example, that the Labor Department showed a good bit of the job weakness was in the government sector, which showed a net decline of 28,000 jobs in August. In contrast, private-sector employers added 24,000 jobs.
"Given how resilient this economy has been in the past two years, with record high oil and gasoline prices and 17 straight rate hikes by the Fed, it's way too premature to bet on a recession," said Bernard Baumohl, author of "The Secrets of Economic Indicators" and executive director of The Economic Outlook Group in Princeton Junction, N.J.
Bolstering that view is 25-year old Natalia Garzon, who works as an account executive at public relations firm Ruder Finn Inc. in New York and recently replaced both her original iPod and her three-year-old iBook.
"I love to shop," she said. "It's bad. It's to the point where I haven't paid off my bills in full in ... forever."
Argentina Bonds, Stks Close Lower; Merval -1.82%; Peso Gains
Argentine bonds and stocks closed lower Friday, tracking Wall Street's negative performance after U.S. payrolls data showed a decline in August for the first time in four years.
The peso strengthened slightly against the U.S. dollar, closing at ARS3.1625 to the dollar, compared with ARS3.1650 of Thursday closing.
"The central bank intervened only at the beginning of this atypical session," said Hector Blanco, a foreign exchange trader with ABC Mercado de Cambio in Buenos Aires, pointing to the peso's relative strength against weakness in stocks and bonds.
The benchmark Merval stock index fell 1.82% to 2,041.04, closing the first week of September with a 1.4% loss after losing more than 5% of its value in August amid global market turmoil.
Despite the general losing trend, shares of steelmaker Siderar SA (ERAR.BA) shined with a 0.27% gain to ARS3.65.
Among bonds, the closely watched inflation-linked Discount in pesos dropped to ARS109, while its yield rose to 8.74% from 8.60% as of Thursday's close. The Par in pesos fell to ARS40, with its yield increasing to 7.81%, from 7.71% at Thursday close.
Traders see market jitters and volatility continuing in the medium term, with local indexes depending on U.S. macroeconomic data.
The peso strengthened slightly against the U.S. dollar, closing at ARS3.1625 to the dollar, compared with ARS3.1650 of Thursday closing.
"The central bank intervened only at the beginning of this atypical session," said Hector Blanco, a foreign exchange trader with ABC Mercado de Cambio in Buenos Aires, pointing to the peso's relative strength against weakness in stocks and bonds.
The benchmark Merval stock index fell 1.82% to 2,041.04, closing the first week of September with a 1.4% loss after losing more than 5% of its value in August amid global market turmoil.
Despite the general losing trend, shares of steelmaker Siderar SA (ERAR.BA) shined with a 0.27% gain to ARS3.65.
Among bonds, the closely watched inflation-linked Discount in pesos dropped to ARS109, while its yield rose to 8.74% from 8.60% as of Thursday's close. The Par in pesos fell to ARS40, with its yield increasing to 7.81%, from 7.71% at Thursday close.
Traders see market jitters and volatility continuing in the medium term, with local indexes depending on U.S. macroeconomic data.
AT A GLANCE: US Jobs Data Put Pressure On Fed To Cut Rates
AT A GLANCE: US Jobs Data Put Pressure On Fed To Cut Rates
THE EVENT
U.S. employment fell Friday for the first time in four years in August on steep drops in construction and manufacturing payrolls. Non-farm payrolls fell 4,000 in August, the first decline since August 2003, the Labor Department said. Economists had expected a gain of 112,000 payrolls. Previous reports were revised sharply lower. The unemployment rate was unchanged at 4.6%, as expected.
THE ANALYSIS
The report suggests that the housing recession is starting to grip the broader economy. It puts added pressure on Federal Reserve officials to aggressively cut interest rates, starting with its policy meeting on Sept. 18.
Financial markets expect a slew of fed funds rate cuts beyond this month - as much as 100 basis points in total by year end - to stem the recent credit crunch and its potential economic effect. That view seems supported by the jobs report.
Indeed, with job conditions clearly eroding, consumers risk losing a key source of support, though robust back-to-school sales reports and better-than-expected automobile sales for August suggest spending continues to grow. Consumer spending makes up two-thirds of economic output.
MARKET REACTION
As stocks fell on fears of a recession Friday, Harley-Davidson plunged on a production pullback, Office Depot dropped on estimate reductions but VeriFone Holdings advanced on a strong outlook. The Dow Jones Industrial Average lost 249.97, or 1.9%, to 13113.38, as 29 of 30 members fell. For the week, the Dow lost 244.36, or 1.8%, its biggest weekly drop since the end of July. The Nasdaq Composite Index fell 48.62, or 1.9%, to 2565.70. For the week, the Nasdaq lost 30.66, or 1.2%, its first drop in three weeks. The Standard & Poor's 500 Index fell 25, or 1.7%, to 1453.55. For the week, the S&P 500 fell 20.44, or 1.4%, its biggest weekly decline in a month.
A far weaker-than-expected U.S. August employment report sent Treasury prices - and expectations for a fed funds rate cut - sharply higher Friday. The 10-year yield fell below its one-year low of 4.44%. At 3 p.m. EDT, the 10-year yield was 4.37%. The two-year yield also fell below its key 4% level, ending at a two-year low level of 3.90%.
The dollar fell sharply Friday as a dismal U.S. employment report for August set the stage for cuts in U.S. interest rates and touched off an across-the-board sell-off of the U.S. currency. Late afternoon, the euro was at $1.3769 up from $1.3686 late Thursday, while the dollar was at Y113.37, down from Y115.36, according to EBS. The euro was at Y156.10, down from Y157.93 late Thursday. The U.K. pound was at $2.0279, up from $2.0233, while the dollar was quoted at CHF1.1876, down from CHF1.2014 late Thursday.
WHAT THEY SAID
=NEWSWIRES SURVEY:Fed To Ease 3 Times, To 4.50% Yr-End
Wall Street banks have ratcheted up again the amount of Federal Reserve easing they expect in coming months, with the central bank now seen cutting rates at each of its three remaining 2007 meetings. Amid a sharp crunch in credit markets and following Friday's negative August nonfarm payrolls report, economists are almost unanimous in seeing a rate cut at the upcoming Sept. 18 Federal Open Market Committee, with six of the dealer banks surveyed calling for a cut of as much as 50 basis points.
US Stocks Outlook: Jobs Data A Tipping Point?
U.S. stocks were down more than 250 points Friday as the first reported contraction in the job market in four years suggested that what began as a financial and housing-market crisis may be eating into economic growth.
Treasury Secretary Henry Paulson said the data weren't a total surprise. "The economy will continue to grow in the second half of the year," he said. "I believe we will work our way through (the credit situation) because it is against the backdrop of a very strong U.S. economy."
Edward Lazear, chairman of President George W. Bush's Council of Economic Advisers, said, "We're still confident we're going to see high growth for the next year and for the next few months as well."
Ian Shepherdson, chief U.S. economist at High Frequency Economics, said in a research note, "One number is not a trend but this will scare the Fed. They will ease 25 (basis points on Sept. 18) but should ease 50."
Ian Morris, senior economist at HSBC, said, "I think in the context of stresses in financial markets, this weak (jobs) report has significantly solidified our expectations for a 50 basis points rate cut at the Sept. 18 meeting."
Currency traders will be keeping close watch on the Y114 mark, according to Andrew Chaveriat, foreign exchange technical analyst at BNP Paribas. "It might be psychologically important to see how we close (Friday). We might see some damage if we close below Y114."
For Kenneth Kim, Fed economist at Stone & McCarthy, the data do "increase the risk of recession. Just yesterday, Atlanta Fed's (Dennis) Lockhart said that he's not yet seeing any spillover into the broader economy. That view is going to have to change."
For Torsten Slok, senior economist at Deustche Bank in New York, "the very worrying observation today is that the (jobs) numbers already were lower in June and July, so it looks like the economy shifted downgear before the credit crisis" intensified.
THE EVENT
U.S. employment fell Friday for the first time in four years in August on steep drops in construction and manufacturing payrolls. Non-farm payrolls fell 4,000 in August, the first decline since August 2003, the Labor Department said. Economists had expected a gain of 112,000 payrolls. Previous reports were revised sharply lower. The unemployment rate was unchanged at 4.6%, as expected.
THE ANALYSIS
The report suggests that the housing recession is starting to grip the broader economy. It puts added pressure on Federal Reserve officials to aggressively cut interest rates, starting with its policy meeting on Sept. 18.
Financial markets expect a slew of fed funds rate cuts beyond this month - as much as 100 basis points in total by year end - to stem the recent credit crunch and its potential economic effect. That view seems supported by the jobs report.
Indeed, with job conditions clearly eroding, consumers risk losing a key source of support, though robust back-to-school sales reports and better-than-expected automobile sales for August suggest spending continues to grow. Consumer spending makes up two-thirds of economic output.
