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Shake and Twist the Summer Away? – 24th April, UK Forex Update

admin — Wed, 25 Apr 2012 16:24:02 +0000

Vantage FX (http://www.vantagefx.co.uk/) provides a daily overview of the news activity and announcements currently shaping currency movements across the world. Jay Mawji, the company’s head of market analysis, takes a look at news surrounding Eurozone economies on 24th April 2012.

The next couple of days could prove to be vital for the UK, US and European economies. The UK has GDP, which could signal the beginning of a technical recession. In Europe, Nikolas Sarkozy will battle to keep his post on top of France whilst the Netherlands have already surrendered their leader. In the US, the FOMC will meet to discuss ‘operation twist’, which is due to expire in the summer.

The Federal Open Market Committee (FOMC) is due to begin discussions tomorrow regarding the current ‘operation twist’ stimulus policy. Essentially, the US sells short-term securities and buys longer-term securities, which is meant to push down the cost of borrowing. The lower borrowing costs act as a stimulus to lend, which in turn catalyses spending and growth. The current policy expires in June and the rest of the economic world is beginning to show some signs of positive movement. There is an expectation that the FOMC will announce further quantitative easing, although it may not necessarily be in the form of ‘operation twist’. A new quantitative easing policy may see the USD weaken.

As the political spectrum continues to change shape in the Eurozone, it is beginning to raise serious questions about whether the stricken area has the political backbone to make it through the crisis. Angela Merkel, once a lynch-pin of the leaders, is now marginalised by her Parliament and has seen her allies begin to fall away. With the change of guard in the Netherlands and Nikolas Sarkozy on the back foot in France, it wouldn’t be inconceivable to think that, by the end of the year, Angela Merkel may not be in power at all. The truth is, political stability is required in economic uncertainty and the Eurozone are now open to a lot worse than imaginable before.

Talking of uncertainty, there is a lot of it going around the UK at the moment with GDP figures due out tomorrow. The UK needs a positive figure to avoid a technical recession. Up until the beginning of March, a recession was a foregone conclusion. However, the sunshine and panic buying surrounding petrol shortages may have given the economy a much needed boost. The Bank of England has been cautious about the economic recovery, asking for patience as the UK economy works its way back. With the Eurozone on the brink once again, a sudden shock tomorrow could cause the Eurozone all kinds of problems. Analysts are quietly confident that UK GDP will be positive tomorrow…

Take your umbrella tomorrow; it may not be the great summer we are hoping for.

Keep your finger on the pulse of the markets with daily commentary from Vantage FX. Visit:

http://www.vantagefx.co.uk/market-news/market-news/

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About Vantage FX UK

Vantage FX UK is a FX trading broker based in the City of London, providing foreign exchange trading services to clients in the UK, the EU and the rest of the world.

What sets Vantage FX apart is its wide range of services and outstanding level of customer support. The company strives to provide an intuitive, interactive Forex experience by continually innovating and taking advantage of the latest trading technology, such as MetaTrader 4 and Expert Advisors.

Vantage FX also offers extensive educational resources to help give traders their edge, keep up with daily market commentary and try a FX trading demo account. For further information, visit http://www.vantagefx.co.uk/

Spanish Bonds Take the Limelight – 19th April, FX UK Forex Update

admin — Fri, 20 Apr 2012 11:34:22 +0000

On a day that was relatively thin on data, French and Spanish Bond sales took centre stage. Concerns over the managing of debt in France and Spain have rocked the Eurozone again and today’s bond sales were a key note for the future of the Eurozone. The ECB had previously supported bond sales through the “cheap money” that was being lent, however this ended in December and has left the Eurozone bond sales somewhat exposed.

Spain had sold short term bonds earlier in the week, which came in at a 6.1% yield. This means that the short term borrowing cost in Spain has now soared above the level at which debt is sustainable. Spain attempted to sell longer dated bonds earlier today, hoping that a lower yield would pull down the overall cost for borrowing. Spain managed to sell over €2.5bn worth of bonds to the market and received bids at just over 3 times the offer. Eventually the bond sale settles at rates slightly above that of previous year’s sales. Although the cost of borrowing rose in these longer term bonds, the Spanish government will be relatively pleased with the response for bonds offered and the achievement of having raised more than half of the capital it requires so early in the year.

