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Action Insight: Special Reports

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Fed Sees Inflation Target within Reach, Impacts of Overseas Slowdown Limited Print E-mail
Special Reports | Written by | Nov 20 14 06:06 GMT
The FOMC minutes for the October meeting suggested that policymakers remained confident about the economic outlook. They acknowledged improvement in the labor market and believed that the 2% inflation target would be reached in the coming years. While recent weaknesses in the global economy would affect domestic growth, the impact so far had been 'quite limited'. We continue to expect the first rate hike would be implemented by 1H15 and expect the Fed to drop the 'considerable time' language in December.
BOE Minutes Showed Splits among Those Favored Keeping Rates Unchanged Print E-mail
Special Reports | Written by | Nov 19 14 13:04 GMT
The BOE minutes for the November meeting showed that the members voted 7-2 to keep the Bank rate unchanged at 0.5%. Yet, there were divisions among the 7 members favoring the status quo. The Committee decided unanimously to keep asset purchases at 375B pound. The pound rose against the US dollar for the first time in 6 days as some members showed concerns that inflation might overshoot the central bank's target, suggesting that the stance to keep the policy rate near zero might need to be adjusted.
RBA Raised Concerns Over Housing Markets, Both At Home And In China Print E-mail
Special Reports | Written by | Nov 18 14 05:16 GMT
The RBA minutes for the November meeting contained few surprises. Policymakers reiterated the forward guidance that 'the most prudent course was likely to be a period of stability in interest rates'. They also continued to complain about the strength in the Aussie. Yet, the central bank showed particular concerns over the property markets, at home as well as in China. BOJ's expansion of asset purchase was also discussed.
Japan Recession, Abe Likely To Call For Delay In Sales Tax Hike Print E-mail
Special Reports | Written by | Nov 17 14 07:02 GMT
Japan's latest GDP data surprised to the downside and suggested that the world's third largest economy is technically in recession. The 3Q14 GDP unexpectedly contracted an annualized 1.6%, following a -7.3% contraction in the second quarter. Although the market has anticipated a +0.5% growth, the headline GDP shrank -0.4% q/q, after a -1.9% contraction in 2Q14. WE expect Prime Minister Abe would announce to delay the second round of sale tax hike as the negative impact of which on Japanese economy exceeded expectations. Japanese yen jumped with the USDJPY falling to a 2-day low of 115.45 as Nikkei slumped.
Chinese Data Showed Further Slowdown in Economy Print E-mail
Special Reports | Written by | Nov 13 14 10:39 GMT
The latest set of Chinese data unveiled that slowdown in the world's second largest economy continued. All major indicators came in worse than expected in October, signaling further monetary easing is needed to bolster the economy. The Chinese government suspended many industrial and construction activities in Beijing, and 6 provinces around it, before and during the APEC Summit which was held on November 5-11. The act was to reduce pollution and 'create' better air quality during the visit of ministers worldwide. Yet, the act has negative impacts over the industrial sector and is expected to reflect in the November data.
Dovish BOE Inflation Report Sent GBP Lower Print E-mail
Special Reports | Written by | Nov 12 14 12:44 GMT
The British pound fell after the BOE delivered a dovish tone in its latest quarterly inflation report. Policymakers trimmed the growth forecasts and forecast that inflation would slow further in coming months. While the employment data had shown signs of improvement, the central bank noted that the decline in the unemployment rate was mainly driven by the lower participation rate, rather than increase in payroll. Speculations over BOE's first rate have been pushed backward, thus sending the gilts higher.
Quick Comments: Rumors Of Abe's Sales Tax Hike Delay Print E-mail
Special Reports | Written by | Nov 12 14 05:12 GMT
Japanese equities jumped with the Nikkei 225 index rising to a 7-year high amidst rumors that the government might delay the second round of sale tax hike. The Japanese yen continued to weaken against the US dollar, only rebounded after the government's chief spokesman indicated that "no change to stance that sales tax decision to come after examining preliminary, revised GDP data". There were also news reports saying that Prime Minister Abe would call a snap election to secure his political standing.
ECB More Dovish, Hinted Moving To Public QE Print E-mail
Special Reports | Written by | Nov 07 14 03:09 GMT
While announcing no new measures, the ECB sounded more dovish in November and signaled that it is moving towards public QE. President Mario Draghi restated that the goal of asset purchases is to raise the ECB's balance sheet to its March 2012 level. The policy statement delivered a strong stance on the size of the balance sheet and signaled a move towards government bond purchases. The ECB also left the main refi rate unchanged at 0.05%.
