The yen strengthened beyond 100 per dollar for a second time this week as the U.S. currency’s bid to break out from a three-month low stalled after Federal Reserve minutes indicated officials were divided over the urgency to raise interest rates.
A gauge of the dollar has fallen more than 5 per cent this year as investors bet the Fed will raise interest rates at most once this year, compared with policy makers’ forecasts at the start of 2016 for four increases.
That means the U.S. central bank is less likely to diverge from the Bank of Japan and European Central Bank, which are boosting stimulus to spur flagging growth.
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New Zealand’s dollar surged to the highest since May 2015 after traders deemed the central bank’s decision to cut borrowing costs was insufficiently dovish amid the global ardour for yield spurred by unprecedented global monetary easing.
The kiwi climbed against all of its 16 major counterparts after the Reserve Bank of New Zealand cut its official rate to a record, aping the reaction of its Australian counterpart when officials there lowered borrowing costs earlier this month.
Some investors had been looking for a more aggressive easing signal from the central bank, which indicated it would cut rates at least once more to boost weak inflation. The US dollar advanced against the euro after last week’s better-than-expected jobs data bolstered a view that the Federal Reserve is among few central banks in developed economies whose next policy move will be to tighten.
Read the rest of Kiwi Soars to One-Year High as it Ignores Central Bank Cuts »
Speculators that are the most bearish on sterling in nearly 25 years may be vindicated by a report published on Monday (August 1) showing Brexit is probably hitting Britain harder than markets previously envisaged.
Sterling declined versus most of its 16 major peers as the data showed UK manufacturing shrank more than initially forecast in July.
Hedge funds and other large speculators ran the biggest net short positions, or bets on the currency’s decline, since records began amid speculation that the Bank of England will cut interest rates for the first time in more than seven years on Thursday, August 4 to head off the risk of recession.
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The yen rose more than 1 per cent against the dollar and the euro on Tuesday (July 26), as traders dialled back expectations of how much new stimulus Japanese authorities will inject into an ailing economy.
The Bank of Japan is expected to announce expanded asset purchases and a rate cut further into negative territory at the end of its policy meeting on Friday (July 29).
Meanwhile the government is compiling a spending package that some sources have estimated could be worth up to 20 trillion yen. But a Nikkei report on Tuesday (July 26) said direct fiscal stimulus into the economy would amount to about 6 trillion yen over the next few years.
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The pound fell even as a report showed the UK’s annual inflation rate rose more in June than economists forecast.
Sterling weakened versus most of its 16 major peers. UK consumer prices climbed 0.5 per cent last month from a year earlier, the Office for National Statistics said in London. Analysts had expected the rate to rise to 0.4 per cent, from 0.3 per cent in May, according to the median estimate in a survey by news agency Bloomberg. The Bank of England’s 2 per cent inflation target was last reached in December 2013.
The Bank of England signalled last week it is readying stimulus for August as the economy reels from Britain’s decision to quit the European Union. Minutes of the BOE’s July meeting showed most members of the Monetary Policy Committee expect policy to be loosened next month.
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Sterling was firmer on Wednesday (July 13), trading near a two-week high against the euro as Theresa May was set to take over as Britain’s prime minister, easing some of the political uncertainty that has dogged the currency in the past few weeks.
Traders will keep an eye on who will be appointed as finance minister with many awaiting for clarity on the new prime minister’s detailed thinking on triggering Article 50, the procedure for exiting the European Union.
May has said “Brexit means Brexit”, but added Britain will not rush to trigger the formal divorce proceedings. The uncertainty over whether Britain will be able to retain access to the single market after exiting the EU, along with expectations that the Bank of England could cut rates on Thursday (July 14), are likely to make traders wary of sterling.
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The pound tumbled to a new 31-year low on Wednesday (July 6), at one point dipping below $1.28, on fears over the effect of last month’s Brexit vote on Britain’s property market and the prospect of cuts in Bank of England interest rates.
The pound, one of the main vehicles through which financial markets can express concern about Britain’s decision to leave the European Union, fell as low as $1.2798 in Asian trading, its lowest since June 1985. It recovered to about $1.2891 in afternoon trading in London.
That still left it more than 13 per cent weaker than it was before the June 23 referendum, and about 1 per cent lower on the day.
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Scandinavia’s biggest bank estimates Denmark sold almost $750 million in kroner to weaken the currency after it became clear early on Friday (June 24) that Britons had voted to leave the European Union.
The flight into safe-haven markets triggered by Brexit drove the krone to its strongest level against the euro in more than a decade, forcing the central bank to intervene to defend its currency peg.
The bank probably sold about 5 billion kroner ($744 million) on Friday (June 24), according to Jan Stoerup Nielsen, a senior analyst at Nordea in Copenhagen. That follows a resumption of interventions to weaken the krone in May for the first time since February last year, when Denmark’s euro peg was under a speculative attack. Interventions in May reached 23.6 billion kroner.
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Prime Minister David Cameron has said Thursday’s (June 23) referendum on Britain’s membership of the European Union was likely to be very close but he also predicted a “remain dividend” in investments if Britons voted to stay in the 28-nation bloc.
