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November/01/2011- Comments and forex-analytics from FBS

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November/01/2011- Comments and forex-analytics from FBS

Postby vanvirtue » Tue Nov 01, 2011 1:24 pm

RBA lowered the benchmark interest rate

The Reserve bank of Australia lowered its benchmark interest rate from 4.75% to 4.50%. The majority of the economists now agree that the RBA is unlikely to start the easing cycle.

Analysts at HSBC claim that as long as Aussie remains strong, the central bank will be less concerned about inflation that will prevent it from decreasing the borrowing costs. In addition RBA’s statement doesn’t contain hints at further rate cuts. According to the specialists, RBA’s approach has switched to neutral.

Strategists at ANZ aren’t sure about the central bank’s neutral position but say that they don’t expect another easing move in December naming February as the potential time when the next cut arrives. Analysts at St. George Bank look forward to only one more rate reduction in March.

Australian dollar fell versus its US counterpart from today’s maximum at $1.0566 to the levels below $1.0450.

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UBS increased forecasts for EUR, GBP, AUD and NZD

Currency strategists at UBS increased their 1-month forecast for the single currency versus the greenback from $1.30 to $1.40 and 3-month one from $1.20 to $1.35. In their view, the pair EUR/USD will be trading between $1.35 and $1.45 during the next few weeks.

The predictions for GBP/USD were also lifted up from $1.51 and $1.40 to $1.60 and $1.55.

In addition, the specialists raised their 1- and 3-month estimates of future AUD/USD rate from 0.95 and 0.90 to 1.04 and 0.97 and of NZD/USD from 0.76 and 0.72 to 0.80 and 0.74 respectively.

As the reason for the revisions the analysts cited the improvement of the market’s sentiment after the European authorities took actions to safe Greece from default.

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Re: November/01/2011- Comments and forex-analytics from FBS

Postby vanvirtue » Tue Nov 01, 2011 1:25 pm

Euro: events and comments

The single currency fell versus the greenback on the expectations that European Central Bank cuts its benchmark interest rates on Thursday, November 3.

According to Bloomberg, Credit Suisse Group AG index shows that yesterday traders expected the ECB to reduce the borrowing costs by 26.1 basis points during the next 12 months, while at the end of July this figure was equal to 11.1 basis points.

Euro was also affected by the weak Chinese Manufacturing PMI data which dropped from 51.2 in September to 50.4 in October. In Addition, the single currency weakened against its US counterpart ahead of the FOMC statement later today (4:30 p.m. GMT).

Apart from the ECB meeting the major coming events are:

- G20 summit on November 3-4;

- Referendum on the EU latest bailout plan for Greece that includes the agreement of the private creditors of the nation to accept 50% loss on their holdings of Greek government bonds or 100 billion euro, the increase of EFSF (European Financial Stability Facility) to 1 trillion euro and support for the region’s banking sector. According to Greek Prime Minister George Papandreou, the referendum will take place after all the details of the bailout package will be set. According to the polls, nearly 60% of Greeks oppose the debt deal;

- The vote of confidence in the ruling Socialist party government will also take place in Greece on Friday.

The pair EUR/USD plunged from October 27 maximum at $1.4247 to open today at $1.3860 and then slump below $1.3750. Analysts at Commonwealth Bank of Australia believe that euro is on the way down to the levels around $1.35. Support for euro is found at 1.3650/60 (October 18-20 minimums).

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Westpac: recommendations ahead of NFP


On Friday comes an important release – US Non-Farm Payrolls for October.

Currency strategists at Westpac Institutional Bank think that if the number of jobs increased last month by more than 95K (the consensus forecast is of 98K increase after September growth of 103K), it would be wise to buy USD/JPY. If the reading is below 60K, the specialists recommend buying USD/CAD pointing out that Canadian economy which has close ties to the one of its neighbor will also suffer.

Westpac analysts regard the first scenario as the most likely. That’s why they advise investors to open dollar longs at 77.00 yen stopping at 76.00 yen and targeting 79.50 yen.

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Re: November/01/2011- Comments and forex-analytics from FBS

Postby vanvirtue » Tue Nov 01, 2011 1:26 pm

Citigroup: Japan’s intervention is unlikely to be a success

On Monday Japan intervened at the currency market for the third time this year in order to weaken its national currency. There’s no official information about of the amount spent, but the market’s speculating that Japan may have sold about 7 trillion yen ($92.31 billion) breaking the previous record of a 1-day intervention of 4.5 trillion yen (August 4, 2011).

Never the less, many analysts are skeptical doubting that the move will be able to succeed in preventing yen from appreciation and easing pressure on Japanese exports. The economists cite the results on the previous unilateral attempts of Japan’s government when after a jump the pair USD/JPY slid down again. Citigroup specialists believe that this time everything will be the same. Economists at BNP Paribas say that the intervention policy is losing effectiveness.

Among the factors which may cause the demand for yen increase one should name the risks connected with the euro area and the possibility that the Federal Reserve may ease its monetary policy. Specialists at Westpac underline that in the current situation investors will crave for safe havens. Another thing that seems likely to undermine the efforts of Japanese monetary authorities is the profit repatriation of Japanese companies which buy yen during this process.

US dollar bounced yesterday by 5% from the record minimum at 75.56 yen to the maximum at 79.53, but then eased down to the levels around 78 yen.

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