Jun 18, · blogger.com Inc. is the leading provider of real-time or delayed intraday stock and commodities charts and quotes. Keep tabs on your portfolio, search for stocks, commodities, or mutual funds with screeners, customizable chart indicators and technical analysis Recent awards include: Best Credit Risk Management Product; Best Research Provider; Best Low-Latency Data Feed Provider; If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ Investors are likely to keep an eye on the Commerce Department's report on new home sales in the month of May on Wednesday. Asian shares finished higher, while European shares are trading mostly lower. As of am ET, the Dow futures were adding
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Based on my reading of the tea leaves, s&p forex commentary, the loonie will fall further over the coming months, and finish the year below parity. My contention is basically that investors are falsely treating the Loonie is a high-yield growth currency, s&p forex commentary, and hence, bidding up its value.
There are a few reasons why I believe this viewpoint is completely erroneous, s&p forex commentary. While it is indeed rich in natural resources would seem to make it stand-out, commodities exports account for only a small portion of GDP. Finally, Canadian interest rates are pretty mediocre, which means there is neither a strong monetary nor an economic impetus for buying the Loonie against the dollar.
Even the most bullish forecasts show a benchmark interest rate of only 1. In other words, it will be a long time before the Loonie becomes a viable target currency s&p forex commentary the carry trade. The two economies share more than just a border. As I said, their economies are closely intertwined, and goods, services and people! move freely between the two. Thus, you would expect that large discrepancies in prices should disappear over the medium-term.
That means that either Canadian prices have to decline something which retailers are always reluctant to effect s&p forex commentary the Loonie must drop further against the Dollar.
Of course, there is a mitigating factor: the US dollar may fall even faster than the loonie, s&p forex commentary. For example, consider that the Canadian dollar is strongly correlated i.
greater than 80 or less than in the chart above with almost every s&p forex commentary major currency, relative to the US dollar. If the correlation was low, than it would imply s&p forex commentary the Canadian dollar is fluctuating in this s&p forex commentary falling for endemic reasons. In this case, however, the almost perfect correlation with the majors shows s&p forex commentary it is almost definitely a US dollar spike rather than a Canadian dollar correction.
Whether this trend continues then, depends more on the health of the US dollar and less on what investors think about the loonie. Well over two years have passed since the collapse of Lehman Brothers and the accompanying climax of the credit crisis, s&p forex commentary. Most economies have emerged from recession, stocks have recovered, credit markets are strong, and commodities prices are well on s&p forex commentary way to new record highs.
And yet, even the most cursory scanning of headlines reveals that all is not well in forex markets. Ignoring the spike of the day clearly visible in the chartvolatility is nearing a high.
Fiscal pressures are mounting across the G7. There is also general economic uncertainty, over whether economic recovery can be sustained, or whether it will flag in the absence of government or monetary stimulus. Speaking of which, investors are struggling to get a grip on how the end of quantitative easing will impact exchange rates, and when and to what extent central banks will have to raise s&p forex commentary rates.
will continue to play chicken with monetary policy. Every time doubt is cast into the system — whether from a natural disaster, monetary press release, surprise economic indicator, ratings downgrade — investors have been quick to flock back into so-called safe haven currencies, showing that appearances aside, they are still relatively on edge.
Even the flipside of this phenomenon — risk appetite — is really just another manifestation of risk aversion. Over the last few weeks, the US dollar has been reborn as a preeminent safe haven currency, having previously surrendered that role to the Swiss Franc and Japanese Yen.
Both of these currencies have already touched record highs against the dollar in For all of the concern over quantitative easing and runaway inflation and low interest rates and surging national debt and economic stagnation and high unemployment and the list certainly s&p forex commentary on…the dollar is still the go-to currency in times of serious risk aversion. In fact, the size of US capital markets is a double-edge sword; since the US is able to absorb many times as much risk-averse capital as Japan and especially Switzerland, sudden jumps in the dollar due to risk aversion will always be understated compared to the franc and yen.
On the other side of this equation stands virtually every other currency: commodity currencies, emerging market currencies, and the British pound and euro. When safe haven currencies go up because of risk aversionother currencies will typically fall, though some currencies will certainly be impacted more than others.
The highest-yielding currencies, for example, are typically bought on that basis, s&p forex commentary, and not necessarily for fundamental reasons. The Australian Dollar and Brazilian Real are somewhere in between, featuring good fundamentals and high short-term interest rates. As volatility is the sworn enemy of the carry trade, s&p forex commentary currencies are usually the first to fall when the markets are gripped by a bout of risk aversion.
Still, just being aware how these fluctuations will manifest themselves in forex markets means that you will be a step ahead when they take place. A picture is truly worth a thousand words. At this time last year, you can see s&p forex commentary all of the s&p forex commentary were basically rising and falling in tandem. One year later, the disparity between the best and worst performers is already significant. In this post, I want to offer an explanation as to why this is the case, and what we can expect going forward.
In the immediate wake of the credit crisis, I think that s&p forex commentary were somewhat unwilling to make concentrated bets on specific market sectors and specific assets, as part of a new framework for managing risk. To the extent that they wanted exposure to emerging markets, then, they would achieve this through buying broad-based indexes and baskets of currencies.
As a result of this indiscriminate investing, prices for emerging market stocks, bonds, currencies, and other assets all rose simultaneously, which rarely happens. Around November of last year, that started to change.
