Posts Tagged "euro"

Spring arrived this week

Posted by on Mar 10, 2014 in Featured, Market News, Uncategorized

Spring arrived this week

You may have heard that the British spend a lot of time talking about the weather. It’s true. But there is another nation that beats us on this score, the USA. In my view, they spend more time discussing the weather in the USA. They even have a dedicated weather channel on TV. Anyone following the US weather will be aware of their big winter freeze this year with exceptionally low temperatures. In her recent testimony to Congress, even Janet Yellen spoke of the impact of the freezing weather on economic activity in the USA. She mentioned that more data is needed as it is difficult to quantify the impact. When spring arrives, our collective mood improves and we feel more positive. The days are getting lighter, the weather is kinder and plants burst into growth. There is an impact on the economy as we head out and spend more. If people have to dig their way through snow drifts and fight off polar bears at the end of the street, they are hardly likely to be out there spending money and driving the economy forwards. Having said all that, the first green shoots of spring arrived this week. And they came from a surprising source – Europe. In his press conference on Thursday afternoon, Mario Draghi referred to the more positive data coming from Europe. Just the mention of growth caused the Euro to leap in value against the US Dollar. With spring arriving in Europe, it was only a short time to wait for the US figures (NFP) on Friday. Evidence from January and February suggested these figures were going to disappoint and the US economy was running out of steam. The dollar sold off again early on Friday giving a further opportunity to profit ahead of the figures. I was watching a trade in the market some 20 minutes ahead of the figures, I detected some buying of the US Dollar, not what I was expecting. As a trader, I am there to act on evidence though. It was this early buying that led me to close my Euro trade for a profit. At that time, I said to a fellow trader that I felt these figures are going to be better than the market expects. Nice when your gut feeling is right. Come the NFP announcement, the figures were better than expected and the previous month’s figures were revised upwards. Buy the dollar. It was an apt reminder that spring always follows winter. After the severe winter in the US, it was inevitable spring would arrive sooner or later. Following in Europe’s footsteps, the US NFP figures announced that spring arrived this...

Read More

Out of the Woods

Posted by on Feb 18, 2014 in Featured, Market News, News

Out of the Woods

The non-farm payroll (NFP) figures a week ago did not suggest to me that we are out of the woods just yet. After strong numbers for several months on the spin, January’s low numbers weren’t significantly revised upwards and the numbers for February came in on the low side. This suggests that while growth in the world’s largest economy is continuing, it is not doing so at the pace set last quarter. This is two months of lower than expected jobs growth. Not the end of the world by any means, as it is only two months of data. Maybe the frozen weather conditions are slowing the rate of growth? Once spring arrives, it will be full steam ahead again? I have a niggling doubt in the back of my mind though. It is not just the USA with figures that aren’t as optimistic. We saw GDP figures for Japan today, which while they are growing, are hardly setting the world alight. As for the Eurozone, it seems that growth of 0.3% is treated as really great news. When I look at the UK economic figures for the past month or so, they too have been as damp as the weather. The levels of growth talked about in the final quarter of last year seem to be on hold for now. The sharp drop in CPI does not suggest a strong demand in the UK economy. Confidence is a word frequently associated with the conditions for economic growth. Where is this confidence right now? One look at some of the emerging economies tells a story. Take Turkey for example. Its exchange rate has been hammered recently, leading to the Turkish Central Bank intervening in the markets to protect its currency. Within 48 hours, the impact of the intervention was lost and the Turkish Central Bank responded by raising interest rates quite dramatically to protect the currency. Turkey was not the only emerging market to suffer. Several others raised interest rates as money flowed out of these countries back to “safe haven” assets. For a fortnight or so, there was a real sense of “risk off” again. Growth figures from China are often cited as a trigger for changes in economic expectations and a trigger for the risk attitude. We could be on the verge of economies slowing again. That could be a bit tough for the Eurozone, as it hasn’t really got started. With Yellen, the new lady in charge at the FED, I wouldn’t want to bet on the current taper in QE continuing at the same rate if weak figures continue. This afternoon, Yellen signalled she wants to review more data prior to making any changes. She also said the recovery has been slow by historical standards. The confidence levels seem to be weaker now than a few weeks ago. Mark Carney, governor of the Bank of England gave a similar message last Wednesday. The tales of caution are all around, rather than descriptions of economies that are out of the...

