Showing posts with label ECB Rate Decision. Show all posts
Showing posts with label ECB Rate Decision. Show all posts
January 25, 2009
ECB Rate Decision and China's GDP Revision
China's GDP revised to 13.0 percent (I think from 11.9 percent). Yen was weaker in Asia in response to the news. I had a short position on eurjpy which was in loss in early European session while the ECB was going to cut the benchmark interest rate. I decided to close the position in the correction when the loss significantly declined.
August 8, 2008
Dollar's Days!
Dollar continued to appreciate against all major currencies:
Euro-zone: Euro fell nearly 2 percent against dollar, touching 1.5005 and extending its weekly losses close to 4 percent, "the most one-day drop since September 2000". Selling euro accelerated after Trichet's comment on "materializing" risks to the growth, in addition to weak economic data from the euro-area.
UK: British pound followed the same scenario even after policymakers decided to keep the interest rate unchanged. Nationwide consumer confidence declined and HBOS home price index dropped when falling oil (and other commodities) prices strengthened this view that the MPC could finally get the flexibility to cut interest rate.
Oceania: Both Australian and New Zealand dollars extended their losses when having even more reasons. In addition to weak economic data and recent comments from officials on the possibility of interest rate cuts in the near future, these so-called commodity currencies had no choice but depreciation as a response to the sharp decline in oil, gold, copper, and other commodities prices.
Oil: Today's 116 $/b oil may looks relatively cheap and it might be the most important reason behind the dollar's strength and also the rally in stock markets. According to the Bloomberg's analyst, "the decline of oil prices is a significant driver behind this dollar rally because it enables other central banks to turn their eyes away from inflation and focus on growth.''
However there are people who believe that such reaction is mostly technical than fundamental. For example, falling euro below its 200 day moving average (around 1.5227) could have triggered euro-selling orders and resulted in a faster depreciation.
As a summary I want to quote an analyst's view from the Bloomberg: "The most important aspect of the dramatic collapse in the euro dollar is the absence of confirmation from other markets,'' said David Woo, global head of currency strategy at Barclays Capital Inc. in London. "None of the typical drivers of the euro-dollar in the past couple of years could have accounted for the magnitude of this move, which leads one to conclude that this is a technical-driven move. From that point of view, we do not think that this move is sustainable.''
Euro-zone: Euro fell nearly 2 percent against dollar, touching 1.5005 and extending its weekly losses close to 4 percent, "the most one-day drop since September 2000". Selling euro accelerated after Trichet's comment on "materializing" risks to the growth, in addition to weak economic data from the euro-area.
UK: British pound followed the same scenario even after policymakers decided to keep the interest rate unchanged. Nationwide consumer confidence declined and HBOS home price index dropped when falling oil (and other commodities) prices strengthened this view that the MPC could finally get the flexibility to cut interest rate.
Oceania: Both Australian and New Zealand dollars extended their losses when having even more reasons. In addition to weak economic data and recent comments from officials on the possibility of interest rate cuts in the near future, these so-called commodity currencies had no choice but depreciation as a response to the sharp decline in oil, gold, copper, and other commodities prices.
Oil: Today's 116 $/b oil may looks relatively cheap and it might be the most important reason behind the dollar's strength and also the rally in stock markets. According to the Bloomberg's analyst, "the decline of oil prices is a significant driver behind this dollar rally because it enables other central banks to turn their eyes away from inflation and focus on growth.''
However there are people who believe that such reaction is mostly technical than fundamental. For example, falling euro below its 200 day moving average (around 1.5227) could have triggered euro-selling orders and resulted in a faster depreciation.
As a summary I want to quote an analyst's view from the Bloomberg: "The most important aspect of the dramatic collapse in the euro dollar is the absence of confirmation from other markets,'' said David Woo, global head of currency strategy at Barclays Capital Inc. in London. "None of the typical drivers of the euro-dollar in the past couple of years could have accounted for the magnitude of this move, which leads one to conclude that this is a technical-driven move. From that point of view, we do not think that this move is sustainable.''
August 7, 2008
Britain is certainly located in Europe!
Bank of England and European Central Bank both decided to leave interest rates unchanged today. Since there was no statement from BoE, it was just up to ECB's Trichet to shape markets' view on the prospect for the economy and monetary policy in Europe.
Deteriorated consumer confidence, decline in investment, rising unemployment, and the possibility of contraction in the GDP are not hidden to the market and recent depreciation of European currencies is certainly its reaction to the data. However, today's comments worked as a catalyst and triggered another round of selling Euro, Swiss Franc, and not surprisingly the British Pound. (see euro's reaction)
Deteriorated consumer confidence, decline in investment, rising unemployment, and the possibility of contraction in the GDP are not hidden to the market and recent depreciation of European currencies is certainly its reaction to the data. However, today's comments worked as a catalyst and triggered another round of selling Euro, Swiss Franc, and not surprisingly the British Pound. (see euro's reaction)
Reactions to ECB's Comments
European Central Bank's Trichet acknowledged weakness in the Euro-zone economic activity after deciding to keep the benchmark rate unchanged. As the chart shows, there was no sign of consolidation even at the daily support and the Euro extended its decline against dollar below that level.