MARKET REACTION
As stocks fell on fears of a recession Friday, Harley-Davidson plunged on a production pullback, Office Depot dropped on estimate reductions but VeriFone Holdings advanced on a strong outlook. The Dow Jones Industrial Average lost 249.97, or 1.9%, to 13113.38, as 29 of 30 members fell. For the week, the Dow lost 244.36, or 1.8%, its biggest weekly drop since the end of July. The Nasdaq Composite Index fell 48.62, or 1.9%, to 2565.70. For the week, the Nasdaq lost 30.66, or 1.2%, its first drop in three weeks. The Standard & Poor's 500 Index fell 25, or 1.7%, to 1453.55. For the week, the S&P 500 fell 20.44, or 1.4%, its biggest weekly decline in a month.
A far weaker-than-expected U.S. August employment report sent Treasury prices - and expectations for a fed funds rate cut - sharply higher Friday. The 10-year yield fell below its one-year low of 4.44%. At 3 p.m. EDT, the 10-year yield was 4.37%. The two-year yield also fell below its key 4% level, ending at a two-year low level of 3.90%.
The dollar fell sharply Friday as a dismal U.S. employment report for August set the stage for cuts in U.S. interest rates and touched off an across-the-board sell-off of the U.S. currency. Late afternoon, the euro was at $1.3769 up from $1.3686 late Thursday, while the dollar was at Y113.37, down from Y115.36, according to EBS. The euro was at Y156.10, down from Y157.93 late Thursday. The U.K. pound was at $2.0279, up from $2.0233, while the dollar was quoted at CHF1.1876, down from CHF1.2014 late Thursday.
WHAT THEY SAID
=NEWSWIRES SURVEY:Fed To Ease 3 Times, To 4.50% Yr-End
Wall Street banks have ratcheted up again the amount of Federal Reserve easing they expect in coming months, with the central bank now seen cutting rates at each of its three remaining 2007 meetings. Amid a sharp crunch in credit markets and following Friday's negative August nonfarm payrolls report, economists are almost unanimous in seeing a rate cut at the upcoming Sept. 18 Federal Open Market Committee, with six of the dealer banks surveyed calling for a cut of as much as 50 basis points.
US Stocks Outlook: Jobs Data A Tipping Point?
U.S. stocks were down more than 250 points Friday as the first reported contraction in the job market in four years suggested that what began as a financial and housing-market crisis may be eating into economic growth.
Treasury Secretary Henry Paulson said the data weren't a total surprise. "The economy will continue to grow in the second half of the year," he said. "I believe we will work our way through (the credit situation) because it is against the backdrop of a very strong U.S. economy."
Edward Lazear, chairman of President George W. Bush's Council of Economic Advisers, said, "We're still confident we're going to see high growth for the next year and for the next few months as well."
Ian Shepherdson, chief U.S. economist at High Frequency Economics, said in a research note, "One number is not a trend but this will scare the Fed. They will ease 25 (basis points on Sept. 18) but should ease 50."
Ian Morris, senior economist at HSBC, said, "I think in the context of stresses in financial markets, this weak (jobs) report has significantly solidified our expectations for a 50 basis points rate cut at the Sept. 18 meeting."
Currency traders will be keeping close watch on the Y114 mark, according to Andrew Chaveriat, foreign exchange technical analyst at BNP Paribas. "It might be psychologically important to see how we close (Friday). We might see some damage if we close below Y114."
For Kenneth Kim, Fed economist at Stone & McCarthy, the data do "increase the risk of recession. Just yesterday, Atlanta Fed's (Dennis) Lockhart said that he's not yet seeing any spillover into the broader economy. That view is going to have to change."
For Torsten Slok, senior economist at Deustche Bank in New York, "the very worrying observation today is that the (jobs) numbers already were lower in June and July, so it looks like the economy shifted downgear before the credit crisis" intensified.
CME Forex, Financial Estimated Futures Volumes - Sep 7
CME Forex, Financial Estimated Futures Volumes - Sep 7
For today, in contracts.
Currencies Financials
Euro 209,118 Eurodollar 4,465,347
Japanese yen 246,953 Libor 16,249
Swiss franc 107,350 Euroyen 4,472
British pound 115,943
Canadian dollar 71,318
Australian dollar 60,056
Mexican Peso 24,341
New Zealand dollar 2,921
South African Rand 28
Brazilian Real 0
Russian Rubble 0
For today, in contracts.
Currencies Financials
Euro 209,118 Eurodollar 4,465,347
Japanese yen 246,953 Libor 16,249
Swiss franc 107,350 Euroyen 4,472
British pound 115,943
Canadian dollar 71,318
Australian dollar 60,056
Mexican Peso 24,341
New Zealand dollar 2,921
South African Rand 28
Brazilian Real 0
Russian Rubble 0
U.S. dollar down sharply against yen
NEW YORK (AP) - The dollar plunged against the yen Friday and dropped sharply against the euro and the British pound after surprisingly weak U.S. jobs data signaled slower economic growth, raising the likelihood that the Federal Reserve will cut interest rates.
The dollar dropped to 113.34 Japanese yen from 115.29 yen late Thursday. The euro rose to $1.3768 in late New York trading from $1.3687, while the British pound rose to $2.0279 from $2.0231 late Thursday.
The Labor Department reported Friday that employers sliced payrolls by 4,000 in August, falling far short of economists' forecasts that payrolls would grow by 110,000. It was the first decline in jobs since August 2003. The report also showed the unemployment rate held steady at 4.6 percent, mainly because hundreds of thousands of people left the work force.
The employment report underlined the strain on the U.S. economy from the past month's painful credit crunch, and may prompt the Fed to lower a key interest rate when it meets next on Sept. 18. A cut from the current rate, 5.25 percent, would be the first reduction in four years.
Lower interest rates, used to jump-start the economy, can weaken a currency by giving investors lower returns on investments denominated in it.
Friday's evidence of a slowing economy pushed currency investors to shy away from the yen-carry trade, a riskier investment strategy that involves selling off the low-yielding yen in favor of higher-yielding dollar-denominated assets. Instead, wary currency traders sold off dollars and bought back yen.
"Today was a pretty dramatic example of a broadly lower dollar," said David Gilmore, a partner at Foreign Exchange Analytics in Essex, Conn. "The past several weeks of the credit crisis, the dollar has been trading in a mixed fashion. Today is the first sign of the dollar weakening" against the euro, pound and yen.
In other trading, the dollar bought 1.1879 Swiss francs, down from 1.2015 late Thursday, and 1.0554 Canadian dollars, up from 1.0528
The dollar dropped to 113.34 Japanese yen from 115.29 yen late Thursday. The euro rose to $1.3768 in late New York trading from $1.3687, while the British pound rose to $2.0279 from $2.0231 late Thursday.
The Labor Department reported Friday that employers sliced payrolls by 4,000 in August, falling far short of economists' forecasts that payrolls would grow by 110,000. It was the first decline in jobs since August 2003. The report also showed the unemployment rate held steady at 4.6 percent, mainly because hundreds of thousands of people left the work force.
The employment report underlined the strain on the U.S. economy from the past month's painful credit crunch, and may prompt the Fed to lower a key interest rate when it meets next on Sept. 18. A cut from the current rate, 5.25 percent, would be the first reduction in four years.
Lower interest rates, used to jump-start the economy, can weaken a currency by giving investors lower returns on investments denominated in it.
Friday's evidence of a slowing economy pushed currency investors to shy away from the yen-carry trade, a riskier investment strategy that involves selling off the low-yielding yen in favor of higher-yielding dollar-denominated assets. Instead, wary currency traders sold off dollars and bought back yen.
"Today was a pretty dramatic example of a broadly lower dollar," said David Gilmore, a partner at Foreign Exchange Analytics in Essex, Conn. "The past several weeks of the credit crisis, the dollar has been trading in a mixed fashion. Today is the first sign of the dollar weakening" against the euro, pound and yen.
In other trading, the dollar bought 1.1879 Swiss francs, down from 1.2015 late Thursday, and 1.0554 Canadian dollars, up from 1.0528
Colombia's Stks Fall On Weak US Employment Data; Peso Down
Colombia's Stks Fall On Weak US Employment Data; Peso Down
BOGOTA (Dow Jones)--The Colombian stock index fell Friday following the U.S. market, which plummeted after the Labor Department reported the first job market contraction in four years.
The IGBC stock index fell 1% to 10,731.63 points, while the Dow Jones Industrial Average dropped 1.9% to 13,110 points.
"The local market followed the markets abroad," said Marcela Giraldo, a market analyst with local brokerage Corredores Asociados. "The bad employment data is a clear sign of a possible recession in the U.S., which would be very bad news for countries like Colombia," she added.
The financial holding company Suramericana de Inversiones SA (SURAMINV.BO) was the most-traded share as 8.6 billion pesos ($3.96 million) worth of shares changed hands. Its price fell 1.6% to COP18,660.
"Suramericana is the benchmark of the Colombian stock market," Giraldo said.
As investors sold shares, the peso depreciated to COP2,184, its weakest level since March 16, from COP2,173.15 on Thursday.
On the debt market, the yield on the benchmark government peso-denominated bond maturing in 2020 rose to 10.579%, from 10.538% on Thursday.
BOGOTA (Dow Jones)--The Colombian stock index fell Friday following the U.S. market, which plummeted after the Labor Department reported the first job market contraction in four years.
