FOMC: No change in policy; EUR/USD makes a false break

The Fed did not change policy but did add fresh warnings about inflation. This is different than the previous statement and initially weighed on the dollar. This is a very modest change. The $85/month bond buying program continues, and the rate remains at rock bottom. The FOMC was not expected to make any policy announcement at this meeting, that wasn’t accompanied by a press conference. 

EUR/USD managed to recover from earlier losses and challenge 1.33 once again. The yen, pound and many other currencies remained depressed after better US data. The initial move is a weaker dollar. EUR/USD is above 1.33.  USD/JPY is under 98.

Here is a part of the statement that relates to inflation:

Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term

In June, James Bullard dissented from the decision, mostly because of inflation. This time, Bullard didn’t dissent.

There was only dissenter, Esther George, which is a known hawk.

What about tapering of QE? The statement doesn’t provide anything new:

The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes.

In theory, the Fed could even “un-taper”, but this language isn’t new. The balanced approach remains, and the Fed is cautiously optimistic from recent developments.

Updated market reaction

• EUR/USD went as high as 1.3335 but is now below 1.3280, back to the range of recent days. Also other currencies are re weakening against the USD. This is a clear false break.
• GBP/USD jumped to almost 1.5220 and is back to 1.5150. It showed weakness early in the day.
• USD/CAD fell down to 1.0250 and it rose back to just under 1.03. Canada showed solid growth.
• AUD/USD showed great weakness: it didn’t managed to tackle the 0.90 line it lost earlier in the day, and even dipped to new lows at 0.8935 before stabilizing.

Update 2: after a fall and a recovery of the dollar, it is falling once again. EUR/USD makes a second move up and it is now at 1.3320. So, do we have the real break after the false one?

The fireworks are expected for September, that could feature a “Septaper” – an announcement about tapering of QE. What will the next chairman do? It might be Larry Summers.

Earlier in the day, ADP Non-Farm Payrolls surprised to the upside and raised hopes for the NFP on Friday. GDP was more mixed: while Q2 growth surprised to the upside, Q1 underwent a big revision and part of the gain in Q2 GDP was due to growth in inventories.

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Greece: IMF wants euro-zone governments to take losses

The IMF sees a financing hole of 10.9 billion euros for Greece: €4.4 billion this year and €6.5 in the next one. And, the IMF wants euro-zone governments to take “substantial losses” on loans made to Greece, and not for the first time. 

The news comes at a bad timing for Angela Merkel: she faces re-election on September 22nd. Up to now, German officials have denied a financing gap and made efforts not to rock the boat. This publication further increases the tensions within the troika.

So far, all the euro-zone bailout money came in the form of loans – not grants. After private bondholders already took a haircut through the Private Sector Involvement, most of the debt is held with the IMF, the euro-zone governments and the ECB.

The magic number for the debt-to-GDP ratio has been 120.5% by 2020. The IMF sees the current path leading to 124%. And, it wants the ratio to fall to 110% in 2021. The Fund also reminded everybody of Greece’s depression: an unemployment rate of 27%, youth unemployment of 57% and a drop of 25% in GDP since 2007.

German elections

This report might provide some back wind to the Alternative für Deutschland party. The party has a “single needle in its compass”: to get Germany out of the euro-zone, riding on popular anti-euro sentiment. The party might snatch some voters from Merkel’s center-right CDU, but has not been seen as a big threat so far.

So far, Germany hasn’t really paid anything, and the debt crisis actually helped the country pay lower yields in bond markets and enjoy a weaker euro for its exports. Even if German taxpayers do find themselves paying off Greek debt, the benefits of staying in the euro-zone are probably much higher for the zone’s locomotive: it couldn’t have such a strong economy without the euro: German exports would not have been so competitive.

While many Germans acknowledge this, and the country might eventually accept losses, nobody will say it out loud before the elections.

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1-2 punch of strong ADP & GDP numbers has put the USD on the offensive

Many pairs traded in fairly tight ranges overnight ahead of the deluge of important data today. One notable mover was the Japanese Yen which was stronger overnight. The JPY ground out small gains against the Euro and Greenback as well as some larger gains against the British Pound and Australian Dollar. Uncertain sentiment, which supported safer assets, led the move. The Swiss franc also benefited from this theme, advancing similarly against the currencies above, though trading sideways against the JPY.