The French were equally nervous about their bond sale, for a different reason. With presidential elections around the corner the French weren’t too sure how the market would react to bond sales. In addition to this, they added a couple of new bonds to the auction. Overall the bond sale in France was well received, with only a slight increase in the cost of borrowing.

We are all hoping for some respite for the Eurozone; however the markets are beginning to align themselves for something else.

Keep your finger on the pulse of the markets with daily commentary from Vantage FX. Visit:

http://www.vantagefx.co.uk/market-news/market-news/

About Vantage FX UK

Vantage FX UK is a FX trading broker based in the City of London, providing foreign exchange trading services to clients in the UK, the EU and the rest of the world.

Inflation + Unemployment = NO Growth – 18th April, FX UK Forex Update

admin — Thu, 19 Apr 2012 13:15:14 +0000

That is a simplified formula regarding the state of the UK economy, something that was confirmed by data and statements released today. Whilst unemployment figures appear positive on the surface, in reality they hide a different story. At the same time, inflationary pressures gathered pace once again which forced the hand of the MPC.

Unemployment fell by 35,000 bringing the total to 2.65m which is the lowest level since summer 2011. This should be great news but hidden behind is a slightly more worrying figure. The claimant count, which measures the number of people claiming unemployment benefits, has risen by 3600 in March and now stands at just over 1.6m. This figure represents the number of people in the UK who have been unable to find work over the past 3 months and require the safety net of state. This figure represents the real casualty of the recession. Worryingly, the jobless claims figure is at its highest since October 2009 and reflects the lack of productivity in the economy. As long as this figure is high, growth as a prospect will most certainly be low.

There was a decisive change in the MPC policy regarding the quantitative policy, which saw the GBP/USD pair through the 1.60 level. Adam Posen, who had previously been a strong advocate for further quantitative easing, retracted his view after the threat of inflation in the UK gathered pace. Inflation in March turned from the previous falling trend, rising 0.1% as sales in the shops finally wore off. This is a worry for the UK economy as the high inflation level is taking much needed money out of the pockets of the consumers, whose falling spending has considerable effects on employment and growth. High inflation also suggests a weaker sterling which, although favourable for exports, has a cumulating, damaging effect on the prices of goods and services in the UK. With Adam Posen abandoning his views, the Bank of England may now look to further measures to control inflation. This is no suggestion to increase interest rates, but it may open the door to a slightly more pro-active approach than they had hoped to take.

Is it premature to start talking about interest rate hikes?

Keep your finger on the pulse of the markets with daily commentary from Vantage FX. Visit:

http://www.vantagefx.co.uk/market-news/market-news/

About Vantage FX UK

Vantage FX UK is a FX trading broker based in the City of London, providing foreign exchange trading services to clients in the UK, the EU and the rest of the world.

Eurozone Heading for a Disaster – 16th April, FX UK Forex Update

admin — Tue, 17 Apr 2012 09:27:01 +0000

After the Greek bailout, it was meant to be smooth sailing for the Eurozone. Deep down, however, we knew this wouldn’t be the case. Greece was a ‘pleasant’ distraction, hiding the economic mess and the real state of affairs in the Eurozone.

The first problem the Greek bailout caused was the change in the political atmosphere. We saw a change in government in several countries across the Eurozone and a further ‘rocking’ of political stability in key nations such as Germany and France. We all know how Angela Merkel has been fighting for her political existence whilst the German Parliament has been pegging her back and monitoring her every step in the Eurozone. Now there are elections in France, with Sarkozy under pressure, while dissent in Greece, Spain and other nations indicates that there may well be a new face to Eurozone politics by the time the crisis is behind us.

The second problem is what is next for Eurozone economies? After the Greek bailout, there was a self-assessed agreement of each nation to align themselves within the austerity targets. Unfortunately, austerity targets are quickest achieved by cutting down government spending, which hits the public sector the hardest. This radically accelerates unemployment, which doesn’t aid the economic situation. Whilst governments hold back on spending, growth generally tends to suffer. The result is slowing growth, rising unemployment and inflation tending to move upwards. Of course, the most significant impact comes from the fact that as Eurozone economies slide, the cost of borrowing increases, which compounds the problems of the economy and starves off liquidity.

