Pound is Down

There were some disappointing numbers out of the United Kingdom on Tuesday. The UK economy returned to growth in the fourth quarter after six consecutive quarters of contraction but fourth quarter annualized GDP expanded just 0.1%; lower than the +0.4% expected. The lowest estimate of the 30 economists surveyed by Bloomberg was +0.2% so the reading is much worse than expected. It was also weaker across all segments of the UK economy as both the manufacturing and service sectors grew by 0.1%.The data led to a swift fall in the pound sterling; it is the worst-performing major currency on Tuesday and down by a full cent against the U.S. dollar.

Euro Interest in Greek 5-Year Note Sale

Yay for the Euro!!!

The euro made gain on Monday on reports of strong interest in a proposed Greek 5-year note sale. Greece was able to raise 5 billion euros in the first 30 minutes of selling and a total of 9 billion euros in sale. Focus will remain on the PIIGS countries (Portugal, Italy, Ireland, Greece Spain) in the day ahead with Portugal set to deliver its budget on Tuesday.

Euro Strengthens After Upbeat Economic Data & ECB-Speak

Yay for the Euro!!!

The euro is stronger on Friday after some upbeat economic data and a barrage of comments from European Central Bankers earlier in the day.

Earlier in the day Eurostat reported that industrial new orders were up 1.6% month-over-month in November, faster than forecasts for a 0.5% increase and better than the prior 1.9% pullback. Annual orders fell 1.5%, also better than expectations for a 7.1% contraction and prior 14.4% decline.

Meanwhile, on the policy front, in an op-ed piece in the Financial Times, Greek central bank head, George Provopoulos said that it will be "unequivocally easier" for Greece to resolve its problems within the framework of the euro zone.

Also of interest were comments from Governing Council Member Jose-Manuel Gonzalez-Paramo that the very idea of a European bailout of Greece from its budget problems was "absurd".

EUR/USD last traded higher by 40 pips at 1.4123 after trading in a range of 1.4066 to 1.4166 so far today. Short term support lies at 1.4066 and 1.4029. Resistance comes in at 1.4221.

While the comments and the data appear to have taken some of the negative focus away from Greece, the big questions remains how EUR/USD will react to the Obama Administration's latest initiative to limit the size of U.S. banks.

Earlier on Friday, Reuters' sources reported that U.S. Treasury Secretary Timothy Geithner is allegedly concerned that the recent measures might hurt the competitiveness of the broader financial system.

The report contrasts with an interview which Geithner gave on Thursday with PBS, where he said that banks should not use the U.S. government's safety net to subsidize risky behavior, and that financial institutions should not be allowed to become so big that they threaten the U.S. financial system.

The FX fallout from these comments are abstract given the lack of confidence from Geithner's decision. In theory, confidence in the USD could be shaken if Obama's administration doesn't appear to be behind the latest initiatives.

USD Rises On Talk the PBOC Will Continue Tightening Monetary Policy

More info....

The U.S. dollar is outperformed only by the commodity currencies on Thursday morning in the aftermath of speculation the PBOC will continue tightening monetary policy.

Earlier in the day, Chinese real GDP advanced 10.7% year-over-year in Q4, above the expected 10.5% gain and the revised 9.1% increase in the previous quarter, prompting speculation of additional monetary policy tightening in the region.

Indeed, China's December CPI gained 1.9% year-over-year in December, overarching the expected 1.4% increase and the previous 0.6% rise. Meanwhile, producer prices rose 1.7% on the year, above expectations for a 0.8% rate, and following the 2.1% decline in November.

Following the publication of the results, the People's Bank of China hiked the yield on three-month bill by 4 bps to 1.4088%, its second such move in 2009, and in a press conference, Chinese head of the National Bureau of Statistics Ma Jiantang told reporters in Beijing that the country now faces the challenges of balancing economic growth and inflation.

On the surface, the key question remains how quickly the central bank is willing to tighten policy in response to the data. After all, the PBOC has already raised the yield on three month bills twice this year and the yield on one year bills once.

More importantly, however was the 50 bps increase in the reserve ratio on financial institutions, which effectively means banks need to hold a greater proportion of liquid cash in the vault to cover their deposits. Such a move forcibly pulls money from the financial system and forces interest rates higher.

So far this month, tighter monetary policy from China has meant a stronger USD and yen, and this morning was no exception.

So far today, EUR/USD traded has in a range of 1.4029 to 1.4137, after last trading lower by 22 pips at 1.4083. Short term support lies at 1.4008 with resistance at 1.4512.