The Sterling and the Aussie were the big stragglers through the overnight session as demand for both has been soft recently. The Australian unit has legged lower again this week following yesterday’s speech from Reserve Bank of Australia head Glenn Stevens, during which he noted that there was room for both interest rates and the local currency to decrease further. The AUD has been one of the worst performing G10 currencies in recent months as talk of tapering from the US Federal Reserve took the wind out of the sails of carry currencies like the Australian Dollar.

Turning to the Sterling, despite some constructive PMI, CPI, Retail Sales, and employment data recently, the GBP continues to underperform. The action seems to be on the back of dovish Bank of England comments last month, where freshly minted governor Mark Carney stated that expectations interest Rates in the UK would be rising soon were “unwarranted”. In overnight trading a soft Cable and stable EURUSD led the EURGBP cross to highs not seen since March 2013 as the Common Currency outperformed the Pound.

In the equities world, the Asian session weak as Japan’s Nikkei & Topix both contracted to the tune of 1.45%, a stronger Yen hurting the bottom line of exporters. The Hang Seng & New Zealand NZX both also retreated, though only about -0.3%, while the Australia’s ASX squeaked out a tiny gain of +0.09%. In Europe indices were mixed, the German DAX and European Stoxx50 posting small losses. This was in contrast to the British FTSE which advanced following better than expected earnings results from alcoholic beverage maker Diageo and the utilities provider Centrica.

The data free for all began early this morning as the American session moves into full swing. First up was the ADP Employment report, often used as a leading indicator for this Friday’s critical Non-Farms Payroll number. The result was a gain of 200k, besting the consensus forecast of 180k according to Reuters. This was followed up with 15 minutes later with Advance GDP, which printed a +1.7% versus expectations of +1.1% according to Bloomberg. The surprise Q2 result, which was largely expected to be soft due to the government Sequester, comes on the back of unexpected growth in inventories. This morning’s data is an encouraging sign that the American economy may be resilient enough to absorb any drag associated with reduced stimulus.

Also released this morning was Canadian GDP numbers for the month of May, which in line with expectations, showed economic expansion of +0.2%. The result marks the fifth straight positive outcome, the longest continuous phase of growth since 2010. Looking into the numbers, retail spending outweighed a drop in output from hydrocarbon producers and drove the end number.

The response to this morning’s data in currencies has been as expected. The 1-2 punch of strong ADP employment and GDP numbers has put the USD on the offensive. The Big Dollar picking up ground against all major currencies as bulls come out of the woodwork ahead of this afternoon’s Fed Announcement.

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Asian stocks mostly higher following China PMI; Nikkei up 1.16%

Most Asian stocks traded higher Thursday despite divergent readings of China’s July PMI data. 

In Asian trading Thursday, Japan’s Nikkei 225 rose 1.16%. On Wednesday, the Federal Reserve said it will continue its USD85 billion per month asset-buying program over the near-term. 

"The committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes," the Fed said in a statement.

"The committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens," the Fed added. 

Hong Kong’s Hang Seng added 0.99% while the Shanghai Composite soared 1.64% after China’s PMI read 50.3 in July, according to the National Bureau of Statistics and China Federation of Logistics and Purchasing. Economists expected a reading of 49.8. The June reading was 50.1. Readings above 50 indicate expansion. The HSBC was worse, checking in well below 50. 

Australian stocks fell after the Australian Bureau of Statistics said its import price index contracted 0.3% in July after being flat in June. Analysts expected a July increase of 1.8%. 

On Wednesday, the Australian Industry Group said its manufacturing index fell 7.6 points to 42 last month, marking the worst decline since April. 

New Zealand’s NZSE 50 was flat while Singapore’s Straits Times Index jumped 0.75%. South Korea’s Kospi advanced 0.48% after the Korea National Statistical Office said that South Korean CPI rose 1.4% last month. Analysts expected a 1.5% increase. 