The IGBC stock index fell 1% to 10,731.63 points, while the Dow Jones Industrial Average dropped 1.9% to 13,110 points.
"The local market followed the markets abroad," said Marcela Giraldo, a market analyst with local brokerage Corredores Asociados. "The bad employment data is a clear sign of a possible recession in the U.S., which would be very bad news for countries like Colombia," she added.
The financial holding company Suramericana de Inversiones SA (SURAMINV.BO) was the most-traded share as 8.6 billion pesos ($3.96 million) worth of shares changed hands. Its price fell 1.6% to COP18,660.
"Suramericana is the benchmark of the Colombian stock market," Giraldo said.
As investors sold shares, the peso depreciated to COP2,184, its weakest level since March 16, from COP2,173.15 on Thursday.
On the debt market, the yield on the benchmark government peso-denominated bond maturing in 2020 rose to 10.579%, from 10.538% on Thursday.
Saturday, September 1, 2007
USDJPY, Nikkei 225 Likely to Gain Amidst Carry Trade Resurgence
Written by Terri Belkas, Currency Analyst
SEP 2
Capital Spending ex Software (2Q) (19:50 EST; 23:50 GMT)
Labor Cash Earnings (YoY) (JUL) (21:30 EST; 01:30 GMT)
Expected: 10.3%
Expected: -0.5%
Previous: 14.2%
Previous: -0.9%
How Will The Markets React?
Japanese capital spending growth is anticipated to slow down to an annual rate of 10.3 percent in Q2 – the weakest pace since Q4 2005 – signaling that businesses are not investing as heavily as they anticipate softer demand amidst an economic slowdown in the US. Nevertheless, even a drop in line with estimates still leaves the figure at relatively robust levels as capital spending remains a driver of Japanese expansion. In fact, the Q2 GDP report showed that capital investment climbed 1.2 percent, accelerating from a 0.3 percent gain in Q1. What about the consumer? That has been a far less resilient sector of the economy, as spending only rose 0.4 percent in Q2, half the pace of Q1. The current quarter isn’t likely to show a marked improvement either, as tepid wage growth limits disposable income. Indeed, labor cash earnings for the month of July are anticipated to show contracting payroll growth for the eight consecutive month, with estimates pinned at an annual rate of -0.5 percent. Given these deteriorating conditions, there is an increased burden on exporters and manufacturers to support Japanese expansion. Furthermore, it also limits the ability of the Bank of Japan to normalize interest rates, as declining wages and softer spending will do little to fuel inflationary pressures, as the economy remains in slight deflation.
Bonds – 10-Year Japanese Government Bond Futures
The Tokyo afternoon session gapped down sharply pm Friday, possibly leaving a runaway gap that suggests a bias reversal, especially as the daily charts show a reverse flag formation. Support at 135.00 has been holding up for the past week, but JGBs could plummet if Japanese economic data proves to be stronger than expected, as traders ramp up speculation of a September rate hike by the Bank of Japan. A bearish move lower could target 134.44, with sharper declines targeting 133.81.
The Japanese yen has appreciated quite a bit over the past two months, as risk aversion has pervaded the forex markets and led carry trades to unwind. Fundamental data hasn’t played much of a role in this, however, as Japanese expansion showed a sharp slowdown in Q2 and data continues to signal that the economy has yet to emerge from deflation. As it stands, there are really only two fundamental events that could perpetuate a strong move by the Japanese yen: a rate hike by the Bank of Japan or a jump in inflation – neither of which we’ll see this week. Nevertheless, traders should be aware of the Japanese economic data on tap this week, as the results could have an impact on future policy decisions by the BOJ. Capital spending is anticipated to remain strong, but show a slowdown from the quarter prior, while wage growth is predicted to soften further, which will not bode well for consumer spending. With two drivers of economic growth – business investment and consumption – showing diminishing power, the picture does not look good for Japan. Regardless, USDJPY price action will likely remain contingent upon risk aversion trends, and now that Fed Chairman Ben Bernanke has somewhat assured investors that he will support the markets in times of distress, carry trades and equities could resume their gains next week, with a break above trendline resistance at 116.93 targeting 119.34.
As traders became more risk seeking at the end of the week, the Nikkei 225 broke through trendline resistance to end the session up 2.57 percent at 16,569.09. Japanese economic data has generally not played much of a role in Nikkei 225 trading, and next week isn’t likely to represent a shift from the norm. Capital spending is anticipated to remain strong, but show a slowdown from the quarter prior, while wage growth is predicted to soften further, which will not bode well for consumer spending. With two drivers of economic growth – business investment and consumption – showing diminishing power, the picture does look good for Japan. Similar to USDJPY trading, Nikkei 225 price action will likely remain contingent upon risk aversion trends. Now that Fed Chairman Ben Bernanke has somewhat assured investors that he will support the markets in times of distress, carry trades and equities could resume their gains next week, with the Nikkei 225 possibly targeting the 200 SMA at 17,275.
SEP 2
Capital Spending ex Software (2Q) (19:50 EST; 23:50 GMT)
Labor Cash Earnings (YoY) (JUL) (21:30 EST; 01:30 GMT)
Expected: 10.3%
Expected: -0.5%
Previous: 14.2%
Previous: -0.9%
How Will The Markets React?
Japanese capital spending growth is anticipated to slow down to an annual rate of 10.3 percent in Q2 – the weakest pace since Q4 2005 – signaling that businesses are not investing as heavily as they anticipate softer demand amidst an economic slowdown in the US. Nevertheless, even a drop in line with estimates still leaves the figure at relatively robust levels as capital spending remains a driver of Japanese expansion. In fact, the Q2 GDP report showed that capital investment climbed 1.2 percent, accelerating from a 0.3 percent gain in Q1. What about the consumer? That has been a far less resilient sector of the economy, as spending only rose 0.4 percent in Q2, half the pace of Q1. The current quarter isn’t likely to show a marked improvement either, as tepid wage growth limits disposable income. Indeed, labor cash earnings for the month of July are anticipated to show contracting payroll growth for the eight consecutive month, with estimates pinned at an annual rate of -0.5 percent. Given these deteriorating conditions, there is an increased burden on exporters and manufacturers to support Japanese expansion. Furthermore, it also limits the ability of the Bank of Japan to normalize interest rates, as declining wages and softer spending will do little to fuel inflationary pressures, as the economy remains in slight deflation.
Bonds – 10-Year Japanese Government Bond Futures
The Tokyo afternoon session gapped down sharply pm Friday, possibly leaving a runaway gap that suggests a bias reversal, especially as the daily charts show a reverse flag formation. Support at 135.00 has been holding up for the past week, but JGBs could plummet if Japanese economic data proves to be stronger than expected, as traders ramp up speculation of a September rate hike by the Bank of Japan. A bearish move lower could target 134.44, with sharper declines targeting 133.81.
The Japanese yen has appreciated quite a bit over the past two months, as risk aversion has pervaded the forex markets and led carry trades to unwind. Fundamental data hasn’t played much of a role in this, however, as Japanese expansion showed a sharp slowdown in Q2 and data continues to signal that the economy has yet to emerge from deflation. As it stands, there are really only two fundamental events that could perpetuate a strong move by the Japanese yen: a rate hike by the Bank of Japan or a jump in inflation – neither of which we’ll see this week. Nevertheless, traders should be aware of the Japanese economic data on tap this week, as the results could have an impact on future policy decisions by the BOJ. Capital spending is anticipated to remain strong, but show a slowdown from the quarter prior, while wage growth is predicted to soften further, which will not bode well for consumer spending. With two drivers of economic growth – business investment and consumption – showing diminishing power, the picture does not look good for Japan. Regardless, USDJPY price action will likely remain contingent upon risk aversion trends, and now that Fed Chairman Ben Bernanke has somewhat assured investors that he will support the markets in times of distress, carry trades and equities could resume their gains next week, with a break above trendline resistance at 116.93 targeting 119.34.
As traders became more risk seeking at the end of the week, the Nikkei 225 broke through trendline resistance to end the session up 2.57 percent at 16,569.09. Japanese economic data has generally not played much of a role in Nikkei 225 trading, and next week isn’t likely to represent a shift from the norm. Capital spending is anticipated to remain strong, but show a slowdown from the quarter prior, while wage growth is predicted to soften further, which will not bode well for consumer spending. With two drivers of economic growth – business investment and consumption – showing diminishing power, the picture does look good for Japan. Similar to USDJPY trading, Nikkei 225 price action will likely remain contingent upon risk aversion trends. Now that Fed Chairman Ben Bernanke has somewhat assured investors that he will support the markets in times of distress, carry trades and equities could resume their gains next week, with the Nikkei 225 possibly targeting the 200 SMA at 17,275.
The Carry Unwind
If the forecast for a slowdown in the US economy is indeed correct what trade in the currency market would benefit most from such outcome? For those traders betting on this scenario we believe a short USDJPY position may offer the most promising opportunity in 2008. Over the past two years USDJPY has been essentially a one way trade to the upside as the pair benefited from the widening interest rate differentials between the dollar and the yen as well as increased risk appetite as global equity markets soared across the board. A sharp deceleration in US growth will reverse both of those dynamics making the carry trade far less attractive and setting in motion the long unwind process.
