Action Insight: Special Reports
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Special Reports |
Written by ActionForex.com |
Jul 04 09 06:24 GMT |
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Leaders of the Group of Eight will in Italy to discuss economic outlook. There are rumors that China will raise discussions about using a new 'super-sovereign' currency to replace USD as the dominant reserve currency and any official comments will trigger big moves in the forex market. RBA and BOE will meet this week and we believe both meetings will be non-events as both central banks have recently taken a 'wait-and-see' approach after reducing policy rates to unprecedentedly low levels. Moreover, Australia and Canada will release employment report for June. While unemployment rates probably increased further, we expect the pace of increases have slowed down. |
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Special Reports |
Written by ActionForex.com |
Jul 03 09 05:23 GMT |
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The US employment report for June disappointed us, as well as the market, in many ways. First, decline in non-farm payrolls, by -467K last month, was much higher than expected and in May. The sharp contraction was brought by exacerbated employment conditions in services and construction sector. A 52K reduction in temporary payrolls after government census exerted additional pressure to the situation. Employment at auto dealers dropped 9K last month, signaling further declines will be seen in coming months as around 40K positions were slashed as Chrysler and GM went bankrupt. After seeing slowdown in the pace of job loss in previous months, we had anticipated the trend will continue, However, June's sharp decline suggested that the expectation is premature. |
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Special Reports |
Written by ActionForex.com |
Jul 02 09 15:18 GMT |
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As expected, ECB keeps its main refinancing rate unchanged at 1% for the second month as policymakers believed current rates are 'appropriate. At the same time, no news measures of any other kinds were announced. Since last October, the ECB has reduced its policy rate by 325 bps to unprecedentedly low level at 1% in May. Although the central bank once again refused to confirm it's the floor, it's widely understood that many of the Council members were reluctant to see interest rates going below 1%. Current economic condition, despite improvement has been shown in economic data, remains fragile. Rising unemployment and Negative inflation suggested further reductions are warranted. |
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Special Reports |
Written by ActionForex.com |
Jul 01 09 05:40 GMT |
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Japan's quarterly Tankan survey showed improved, but lower than expected, sentiment in large corporations while small firms continued to struggle in June. The brightest spots were the decline in 'inventory level for finished goods and merchandise' and improvement in financial position of large corporate. |
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Special Reports |
Written by ActionForex.com |
Jun 27 09 14:55 GMT |
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We are going to have a busy week despite US' public holiday Friday. The ECB will meet Thursday but will likely keep its policy rate unchanged. On the 'non-standard' easing front, we expect more details on the purchase on covered bonds. Moreover, after allotted 442.2B euro 12-month loans last week, we would like to see if the central bank will clarify any shift in policy from monitoring short-term to long- term rates. Earlier in the week, inflation report in the Eurozone will likely show the first negative reading and trigger the ECB to keep interest rate low at an extended period of time. |
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Special Reports |
Written by ActionForex.com |
Jun 26 09 05:11 GMT |
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The Treasury has just undergone a 3-day auction with all of the 2-, 5- and 7-year government debts well-received, suggesting the supply issuance has not been saturated yet. Demand for the 7-year notes was strong with indirect bidders, contributing 67.2% of the purchase, more than double the level of the last auction in May and the $27B auction was the largest ever for this bond. Together with the $40B and $37B for the 2-year and 5-year auctions, the Treasury sold a record $104B of debts this week. |
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Special Reports |
Written by ActionForex.com |
Jun 25 09 04:48 GMT |
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The June FOMC meeting ended largely inline with our forecasts though the Fed’s outlook on inflation seemed to be more hawkish than what we anticipated. On the whole, the Fed kept the target range for the federal funds rate at 0 - 0.25% and maintained the current asset purchase program of $1.75 trillion. |
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Special Reports |
Written by ActionForex.com |
Jun 22 09 13:41 GMT |
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This IMM data report covers the 4-week period from May 19-June 16. During the period, USD experienced huge volatility as the dollar index plunged to 6-month low of 78.3 in early June before rebounding above 80 amid speculations on earlier increase in Fed funds rate. The index dropped around -2% during the period, and net speculative short positions on aggregate USD rose modestly by $2 billion. |
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Special Reports |
Written by ActionForex.com |
Jun 20 09 14:51 GMT |
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The Fed will meet on June 23-24 to discuss about its monetary policy. Although economic outlook has improved as suggested by recent indicators, policymakers will likely keep interest rates unchanged at 0-0.25% for the rest the year. In light of recent speculations of earlier rate hike, we believe the Fed will reinforce its stance that interest rates will remain low at an extremely long period of time. Moreover, we forecast the Fed will keep the asset buying program as what it is but compositions of asset types should be given more flexibility. |
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Special Reports |
Written by ActionForex.com |
Jun 18 09 10:34 GMT |
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At the accompanying statement, SNB stated although there have been signs of improvements in economy, global environment remains 'unfavorable and further economic deterioration cannot be ruled out'. Concerning economic forecasts, the central bank stayed unchanged at its GDP growth forecasts of -2.5% to -3% for 2009 while annual average inflation will drop to around -0.5% this year. In 2010 and 2010, inflation will become slightly positive, amounting to +0.4% and 0.3% respectively. SNB reiterated that the nation's economic condition is still difficult and the 'the risk of deflation has abated, but still remains a concern'. |
