Australian Dollar Soars on Business Investments

australian currencyThe Australian currency climbed to an exceptional high during the past three weeks following the strong performance of business investments in the country.

On the other hand, the US dollar was moving towards the third successive fall off against other key currencies due to the slow pace of economic growth.

The Aussie dollar went up 0.3 percent to 93.62 US cents after going up 93.72. It lost 0.1 percent to $1.3208 against the euro and fell 103.78 versus the Japanese yen from 103.88.

The Australian dollar traded above $1.10 in 2011 as the nation’s terms of trade hit the highest point. It is acknowledged as the best performer in the Group of 10 currencies for 2014 after going up 4.7 percent.

The strength of the Australian note is said to be an obstruction to efforts of policy makers to further national growth drivers. The Reserve Bank of Australia reduced overnight cash rate goals by 2.25 percent to a low 2.5 percent in nearly two years.

USD/CAD Forex Trading

Twenty points of the pair is eased to trade at 1.0964 as the dollar went down and gold went up. The Canadian dollar has disconnected from the oil market for a longer period in 2014; and it drives valuation of the currency often in flux. According to one prominent Canadian analyst, the trend could be could be a return to the situation where the movement of the oil market was feeding into the CAD. And, this is not a good sign for those who are maintaining a stronger Canadian currency.

Yesterday, the WTI crude downed to $92.50 and this makes the lowest level since middle of January.  WTI crude, as a USDCAD driver, has been gaining little by little in importance since late July. However, a BMO analyst stated that a more intense pullback lower than $90.00 could hasten the trend, and intensify the benefits from USDCAD risks emanating from more positive rate differentials.

An expectation that inflation would drop off a bit compared with the previous month bringing it closer BoC’s target level, the Canadian dollar would stay intact against most of its G10 peers. The Canadian retail sales are expected to be slightly improved from the past month and this could provide some firm support.

FOREX Updates

currency reviewsAfter taking recent gain, the dollar is taking a rest but that provided a small comfort to the struggling euro that was crashed down for 19-month lows versus the Swiss franc due to presumption of a subdued inflation reading and more currency maneuvering.

German business sentiment appeared sagging after a run in its fourth month and the French government’s resignation after an argument over fiscal policy that increased euro’s bearish mix.

On Monday, the Swiss franc’s having fallen to 1.2072, it was the single currency trading 1.20775, and it’s lowest since early January 2013 on trading platform EBS. The market close was testing the three-year pledge of the Swiss National Bank to cap its currency at 1.20 per euro.

The euro pitted with the dollar was at $1.3202, having descended to $1.3178 in Asian trade. Following the dovish comments coming from the head of the ECB at the weekend report released on Monday, the German business showed that their sentiment was sagging during a fourth month running.

Investors were awaiting the euro zone inflation data on Friday. Reuter’s analysts anticipate a yearly inflation to have decelerated to 0.3% in August from 0.4% in July. Against the yen, the dollar dipped 0.2% to 103.85, having peaked at a seven-month high of 104.49 overnight.

Sterling escalated after a five-month low of $1.6501 that struck on Monday to trade at $1.6582, slightly higher on the day.

Economic Crisis Forces French President to Dissolve Government

President Francois Hollande of France abolished the nation’s Socialist government in a bid to maintain his power amidst a deepening economic slump.

The turmoil came as Left-wing economy minister Arnaud Montebourg staged an after alleging that the president is bringing the country to serious trouble by implementing deficit-cutting measures on orders upon orders of Germany.

The minister defied the chief executive’s authority by urging Mr. Hollande to reject austerity cost-cutting measures imposed on the euro zone by the German government.

Before this, German president Angela Merkel snubbed pleas from Mr Hollande to moderate the zone’s deficit targets which France failed to comply with.

The French president Hollande asked Prime Minister Manuel Valls to create a new cabinet that will follow his direction for France.

Meanwhile, his approval rating has plummeted to 17 percent which is the lowest in the history of contemporary France.

The French economy has been dormant for the last six months while unemployment has fallen above 10 percent.

The Euro dropped to 1.3185 versus the US currency. This was the lowest since September of last year.

The British Pound was up against the Euro at 1.25 last week.

France has been called the new “sick man” of Europe without any sign of growth for two months. Another minister, Education Secretary Benoit Hamon expressed his support for Mr Montebourg.

Australian Dollar Gains

AUD DollarThe Australian dollar touched a three-week peak merely below 0.9480 in July after going through a firm period.

It advanced higher breaching the resistance level at 0.9425 before going back. Since the halfway point of June, the currency made constant attempts to penetrate the resistance point close to 0.9425.

Meanwhile, a former official of the Reserve Bank of Australia and now chief international economist of Standard Life Jeremy Lawson said houses in the country were overvalued by a high of 30 percent. The misrepresentation in valuation was generated by lax monetary policies and unwillingness of regulators to make use of the so-called macro-prudential tools to slow down price increases.

The overall financial situation may have been too unrestricting which undermined long-term financial stability, according to the former RBA executive.

It is possible to have low rates for the sake of the economy while preserving tight credit controls for risky industries.  He also assailed the fiscal policies of the central bank as well as the partiality of large banks towards the financial system.

Cycle Shows Recovery of Dollar Prior to Previous Tightening

The US Dollar always showed signs of improvement in the past when the US Federal Reserve resorted to tightening measures.