The third problem comes from the loss of competitive advantage. Whilst the Eurozone slows down and depletes in presence, the rest of the world will take advantage. We have heard of Asia turning down the opportunity to bailout Europe and electing instead to pick up cheap European assets. Then we saw trade move towards South America, with Brazil rapidly rising up the ranks and overtaking the UK economy in size. Now not only will the Eurozone have to battle through the crisis, but they will have to develop a ‘competitive strength’, which will be hard to do once the rest of the world has moved on.

It is no surprise that China is almost ready for its new, exchange-tradable currency, the Renminbi (CNH), to be released. Restrictions have now been lowered, allowing the currency to move 1% a day. They have elected for the CNH to be based in London, not in Europe, which will come as a big blow to the European Financial Economy.

Out with the euro, in with the CNH – they did predict that Asia would rule the world.

Keep your finger on the pulse of the markets with daily commentary from Vantage FX. Visit:

http://www.vantagefx.co.uk/market-news/market-news/

About Vantage FX UK

Vantage FX UK is a FX trading broker based in the City of London, providing foreign exchange trading services to clients in the UK, the EU and the rest of the world.

Magician Wanted – 12th April, FX UK Forex Update

admin — Sat, 14 Apr 2012 14:18:46 +0000

Every good thing (or bad thing) has to come to an end. We have seen the quiet Mervyn King manage the MPC and the Bank of England through some of the toughest years, having had to shield the UK economy from the Eurozone and the global recession and then begin the process of building it all up again.

As it stands, the UK economy looks to be in a potentially prosperous state. Fears of a second recession this year have diminished; inflation has begun to descend much in the manner expected and is on target to reach the 2% level by year end, and consumer sentiment is on the way up – reaching a pre-recession high. Unemployment is still high in the UK; however, controlling unemployment isn’t in the remit of Mervyn King’s duties. Trade deficit figures came in today, showing a widening in the deficit. Exports for the UK decreased as the demand for British products outside of the European Union declined. Although the slight widening in deficit isn’t too much of a problem, the major concern stems from the fact the Eurozone is slowing down once again.

Judging by recent meetings in the MPC and the Bank of England, Mervyn King will aim to let his last year in charge go by without making another rate cut or decision on quantitative easing. According to him, albeit in a fragile state, the UK economy is set on path to a suitable recovery.

Of course the Eurozone and energy prices will always pose the main threat, and if they do, ‘Mervyn the Magician’ is sure to be ready to react.

Keep your finger on the pulse of the markets with daily commentary from Vantage FX. Visit:

http://www.vantagefx.co.uk/market-news/market-news/

About Vantage FX UK

Vantage FX UK is a FX trading broker based in the City of London, providing foreign exchange trading services to clients in the UK, the EU and the rest of the world.

Little Shopping Feet are the Driving Force behind the Economy – 11th April, FX UK Forex Update

admin — Fri, 13 Apr 2012 14:25:19 +0000

I am aware of the danger of sounding stereo-typical here but it is the sounds of shopper’s heels pounding the pavements and shopping malls that signal a vibrant economy. Of course in the modern day this includes shoppers tapping at keyboards and delivery men knocking at doors, but combined together, retail sales tell us so much about the economy.

Retail sales in Britain grew at the fastest pace in March this year and overcame the small decline in February as retail sales are now up 3.6% on the year. This is a much better than expected gain and analysts point this change in retail sales to the change in consumer’s attitude. In the past, consumers have tightened their belt in fear of the crisis and had their pockets emptied by rising inflation and falling income. However, as inflation has fallen, we have seen an increasing number of consumers loosening their belts and opening their pockets to reflect the change in consumer confidence. Consumers appear united in their view that interest rates will remain low and inflation will continue to fall, with the economy returning to growth by the end of the view – the perfect recipe to justify a little bit of shopping!