S&P 500 futures added 0.40% a day after the benchmark U.S. index inched down 0.01%.

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Forex Trading Signal for 1st August 2013

                                                                                


Japan (Tokyo)                               United Kingdon (London)                        USA (New York)

For more easy access,,,,,,Download our mobile application on your mobile :   Click Fxsignals 

EUR/USD

 Up Trend :

 (1) BUY

E/P: 1.32897

T/P: 1.33200

S/L: 1.32500

 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

GBP/USD

Up Trend:

(1) BUY

E/P: 1.51964

T/P: 1.52200

S/L: 1.51500

NOTE: The above posted Signals are delayed 2 - 4 hours after it has been  generated.
Daily forex signals are sent ontime to only our subcribers.

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U.S. stocks end mixed on Federal Reserve statement; Dow dips 0.14%

U.S. stocks closed mixed on Wednesday after the Federal Reserve said monetary stimulus programs would stay in place for now. The announcement sent stocks rising initially, as stimulus measures are often bullish for equities, though investors sold for profits later in the rally.

At the close of U.S. trading, the Dow Jones Industrial Average finished down 0.14%, the S&P 500 index fell 0.01%, while the Nasdaq Composite index rose 0.27%.

The Federal Reserve said it would continue to buy USD85 billion in Treasury holdings and mortgage debt a month from banks to keep long-term interest rates low across the economy, a stimulus tool known as quantitative easing, which pumps up stock prices as a side effect.

"The committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes," the Fed said in a statement.

"The committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens," the Fed added, which allowed the dollar to soften.

The statement ended uncertainty on Wall Street though gains were short lived on expectations that the U.S. central bank will begin tapering later this year, which could rekindle uncertainty as to how stocks will perform without Fed support albeit in an improving economy.

Elsewhere, the Bureau of Economic Analysis reported earlier that the U.S. gross domestic product grew at an annual rate of 1.7% in the three months to June, shooting past expectations for a 1.0% reading 

The report showed personal consumption grew 1.8% in the second quarter, above expectations for 1.6%. Consumer spending typically accounts for nearly 70% of U.S. economic growth.

Separately, payroll processing firm ADP said non-farm private employers created 200,000 jobs in July, above expectations for an increase of 180,000. 

Data also showed that the Chicago purchasing managers' index rose less than expected in July, hitting 52.3 from 51.6 in June. Analysts had expected the index to rise to 54.0 for July.


Leading Dow Jones Industrial Average performers included Walt Disney, up 0.84%, UnitedHealth Group, up 0.82%, and JPMorgan Chase, up 0.78%.

The Dow Jones Industrial Average's worst performers included American Express, down 1.86%, Verizon Communications, down 1.80%, and Pfizer, down 1.38%.
European indices, meanwhile, finished higher.

After the close of European trade, the EURO STOXX 50 rose 0.32%, France's CAC 40 rose 0.15%, while Germany's DAX 30 finished up 0.06%. Meanwhile, in the U.K. the FTSE 100 finished up 0.76%.

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Forex Trading Signal for 31st July 2013

                                                                                


Japan (Tokyo)                               United Kingdon (London)                        USA (New York)

For more easy access,,,,,,Download our mobile application on your mobile :   Click Fxsignals 

EUR/USD

 Down Trend :

 (1) SELL

E/P: 1.32638

T/P: 1.32300

S/L: 1.33000

GBP/USD

Down Trend:

(1) SELL

E/P: 1.52663

T/P: 1.52200

S/L: 1.53100

NOTE: The above posted Signals are delayed 2 - 4 hours after it has been  generated.
Daily forex signals are sent ontime to only our subcribers.

To subcribe: click here

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Forex - EUR/USD erases losses as market braces for Fed decision

The euro erased earlier losses and firmed against the dollar on Wednesday after investors looked past better-than-expected gross domestic product data released in the U.S. that bolstered the dollar in earlier trading.

The pair held steady as investors waited for the Federal Reserve's announcement on interest rates and monetary policy later Wednesday.