Meanwhile, cable last traded lower by 66 pips at 1.6226 after moving in a range of 1.6126 to 1.6312 today. Short term resistance lies at 1.6458 with support at 1.6116.

USD/JPY traded in a range of 91.19 to 91.88 today, and was last higher by 31 pips at 91.55. Short term resistance lies at 92.05 with support at 90.32.

Sterling Spikes After BOE Minutes & Jobless Claims

Srerling! Sterling!

Sterling is managing to outperform all but the USD and yen on Wednesday after a strong employment report, and talk that the Bank of England was shifting to a neutral stance.

Earlier in the day it was reported that the Bank of England unanimously voted to leave rates at 0.50% and the Asset Purchase Facility unchanged at 200 billion when the Monetary Policy Committee last met on Jan. 7.

More importantly however was the affirmation that it is becoming "increasingly probably" that CPI will rise to "well above" the 2.0% target in early 2010, and that CPI will return to target after near term price shocks have work their way through.

The development suggests that the central bank is moving away from additional monetary policy easing, a development which although suggested, had yet to be priced into the markets. In theory, this should support a stronger pound sterling.

In addition, the Office For National Statistics said that UK jobless claims fell 15.2k in December, further than expectations for a 4.6k pullback and revised 10.8k fall in November.

The claimant count rate was unchanged at 5.0%, as expected.

In the immediate aftermath of the announcements, which both came simultaneously, GBP/USD rallied 43 pips to 1.6324, while EUR/GBP fell 228 pips to 0.8707.

Nevertheless, the USD has managed to be the big winner of the day on the back of earlier reports that China was tightening bank lending, and a fresh snag in the U.S. Healthcare overhaul bill, as Senate Democrats lost a critical vote after Republicans snagged the seat in Massachusetts last night.

GBP/USD last traded lower by 65 pips at 1.6286, having traded in a range of 1.6244 to 1.6372 so far today. Short term resistance lies at 1.6458 with support at 1.6211.

EUR/GBP last traded lower by 794 pips to 0.86526, after trading in a range of 0.86528 to 0.87345. Short term resistance lies at 0.86957 with support at 0.86313.

Euro Under Pressure, Sterling Holds Its Ground

Yikkesssssss

The U.S. dollar is outperforming the European currencies on Tuesday, but the euro is the biggest lower after some downbeat economic news for the regions.

Earlier on Tuesday the German ZEW economic optimism index fell to 47.2 in January, further than expectations for a decline to 50.0 from 50.4 the month prior and the current conditions index rose to -56.6, less than expectations for an increase to -56.2 from -60.6.

In the minutes following the announcement, EUR/USD fell 34 pips to 1.4321, before moving lower to an intraday low at 1.4264.

The currency has also been under added pressure throughout the morning on the back of concerns surrounding Greece’s ability to finance its budget deficit.

The next support level to watch will be 1.4258, followed by a critical support level at 1.4218, a breach of which will open the way for a new four-month low in the pair.

Across the Channel, sterling remains under pressure against the U.S. dollar, but is outperforming other major currencies after an inflationary CPI report on Tuesday.

CPI rose 0.6% month-over-month in December, faster than calls for a 0.3% increase and prior 0.3% gain. Annual CPI was up 2.9% compared to calls for a 2.6% increase and prior 1.9% pickup.

In the immediate aftermath of the release, GBP/USD rallied 37 pips to a fresh intraday high at 1.6458, as markets participants priced in a more hawkish response from the Bank of England, whose mandate it is to control inflation.

Sterling’s resilience on Tuesday is also being attributed to a deal being struck between Kraft Foods buying UK confectioner Cadbury for $19 billion. The deal seals months of bargaining between both firms and is a boon to the pound sterling given that Kraft will logically have to buy pounds to pay for the deal.

Sterling nevertheless remains weaker against the U.S. dollar, which has benefitted from tighter monetary policy in China.

So far today, GBP/USD has traded in a range of 1.6320 to 1.6458. Short term resistance lies at 1.6421 with support at 1.6137.

Meanwhile, EUR/GBP has traded in a range of 0.8731 to 0.88104 today. Short term resistance lies at 0.89670 with support at 0.87053.

Euro Under Pressure As Finance Ministers Meet

Euro is under pressure!!! Looks like it needs a massage..hehehe...

The euro is under some pressure on Monday on the back of a light day for economic news and data, and as euro zone Finance Ministers meet to discuss the fate of Greece.

Finance Ministers from euro zone nations are meeting in Luxembourg for a regularly scheduled meeting on Monday, where a variety of topics will be discussed from the economy, to the reappointment of Eurogroup President Jean-Claude Juncker, to the debate over who will be the next Vice-President of the European Central Bank, to Greece’s fiscal position.