Read More

Kicking the can

Posted by on Nov 29, 2012 in Commentary, Featured, Market News, News

Kicking the can

When it comes to kicking the can down the road, European ministers have shown the world their expertise. Aligned with their ability to fudge issues, it gives markets and commentators plenty of material to write about. This weeks further instalment of the Greek bailout is a case in point. After months of negotiation and discussion, including an open spat with the IMF, European institutions handed over several billion more Euros to Greece as part of their international bailout. IMF participation at this time was deferred. Greece now has the liquidity to meet it’s immediate financial needs and will be kept off the front pages of the newspapers for the time being. Meanwhile, Greek people will be subjected to further austerity and recession. Greek debt is supposed to be capped at 120% of GDP by 2020. Best guesstimates suggest this figure will be missed by a small margin. The figure is meant to be 110% by 2022. That suggests debt repayment at the rate of 5% per annum, an amazing achievement by any standards. To help achieve these goals, interest rates paid by Greece have been cut to the bone. If market interest rates increase, it will have a knock on effect on Greece. A reduction in the amount owed by Greece has been factored in, without any details of how and when this might occur. So there will be future losses to be incurred by the lenders. The plight of the Greek economy is subject to further downturns. Significant structural changes to the economy and state activity are needed, requiring strong political leadership. So far, these structural changes have not been addressed, and it would have been easier to implement them earlier, at a time when the Greek economy was stronger than it is now. All in all, there is still widespread expectation of losses on Greek government borrowing. Much has been left undetermined. Yet Greece will slide out of the headlines for now. Plenty of potential uncertainty for trading the Euro and an expert lesson in kicking the can down the...

Read More

Waiting for Godot … or trading the Euro

Posted by on Aug 2, 2012 in Commentary, Market News, News

Waiting for Godot … or trading the Euro

Or is it waiting for Mario? The minutes coming from the meeting of the Fed yesterday did not give the markets the stimulus they were hoping for. There was a general acknowledgement that things are slow in the USA and everything is under close scrutiny. This could be loosely translated as jam tomorrow. No stimulus today, but maybe tomorrow. All eyes turn to the ECB now. After Mario Draghi’s comments last week, the market expects to see just what was meant by “everything in our power to save the Euro and it will be enough”. A drop in interest rates won’t qualify, as that is just business as usual. There has to be something of a “shock and awe” content to today’s announcements and the implementation has to be NOW, not sometime in the future once a new treaty is ratified by all member states. If Mario delivers, we can expect a rally in the value of the Euro. Otherwise, it is likely to start heading south again. Until the non-farm payroll figures tomorrow that is. My weekend has started already, I’m an observer on the sidelines through this and will resume trading the Euro once the dust settles...

Read More

A little optimism

Posted by on Jul 25, 2012 in Featured, News

A little optimism

Optimism in the markets seems as rare as sunshine in a British summer this year. But as the sun comes out, the temperature soars. Phew, it’s hot right now. The same is true with optimism and the Euro. A few comments this morning about changing the status of the European Stability Mechanism (ESM) by an ECB council member sent the Euro soaring as well. Ewald Nowotny suggested the ESM could be classified as a bank, although no formal discussions have taken place with this objective. The optimism from this simple statement had the Euro appreciating fast against the Dollar. Why does this make a difference? It means the ESM could then raise funds from the European Central Bank (ECB). It would then have, in theory, enough money to bail out Spain and still have some petty cash for Italy, another round for Greece, Cyprus, Slovenia and any other member state running into trouble. Presumably last months statement about central bank supervision of national banks could be extended to ensure the ESM is managed by the ECB. Thus creating more liquidity for governments with lopsided books, you know the sort, the books that don’t quite balance. It is this underlying desire to see some kind of a fix that will work and salvage the Euro that provides many trading opportunities. In spite of a little sunshine today, remember it’s been a very wet, cloudy, cold and miserable summer so...

Read More