RBA Left Policy Rate Unchanged, Sending No Surprise Print E-mail
Special Reports | Written by | Nov 04 14 07:04 GMT
As expected, the RBA in November left the cash rate unchanged at 2.5% and retained the neutral forward guidance that “on present indications, the most prudent course is likely to be a period of stability in interest rates”. The accompanying statement had few changes from the previous ones although the volatile labor market comments were dropped. The complaint about high exchange rate remained strong despite recent decline in the Aussie. The monetary stance signaled that the RBA might leave the policy rate unchanged at least until 2H15.
The Week Ahead - ECB Under the Spotlight Print E-mail
Special Reports | Written by | Nov 03 14 12:55 GMT
The focus of this week is the ECB meeting due Thursday. Eurozone's CPI picked up to +0.4% y/y in October, from +0.3% a month. This remained significantly below ECB's target of "close but below +2%". Indeed, the ECB is facing a harder time as the Fed is looking to tighten in the next move while the BOJ surprisingly expanded asset purchases last Friday. While the central bank is in need of adding further expansionary measures to revive growth and inflation, nothing new is expected to happen this month. At worst, we expect the ECB to reiterate the stance that it "remains unanimous in its commitment to other unconventional policies if necessary". President Mario Drgahi might re-introduce the phrase that the Council is ready to adjust the "size and composition" of asset purchases.
BOC Revised Growth And Inflation Outlook Higher In October Print E-mail
Special Reports | Written by | Oct 23 14 05:31 GMT
The BOC left the overnight rate unchanged at 1% in October. Accordingly, the Bank rate stayed at 1.25% and the deposit rate at 0.75%. The tone in the accompanying statement was, however, modestly hawkish. Policymakers expected the global economy to pick up speed in 2015 and 2016 with accelerating US growth benefiting Canadian exports. The BOC also raised its growth estimates for this year and core inflation for 2015. As the central bank remained generally optimistic over the economic outlook, we continue to expect tightening to begin in the second quarter of 2015.
British Pound Declined after Dovish BOE Minutes Print E-mail
Special Reports | Written by | Oct 22 14 13:08 GMT
The British pound slipped after the release of the BOE minutes for the October meeting though it contains little news. As expected, policymakers voted 7-2 to leave the Bank rate unchanged at 0.5% and unanimously to leave the size of asset purchases at 375 pound. Weale and McCafferty remained the dissenters and favored raising the policy rate by +25 bps for a third consecutive meeting. The tone of the minutes was more dovish than the previous one as some members saw signs that UK growth is losing momentum. Most members judged that inflationary pressures from both the labor market and underlying CPI data were rather muted.
Decelerated Chinese Growth Calls For More Easing Print E-mail
Special Reports | Written by | Oct 21 14 09:06 GMT
China's GDP growth exceeded market expectations in 3Q14 but the dataflow for September depicted a mixed picture. GDP grew +7.3% in 3Q14, easing from +7.5% in the second quarter but exceeded market expectations of +7.2%. Growth was driven by a strong rebound in IP growth to +8.0% in September, up from +6.9% in August but was partly offset by the +16.1% in fixed asset investment growth in the first9 months of the year (FAI growth in the first 8 months of 2014 was +16.5%). Real estate investment eased +12.5% in September, down from +13.2% in August, whilst retail sales moderated to +11.6% from +11.9% in August. The set of data might lead the Chinese Communist Party to revise lower its growth target for 2015 and it has become more necessary for the government to implement further 'targeted easing' measures to bolster growth.