The currency wars were in full swing, inflation was rising, and there were doubts over whether EM central banks would have the stomach to tighten monetary policy, lest it increase the appreciation pressures on their respective currencies. EM stock and bond markets sputtered, and EM currencies dropped across the board. Shortly thereafter, I posted Emerging Market Currencies Still Have Room to Riseand currencies resumed their upward march.
What changed? In a nutshell, emerging market central banks have gotten s&p forex commentary about tackling inflation. On the contrary, they have adopted so-called macroprudential measures quickly becoming one of the buzzwords of !
Most EM central banks have sought to achieve this by raising their required reserve ratios see chart abovelimiting the amount of money that banks can lend out. In this way, s&p forex commentary, they sought to curtail access to credit and limit growth in the money supply without inviting a flood of yield-seeking investors from abroad.
Other central banks have gone ahead and hiked interest rates namely Brazilbut have used taxes and other types of capital controls to discourage speculators. In addition, whereas s&p forex commentary credit ratings are falling in the G7 as a result of weak fiscal and economic outlooks, ratings are actually being raised for the developing world. The primary impetus for buying emerging markets continues to come from interest rate differentials.
If you re-cast the chart above relative to the euro, the performance of EM currencies is much less impressive, and in some cases, negative. Ultimately, the outlook for EM currencies is tied closely to the outlook for inflation. If raising the required reserve ratios is enough to head off inflation and other forces, such as rising commodity pricesabatethen EM central banks can probably avoid raising interest s&p forex commentary. In that case, you can probably expect a correction in forex markets, which will be amplified by rate hikes in the G7.
On the other hand, if inflation continues to rise, broad EM interest rate hikes will become necessary, and s&p forex commentary floodgates will have been opened to carry traders. Either way, the gap between the high-yielding currencies and the low-yielding ones will continue to widen.
In answering the question that I posed above, I s&p forex commentary that regardless of what happens, investors will only become more discriminate. EM central banks are diverging in their conduct of monetary policy, and it no longer makes sense to treat all EM currencies as one homogeneous unit. While once there s&p forex commentary too little data, now there is clearly too much, and that is no less true when it comes to data that is relevant to the forex markets.
In theory, s&p forex commentary, all data should be moving in the same direction. Or perhaps another way of expressing that idea would be to say that all data should tell a similar story, s&p forex commentary, only from different angles. If we are serious about finding the truth and not about proving a point, then, the question is: Which data should we be looking at? I think the quarterly Bank of International Settlements BIS report is a good place to start.
The report is not only a great-read for data junkies, but also represents a great snapshot of the current financial and economic state of the world. If anything, one could argue that the scope is too broad, since data is broken down no further than US, UK, s&p forex commentary, EU, and Rest of World.
The best part is that all of the raw data has already been organized and packaged, and the output is clearly presented and ready for interpretation. Anyway, the stock market rally that began in has showed no signs of slowing down inwith the US firmly leading the rest of the world.
As is usually the case, this has s&p forex commentary with an outflow of cash from bond markets and a steady rise in long-term interest rates. However, emerging market equity and bond returns have started to flag, and as a result, the flow of capital into emerging markets has reversed after a record Economic growth, combined with soaring commodities prices, is already producing inflation.
See my previous post for more on this subject. However, the markets expect that the ECB, BoE, and Fed in that order will all raise interest rates over the next two years, s&p forex commentary.
The picture for emerging market economies is slightly less optimistic, however. Any sudden optimism in the Dollar and Euro and the Pound, to a lesser extent must be tempered, however, by their serious fiscal problems and consequent volatility. According to a BIS analysis, US and UK banks are very exposed to Eurozone credit risk, which means a default by one of the PIGS would reverberate around the western world.
More specific conclusions naturally demand more specific data analysis! They are that industrialized currencies led by the Dollar and perhaps the Euro might stage a comeback indue to stronger economic growth and higher interest rates. While GDP growth and interest rates will undoubtedly be higher in emerging markets, investors were extremely aggressive in pricing this in.
An adjustment in theoretical models naturally demands a correction in actual emerging market exchange rates! Propelled by economic recovery and the recent Mideast political turmoil, s&p forex commentary, oil prices have firmly shaken off any lingering credit crisis weakness, and are headed towards a record high. Moreover, analysts are warning that due to certain fundamental changes to the global economy, prices will almost certainly remain high for the foreseeable future.
The same goes for commodities. Whether directly or indirectly, the implications for forex market will be significant. First of all, there is a direct impact on trade, and hence on the demand for particular currencies. Norway, Russia, Saudia Arabia, and a s&p forex commentary other countries are witnessing record capital inflow expanding current account surpluses. In fact, the Russian Rouble and Norwegian Krona have both begun to rise in recent months.
On the other hand, Canada and Australia and to a lesser extent, New Zealand are experiencing rising trade deficits, which shows that their is not an automatic relationship between rising commodity prices and commodity currency strength. Those countries that are net energy importers could experience some weakness in their currencies, s&p forex commentary, as trade balances move against them. In fact, China just recorded its first quarterly trade deficit in seven years.
Instead of viewing this in terms of a shift in economic structure, s&p forex commentary, economists need to understand that this is due in no small part to rising raw materials prices, s&p forex commentary.
Meanwhile, s&p forex commentary nuclear crisis in Japan is almost certainly going to decrease interest in nuclear power, especially in the short-term. This will cause oil and natural gas prices to rise even further, and magnify the impact on global trade imbalances.
US Stock Market S\u0026P 500 (SPX) \u0026 Nasdaq 100 (NDX) Chart Reviews \u0026 Price Projections - blogger.com
, time: 12:00Daily market commentary: European stocks plunged alongside the S&P
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