On the interest rate front market participants expect the Fed to begin easing in response to the turbulence of the past several weeks. Although it appears as though FOMC members are reluctant to cut rates, if labor data continues to deteriorate the Fed will have no choice but to act. As the loosening cycle builds force the rate differentials between the dollar and the yen will begin to compress and may even accelerate if the BOJ continues its normalization process as Asian economies appear to be relatively insulated from the liquidity crunch affecting western markets.
More importantly however, the slowdown in US economy is sure to impact the profit margins of US corporations and will likely cause a decline in the Dow. Over the past two years the carry trade benefited tremendously from the rise in equities as risk tolerance increased significantly. In fact USDJPY has a greater than 0.6 correlation with Dow Jones index suggesting that the carry trade has been driven as much by the stock market rally as by the interest rate spread between the yen and the dollar. As equities rallied many speculators finances their US stock purchases with very cheap yen loans levering up their positions. That is why any downdraft in stocks immediately brings a decline in the USDJPY pair as those positions are unwound. Should the US stock market enter a prolonged bear phase, USDJPY is quite likely to follow as stop losses and margin calls will trigger a sharp decline in the pair.
Risks to the Trade
There are of course critical risks to this trade. First and foremost the US economy may weather the collapse of housing and remain resilient as exports most notably in the technology sector helped by the lower dollar pick up the slack in demand. Secondly, Japanese retail investors, who continue to be the biggest proponents of the carry trade, as they seek yield for their large pool of domestic savings could provide a very strong bid for the carry trade irrespective of cuts by the Federal reserve. The latter scenario could be especially likely if the Fed’s policy initiate is slow and gradual resulting in only modest compression of yields. Finally, a short USDJPY incurs significant interest rates costs for investors, and those contemplating a long term position should most particularly mindful of the leverage of the position which could magnify those costs many fold. Nevertheless, those traders who are confident in their prognosis of a slowdown in US economy in 2008 may want to express that idea through the short USDJPY position which should benefit disproportionately from any decline in US interest rates and equity prices.
The USDJPY may have completed a 12 year correction in the form of a triangle at 124.13. Triangles unfold in 5 waves (A-B-C-D-E) and the structure above is clearly in 5 waves. There is risk of wave E extending higher towards the next major resistance level of 128.00 but the weight of evidence suggests that wave is complete at 124.13. For one, wave E is close to 61.8% of wave C. Alternating legs of triangles are often related by 61.8% or a derivation of Φ (Phi….618). Wave E would be exactly 61.8% of wave C at 122.57. The top was at 124.13. A difference of just 155 pips when projecting a move that is nearly 3000 pips works out to just over a 5% error. The time relationships between the different legs of the triangles also favor the idea that wave E is complete at 124.13. The weeks that each leg of the triangle took to unfold (from A to E) were 41, 16, 27, 37, 30. The average length of time for each leg is 30.2. Wave E took 30 weeks. The 'look' is right for a top and reversal of significant proportion. A terminal thrust in the direction of the larger trend succeeds completion of a triangle. In the case of the USDJPY, a terminal thrust would result in a drop below the 1995 low of 81.12. A break of the base of the triangle at 101.26 would strongly signal that price is headed below 81.12. However, with the evidence making a strong case that the triangle is complete at 124.13, a bearish bias is warranted at the current juncture against 124.13.
The DJIA and JPY crosses have tracked each other for the better part of this decade. With this in mind, analysis of the DJIA can support or refute our bearish bias on the JPY crosses. Over the last 100+ years, stocks have exhibited what is termed the decennial pattern. In the pattern, years 0-2 of the decade are bearish for stocks as is year 7. Specific examples include the Panic of 1907 when the stock market crashed in both March and October. The DJIA ended 1907 down 38%. 1917 saw a 23% drop in the DJIA. 1927 was a positive year for stocks but the DJIA dropped 5.2% in the September-October period. In 1937, stocks began plummeting in March and ended the year down 32%. The biggest declines of that year came in September and October when Stocks fell 20%. 1947 was flat (up 3% for the year). Stocks declined 12% in 1957 and 9.3% of that decline occurred in the September-October period. 1967 was a positive year but stocks declined 8.7% in the September-October period. A drop of 17% occurred in 1977 with 5.4% of the decline occurring in the September-October months. The DJIA ended up 1% in 1987 but October 19th was Black Monday, the second largest one-day percentage decline in stock market history. Equities rallied strongly in 1997, finishing the year up 22%. However, the September-October months were bearish (down 3%). In summary, history tells us that the September-October months are seasonally bearish and years ending in 7 are cyclically bearish. The confluence of these two patterns have led to the worst stock market crashes in history. Given the high correlation between stocks and the JPY crosses, the biggest decline in years may be in store for the JPY crosses over the next two months. Recent technical articles on the JPY/Dow relationship can be found at Early August and June.
Show me the Money
Speculators and investors may disagree about the extent of the damage from the recent fallout in the sub-prime markets but one fact is incontrovertibly clear – credit is no longer cheap or easily available. Although long term jumbo mortgage rates have come off their highs they are still more than 100 basis points higher than the traditional 30 year fixed mortgage. Furthermore, not only has credit become expensive, but lending standards have been tightened considerably over the past month. Poor credit ratings and no income verification loans are quickly becoming history. Potential house buyers will now require a strong personal balance sheet and will have to adhere to more stringent lending terms.
This change in the real estate markets will inevitably lead to lower home sale prices and less mortgage equity withdrawal activity in the next year. Already existing home sales have declined to 5.70 Million annual rate down from the peak of 7,21 Million units less than two years ago while new homes sales are averaging 870K units from their peak of 1389K. Although residential real estate directly accounts for only 5% of the GDP, some analysts calculate that the indirect impact of the real estate market on the US economy, when finance and retail sectors are factored in, may be responsible for as much as 50% of GDP growth over the past several years.
In short the contraction in real estate market should lead to a deceleration in the overall economy, but because this process is gradual, its effects may not be fully realized until 2008. Indeed given the blazing 4% GDP growth recorded in the 2nd quarter of 2007, it’s hard to believe that a US recession is possible in the near future. Yet the GDP numbers represent economic activity before the recent market turbulence. Going forward US demand is likely to slow significantly as the weight of the new reality in the credit markets begins to bear down on the US consumer facing more than 1 Trillion dollars of Adjustable Rate Mortgages in the next year. The average combined loan-to-value ratios of these 2004-2006 vintage loans are approximately 92%, allowing fro very little margin of error. Therefore, this combination of massive increases in mortgage costs in conjunction with much tighter credit standards is likely to result in a new wave of bankruptcies and is the primary reason to expect an economic slowdown in 2008. Evidence of deceleration in growth is already building in the employment numbers. June’s Non Farm payrolls report printed below the key 100K job level for the first time since February and latest weekly numbers jobless claims numbers ballooned to 334K – highest level in 5 months.
This change in the real estate markets will inevitably lead to lower home sale prices and less mortgage equity withdrawal activity in the next year. Already existing home sales have declined to 5.70 Million annual rate down from the peak of 7,21 Million units less than two years ago while new homes sales are averaging 870K units from their peak of 1389K. Although residential real estate directly accounts for only 5% of the GDP, some analysts calculate that the indirect impact of the real estate market on the US economy, when finance and retail sectors are factored in, may be responsible for as much as 50% of GDP growth over the past several years.
In short the contraction in real estate market should lead to a deceleration in the overall economy, but because this process is gradual, its effects may not be fully realized until 2008. Indeed given the blazing 4% GDP growth recorded in the 2nd quarter of 2007, it’s hard to believe that a US recession is possible in the near future. Yet the GDP numbers represent economic activity before the recent market turbulence. Going forward US demand is likely to slow significantly as the weight of the new reality in the credit markets begins to bear down on the US consumer facing more than 1 Trillion dollars of Adjustable Rate Mortgages in the next year. The average combined loan-to-value ratios of these 2004-2006 vintage loans are approximately 92%, allowing fro very little margin of error. Therefore, this combination of massive increases in mortgage costs in conjunction with much tighter credit standards is likely to result in a new wave of bankruptcies and is the primary reason to expect an economic slowdown in 2008. Evidence of deceleration in growth is already building in the employment numbers. June’s Non Farm payrolls report printed below the key 100K job level for the first time since February and latest weekly numbers jobless claims numbers ballooned to 334K – highest level in 5 months.
The Best Trade for the End of the Year?
For those traders forecasting a significant slowdown in US economy in 2008 we take a look at the merits and dangers of selling USDJPY from both a fundamental and technical perspective.
Yen: The Best Trade for the End of the Year?
For those traders forecasting a significant slowdown in US economy in 2008 we take a look at the merits and dangers of selling USDJPY from both a fundamental and technical perspective. The stock market is entering its worst period historically within the monthly seasonal and 10 year cyclical patterns. Given the high correlation between stocks and the JPY crosses, the biggest decline in years may be in store for the JPY crosses over the next few months.