There is talk from traders that the group is planning a harsh statement on the state of Greece’s public finances, as well as the disorganization within the country’s national statistics agencies.

The moves in the European currency are also being influenced by a low-volume trading day in the United States, which is closed for Martin Luther King Jr. Day.

EUR/USD last traded lower by 13 pips at 1.4374. So far today, the pair has traded in a range of 1.4335 to 1.4394. Short term support lies at 1.4335 with resistance at 1.4579.

Meanwhile, EUR/GBP last traded at 0.88101, down 351 pips. So far today, the pair has traded in a range of 0.87826 to 0.88395. Short term resistance lies at 0.90282 with support at 0.8772.

The question lies in whether or not the meeting will yield anything that the markets haven’t already priced in.

Euro Under Pressure After Status Quo ECB Policy

Euro is still under pressure!!!

The euro remains under pressure on Thursday after the European Central Bank suggested the status quo monetary policy for the coming months.

After leaving its benchmark interest rate unchanged at 1.00%, as expected on Thursday morning, central bank President Jean-Claude Trichet affirmed that rates were “appropriate” and that the economy would continue to expand at a “moderate” pace with inflation “subdued over the policy-relevant horizon”.

While the rhetoric appeared similar to that of previous meetings, the differences came on the subject of Greece, whose debt rating now falls below the minimum standards to be accepted at the central bank’s open market operations.

“We will not change out collateral framework for the sake of any particular country”, said Trichet when asked whether or not the ECB would consider making an exception for Greek government bonds.

Earlier this morning Greece unveiled plans to bring the country’s spending within the limits outlined by the European Union by 2012. In addition, a new report from the Moody’s ratings agency suggests that the country has little time to address its budget concerns before facing further ratings cuts.

The comments, combined with the view that monetary policy would continue to remain loose, put downward pressure on the euro throughout the morning session.

At 11 a.m. EST, EUR/USD was down 47 pips at 1.4464 after trading in a range between 1.4459 and 1.4556. Short term support lies at 1.4554. The Fibonacci level at 1.4570 presents itself as the next resistance, followed by 1.4679.

Meanwhile, EUR/GBP was down 363 pips at 0.88756, after trading within 0.89695 to 0.89358. Key short term support is at 0.8847 with resistance at 0.8953, 0.9027 and 0.9055.

Sterling Strengthens After Hawkish Comments from BOE Member

Getting even stronger....!!!!

Sterling is Wednesday’s outperformer after some hawkish talk from a Bank of England policy maker earlier this morning.

Bank of England Monetary Policy Committee Member Andrew Sentance told the Guardian newspaper that the central bank should pause its bond purchases to as to gauge the risks to inflation.

Furthermore, when asked whether investors should bet on stable interest rates for 2010, he responded, “It would not be wise to put yourself in that camp. A lot can happen in a year.”

The comments were enough to offset an unexpectedly weak manufacturing report from the region.

The country’s November manufacturing production came in flat for November despite forecasts for a 0.2% increase and after a flat reading the previous month’s level.

Annual production was down 5.4% in November, faster than forecasts for a 5.1% decline and prior 7.8% slide.

Meanwhile, industrial production rose 0.4% month-over-month in November, faster than calls for a 0.3% increase and prior flat reading, and annual production was down 6.0%, just slower than expectations for a 6.1% slide and previous 8.4% contraction.

In the immediate aftermath of the release, GBP/USD briefly popped lower by 29 pips to 1.6238, before rebounding higher.

GBP/USD last traded 122 pips higher at 1.6286 after trading in a range of 1.6137 to 1.6294 today.

Short term resistance lies at 1.6341 with support at 1.5897.

Note that Sentance is a well known hawk on the central bank’s board, and some traders have said the pound’s gains have been over exaggerated.

Sterling Outperforms After Strong Economic Data

Ohhhh the Brits!!!! It's all about sterling baby!!! Start buying...?!?! Post comments below!

Sterling is one of the top performing currencies on Tuesday on the back of some strong economic data in the overnight.

Earlier in the day, the UK’s visible trade deficit fell to £6.784 billion in November, further than calls for a decline to £7.0 billion from a revised £7.016 billion in October.

Exports were up 0.1% month-over-month, while imports declined 0.8%.

In the immediate aftermath of the release, sterling, already under pressure from gains in the USD, rallied 14 pips to 1.6112 before reaching an intraday high at 1.6194 several hours later.