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Special Reports |
Written by ActionForex.com |
Jun 17 09 11:24 GMT |
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At the minutes, the MPC members stated that 'the risk of a continued sharp contraction in output in the near-term had receded somewhat' while 'The news over the month had been mostly encouraging. Conditions in financial markets had continued to improve'. The central bank acknowledged that 'activity indicators for Q2, especially the PMI surveys, suggested that the rate of contraction in the global and UK economies had slowed, and there were signs of improving business confidence' and 'there had also been signs that the second-quarter decline in consumption would be smaller than the Committee had previously anticipated'. However, the central bank added 'there was no reason to conclude that the medium-term outlook for the economy, and thus inflation, had changed materially'. |
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Special Reports |
Written by ActionForex.com |
Jun 16 09 11:14 GMT |
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Commodity currencies have risen sharply since March as driven by rallies in commodity prices and improvement in risk investors. However, the double-digit rally has looked excessive given the actual economic conditions in those countries. In fact, an undue surge in a country's currency is negative for economic growth, especially when the country has high dependence on exports. |
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Special Reports |
Written by ActionForex.com |
Jun 13 09 23:11 GMT |
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Although USD staged a strong rebound in the first week of June amid speculations that the Fed will increase policy rate earlier than previously anticipated as economy has shown further signs of bottoming. However, the rally is expected to be short-lived. Expectation that the Fed will hike rate later this year is premature. Although some leading indicators such as ISM index signaled improvement in coming quarters, absolute readings of the indices remained at low level and still suggested contraction. |
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Special Reports |
Written by ActionForex.com |
Jun 13 09 10:02 GMT |
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There has been much talk about reserve diversifications and de-dollarization in the past few weeks leading to the first BRIC summit in Russia. Dollar has been under much pressure and lacked decisive buying for sustained rebound. The announcements from BRIC summit will probably clear out recent hesitations in the forex markets which either reinforces the current down trend in dollar or provides the needed fuel for a reversal. |
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Special Reports |
Written by ActionForex.com |
Jun 11 09 05:20 GMT |
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The RBNZ decided to keep interest rate unchanged, for the first time in a year, at 2.5% after June's meeting as 'there are signs that international economic activity is stabilizing, and international financial conditions are improving'. That said, the central bank indicated that the monetary policy will remain expansionary for sometime by stating that the OCR will be kept 'at or below the current level through until the latter part of 2010'. |
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Special Reports |
Written by ActionForex.com |
Jun 09 09 18:19 GMT |
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Market's speculation on Fed's rate hike has accelerated since the beginning of June. Yields on 2-year Treasury notes rose 44 bps on June 5 and June 8, the largest gain since September while CBOT's Fed Funds futures priced in 70% chance that the Fed will raise interest rate in November's meeting. Although the yield has fallen since then, it still represented about 60% probability. Also look at Eurodollar futures, the yield has picked up pronouncedly, implying the likelihood of tightening monetary policy in the US. |
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Special Reports |
Written by ActionForex.com |
Jun 06 09 15:28 GMT |
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RBNZ will meet Thursday to discuss about interest rate. While the market has widely priced in a month of pause, it's still likely for the central bank to 'shock' the market by announcing a 25 bps reduction as policymakers have earlier expressed their disappointment about domestic banks' sluggishness in passing the cuts to the public. Australia's employment in May should have driven much interest after a surprising rise in the number of jobs in April. However, we still believe a pullback will be seen in May. |
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Special Reports |
Written by ActionForex.com |
Jun 04 09 17:01 GMT |
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As widely anticipated, ECB decided to keep the main refinancing rate unchanged at 1%. According to the accompanying statement, the central bank stated that ‘The current rates are appropriate taking into account our decisions of early May, including the enhanced credit support measures, and all the information and analyses which have become available since then'. Same as the previous meeting, President Trichet refused to comment about the future, neither on whether the current rate has reached a floor nor on expansion plan of the asset buying program. |
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Special Reports |
Written by ActionForex.com |
Jun 04 09 06:44 GMT |
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Traditional financial theory told us that a country's bond yields have direct impact on the country's currency. For example, a rise in US yields should be supportive for USD because higher returns should attract foreign capital inflows. Charts below show that widening in US and European bond yield spread came in inline with USD's rise against the Euro until late-April/early-May while positive correlation between US treasury yield and USD/JPY broke down in the past 2 months. What's wrong with the US bond market or is the something abnormal in the currency market? |
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Special Reports |
Written by ActionForex.com |
Jun 02 09 07:33 GMT |
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As widely anticipated by the market, RBA announced to keep interest rate unchanged at 3% for the second month. The most stunning comment by the central bank is that moderation in inflation pressure may trigger further easing in the future. |
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