RBA Reiterated A Period Of Stable Interest Rates Print E-mail
Special Reports | Written by | Oct 21 14 07:33 GMT
The RBA minutes for the October sent little surprise and the message was largely the same as the September one. Policymakers reiterated the forward guidance for interest rate stability. Policymakers remained concerned about the rising home prices and had discussions about the macro prudential policy for home loans. However, no details were disclosed. On exchange rate, the central bank appeared to be less strict as it acknowledged the depreciation of Australian dollar
Fed's Beige Book Described US Growth As 'Modest to Moderate' Print E-mail
Special Reports | Written by | Oct 16 14 05:38 GMT
The Beige Book prepared by the Minneapolis Fed, covering the period before October 6 and does not incorporate volatile financial market conditions over the past week, indicates that the US economy continued to grow at modest-to-moderate' pace. Growth in employment remained steady while inflation stayed subdued. The report suggested that 'several Districts' were 'generally optimistic about future activity' and 'most Districts' showed slight to moderate growth in consumer spending. Employment was seen to have 'continued to expand at about the same pace as that reported in the previous Beige Book' but most Districts reported little to no change in price levels'.
Weakness In Inflation Should Prompt PBOC To Add Stimulus Print E-mail
Special Reports | Written by | Oct 15 14 07:43 GMT
Headline CPI in China decelerated to +1.6% y/y in September from +2% in the prior month. Food inflation moderated to +2.3% from +3% in August, leading non-food prices to ease to +1.3% from +1.5% previously. From a month ago, the reading rose +0.5% after a +0.2% increase in August. Increased food supplies trimmed food inflation while the austerity program hurt alcohol and tobacco sales. The property market continued to cool although many local governments reversed restrictions on the market. The recent trend suggested that inflation would remain soft and stay significantly below the government's target of +3.5%. The PPI deflation widened to -1.8% y/y in September from -1.2% previously, mainly driven by the sharp fall of commodity prices.
September Minutes: Members Argued About 'Considerable Time' Reference Print E-mail
Special Reports | Written by | Oct 09 14 03:34 GMT
The FOMC minutes for the September meeting unveiled little news about the central bank's monetary outlook. Policymakers, while acknowledging improving economic prospects, decided to keep the 'considerable time' language amidst concerns that the removal of which would lead to unexpected tightening financial conditions. Yet, the central bank emphasized that the 'considerable time' language would be changed if economic data are deemed favorable by policymakers. Immediate market reaction suggested that the minutes were interpreted as dovish. The US dollar declined while the euro and gold climbed higher.
BOJ Maintained Asset Purchase Program While Tweaking Output Assessment Print E-mail
Special Reports | Written by | Oct 07 14 08:44 GMT
The Bank of Japan maintained the asset purchase program unchanged, keeping the pace of increasing base money at 60-70 trillion yen per year through purchases of government bonds and risky assets, in October. While retaining the view that the central bank's 2% inflation target would be achieved next year without further monetary easing, policymakers acknowledged that weak consumer spending has hurting output and business sentiment. The BOJ admitted that the effect of the sale tax hike on the economy was 'prolonged'. A member dissented the description on inflation expectations and suggested the inflation expectations have been on an uptrend from a somewhat longer-term perspective.
RBA Left Cash Rate Unchanged For A Year, Maintaining Neutral Stance Print E-mail
Special Reports | Written by | Oct 07 14 06:58 GMT
The RBA left the cash rate unchanged at 2.5% and maintained the neutral stance in October. Despite signs of improvement in the domestic economy, the central bank retained the forward guidance that 'on present indications, the most prudent course is likely to be a period of stability in interest rates'. The RBA appeared to have toned down the stance on strong Australian dollar following the recent decline. Yet, it continued to warn that, at the current level, the Australian dollar has offered'less assistance than would normally be expected in achieving balanced growth in the economy'.
ECB Downplayed Target Of Balance Sheet Expansion Print E-mail
Special Reports | Written by | Oct 03 14 05:42 GMT
The ECB disappointed the market by sounding less dovish in the October meeting. President Mario Draghi appeared to have de-emphasized balance sheet expansion. While reiterating that ABS and covered bond purchases, together with the TLTROs, would have a sizeable impact on ECB's balance sheet, the statement did not mention the target for the balance sheet expansion. Indeed, Draghi only stated in the press conference that the size of purchases would depend on the macroeconomic data flow, especially inflation and inflation expectations. On the economic assessment, Draghi continued to warn of the weakening of growth momentum and recalled that business surveys for September continue to disappoint. The policy statement again noted that risks were skewed to the downside and added that a close monitoring of the situation was needed. After the press conference, the ECB published further detailed on its ABSPP program under which it plans to purchase ABS from 4Q14 onwards, focusing on the secondary and primary market. Market reaction was negative with European bank equities (especially Italian and Spanish banks) falling and periphery bonds spreads widening.
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