President Bush Announces Plan That Boosts Risky Currencies
Friday is looking up for risky currencies, as President Bush will announce a plan to help US homeowners who are at risk of defaulting on their mortgage loan. This has eased the concerns of many forex traders who have been resting their money in low-yield currencies like the yen. Now, with the subprime mortgage issues being addressed by the US government, high-risk investments will resume. Reports Reuters:
"There is some reaction to Bush's plans to help out people who are in trouble with their mortgage payments and markets are also expecting some comments from Bernanke this afternoon regarding rate cuts. Both these factors are helping the carry trade," said Carsten Fritsch, currency strategist at Commerzbank Corporates & Markets in Frankfurt.
"There is some reaction to Bush's plans to help out people who are in trouble with their mortgage payments and markets are also expecting some comments from Bernanke this afternoon regarding rate cuts. Both these factors are helping the carry trade," said Carsten Fritsch, currency strategist at Commerzbank Corporates & Markets in Frankfurt.
Yen Bounces Back From Wednesday's Drop
Investors, confident that the US mortgage situation could be weathered, pulled money out of the yen on Wednesday and put it back into risky carry trades. However, things did not look so promising for the US on Thursday. As a result, the yen was once again strengthened by nervous investors. Reuters reports:
The yen brushed off a rebound in European and Asian stocks and climbed after British newspaper The Times reported that the co-head of RBS Greenwich Capital's collateralised debt obligations unit had left the bank along with six colleagues.
The yen brushed off a rebound in European and Asian stocks and climbed after British newspaper The Times reported that the co-head of RBS Greenwich Capital's collateralised debt obligations unit had left the bank along with six colleagues.
Investment in European Stocks Weakens Yen
While the US had a rough day yesterday, European stocks performed well enough to tempt investors away from the yen. Though a stable currency, the yen is a low-yielding investment and traders are ready to try their hand at a riskier venture with European stocks. There is no word yet on how this may affect Wall Street. According to Forbes:
This has pushed the yen down as investors make tentative steps back to engaging in the risky carry trade - where investors sell low-yielding currencies such as the yen to buy higher-yielding ones elsewhere. With no US data due this afternoon, how equities fare on Wall Street is likely to determine whether the rise in risk appetite can be sustained.
This has pushed the yen down as investors make tentative steps back to engaging in the risky carry trade - where investors sell low-yielding currencies such as the yen to buy higher-yielding ones elsewhere. With no US data due this afternoon, how equities fare on Wall Street is likely to determine whether the rise in risk appetite can be sustained.
Credit Problems Strengthen Yen
Once again, fear of US mortgage problems has led investors back to arms of the reliable yen. A low-yield, low-risk currency, the Japanese yen has become a safe haven for skittish traders in recent weeks. Investors are right to be concerned, as the US housing market hasn't been in this kind of shape in two decades. Reuters reports:
The yen extended gains against the dollar after a measure of U.S. home prices reflected the biggest year-on-year decline in the second quarter since 1987.
The yen extended gains against the dollar after a measure of U.S. home prices reflected the biggest year-on-year decline in the second quarter since 1987.
Friday, August 31, 2007
US Dollar Steady in Japan
Bank of Japan governor, Toshihiko Fukui, has expressed a desire to keep credit rates low in Japan. His aspiration to stabilize interest rates has had a positive effect on the US Dollar in Japan, reports from Tokyo are showing. While many global markets are reeling from the subprime credit problems in the US, Japan is remaining calm and forgoing a reactionary rate hike. Forbes reports:
'I understand that global credit markets are now in the process of re-pricing risk, and we need to see if the current re-pricing proceeds in an orderly fashion, or if it develops in a disorderly manner,' Fukui said.
'I understand that global credit markets are now in the process of re-pricing risk, and we need to see if the current re-pricing proceeds in an orderly fashion, or if it develops in a disorderly manner,' Fukui said.
Promising Survey Strengthens Pound
Although the British pound suffered earlier in the week from a large Bank of England loan, the currency has been lifted due to a survey taken by UK manufacturers. The results of the survey, which inquired about their order books, showed that manufacturers were more successful this month than they've been in over a decade. Analysts did not expect such a promising report, as it proved that the UK is handling global credit problems better than most countries. According to Forbes:
The Confederation of British Industry revealed that a balance of +9 pct of firms polled reported that their order books were above normal in August - the highest level for more than 12 years.
The Confederation of British Industry revealed that a balance of +9 pct of firms polled reported that their order books were above normal in August - the highest level for more than 12 years.
Monday, August 27, 2007
forex
There are three bases, which can be extremely handy for currency traders and are easy to implement. They are listed below and you can take advantage of these 3 bases to maximize your advantage.
The first base states that it is quite useful for some Forex traders to trade with a currency pair everyday at the same time. The reason behind this is that the other traders involved in selling or buying the same currency pair might also end up trading at the same time, everyday. This is a proven technique that is useful for those Forex traders who are able to understand and capitalize on various technical analysis of the currency market. Another probable reason would be that this sets a standardization process for trading conditions if the trader does the trading everyday at the same time. This kind of standardization can also yield profit. But never forget that the currency or Forex market is extremely volatile and can change rapidly.
The second base deals with particular currencies trading with a particular volatile situation of the market at a particular time. After you have outgrown the demo account where you have practices all your skills, you can take the dip into high waters. When you are investing your own capital there can be two scenarios. You would want to minimize the liquidity amount and the volatility to decrease your risk. The second scenario is that you can increase your risk and thus increase the changes of earning a huge profit.
The foreign exchange market revolves around the sun but follows a different path from the actual sun. Instead of the sunrise happening in the east, the Forex market opens in the west. It starts from the United States and takes the Pacific route to Australia and then to Far East and Europe and comes back a full circle to the United States. The total foreign currency trading volume is determined by the opening figure of the market and the various overlaps caused during the time the market was open. Although the Forex trading market works 24 hours a day but there are certain peak hours of trading when the volumes are relatively high. This time according to GMT is between 1 pm and 4 pm. Hence if you trade at a certain time in the day then you will be able to minimize or maximize the risk involved for a particular currency pair.
The third base deals with the volume of activity involved with a particular currency or currency pair. It is always a sound theory to capture the different levels of volatility for the particular currency pairs and thus capitalize on your profits. One of the popular tools used by technical analysts is the Bollinger bands and they help in quantifying volatility. These Bollinger bands can compare volatility with reference to their relative price over a pre-determined period of time. But it really depends what your trading manager wants to use because there are certain Forex trading managers who don’t find this as a utility tool while others swear by it. It also depends on whether the Bollinger bands are favorable for use in your situation.
Understanding Forex Better
Forex trading can be a harmonious affair and at the next moment it can turn chaotic. It can be similar to watching the movement of a herd of deer. When the herd is attacked by a predator, they seem to move in all directions. Now if you were to place a bet on whether they will run to their left or right, would you feel confident about it? Not really because it is absolutely unpredictable.
Three Bases of Being a Smart Forex Trader
There are three bases, which can be extremely handy for currency traders and are easy to implement. They are listed below and you can take advantage of these 3 bases to maximize your advantage.
The first base states that it is quite useful for some Forex traders to trade with a currency pair everyday at the same time. The reason behind this is that the other traders involved in selling or buying the same currency pair might also end up trading at the same time, everyday. This is a proven technique that is useful for those Forex traders who are able to understand and capitalize on various technical analysis of the currency market. Another probable reason would be that this sets a standardization process for trading conditions if the trader does the trading everyday at the same time. This kind of standardization can also yield profit. But never forget that the currency or Forex market is extremely volatile and can change rapidly.
The second base deals with particular currencies trading with a particular volatile situation of the market at a particular time. After you have outgrown the demo account where you have practices all your skills, you can take the dip into high waters. When you are investing your own capital there can be two scenarios. You would want to minimize the liquidity amount and the volatility to decrease your risk. The second scenario is that you can increase your risk and thus increase the changes of earning a huge profit.
The foreign exchange market revolves around the sun but follows a different path from the actual sun. Instead of the sunrise happening in the east, the Forex market opens in the west. It starts from the United States and takes the Pacific route to Australia and then to Far East and Europe and comes back a full circle to the United States. The total foreign currency trading volume is determined by the opening figure of the market and the various overlaps caused during the time the market was open. Although the Forex trading market works 24 hours a day but there are certain peak hours of trading when the volumes are relatively high. This time according to GMT is between 1 pm and 4 pm. Hence if you trade at a certain time in the day then you will be able to minimize or maximize the risk involved for a particular currency pair.
The third base deals with the volume of activity involved with a particular currency or currency pair. It is always a sound theory to capture the different levels of volatility for the particular currency pairs and thus capitalize on your profits. One of the popular tools used by technical analysts is the Bollinger bands and they help in quantifying volatility. These Bollinger bands can compare volatility with reference to their relative price over a pre-determined period of time. But it really depends what your trading manager wants to use because there are certain Forex trading managers who don’t find this as a utility tool while others swear by it. It also depends on whether the Bollinger bands are favorable for use in your situation.