With just two days to go until the referendum that will shape the future of Europe, opinion polls have indicated that British public opinion is so divided that the outcome is too close to call.
Meanwhile, Swiss investment bank UBS warned its clients on Tuesday (June 21) it may fail to execute some orders on its electronic trading platform should this week’s Brexit referendum affect liquidity or cause extreme volatility.
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With the Brexit vote taking place in less than 48 hours, many Forex online traders (Foreign Exchange Market) are sweating at their palms. Numerous, who are trading, had said that the markets were looking incredibly risky. Investors have been closely been following the vote. The vote will take place on Thursday. According to recent polls, the vote is set to be substantially close.
Read the rest of Markets soaring just 48 hours to Brexit vote »
With sterling trades seen too expensive, the yen and Swiss franc are in demand according to in-depth research by news agency Bloomberg.
The UK’s referendum on European Union membership is spurring volatility in the pound, making trading sterling increasingly expensive. Banks are pointing clients toward alternative currency bets or hedges that could fare well regardless of the outcome.
Here is a list of analysts’ favourite trades as written in research notes or recommended in interviews conducted by Bloomberg News in recent days.
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Australia’s dollar rose to a one-month high and bond yields rebounded from the lowest ever as the central bank refrained from cutting interest rates.
The Reserve Bank of Australia left the benchmark rate at a record-low 1.75 percent, as forecast by all but one economist surveyed by news agency Bloomberg. Most expect the central bank to resume easing in August after a quarter-point reduction in May in response to a record-low core inflation reading.
“Last night’s RBA policy statement was judged as lacking an explicit easing bias,” said Jane Foley, a senior currency strategist at Rabobank International in London. “While this assessment has lent the Australian dollar significant support this morning, there are sufficient negative nuances contained within the RBA’s policy outlook to infer that the prospect of an August rate cut remain very strong.”
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The Colombian peso weakened on Tuesday (31/5) after the country’s central bank announced it would suspend an intervention policy aimed at slowing the currency’s decline.
The central bank said on Friday (27/5) it would not hold any additional dollar option sales, but did not fully rule out further intervention.
The bank also increased its benchmark interest rate for a ninth consecutive month on Friday, to 7.25 per cent, confirming the expectations of most analysts in a Reuters poll.
Read the rest of Emerging Markets: Colombian Peso Weakens After Cenbank Backs Off Intervention »
The dollar climbed to a two-month high against the euro as traders boosted wagers that U.S. interest rates will rise, starting as early as next month.
The greenback strengthened versus most of its major peers after Federal Reserve Bank of Philadelphia President Patrick Harker said on Monday, May 23 that he could see two to three rate increases this year, echoing remarks by the San Francisco Fed Bank’s John Williams.
Futures are indicating for the first time since March a better-than 50 percent chance that the Federal Open Market Committee will raise rates by its July meeting.
Read the rest of Dollar Rises To Two-Month High on Fed Rate-Increase Speculation »
The pound rallied the most in three weeks after a poll of UK voters released on Monday showed people who support a campaign to remain in the European Union exceeded those saying they will vote to leave by a wider margin than last month.
Sterling rose against most of its 16 major peers after the ORB/Telegraph poll showed 55 percent of respondents were in favour of remaining in the European Union, while 40 percent wanted to leave.
Read the rest of Pound Jumps Most in 3 Weeks as Remain Vote Rises in Brexit Poll »
The Philippine peso rose the most in six weeks against the dollar as Rodrigo Duterte sought to ease investor concerns after claiming victory in the nation’s presidential election.
The currency also strengthened versus all of its 10 Asian peers as preliminary results showed Duterte, the tough-talking mayor of Davao city, won about 39 percent of the vote.
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Less than two months after Goldman Sachs Group Inc. softened its short-term euro forecast after a central-bank policy meeting, the bank is doing the same with the yen.
Japan’s currency is likely to strengthen until Bank of Japan Governor Haruhiko Kuroda rolls out or signals additional stimulus measures, analysts led by Robin Brooks, the bank’s chief currency strategist, wrote in a note to clients on Monday.
Read the rest of Goldman Succumbs to a Stronger Yen, Mirroring Euro Call Mistake »
Eyes on the Euro?
There are a few key points to mention in this latest segment of online Forex trading news.
This week, the relationship between the dollar and the euro remained relatively unchanged after unexpectedly weak American housing data was released.
Analysts had expected the market to rise a single percentage point and yet, statistics showed that sales dropped 1.5 per cent.
Read the rest of A Watch-and-Wait Week: Eyes on the Euro and Shanghai Composite index? »
Financial researchers have indicated that trading across all G10 currencies is similar to the type of trading conducted throughout recession periods. The G10 currencies are the most widely traded globally, these are:
US dollar (USD
Japanese yen (JPY
British pound (GBP
Australian dollar (AUD
Swiss franc (CHF
New Zealand dollar (NZD)
Swedish Krona (SEK
Canada dollar (CAD
Norway Krone (NOK
The researchers at NOMURA state fears of recession are not being stated at present, however, the current pattern of financial trading shows close links to the type of trading conducted during the recent financial crisis.
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