Charts indicated that the currency rose approximately seven percent several months before the three previous central-bank retrenchments started. These were in 1994, 1999, and 2004. The US note’s appreciation is inclined to sputter and performances were varied after the initial increase in the aim for value of federal funds.

The Reserve kept the standard rate at an exceptionally low of zero up to 0.25 percent dating back to December of 2008.

Meanwhile, futures’ traders are convinced that the US central bank will begin raising rates in July of 2015. The Federal Open Market Board revealed that policy makers discussed the probability of employment gains will bring about the rate increase sooner than scheduled.

The US Dollar Index gained 3.5 percent this quarter against the six major currencies based on indications that economy is picking up. Last July, the unemployment rate was 6.2 percent after declining in June to a five-year depth of 6.1 percent. This was a trough that policy makers did not expect will take place until the end of 2014.

The difference in worldwide interest rates should determine whether the dollar will continue to recover following the first rate increase.

USD/CAD Pair Update

forex tradingThe US Dollar/Canadian Dollar upped by 3 points trading at 1.0948 as the dollar escalated 82.55 as the market considered positive Janet Yellen’s speech. It appears that there was a tremendous change in expectation happening over the past few weeks. Strong US economic data is hawkish following minutes coming from the Fed Reserve. The speech of Janet Yellen at Jackson Hole assisted in heating the advantageous momentum. Strengthening of dollar means that there are big steps contravened on the major forex pairs insinuating a basic shift in expectations of USD. Enthusiasm might descend, but it has not plummeted far enough to frustrate countless from crossing the line to shop.

Douglas Porter, BMO chief economist, stated that between 2000 to 2005 nearly 55 m Canadians came to the United States when CAD was worth 60 c to 80 US c levels.

Last Thursday, Statistics Canada reported that $8 billion worth of building permits were issued by municipalities in June was increased by13.5% from the previous month. The increase in June was attributed to the higher construction demands from Quebec’s institutional & industrial buildings and Alberta’s commercial buildings. Even the value of permits for non-residential building was increased by 32.5% to $3.8 billion in June as the third consecutive monthly gain.

Gold Prices Drop

The price of gold is looking at a two-month low and possibly extends another two weeks of shortfall even as investors tried to evaluate whether national economy can endure the increase in bank interest rates imposed by the US Federal Reserve.

Meanwhile, silver also plunged to the lowest in over two months.

Gold crashed by a whopping 0.5 percent to $1,274.45 per ounce. It traded at $1,278.27 in Singapore, based on general pricing structures by Bloomberg. It dropped to $1,273.14 in August 21 which was a trough since June 18.

Macroeconomic strategists stated that the market is focusing on strengthening the nation’s economic policy which pressures the precious metal.

Gold traded at $1,279.30 for every ounce on the COMEX Contract market at the New York Mercantile Exchange from $1,280.20 last August 22. CME Group, the biggest and most varied derivatives market, stopped its GLOBEX electronic trading markets with the exception of Malaysia’s equity index commodity derivatives for several hours.

Monetary Markets Vulnerable to Cyber Assault

cyber crimeThe International Organisation of Securities Commissions issued a warning against the possibility more cyber attacks against financial markets.

Companies, investors and regulatory agencies worldwide need to be more proactive in responding to the risks of web-based attacks.

According to IOSCO chairperson Greg Medcraft, there is lack of uniformity in the approach of stakeholders.

Regulators are considering producing a worldwide tool kit starting 2015 to evaluate whether companies are managing these risks properly. The plan is to pinpoint risk management standards to discover and deal with cyber intrusions.

The United States Securities and Exchange Commission already disclosed it would look at the cyber resilience of over 50 brokers and investment advisers. The SEC described these threats were extraordinary and very serious. The public and private sectors must collaborate to resolve these issues.

Medcraft is also chairman of the Australian Securities and Investments Commission.

He also warned that the focus includes broker-dealers, fund managers and firms listed in stock markets as well as the trading floors.

This membership of the global watchdog consists of over 120 securities regulators.

The Bank of England has proposed a programme of “ethical hacking” to determine the capacity of prominent players consisting of banks and insurers to repulse cyber assaults.


Draghi Drives ECB Close to Quantitative Easing

European Central Bank President Mario Draghi has driven the bank closer to quantitative easing.

Euro area data is expected to reveal the weakest round of price increases since 2009 this week. The ECB president relied on the central bank forum in Jackson Hole, Wyoming, USA to issue a warning that investor stakes on prices have shown major weakening.

The remarks drum up guesswork that the ECB is ultimately headed towards some kind of monetary incentive it has stayed away for so long. The ECB head mentioned that degeneration of medium-term inflation viewpoint provides motives for international asset acquisitions.

Inflation in the EU decelerated to 0.3 percent in August. This is just a part of the ECB’s target of below two percent. This based on the median forecast made by the Bloomberg News Agency.

Other revelations are projected to show unemployment going to a record high and economic confidence dropping. GDP in the European Union declined during the second quarter.

Draghi displayed his fears as he delivered his talk in Jackson Hole speech and singled out his ideal assessment of inflation prospects. Meanwhile, the five-year inflation swap rate fell under two percent since October of 2011.

The main worry of Draghi is if inflation expectations continue to fall, this can impact actual inflation as speculators, local consumers and enterprises can reduce spending as weaker prices are expected. This can lead the EU to a deflationary whirl that will be difficult to turn back.