Forex Strategy
Whether we are talking of a business or about Forex trading, a sound strategy is a must. Forex trading may look simple but that’s not the reality. To be successful in trading, you will need to gain in-depth information and knowledge regarding the Forex market. You need to follow the market through its ups and downs, and determine the underlying causes for the rise and fall in rates. You can make a lot of money in Forex trading but sometimes you will also incur losses.
When talking about trading in such a volatile market, you need to continuously monitor the changes. Gather data and information regarding various changes that has taken place in the Forex market in a couple of years. This will strengthen your knowledge and help you to formulate a strategy. A successful trading is one that is based on an informed decision depending on the market sentiment and expectation. Your decision needs to be well timed and the difference can make you a winner or loser.
Here are a few tips that can help you become a successful investor.
Money: Always trade with only that amount of money, whose loss would not impact deeply into your day-to-day life. Forex trading is a speculative activity and one mistake can bring you down. The best thing to do is invest wisely.
Market Situation: Before you start to invest in the Forex trading, try to get a grip on the prevailing market situation. Is the market going up or is it going down? Is the trading strong or weak? Once you get a clear picture, it will be easier to start trading.
Time Frame: Many investors and traders enter the market with the sole objective of earning quick money but that’s not what Forex trading is all about. This is a volatile market and movements can change the entire situation in matter of minutes. It is always good to observe the market for some time and know the various time frames when the market behaves sluggishly or when it is at an all time high. For example: 1pm in the US, the market is absolutely packed with investors, buyers and sellers. Everything seems to be happening then. So this is the appropriate time to go for it. It is also important for you to decide whether you are going to do it short-term or for long-term. For short-term time frames, you need to analyze the market carefully and go through all the statistical graphs.
Right Move: Timing your trade is very important because one wrong move can take you down. There could be an upward movement in the market but take time out to understand and analyze whether it is going to remain for some time or is it just another illusion. The trade timing is two fold and an expected market figure like CPI or a decision from the Federal Reserve can consolidate any Forex market movement whatsoever. A good timing means that you need to take into account all possibilities. If you are doubtful, then don’t take an unnecessary risk, stay out of it.
How To Be A Winning Trader
Forex trading can seem to be tough at the first instance to a new investor but once you have understood the grooves then it is all about making the right decision and earning a handsome profit. The first taste of profit can be scintillating and gives a great feeling. But on the downslide, a loss will cause enough pain. It is a consistent and self running pattern. With every new generation of traders hitting the market, this pattern keeps repeating itself. The pattern is strong enough to pull you down or earn higher.
It is imperative for a trader to learn, understand, and master this pattern. Of course it cannot be mastered because it can change anytime and is volatile in nature. To be on the top of this pattern, a trader needs to ask the right questions, do an analysis, understand the forces behind it and backed by a keen observation, he/she can draw upon a logical conclusion. The patterns might be similar and recurring but observing them closely means that as a trader you may get to know what makes them tick.
There are various conclusions that can be drawn from observations of this pattern. Let try and understand some of them because this is the thin line between failure and success.
The highest number of traders who have suffered a loss can be found in the short-term and intraday group. Although traders do blame the result on time, but this is not the case. It is more because of a lack of preparation and formulation of a strategy and game plan. If a trader is trading in a precariously balanced time frame where the smallest of errors can be damaging, the lack of a strategy or plan can raise the volume of the loss. It has been observed that trading in selected time frames like the mid-term and long-term time frames can offer a higher success rate.
It has been seen that many traders use complex systems or tools and even rely on black boxes and this has led to recurring losses. On the other hand, traders with winning streaks have been found to use some of the simplest techniques. Actually, most people try to confuse complex with better. That is certainly not the case. The more complex the system is, the more difficult it will be to understand and as a result might create confusion or error in understanding the data. And from a logical point of view, the simplest approaches are less prone to incorrect interpretations.
Traders who have lost money generally spend a lot of time forecasting the next day’s market situation. On the other hand winning traders spend most of their time strategizing keeping in mind the current market scenario. A successful trader is the one who can predict what kind of a behavioral reaction the crowd will have to a certain change in the market. Since the market is always volatile hence a rational thought for the irrational buying and selling behavior can be the benchmark for success.
The Inter-Relationship Of Business With Forex
Any business is a continuous process. In a business, you sell a service or product and the money earned goes back into the market in the form of employees, labor, infrastructure, banking etc. It is a complex world where everything is influenced by the demand and supply curve. The more the demand, the more the supply and if the equilibrium is not reached then it leads to black marketing. Money through business is transferred throughout the world from one country to another. For example, a business is situated in Chicago, US and has offices in Venice, Brisbane, Moscow, and Delhi. Then there will be daily money transactions involving multiple currencies belonging to each of these countries. Everyday Indian Rupee, Australian Dollar, and Italian Lira is going to be converted in to US Dollar. This is where the Foreign exchange department plays an important role. The Italian Lira gets converted at the selling rate to Dollars and the dollars are then sent to the US Office who buys it on the buying rate. Forex basically means conversion of one currency form to another and this facilitates transfer of money from one country to another.
The birth of foreign exchange happened due to different countries having different currencies. There is a difference in the denomination of these currencies and the currency of Italy cannot be used in Australia for buying any product or for paying hotel bills etc. The foreign exchange buys the Italian currency, converts it into its applicable amount in Australian Dollars and gives it to you so that you can use it. The use of foreign exchange is very popular when it comes to trading, traveling or business purposes that entail the transfer of different currencies. It is important for any business to convert their currency to that of the local market. This enables businesses to run smoothly and they can purchase their raw materials from the local market. If a business had to purchase from their home market, which is thousands of miles away then that would lead to incurring losses due to high costs. The Forex just makes it easier by providing the required raw material in the local markets through currency conversion. In brief, the business will actually be able to avoid the losses and make profits.
The price of the Forex also fluctuates from time to time depending on the demand and the supply. It is similar to the stock exchange yet much different. The foreign exchange rates are generally published in all daily newspapers and on various financial websites. The rates are provided on a day-to-day basis. The foreign exchange rates also vary depending on the position of the two countries in question in the competitive market scenario. For example, if the two countries in question are Saudi Arabia and US then it is a known fact that the US buys oil from Saudi Arabia. Hence the Forex for Saudi Arabia will be significantly higher than that of the US. Oil is one of the many products, which influences the Forex of a particular country. Other commodities are gold, and export items.
Online Forex Trading
It has been seen that Forex trading has changed considerably in the last decade and one technology responsible for this is the Internet. Real-time streaming technologies combined with efficient PC’s and Laptops, FX trading can be done at the click of a button. There are quite a few benefits of online Forex trading and with the continuous advancement of technology; things are only going to get better.
If you are new to online Forex trading then the suggestion here is to take up an online FOREX trading class. More and more investors and Forex traders have started using the online system to their benefit. One of the popular courses is by Peter Bain and it is a very good course for a beginner like you. Apart from this there are various foreign exchange websites that offer help in understanding the ways of online Forex trading. You can also check for articles in web libraries, which provide detailed information about trading Forex online.
Alternatively you can learn from free trial offers or reports. There are many software’s or investment companies who have developed software specific to Forex trading. The software can be used for trading purposes and updating databases. The software companies can let you download their forex trading software for a limited time period free of cost. It will help you understand forex trading in a better light because through these software’s, you will get to do paper trading. You have nothing to loose. This way you will learn about Forex trading and what to do when the market shifts. So when you actually go for the kill, you will know exactly where to invest and what to expect. This is not a completely foolproof way because the Forex trading market can also be volatile and changes can happen suddenly. But this surely is the easiest way to learn and probably the best shortcut that you can take.
The learning curve can take longer time than expected but then you need to spend as much time as possible, so that when you actually start trading, you will be confident. There are some traders and investors who get scared at the first instance of market volatility. This will not happen with you because you are mentally prepared. Practice makes one perfect and this applies with Forex trading. Paper trading is probably the next best thing to learn and master before risking your money on Forex trading. Paper trading is also known as simulation trading. Here you are allowed to experiment as much as possible. You can trade as if you were a real investor with $5000. You can get involved in various activities, which are a part of Forex trading like asking for price, setting up a bid etc.
Once you have gone through the software, it is important to get information about how the market has been behaving in the recent times. If you can get the technical data dating back to a couple of years then you will be able to spot many trends. These trends can guide you towards making a sound investment decision.
The Impact of Fear on Forex Traders
Fear is probably the most common cause that leads to inaction. Just because we fear that the results might be bad, we don’t try. So is it good to have fear or is it a disadvantage? Let us take a walk through the various facets of fear and what it stands for in Forex trading.
Forex trading is one of the most profitable business occupations in the world and more and more people are getting into the world of Forex trading. There are new traders and new investors entering this ever-changing circle of Forex trading. Since Forex trading is open 24 hours a day, many people find it a convenient way of making money. For those who are tired of the fixed working hours can make this a regular earning mode.
The first thing that a new trader requires is a reliable contact in Wall Street. This will help a trader to carve a place amongst the very best. The second most important thing required is a starting capital. The capital can be as low as $100 but if the investment amount is between $4000 and $10,000 then it can be quite an exhilarating experience. The buying and selling takes place on a trading platform, which is provided by a Forex broker.
