Tuesday, January 11, 2011

Mother Nature Unleashed!

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By Mike Conlon | January 11, 2011

The Aussie is once again lower as flooding continues to ravage the country.  This could have a seriously negative effect on the Australian economy, as this is the worst flooding in nearly 100 years.  Here in the US, we are bracing for another major snowstorm along the eastern coast, which could also cause an economic slowdown.  This could have inflationary consequences in the energy sector, as supply and demand are affected accordingly.

One region whose climate is looking better is the Euro zone, as overnight Japan said they would be looking to buy Euro bonds to help the support the region.  While not truly a philanthropic venture, this makes sense from an investment perspective as yields are likely to be higher than elsewhere.  In addition, the Portuguese PM has stated that no aid is needed, though we’ve heard that before.  So the Euro is higher, the Yen is lower.

Retail sales in the UK were lower putting pressure on the Pound as austerity measures begin to take effect.  The market is waiting on Thursday’s BOE rate decision.

The Loonie is higher as oil is up trading just under $90, as the weather on the East coast may increase demand, and the Alaska oil pipeline situation is still in flux.  Adding to Loonie strength is the notion that Canada, and not New Zealand, may be the next to raise interest rates sometime in Q2, according to range of analysts.

Here in the US, we have some Fedspeak going on today, with no major news slated.  Both stocks and commodities are higher, so today looks like some risk taking.

In the forex market:

Aussie (AUD):   The Aussie is lower in the wake of the flooding, and trade balance figures came in lower than expected on dwindling exports.  This is a major natural disaster which could cause economic slowdown, which means that the RBA would stay steady with rates for some time.

Kiwi (NZD):   The Kiwi is also lower as signs that NZ may have avoided an official recession have increased, though the economy is far from operating on all cylinders.  Home-building approvals rose 8.8%, and improved confidence may help improve GDP figures, which were negative last quarter after NZ was rocked with an earthquake.

Loonie (CAD):   The Loonie is higher across the board as eyes are turning toward the Canadian economy for the next sign of interest rate growth.  Increased US demand has helped Canadian exports and higher oil prices due to inclement weather and possible supply shocks have buoy the Loonie higher.  Money flows from the antipodean currencies show that the market expects the BOC to be the next to move on rates.  (Click chart to enlarge)


Euro (EUR):   The Euro is trading higher in a bit of a relief rally as Japan has said that they want to buy Euro debt as well, providing the region with yet another bidder.  This may help keep rates from spiraling out of control, which will allow PIIGS countries to issue debt without having to offer inflated rates of interest that the market may demand.  The ECB is also releasing its rate decision on Thursday, but expect that to have little impact.  (Click chart to enlarge)


Pound (GBP):   The Pound has regained some earlier losses and is trading higher despite retails sales figures which came in showing a decrease of .3%.  Thursday’s rate decision will show whether there is a shift in policy statement or not.

Dollar (USD):   Not much happening here in the US from an economic data standpoint, but US stock earnings season is upon us and so far positive results have lifted markets higher.  Fedspeaker Plosser today said that he expects to see growth this year of 3-3.5%.

Yen (JPY):   The Yen is weaker as Finance minister Noda said that Japan would buy European debt.  It looks like Japan is about to start making its own carry trades!

While the weather outside may be frightful, the climate inside is delightful if you are a currency investor!

Economic stability appears to be taking place and we are seeing signs that economies that were slow to grow may be catching up; and those who were quick to grow may be slowing down.  As the economic landscape evens itself out, money flows will make their way to best the best performing economies.

Investors who can stay ahead of the curve can profit from these global shifts.  Inflationary pressures and austerity measures will be two of the biggest clues as to where money flows will go, as Central bankers scramble to find balance.

So buy the winners and sell the losers and your account balance will thank you later!

To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!

To follow these events live with a free, real-time practice account, click here!  Don’t miss out on the world’s fastest growing market!

Tags: account, AUD, Aussie, blog, cad, course, currenc, currencies, currency, currency trading, dollar, dow, economy, EUR, Euro, forex, forextrading, fx, fxedu, gbp, Il, jpy, market, Mike Conlon, nzd, practice, ssi, time, trade, USD, Yen

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