Forex Crunch BoE Hints are Pound-Bearish |
| Posted: 08 Oct 2009 05:02 AM PDT  The British rate decision brought no surprises – the rate stayed unchanged at 0.5%, and so did the Quantitative Easing program. The 175 billion pound plan isn’t changing. Not yet. But with money running out of this program by the end of the month, and with BoE Governor King wanting an expansion of the program, we got hints about the next rate decision. In the official statement by the BoE, they refer to the Quantitative Easing program (also known as Asset Purchase Facility):
In the note to editors they add that 162 billion pounds have already been spent. GBP/USD shook after the decision, but didn’t fall. It kept the small gains from yesterday and this morning and is now trading at 1.6060. King’s policy According to the recent NIESR GDP estimate, the British economy didn’t grow in the third quarter that just ended. While this isn’t the official figure, the economic recovery is quite slow in the UK. Prices aren’t picking up. Other countries have shown much stronger figures than the UK. This is expressed in the forex markets as well. The Pound is beaten by all the important currencies. Mervyn King, governor of the Bank of England, already wanted an expansion of the QE program last month, when he saw no fears of inflation. He didn’t get enough backing from other members. Here’s the quote from Bloomberg: King had favored a bigger increase in the program to 200 billion pounds as the bank's predictions showed inflation may not return to the 2 percent target in two years. He and policy maker David Miles, who had sided with King, opted for consensus on the nine-member panel at the September meeting, while saying a bigger increase could still be justified. We’ll see the minutes from today’s meeting on October 21st. Were other senior bankers convinced by King? With money running out of the current program, and no recovery in sight, King’s opinion could gain more support in the next meeting at the beginning of November. An expansion of the program could hurt the Pound. More money in circulation means a devaluation of the Pound. Today we got hints about the BoE’s policy in the near future. These hints are bad for the British Pound. Further reading:
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| Forex Daily Outlook – October 8th 2009 Posted: 08 Oct 2009 12:22 AM PDT  Rate decisions are due in Britain and in Europe. There are lots of other events in this very busy day. Will the dollar continue falling? Let’s see what’s up for today. Take a deep breath. Australia’s employment figures were also an excellent positive surprise, and sent AUD/USD above the resistance line of 0.8950. The number pf employees (employment change) rose by 40.6K. Economists had a expected a loss of 9.7K jobs. This rise in jobs was backed by an improvement in unemployment. The Australian Unemployment Rate fell from 5.8% to 5.7%, beating pessimistic expectations for a rise to 6%. The Australian dollar enjoyed these great figures and made nice gains. AUD/USD broke the resistance line and rose made climbed up to .9040 (at the moment of writing). These week’s events, starting with rate hike have pushed the Aussie far up. For more on the Australian dollar, read the AUD/USD Outlook. In Japan, the Economy Watchers Sentiment was better than expected and rose from 41.7 to 43.1, exceeding expectations. Also the Yen is at a dangerous zone for Japanese policy makers. In Britain, the CB Leading Index is expected to continue rising. A drop here would hurt the Pound just before the rate decision. Mervyn King and the other MPC members aren’t expected to move the historically low Official Bank Rate of 0.5% in their decision at 11:00 GMT. Britain will definitely not be the next country to raise rates after Australia. With no inflation pressures and very slow recovery, they might even try to boost the economy with more money in the Quantitative Easing Program (Asset Purchasing Facility). After shocking the markets two months ago with an expansion of this program to 175 billion, all eyes are on this program. The MPC Rate Statement is expected to shed some more light on the situation. For more on the Pound, read the GBP/USD Outlook. In Europe, German Industrial Production works as a prelude to the rate decision. Production is expected to rise by 1.9%, after a fall of 0.9% last time, showing that also this sector in the German economy is strong. Jean-Claude Trichet is also expected to leave the rates unchanged at 1%. Despite a recovering economy in Germany, prices haven’t really picked up, and there’s no danger of inflation. ECB policy makers fear a strong Euro. We’ll hear about future policy at the ECB Press Conference. For more on the Euro, read the EUR/USD Outlook. In Canada, Housing Starts are expected to drop marginally from 151K to 147K. The Canadian dollar is exploring new ground, with USD/CAD dropping to 1.0535, the lowest levels in a year. Later in the evening, BOC Senior Deputy Governor Paul Jenkins will be speaking. For more on the loonie, read the USD/CAD Outlook. Following the disappointing Non-Farm Payrolls, this week’s Unemployment Claims are expected to decline from 551K to 543K. The US is still far from a growth in jobs. A surprise here will shake the dollar across the board. FOMC members Jeffrey Lacker and Daniel Tarullo will be talking today in different occasions. The more important speech will come from their boss, Ben Bernanke. He’ll be speaking about the Federal Reserve’s balance sheet, and might refer to the bond buying scheme, also known as dollar printing. That’s it for a very busy day. Happy forex trading!    |
| Posted: 07 Oct 2009 08:54 AM PDT  The rate hike by the RBA fueled the Aussie’s engine for further gains. These gains came to halt at the 0.8950 resistance line. The surprising decision by Glenn Stevens on Tuesday morning sent the Aussie above last week’s peaks. Australia was the first country in the West to raise interest rates. They went from 3% to 3.25%, making their high rate even higher. At first, AUD/USD went up 0.8870, where it stalled for many hours. It then continued the climb the steady climb upwards, trading between 0.8870 to 0.8900. This morning, it made another move up. The Aussie rose up to 0.8950, which was the support line last year, temporarily stopping AUD/USD from falling during the height of crisis. I’ve mentioned this resistance line in the AUD/USD Outlook. Upon reaching 0.8950, the Aussie fell back very fast, now trading at 0.8880. It’s amazing to see how the resistance line worked in a very precise manner. I keep repeating this over and over again: AUD/USD is the most predictable currency pair. What lies ahead? I continue to be bullish for the Aussie. The strong economy, high interest rates and the recent uncharted price of gold all pave the way up. I believe that this break upon reaching the resistance line is temporary, and that the uptrend will resume. The next, far and major resistance line above 0.8950 is 0.93. Below, a strengthening US dollar will be supported at 0.85. Decisions by the IMF and the continuing rise of gold will also affect the pair this week. Further reading:
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