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Action Insight: Special Reports

Action Insight is the most popular section of the site, read by traders around the world. Our team of analysts work around the clock, analyzing the markets from technical and fundamental perspectives in providing the reports in this section to you.

SNB Surprisingly Introduces Negative Rates To Defend EURCHF Floor Print E-mail
Special Reports | Written by | Dec 19 14 04:01 GMT
The SNB surprisingly announced to cut interest rate to -0.25% on sight deposit account balances that exceed a given exemption threshold. Negative interest is expected to be levied from 22 January 2015. The move attempts to limit unwanted CHF appreciation and alleviate pressures on the EURCHF floor. The central bank in the accompanying statement reiterated its pledge to the EURCHF floor if 1.2 and would 'take further measures, if required'.
Fed Replaced 'Considerable Time' Language With Patience In Normalization Print E-mail
Special Reports | Written by | Dec 18 14 04:04 GMT
Fed members removed the 'considerable time' language in the December FOMC statement, suggesting that, based on its current assessment, 'it can be patient in beginning to normalize the stance of monetary policy'. The overall tone of the statement remained dovish. Fed Chair Yellen talked about the recent decline in oil prices in the press conference, indicating that it should have a transitory effect on inflation and would stimulate growth. She also noted that Russia's economic crisis would only have limited impacts on the US.
BOE: Sharp Fall In Oil Prices Supportive Of Economy. Benign Inflation Signaled Rate Hike Not The Time Yet Print E-mail
Special Reports | Written by | Dec 17 14 11:08 GMT
The BOE minutes for the December meeting showed that the members had detailed discussions over the recent decline in oil prices. They indicated that the selloff in oil prices turned out to be more sharply than they expected in November. Policymakers had different views over the economic outlook and the monetary stance. Yet, the spread appeared less diverse than the prior month as the reference suggesting members were holding 'material spread of views disappeared. The central bank voted 7-2 to keep the policy rate unchanged at a record low of 0.5% and decided unanimously to keep the asset purchase program at 375B pound.
RBA Minutes Downplayed Rate Cut Expectations Print E-mail
Special Reports | Written by | Dec 16 14 07:42 GMT
The RBA minutes for the December meeting offered little news. Policymakers warned of the strength in Australian dollar and suggested that further depreciation would be needed to 'achieve balanced growth in the economy'. The minutes retained the reference that 'members considered that the most prudent course was likely to be a period of stability in interest rates', suggesting that the central bank attempted to downplayed expectations of further rate cut next year.
The Week Ahead for December 15: Will FOMC Remove "Considerable Time" Reference? Print E-mail
Special Reports | Written by | Dec 15 14 11:54 GMT
The Fed officials would be meeting for the last time this year on Wednesday. While it is almost definite that no change in the monetary decision would be seen, the market is interested in seeing whether there would be changes in the statement language. Indeed, the better-than-expected employment data in November should lead the Fed to be more upbeat. The number of payrolls increased much more than expected in November. Payrolls increased +321K in November, while figures in September and October were revised higher by a total of +44K. The unemployment rate stayed unchanged at 5.8%. Meanwhile, average hourly earnings growth accelerated to +0.4%. The pleasant surprise might trigger to Fed to remove the "considerable time" language in describing the timing of low interest rates.
China Watch – Disappointing IP And Inflation Urges China To Heighten Stimulus Print E-mail
Special Reports | Written by | Dec 12 14 11:25 GMT
China's November economic data showed mixed developments. However, together with soft inflation data released earlier in the week, the market was obviously disappointed and speculations of further easing by the PBOC escalated. Growing at the slowest pace since August, IP rose +7.2% y/y in November, compared with market expectations of +7.5% and October's +7.7%. Indeed, the weakness has already been signaled by the soft November PMI which fell to an eight-month low of 50.3 from October's 50.8. The reading compiled by HSBC/Markit showed a weaker reading of 50, suggesting the manufacturing sector is on the verge of falling back to the contractionary zone. Fixed-asset investment, gained +15.8% in the first 11 months of the year, in line with expectations but less than October's +15.9%. Note, however, that strong gain were seen in public facilities (+24.8% y/y), water production (+26.9%) and railway transportation (+24.7%). We expect to see further expansion in these areas as the government's fiscal spending has increased. A conclusion of the Central Economic Work Conference indicates that fiscal measures will be strengthened.