Also supporting the gains was an earlier report from the British Retail Consortium, which said that retail sales rose 6.0% year-over-year in December after a 4.1% gain the month prior.

GBP/USD last traded 64 pips higher at 1.6179 after trading in a range of 1.6063 to 1.6181 today. Support lies at 1.6054 and 1.6050 followed by 1.5955 and 1.5900. There is resistance at 1.6194.

Meanwhile, EUR/GBP last traded 221 pips lower at 0.89840, after trading in a range between 0.89623 and 0.90282. Short term support is at 0.8923 with resistance at 0.9055.

CHF Falls After More Intervention Talk from SNB

Omg is this possible...the swiss frank is going downhill!!! Does that mean it will be cheaper for us to buy chocolate or cheese?!? hehe. or go on luxurious ski trips to Gstaad or St. Moritz? I sure hope so!!! :)

The Swiss Franc is weakening after talk of more currency interventions from the Swiss National Bank.

Earlier on Monday, SNB Chairman Philip Hildebrand said the central bank will act to prevent an “excessive appreciation” of the Swiss franc, promising to “monitor foreign-exchange developments very closely.”

Trader says the SNB intervened earlier this morning to support the currency against the U.S. dollar and euro.

Indeed, EUR/CHF jumped 38 pips to an intraday high of 1.4795, while USD/CHF spiked 33 pips to 1.0205.

In the past, policy makers have expressed a particular desire to control the franc’s gains against the euro, Switzerland’s largest trading partner.

SNB board members feared that a stronger Swiss franc will cause deflation, a scenario which the central bank is mandated to prevent.

EUR/CHF last traded higher by 7 pips at 1.4760 after trading in a range of 1.4724 to 1.4795 today. Support lies at 1.4724 with resistance at 1.4795 and 1.4827.

Meanwhile USD/CHF last traded lower by 85 pips at 1.0152 after trading in arrange between 1.0131 and 1.0242. Resistance lies at 1.0420 with support at 0.9988.

EUR/USD Ignores Economic Data Ahead of U.S. Nonfarm Payrolls

Even More.....Oh Boy....

EUR/USD has largely ignored a series of mixed economic data for the region on Friday, as markets await nonfarm payrolls.

Ahead of the key economic release for the United States, EUR/USD traded lower by 15 pips at 1.4291.

The moves come after a barrage of economic news for the region, including final Q3 euro zone GDP being unrevised, with the economy growing 0.4% quarter-over-quarter, as expected. Annual growth, however, was revised lower by 4.1% despite calls for no change to the preliminary reading of a 4.0% pullback.

Meanwhile, the Euro zone unemployment rate rose to 10.0% in November from the upwardly revised 9.9%. Forecasts had been for an increase to 9.9% from an unrevised 9.8% level.

Over in Germany, the trade surplus surged to €17.4 billion in November, above calls for a decline to €12.5 billion from €13.4 billion the month prior, with exports up 1.6% month-over-month, faster than forecasts for a 0.8% increase but slower than October’s 1.9% pickup.

Also, German industrial production advanced 0.7% month-over-month in November, short of calls for a 1.0% increase and faster than October’s 1.7% pullback. Annual production down 8.0%, faster than calls for a 7.8% fall, but slower than the prior 12.3% contraction.

So far today, EUR/USD has traded in a range of 1.4276 to 1.4335 so far today. Short term support lies at 1.4258 with resistance at 1.4484.

Euro Under Pressure After Series of Broadly Negative Data

Ohhhhhhhhh the Euro is under..... Pressure!!!! What did i tell you guys about the Euro..we got to watch out...!!!

The euro is under pressure on Thursday after a broad bout of downbeat economic data throughout the morning.

German retail sales fell 1.1% month-over-month in November despite forecasts for a 0.3% increase and prior flat reading, and annual sales were down 2.8% compared to expectations for a 1.7% contraction and prior 1.6% pullback.

Also, German factory orders rose 0.2% month-over-month in November, short of forecasts for a 1.5% increase and partially offsetting a 1.9% decline in October, while annual sales were down 1.8%, faster than calls for a 0.2% decline and prior 8.2% pullback.

Turning to the euro zone, retail sales fell 1.2% month-over-month in November despite forecasts for a flat reading and the prior 0.2% gain, and annual sales contracted 4.0%, faster than forecasts for a 1.9% decline and prior 1.3% decrease.

The only real good news was euro zone business climate index rising to -1.22 in December, above expectations for an increase to -1.43 from -1.53 the month prior, while the economic confidence index expanded to 91.3, also above expectations for a reading of 90.0 and the prior 88.8. Consumer confidence index increased by one point to -16 as expected in December.