There is a lot of difference between Forex trading and becoming a successful Forex trader. To be a profitable Forex trader, a trader has to understand the various technical aspects of the market. He/she will have to acquire accurate knowledge of the various aspects of the trading market and be able to interpret the technical indicators and the various changes that take place in the market.
A good understanding of concepts like Fibonacci levels and Bollinger Bands can be extremely useful. Once the money is on the line, the entire process becomes tricky and that is where the fear starts to invade. In spite of all the knowledge, fear will lead to irrational decisions and things can get murkier. The result is that an inexperienced trader can incur losses.
Fear is a natural human instinct and at times cannot be controlled. After all who would want to see a loss of $10,000? It can be heart breaking and can lead to stress related problems. Fear has always been the unseen enemy who is difficult to conquer. But to become a successful trader one has to let go off the fear.
The fear has to be shoved aside and the trader should carry on with his/her activities as if nothing has happened. Another way to avoid the outbreak of fear is by playing safe. When playing safe, the traders will be assured of a minimum loss. The second method of fighting the fear is by making a strong strategy. If there is a plan in place or a backup plans then the chances is that the backup plan can be applied to minimize the loss and thereby driving away the fear.
Why Start Forex Trading?
Foreign exchange trading can be quite interesting, and nerve wracking. Yet each day witnesses new entrants into this puzzling world of Forex trading. There are new investors, new buyers, new sellers and new traders who are ready to try their luck at striking gold. The money making potential is extremely high and the losses incurred can also be quite similar. The Forex trading is even bigger than the US stock market the value of the daily Forex trading is higher than all the stock markets combined. The daily trading is worth $9 trillion. Now, do you really want to be a part of this mega business? If you are still confused or scared of taking the dive, then let us offer you a few hot tips of why you should start Forex trading.
1. Easy: Unlike the stock market, Forex trading is relatively easier. If you have been involved in selling or buying of stocks then you will know how nightmarish it can be. Sometimes even some of the best stockbrokers are not informed regarding the best stock options available. In a stock market, brokers specialize in selling a particular type of stock. On the other hand, trading in Forex is far different. It is much simpler and is something that you can also do on your own. There are three primary currencies and they are the U.S. dollar, the Japanese yen, and the British pound.
2. Flexibility: There are two types of flexibility offered by Forex trading. The first one is time and the second one is convenience. Forex trading is open 24 hours a day, so you can enter anytime and sell or buy currencies. Secondly, you can do it from the comforts of your home. You can just sit at home, finish your dinner and then log on to the Internet, and start trading.
3. Tools: The basic tool required for Forex trading is a computer with an Internet connection. The other important tool is knowledge. You can take some time out and learn more about the Forex market understand the various indicators and go through statistical data and graphs. All this will provide you with an insight into the world of foreign exchange. If you check the technical data of previous year then you will be able to identify the various trouble periods and the high periods. Accordingly, you can then start trading or you can try and avoid those periods or that particular time.
4. Investment: There is no fixed investment in Forex unlike stocks. There are trading options that can start from as low as $100 also. This will allow you to understand the risk involved and accordingly work out your future plans. Even if you are unable to make a profit, at least you will not end up loosing a high amount.
5. Profits: All you need to make profit is knowledge of foreign exchange, understanding of how the system works and a little bit of luck. There are some traders who make large sum of money although the profit is directly proportional to the investment.
Investors and market makers in Forex
The investor is the person who runs the show; he is the heart of the Forex market. No investor, no Forex market. The investor knows that in the currency market he/she can buy a pair of currencies and sell them at a short notice. The entire transaction takes place within minutes and the trading is normally carried on by a professional trading manager or a trading company. It sounds quite easy but the reality is much different. You may have a pair of currencies but if there is no buyer at the other end then who will you sell it to? So there is the need of a buyer who can buy your currencies and maybe sell them again to another buyer. A vicious circle isn’t it?
It is not necessary that you as an investor might be able to find a buyer all the time. Although, the market works 24 hours a day but sometimes finding a buyer can be tough. You will be very lucky if you find a buyer who is ready to buy the currencies at the same rate that you bought them for. The probability of finding a person who may be interested in buying and selling the same currencies for the same amount, at the same time is almost negligible. This leads to a question. How can you as a Forex investor buy and sell at the same time or anytime? This is where the Forex market traders come in.
The Forex market maker can be a brokerage company or a trading association. The market maker can be an individual or a financial organization. They can be a bank with adedicated trading account managers. These individuals or companies are always ready for any outcome. Their job is to speculate and make trading possible so that you can reap the benefits. They negotiate the price for various currencies and sell it to a buyer from whom they can earn profits. The market maker is the lifeline for an investor because he can buy the currencies from you whenever you want to sell them. After buying, the market maker will go ahead and sell a pair of currencies to another buyer. This is good news for you because you don’t have to take the pain of finding a good buyer. Again, as an investor, you can always buy a pair of currencies from the market maker.
In other words, the market maker works both ways and helps in creating the Forex market even if there are less number of buyers and sellers. The Forex market makers keep the market in circulation or flowing all the time. They always update their prices every thirty seconds so that any buyer or seller can be well informed. Even if the market turns volatile, the market makers in Forex will continue with their job of buying and selling the currency. At times, they can even incur losses but that has no consequence on them and the process continues. Some of the famous Forex market makers are Forex Capital Markets (FXCM), Saxo Bank, and Gain Capital etc.
Forex Trading System
The world of foreign exchange is big and marked with technical jargons that can sound quite incomprehensible to a layman. Let’s start by understanding what a Forex trading system really is. It is a method of trading where we use objective entry and exit criteria. This criterion is based on definite parameters, which can be validated through historical testing of quantifiable data. The Forex trading system doesn’t work on any predefined guidelines but it does help a trader to make important and timely decisions while trading. It’s like a protective security jacket that strengthens the trader, provides the necessary confidence, and helps them to take the necessary decisions.
The orders placed by different traders are generally governed by an established set of rules, which are based on the movement of the market or the action in the market. Like most trading systems, the Forex trading system is no different and it is based on the principle of risk vs. reward. Let us simplify it a little further, and define it as the amount of capital that you would be ready to invest or risk for a certain amount of return. This is always the top priority and you can’t really take unnecessary risks in the Forex trading market. The other important facets to be considered are costs, trading activity and pre-investment market scenario. The Forex trading system is a self-running program and can be mastered through practice and application of science. There are various rules and principles, which govern the market and the trading. If you follow the rules and the principles and acquire enough knowledge of the trading system, then with the help of technology, you can make important decisions.
Forex trading systems also consist of a mechanical trading system, which enhances your decision-making ability. All you are required to do is feed it with the trading data and the system will produce a response that can help you take evasive action. Depending on the formula used by the system, you can buy or sell stocks. It is like having a mechanical stockbroker who knows everything and guides you through the puzzling yet simple world of Forex trading. There are various versions of the mechanical trading systems available in the market today. The recent version comes packed with a black box operation. Just because they are mechanical and are not living doesn’t mean that they lack intelligence. Somewhere this reminds one of what is also known as artificial intelligence. Although that is far different but then any system that makes your work much easier has to be intelligent. All you need to do is start the computer and the system will automatically detect and update your database. It will also generate various trading options that best suit you and help in placing orders straight to a broker.
Keeping in stride with the technological advancements, the Forex trading system is a state of the art and highly effective way of Forex trading. It’s all about speed, the faster you are, the more distance you will cover!
US Dollar Steady in Japan
Bank of Japan governor, Toshihiko Fukui, has expressed a desire to keep credit rates low in Japan. His aspiration to stabilize interest rates has had a positive effect on the US Dollar in Japan, reports from Tokyo are showing. While many global markets are reeling from the subprime credit problems in the US, Japan is remaining calm and forgoing a reactionary rate hike. Forbes reports:
'I understand that global credit markets are now in the process of re-pricing risk, and we need to see if the current re-pricing proceeds in an orderly fashion, or if it develops in a disorderly manner,' Fukui said.
Promising Survey Strengthens Pound
Although the British pound suffered earlier in the week from a large Bank of England loan, the currency has been lifted due to a survey taken by UK manufacturers. The results of the survey, which inquired about their order books, showed that manufacturers were more successful this month than they've been in over a decade. Analysts did not expect such a promising report, as it proved that the UK is handling global credit problems better than most countries. According to Forbes:
The Confederation of British Industry revealed that a balance of +9 pct of firms polled reported that their order books were above normal in August - the highest level for more than 12 years.
Yen Suffers as Carry Trading Resumes
Following a tumultuous period that stemmed from mortgage problems in the US, the global markets are finally calming down. While this is good news for most, the Japanese yen is weakening as a result. Why the change? Investors are feeling more confident about high-yielding ventures once again, leading them to pull out of the yen and continue with high-risk carry trading. Reuters reports:
While confidence in global credit markets has by no means been fully restored and fears remain that short-term liquidity could dry up, investors across a range of asset classes felt bold enough to shun safe-havens and seek higher returns.