It was when Pending Home Sales unexpectedly rose 5.3 percent in June which overshadowed a worse-than-expected rise in jobless claims.
It was when Pending Home Sales unexpectedly rose 5.3 percent in June which overshadowed a worse-than-expected rise in jobless claims.
Update: German Exports
Germany's trade surplus rose to 19.7B in Jun from 14.3B in previous month. Imports declined 0.1 percent while exports climbed 4.2 percent, which is "the most in almost two years" and better than 1.8 that market was expected. Euro appreciated in response waiting for ECB Rate Decision.
July 3, 2008
US Unemployment vs. ECB Rate Expectation
Initial jobless claims passed 400K, which is usually a number in recessionary periods. Unemployment rate stands at 5.5 percent in June, after biggest jump in almost two decades in May.
However, the negative reaction to the dollar was limited, probably because the data was overshadowed by the market expectation on the future of interest rates in Europe; it is expected that the ECB is not in a position to raise its benchmark again, after raising it today.
(this post has been added later)
However, the negative reaction to the dollar was limited, probably because the data was overshadowed by the market expectation on the future of interest rates in Europe; it is expected that the ECB is not in a position to raise its benchmark again, after raising it today.
(this post has been added later)
ECB finally raised interest rates; Exploring different views
French View:
French's Nicolas Sarkozy has been an opponent of ECB for what he sees as forgetting growth at the price of fighting inflation. However Sarkozy's Finance minister, Christine Lagarde seems to be comfortable with the comments from Jean Claude Trichet reducing the possibility of further interest rate rise.
"The comments of French officials carry greater weight after France on July 1 took over the presidency of the 27-nation European Union, meaning it will help shape the EU's agenda and policies for the rest of this year.", Bloomberg said.
Italian View:
Silvio Berlusconi repeatedly showed concerns on inflation especially from rising oil and other commodity prices which he blames excessive speculation as the main reason. According to Bloomberg, in the past, Berlusconi has criticized ECB for raising rates when European growth was slow, but for now, after arriving in Tokyo for attending G-8 summit, he praised ECB's decision to raise its benchmark interest rate.
European Bonds:
Two years German bund rose for the week because the market pared bet on further interest rate rise. Comment from Trichet was also effective when he said he has "no bias" on more rate moves.
Traders:
The euro will rise to $1.60 in the next two months as inflation pressures won't abate and traders will step up bets on rate increases, said Simon Derrick, chief currency strategist in London at Bank of New York Mellon Corp.
``Trichet has confirmed that the central bank has shifted back to a more neutral stance,'' BNP Paribas SA strategists led by Hans-Guenter Redeker wrote in a research note dated yesterday. ``We believe that interest rates are now on hold, suggesting that further downward pressure on the euro is now likely to develop.'' The euro may fall to $1.53 on a break below $1.5650, according to BNP.
(This post has been added with delay)
French's Nicolas Sarkozy has been an opponent of ECB for what he sees as forgetting growth at the price of fighting inflation. However Sarkozy's Finance minister, Christine Lagarde seems to be comfortable with the comments from Jean Claude Trichet reducing the possibility of further interest rate rise.
"The comments of French officials carry greater weight after France on July 1 took over the presidency of the 27-nation European Union, meaning it will help shape the EU's agenda and policies for the rest of this year.", Bloomberg said.
Italian View:
Silvio Berlusconi repeatedly showed concerns on inflation especially from rising oil and other commodity prices which he blames excessive speculation as the main reason. According to Bloomberg, in the past, Berlusconi has criticized ECB for raising rates when European growth was slow, but for now, after arriving in Tokyo for attending G-8 summit, he praised ECB's decision to raise its benchmark interest rate.
European Bonds:
Two years German bund rose for the week because the market pared bet on further interest rate rise. Comment from Trichet was also effective when he said he has "no bias" on more rate moves.
Traders:
The euro will rise to $1.60 in the next two months as inflation pressures won't abate and traders will step up bets on rate increases, said Simon Derrick, chief currency strategist in London at Bank of New York Mellon Corp.
``Trichet has confirmed that the central bank has shifted back to a more neutral stance,'' BNP Paribas SA strategists led by Hans-Guenter Redeker wrote in a research note dated yesterday. ``We believe that interest rates are now on hold, suggesting that further downward pressure on the euro is now likely to develop.'' The euro may fall to $1.53 on a break below $1.5650, according to BNP.
(This post has been added with delay)
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