Investors Worried about Surge in Franc as SNB Kept the Powder Dry Print E-mail
Special Reports | Written by | Dec 11 14 13:27 GMT
EURCHF plummeted after the SNB kept its powder dry in December. While warning of heightening deflation pressure, policymakers decided to maintain target range for the three-month Libor unchanged at 0.0-0.25%. They also kept the floor of EURCHF at 1.20. In the statement, the central bank pledged to enforce the minimum exchange rate with "the utmost determination" and is prepared to "buy foreign currency in unlimited quantities for this purpose". In light of further easing by the ECB in upcoming meetings, the SNB only indicated that it "will take further measures immediately" if required.
RBNZ Forecast Longer Pause In Monetary Decision Print E-mail
Special Reports | Written by | Dec 11 14 08:58 GMT
The RBNZ left the OCR unchanged at 3.5% for the 4th time in a row in December and revised lower the future tightening outlook. It now forecast that the next rate hike will occur in 4Q15 and the policy rate would increase to 4.25% in early 2017. The central bank's neutral interest rate estimate stays at 4.50%. The RBNZ appeared more optimistic on growth but continued to expect inflation to remain contained. As in previous meeting, policymakers complained about the strength of New Zealand dollar and noted that they had sold the currency over recent months. NZD continued to rise against USD but the strength was obviously diminished with compared with the past 2 days.
Japan 3Q GDP Contracted More Sharply Than Previously Estimated. 4Q Growth To Pick Up Print E-mail
Special Reports | Written by | Dec 10 14 06:05 GMT
Japan's GDP came in worse than previously estimated. The 3Q14 GDP contracted -0.5% q/q, compared with the initial estimate of -0.4%. On annualized basis, GDP contracted -1.9% saar during the quarter, compared with previous estimate of -1.6%. Meanwhile, the 2Q14 real GDP was revised slightly upward to +1.7% q/q (-6.7% saar) from -1.9% (- 7.3% saar). Japan’s economy has confirmed to be in a technical recession.
The Week Ahead – ECB To Update Staff Projections, US Job Market Improves Steadily Print E-mail
Special Reports | Written by | Dec 01 14 02:36 GMT
The coming week would be a busy one. We have 4 major central bank meetings and a number of critical economic data including the US employment report. Although all central banks are expected to leave the monetary policies unchanged, the focus would be the ECB meeting on Thursday. The new staff economic projections would likely show a sharp downgrade of economic outlook. BOC policymakers would also keep the powder dry in the December meeting on Wednesday. Yet, the OECD forecasts that the central bank would begin tightening in May 2015. The RBA meeting due Tuesday and the BOE on Thursday would be non-events with both central banks leaving the monetary decisions unchanged.
EURCHF And Gold Referendum Print E-mail
Special Reports | Written by | Nov 26 14 11:07 GMT
Voters in Switzerland would vote for 'Save our Swiss Gold' initiative on November 30, deciding whether the SNB would be required to make physical gold at least 20% of the bank's assets and whether the central bank should refrain from further gold sales. The Federal Council, the Swiss parliament and the SNB object the initiative. The latest poll suggested 'no' vote is leading the 'yes' by a wide margin. Despite short-term fluctuation, we do not to see significant impacts of the referendum result on EURCHF. For the SNB, it would continue to pledge the commitment to maintain the EURCHF floor at 1.2.
BOJ Divided Over QQE Expansion, October Minutes Show Print E-mail
Special Reports | Written by | Nov 25 14 06:16 GMT
Japanese yen climbed higher against the US dollar and the euro after the release of the BOJ minutes for the October meeting. The central bank decided in the meeting to raise its purchases of government bonds by about 30 trillion yen to 80 trillion yen, and increase Japan's monetary base at an annual pace of about 80 trillion yen, up from 60-70 trillion yen. Yet, the minutes suggested that the decision was not made unanimously (5-4 vote), suggesting Governor Haruhiko Kuroda might face more hurdles to add stimulus in coming meeting.
China Watch: PBOC's Surprising Rate Cuts Signal The Beginning Of Easing Cycle Print E-mail
Special Reports | Written by | Nov 24 14 10:49 GMT
The People's Bank of China (PBOC) cut the benchmark 1-year lending rate by -40bp to 5.6% and the 1-year deposit rate by -25bp to 2.75%, effective November 22. The central bank also raised the deposit rate ceiling to 120% of the benchmark from 110%. The rate cut was the first time since 2012 and was definitely a surprising move. We believe the PBOC was concerned about the shrinking consumer spending and rising inflation risks. The disappointing response of the Shanghai-Hong Kong Stock Connect probably raised the worries. This reduction signaled the beginning of the easing cycle in China and we expect to see further rate cuts and reduction in RRR in the coming 12 months.
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.
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