Pound Weakened After Large BoE Loan
Although it is not known whether the Bank of England loaned £314 million to one borrower or many yesterday, the effects were still the same. A one-day loan of such magnitude weakened the domestic currency, if only temporarily. As experts point out, this isn't entirely unusual and the economy has survived much larger Bank of England loans. Reports Forbes:
Significantly more than 314 mln stg this [sic] has been borrowed in one day in the recent past -- for example nearly 4 bln stg on June 29 and 2 bln on July 2, he [George Buckley] added.
Forex Becoming Popular in Jamaica
A huge turnout at the recent "Jamaica Forex Expo" shows that foreign exchange trading is becoming a widespread practice in Jamaica. This expo was organized by the Market Traders Institute (MTI), which has reportedly trained nearly 1500 Jamaicans thus far. It would seem that citizens of this impoverished nation have found a new hope for their future with the help of forex trading. According to Jamaica Gleaner News:
"Trading on the forex has been my path to financial independence," proclaimed one patron who was in attendance at the expo.
"Trading on the forex has been my path to financial independence," proclaimed one patron who was in attendance at the expo.
Singapore Market Steady Despite Global Turmoil
Although recent credit problems in the US have led to a global market crisis, Singapore remains largely unaffected. The Singapore dollar was weakened briefly on Thursday, only to bounce back again by Friday. As for the foreign exchange markets, Singapore has been watching the unfolding drama with close observation. This is, perhaps, the reason for the city-state's stable economy. Reports Forbes:
The MAS [Monetary Authority of Singapore] said it 'has not needed to conduct any extraordinary operations in the markets. However, we stand ready to act if the situation warrants.'
The MAS [Monetary Authority of Singapore] said it 'has not needed to conduct any extraordinary operations in the markets. However, we stand ready to act if the situation warrants.'
Dollar and Yen Continue to Strengthen
Despite the effects of US subprime mortgage troubles on the rest of the world, investors have scaled back risky ventures and increased the value of both dollar and yen. While this result may be inadvertent, it is much appreciated by those who have lost major funds in the stock market recently. The future doesn't look any brighter for US mortgage, either. According to Hemscott:
Housing starts sank 6.1 pct in July to a 1.381 million unit annual rate, the lowest since January, while building permits -- a more forward-looking indicator -- fell 2.8 pct to a 1.373 million rate, the lowest since October of 1996.
Housing starts sank 6.1 pct in July to a 1.381 million unit annual rate, the lowest since January, while building permits -- a more forward-looking indicator -- fell 2.8 pct to a 1.373 million rate, the lowest since October of 1996.
Forex - Calm Before the Friday Storm?
EUR/USD today continued going flat below 1.3700 mark unsure if Euro has enough power and U.S. economy has more holes to stop Bernanke from raising the rates before the Autumn comes. This day didn't bring a lot of macroeconomic surprise to traders, but it had its important data.
Initial jobless claims for the previous week in United States increased by as little as 4k and came out at 307k - still lower than 310k predicted - that is, the employment market remains one of the steadiest part of the U.S. economy.
Factory orders in June rose by 0.6% which is far better than the May's number of -0.5% decline, but slightly lower than predicted growth of 1.0%. I think that this indicator will just be a little slower second half of the 2007, staying positive to provide better total GDP numbers.
Initial jobless claims for the previous week in United States increased by as little as 4k and came out at 307k - still lower than 310k predicted - that is, the employment market remains one of the steadiest part of the U.S. economy.
Factory orders in June rose by 0.6% which is far better than the May's number of -0.5% decline, but slightly lower than predicted growth of 1.0%. I think that this indicator will just be a little slower second half of the 2007, staying positive to provide better total GDP numbers.
Dollar Struggling Below 1.3700
Another day marked by U.S. dollar's struggle to hold below the 1.3700 mark and get out of the bearish trend. EUR/USD is waiting for more bull power before turning back to rising or is just being corrected by some good yesterday's economical news from United States.
ISM reported on Manufacturing PMI in July disappointed many dollar bullish traders as it came out at 53.8%, below the 55.5% expected, showing some possible problems in the manufacturing sector of the U.S. economics.
Previous week's oil inventories report showed a great decline of 6.5 million barrels of crude oil, while commercial petroleum inventories fell by 0.7 million barrels. But total present volumes of inventories remain satisfactional.
Today's news are less encouraging than usually - but one day doesn't mean a lot in the economics. Further news releases will tell us what to expect from U.S. economy and USD.
ISM reported on Manufacturing PMI in July disappointed many dollar bullish traders as it came out at 53.8%, below the 55.5% expected, showing some possible problems in the manufacturing sector of the U.S. economics.
Previous week's oil inventories report showed a great decline of 6.5 million barrels of crude oil, while commercial petroleum inventories fell by 0.7 million barrels. But total present volumes of inventories remain satisfactional.
Today's news are less encouraging than usually - but one day doesn't mean a lot in the economics. Further news releases will tell us what to expect from U.S. economy and USD.
Carnival of Forex Trading - August 1, 2007
Welcome to the August 1, 2007 edition of carnival of Forex trading:
Jimmy Atkinson presents 13 Socially Responsible Careers in Finance posted at Forex Blog.
Gerald Njuguna presents 7 Tips to Weed Out Fake Forex Brokers posted at Online Forex Trading Systems.
The Smart Trader presents Do You Need Trading Rules? posted at Smart Trading For Profits, saying, "Trading Rules"
Jimmy Atkinson presents 13 Socially Responsible Careers in Finance posted at Forex Blog.
Gerald Njuguna presents 7 Tips to Weed Out Fake Forex Brokers posted at Online Forex Trading Systems.
The Smart Trader presents Do You Need Trading Rules? posted at Smart Trading For Profits, saying, "Trading Rules"
Monday, August 13, 2007
DATA SNAP: US Jun Inventories Rise At Rate Expected
DATA SNAP: US Jun Inventories Rise At Rate Expected
=============================================================
Business Inventories ! !
Jun May ! Inventories: !
Total Inventories +0.4% +0.5% ! Consensus: +0.4% !
Inv/Sales Ratio 1.27 1.26 ! Actual: +0.4% !
=============================================================
U.S. businesses accumulated inventories during June at the rate Wall Street expected, with stockpiles rising at car dealers, furniture stores, and food retailers.
Inventories increased by 0.4% to a seasonally adjusted $1.412 trillion, after rising in May an unrevised 0.5%, the Commerce Department said Monday.
Wall Street was looking for stockpiles to move 0.4% higher during June.
Business sales decreased by 0.3% during June, going down to $1.111 trillion. Sales rose in May by an unrevised 1.3%.
The inventory-to-sales ratio rose to 1.27 in June from an unrevised 1.26 in May, Commerce said. The gauge indicates how well firms are matching supply with demand. It measures how long in months a firm could sell all current inventory.
Year over year, inventories grew by 3.6% since June 2006; sales climbed 3.3%.
June manufacturing sector stockpiles of goods rose 0.3% after increasing 0.4% in May. U.S. wholesalers' inventories rose 0.5% after increasing 0.5% in May.
Retailers' stocks of goods rose 0.5% after increasing 0.7% in May. Auto dealer inventories rose 1.0% after increasing 0.6% in May.
Excluding the auto component in Monday's inventory report, other retail stocks rose 0.2% in June after increasing 0.7% in May. Inventories rose by 0.2% at general merchandise stores; 0.6% at food and beverage stores; 0.6% at furniture outlets; and 0.2% at building materials, garden equipment and supplies stores. Stockpiles fell by 0.2% at clothing stores.
=============================================================
Business Inventories ! !
Jun May ! Inventories: !
Total Inventories +0.4% +0.5% ! Consensus: +0.4% !
Inv/Sales Ratio 1.27 1.26 ! Actual: +0.4% !
=============================================================
U.S. businesses accumulated inventories during June at the rate Wall Street expected, with stockpiles rising at car dealers, furniture stores, and food retailers.
Inventories increased by 0.4% to a seasonally adjusted $1.412 trillion, after rising in May an unrevised 0.5%, the Commerce Department said Monday.
Wall Street was looking for stockpiles to move 0.4% higher during June.
Business sales decreased by 0.3% during June, going down to $1.111 trillion. Sales rose in May by an unrevised 1.3%.
The inventory-to-sales ratio rose to 1.27 in June from an unrevised 1.26 in May, Commerce said. The gauge indicates how well firms are matching supply with demand. It measures how long in months a firm could sell all current inventory.
Year over year, inventories grew by 3.6% since June 2006; sales climbed 3.3%.
June manufacturing sector stockpiles of goods rose 0.3% after increasing 0.4% in May. U.S. wholesalers' inventories rose 0.5% after increasing 0.5% in May.
Retailers' stocks of goods rose 0.5% after increasing 0.7% in May. Auto dealer inventories rose 1.0% after increasing 0.6% in May.
Excluding the auto component in Monday's inventory report, other retail stocks rose 0.2% in June after increasing 0.7% in May. Inventories rose by 0.2% at general merchandise stores; 0.6% at food and beverage stores; 0.6% at furniture outlets; and 0.2% at building materials, garden equipment and supplies stores. Stockpiles fell by 0.2% at clothing stores.
Subscribe to:
Posts (Atom)