EUR/USD was under added pressure throughout the morning after the People’s Bank of China tightened monetary policy by selling three-month bills at a yield of 1.3684%, the first increase in 19 weeks. Traders say the move constitutes monetary policy tightening as it means higher interest rates in the region.

The move also served to strengthen the USD to which the Chinese yuan is tied.

Ahead of the opening Bell on Wall Street, EUR/USD last traded lower by 72 pips at 1.4333 after trading in a range of 1.4299 to 1.4447 so far today. Short term support lies at 1.4258 with resistance at 1.4484.

Euro Under Pressure After ECB Member Says No Bailout for Greece

Hey everyone, I am in Athens and it is freezing here. looks like another thing that is dropping degrees is the Euro... check out this article i found and enjoy reading it as much as I did..

The euro is under pressure on Wednesday after comments from European Central Banker Jurgen Stark telling Il Sole 24 Ore that investors must not assume that the EU will bail out Greece.

"Whoever believes that, at the end, the European Union state member will put their hands in their pockets to save Greece, will end up deluded," said the central banker.

Although he affirmed that Greece would likely deal with its fiscal problems without any outside aid, Stark was firm saying that a bailout should not be a foregone conclusion.

Responding to Stark’s comments in an interview with Bloomberg TV, Greek Finance Minister George Papaconstantinou said the country will not need a bailout to tackle its budget problems, and that Stark’s comments were misplaced.

"Frankly we don't need that clarification," Papaconstantinou told Bloomberg Television. "We don't expect to be bailed out by anybody as, I think, it is perfectly clear we're doing what needs to be done to bring the deficit down and control public debt."

The comments are significant to the euro which fell heavily in December after ratings agencies downgraded the country’s sovereign debt rating to levels substandard to ECB open market operations.

EUR/USD last traded lower by 15 pips at 1.4349 after trading in a range of 1.4284 to 1.4383 so far today. Short term support lies at 1.4258 with resistance at 1.4484.

FX Ignores German Employment Report

Merkel, are you going to make some changes or not?! What is this woman thinking??? Her country is going downhill and we need to see some changes. I will be heading off to a different country in Euro soon and will post what I find. Lets think good thoughts for our German brothers!!!

Foreign exchange markets essentially ignored an in line unemployment report from Germany earlier this morning, despite some mild optimism in the numbers.

Earlier on Tuesday, German unemployment unexpectedly fell by 3k jobs for December despite calls for a 5k increase, and November’s 7k decline was revised to a 1k pullback.

The unemployment rate, however, remained unchanged at 8.1% as expected.

Meanwhile, the number of vacancies in German firms increased to 13k, a strong gain compared to the previous month’s 5k pickup.

The data bodes well for the euro zone’s largest economy as it suggests that the labour market in the region is in the process of bottoming out, a positive for the European currency.

Sadly, the euro failed to make any meaningful moves given the proximity of the results to the consensus forecasts.

So far today, EUR/USD has traded in a range of 1.4387 to 1.4484. Short term support lies at 1.4258 with resistance at 1.4536.

After the market open on Wall Street EUR/USD gave up its lead against the USD and last traded lower by 12 pips at 1.4401.

Sterling Spikes After Upbeat Manufacturing and Lending Data

Hello Chaps!!! I am still in London... and look what I got my hands on...It is all about the pund baby...looks like it's coming back..going to follow this and see what happens!

The pound sterling was given a lift on the back of some upbeat manufacturing data and better than expected credit statistics on Monday.

The UK manufacturing PMI surged to 54.1 in December, above calls for an improvement to 52.0 from 51.8 the month prior.

The data implies an acceleration in manufacturing activity for the UK with any reading above the 50-point threshold implying economic growth.

Details of the report were also strong, with the new orders index at its highest level in 29 months and the decline in jobs the slowest since May 2008.

Released simultaneously, UK net consumer credit fell £0.4 billion in November, less than calls for a £0.5 billion decline and prior £0.6 billion shortfall.

The move was led by an increase in mortgage lending for the month, which picked up to £1.5 billion compared to the previous month’s £1.1 billion level. Expectations had been for lending to total £1.0 billion.

Meanwhile, mortgage approvals rose to 60.5k from 57.7k the month prior, further than calls for a 58.0k pickup.

In line with the better than expected results, GBP/USD picked up 41 pips to 1.6210 before hitting new intraday highs at 1.6241. Short term resistance lies at 1.6248 with support at 1.5833.

By Erik Franco, erikf@fxtraderacademy.com