Of course, there are other valid reasons why retail sales might be up. The weather for the beginning part of the year has been particularly favourable, with April showing signs of an early warm summer. Added to this are the continuing sales and bargains from the festive Period, and retailers who are keen to make the most of the footfall. It is unlikely that one week of increased sales could change the profit line for retailers but employment opportunities in the retail sector are increasing, which is a positive benefit of increasing sales.

Talking about unemployment, Australian unemployment figures are out overnight. The Australian economy has struggled of late with the demand for resources in the East falling. The Australian economy is heavily dependent on mineral and commodities trade with China and India, which has been notably slow. However, positive news across the world markets may spark a resurgence in trade activity, which could be reflected in Australian unemployment figures.

Now would be a good time to get that summer shopping done…

Keep your finger on the pulse of the markets with daily commentary from Vantage FX. Visit:

http://www.vantagefx.co.uk/market-news/market-news/

About Vantage FX UK

Vantage FX UK is a FX trading broker based in the City of London, providing foreign exchange trading services to clients in the UK, the EU and the rest of the world.

Far More Exciting Than an Easter Bunny– 10th April, Vantage FX UK Forex Update

admin — Thu, 12 Apr 2012 10:16:22 +0000

Back to business in the World Economy after the Easter break, and it is a whole mix of news and information. Data in the US, news out of Japan, the divide in Europe growing and the beginning of a very important reporting season all makes for a great start to April.

We headed into Easter on weaker-than-expected jobs data in the US, with Non-Farm Payrolls coming in at 120k – quite a bit worse than expected and somewhat in opposite form to previous results. This understandably sent shivers across the European markets which retreated today. The USD seemed a little weaker while it tried to shake off the bad jobs data. Things could have been worse for the USD if reporting season wasn’t next up. Reporting season is when many companies on the exchanges will release financial statements and indications towards dividends. If reporting season is positive, it could provide strength for the USD as investors who previously ran from the US could be tempted back again.

Investors in the Eurozone aren’t sure whether to run and hide or be brave and be counted. News out of Spain and Portugal shows the growing problem in the Eurozone with the cost of borrowing in both countries working upwards to a level that the markets don’t believe is sustainable. Both countries are under pressure to achieve austerity targets enforced by the ECB, yet their unemployment and growth is poor. The split in the Eurozone couldn’t be more evident with Germany posting positive trade figures, showing good growth potential from exports. Perhaps the ‘one size fits all’ economic policy doesn’t work after all.

Data in Japan has united the economic strategy, where there is now a belief that the Japanese economy is on the mend. Rates were left on hold and officials from both the central bank and government appear to believe that Japan will climb out of the recession on its own. There have been long growing rumours that we would see a significant intervention to weaken the yen and protect the economy. That may well be ruled out now, resulting in the yen making steady gains against the USD and the euro.

With all this data and news, it is unlikely that many have all their eggs in one basket…

Keep your finger on the pulse of the markets with daily commentary from Vantage FX. Visit:

http://www.vantagefx.co.uk/market-news/market-news/

About Vantage FX UK

Vantage FX UK is a FX trading broker based in the City of London, providing foreign exchange trading services to clients in the UK, the EU and the rest of the world.

Can the Euro Bail Out Both Spain and Greece?? – 5th April, Vantage FX UK Forex Update

admin — Tue, 10 Apr 2012 15:18:17 +0000

The euro fell to a three-week low against the dollar as Spanish and Italian bonds slumped and borrowing costs increased at a French auction, adding to concern the region’s debt crisis is spreading. The real question here is will the Eurozone be able to bail both countries out of the tight spot they’re in?

The currency of seventeen nations have dropped to a three-week low VS the JPY as Spain’s ten-year bond revenues increased to the biggest spread compared to the German bonds since November last year. There are also investor concerns that Spanish PM Mariano Rajoy may need international aid. The Swiss National Bank stated it would not allow the franc to go beyond 1.20 per euro again, after it rose past that level for the first time since the ceiling was put in place in September.

Meanwhile, the euro fell 0.5% at 11:21am in New York, touching the weakest level since last March 15th. Even more dropping occurred when the currency slid to 0.8% VS JPY, where it declined earlier to a 106.89 – the lowest recorded since March the 8th.