In U.S. trading on Wednesday, EUR/USD was up 0.05% at 1.3269, up from a session low of 1.3214 and off from a high of 1.3300.

The pair was likely to find support at 1.3166, Thursday's low, and resistance at 1.3416, the high from June 16.

The dollar shot up earlier after the after the Bureau of Economic Analysis reported that U.S. gross domestic product grew at an annual rate of 1.7% in the three months to June, shooting past expectations for a 1% reading 

The report showed personal consumption grew 1.8% in the second quarter, above expectations for 1.6%. Consumer spending typically accounts for nearly 70% of U.S. economic growth.

Separately, payroll processing firm ADP said non-farm private employers created 200,000 jobs in July, above expectations for an increase of 180,000. 

Data also showed that the Chicago purchasing managers' index rose less than expected in July, hitting 52.3 from 51.6 in June. Analysts had expected the index to rise to 54.0 for July.

The news sparked talk the economy is on the mend and may convince the Federal Reserve to begin tapering its monthly USD85 billion in asset purchases later this year.

Stimulus measures tend to weaken the dollar weak to spur recovery, and talk of their dismantling can strengthen the greenback.

The dollar gave back its gains against the euro as investors waited for the Fed to release its statement on policy later.

The euro saw support after Germany reported that the number of unemployed people in the country fell by 7,000 in June, defying expectations for a 4,000 decline. Germany's unemployment rate remained unchanged at 6.8% in June, in line with expectations. 

A separate report showed that German retail sales declined 1.5% in June, missing expectations for a 0.4% rise after increasing 0.7% the previous month. 

In addition, the unemployment rate in the euro zone held steady at 12.1% last month, slightly less than expectations for a rise to 12.2%.

The euro zone's consumer price index came in at 1.6% in July, unchanged from June an in line market expectations.  

The euro, meanwhile, was up against the pound and up against the yen, with EUR/GBP trading up 0.50% at 0.8748 and EUR/JPY trading up 0.39% at 130.53.

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Asian stocks mixed with Fed on deck; Nikkei down 0.76%

Asian stocks were mixed during Wednesday’s session as a busy week for central bank commentary gets rolling later Wednesday with a monetary policy announcement from the Federal Reserve. The Bank of England and European Central Bank chime in later in the week. 

Japan’s Nikkei 225 fell 0.76%. In a report released earlier Wednesday, the Japanese Ministry of Health, Labour and Welfare said that Japan’s average cash earnings rose 0.1% in the second quarter following a first-quarter reading of -0.1%. Analysts expected a second-quarter increase of 0.2%. 

Hong Kong’s Hang Seng rose 0.32% while the Shanghai Composite added 0.43%. Since August 2009, the Shanghai Composite has plunged 43%, erasing $748 billion in market value, Bloomberg reported. Still, some investors see Chinese stocks as cheap because equities there trade at significant discounts to their emerging markets and U.S. peers. 

Australia’s S&P/ASX 200 gained almost 1%. In a report released earlier Wednesday, the Reserve Bank of Australia said that Australian private sector credit rose 0.4% in June compared with a 0.3% increase in May. Analysts expected a June increase of 0.4%. 

Chinese import iron ore currently trades around USD131 per ton in the spot market, but Goldman Sachs sees that price falling to USD108 per ton next year as seaborne iron ore moves to oversupply. Analysts believe spot iron ore could average USD126 per ton this year, a four-year low. 

New Zealand’s NZSE 50 inched up 0.01% while South Korea’s Kospi fell 0.15%. 

In U.S. economic news out Tuesday, the S&P/Case-Shiller Home Price Index of 20 U.S. metro areas rose 1% in May, below the 1.3% increase economists expected. Year-over-year growth was 12.2%, just below the 12.3% economists forecast. 

The Conference Board said consumer confidence fell to 80.3 in July from a reading of 82.1 in June. U.S. consumer confidence is still near its highest levels in five years. The Fed is likely to leave interest rates at 0.25% later Wednesday. 

Singapore’s Straits Times Index dropped 0.28% while S&P 500 futures rose 0.10% a day after the benchmark index inched up 0.04%.

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