Hopefully the currency won’t drop to yet another new low…

Keep your finger on the pulse of the markets with daily commentary from Vantage FX. Visit:

http://www.vantagefx.co.uk/market-news/market-news/

About Vantage FX UK

Vantage FX UK is a FX trading broker based in the City of London, providing foreign exchange trading services to clients in the UK, the EU and the rest of the world.

ECB Happy Just Watching – 4th April, Vantage FX UK Forex Update

admin — Thu, 05 Apr 2012 15:25:07 +0000

The ECB chose to keep interest rates on hold today, maintaining the one percent level. According to Mario Draghi, “Downside risks to the economic outlook prevail.” Suffice to say, that’s pretty obvious looking at the challenges that Eurozone countries such as Spain face.

Spanish borrowing costs soared at bond auctions today as fears grew that Spain would follow Greece into a debt fallout and possibly drag Portugal along. The Spanish government are under pressure to reduce deficit dramatically to meet Eurozone targets, whilst growth and unemployment continues to disappoint. Spain did manage to sell the entire pot at the auction, but the price is very much at the bottom of the scale as the government will now pay out at 5.338% on a 2020 maturity. This will push the cost of borrowing up, which will no doubt starve the markets of much needed liquidity. All in all, Spain is most definitely in the hot seat.

The UK economy is starting to look a little lighter, despite the doom and gloom predicted last week. Good data earlier this week all but rules out the possibility of a secondary recession in the short term. Today, Purchasing Managers Index (Services) rose 0.3, which shows that growth in the UK economy may well be achieved sooner than expected. Overall sentiment in the UK economy is on the way up and this is being reflected in the FX market as the Sterling rose to a 2-week high against the Euro. With all this positive news in the UK, the Bank of England Asset Purchase Target is likely to remain on hold tomorrow.

Lots more data to come, stay tuned…

Keep your finger on the pulse of the markets with daily commentary from Vantage FX. Visit:

http://www.vantagefx.co.uk/market-news/market-news/

About Vantage FX UK

Vantage FX UK is a FX trading broker based in the City of London, providing foreign exchange trading services to clients in the UK, the EU and the rest of the world.

Is The Sun Setting on Spain? – 3rd April, Vantage FX UK Forex Update

admin — Wed, 04 Apr 2012 15:21:52 +0000

Could Spain be next in the Eurozone hot-seat? After Greece, Portugal has survived several debt tests but now the attention appears to be pointing towards the Spanish economy.

Spain is under the pressure of meeting the Eurozone austerity demands, which are focused on reducing debt based on a strict target. Unfortunately, by focusing on austerity targets economies will struggle to find growth and reduce unemployment as governments are unlikely to have the resources to buoy up the economy. To start with, the GDP-Debt ratio in Spain is soaring to 78% which is significantly higher that the EU permits. Recent budgetary announcements in Spain show that the Spanish government will be tackling this head on – aiming to reduce the deficit from 8.5% down to 3% in 2013. The downside for Spain is that unemployment is creeping up and the crippled property markets which were once the core of the Spanish economy are nothing more than a ruin of bricks and rubble. Borrowing has to remain cheap for Eurozone countries to be able to make it out of the austerity measures with any kind of growth. Unfortunately, the markets don’t believe Spain can pull off this magic trick and the cost of borrowing has already moved up 3 basis points overnight on Monday.

Whilst the Spanish are unlikely to take to the streets in the manner that protestors in Greece did, and whilst their democracy is unlikely to be debated in Parliament or households around the nation, and whilst it is unlikely that the Spanish government will fall apart trying to do the right thing, one thing is for sure; Spain has the toughest economic years ahead.

Hopefully the Spanish won’t wait for “mañana” to get things right.

Keep your finger on the pulse of the markets with daily commentary from Vantage FX. Visit:

http://www.vantagefx.co.uk/market-news/market-news/

About Vantage FX UK

Vantage FX UK is a FX trading broker based in the City of London, providing foreign exchange trading services to clients in the UK, the EU and the rest of the world.