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Weekly Look Ahead 30th May

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Forex: The ECB won’t weaken the euro

Whatever policy measures the ECB announces at its June meeting, they will scratch the surface of Europe’s deflationary threat and the impact on the currency will be marginal at best.  Here’s the underlying analysis for both views. The issues prior to the financial crisis are well documented, but one was the fact that wage costs and prices in the peripheral nations (Italy, Spain, Greece, Ireland, Portugal) were running ahead of the Eurozone average, making their economies uncompetitive.  On ...

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Forex: Going to the dollar plan

We reach the last day of the month and also a Friday, which brings risk of greater volatility than we’ve seen in recent days as institutional investors and others adjust positions and hedge into month end. We pointed out at the beginning of the month that May has traditionally been a good month for the dollar in recent years and although the dollar has risen overall, it has been modest in comparison to previous May’s. After the weaker than expected US GDP data yesterday, which revised the first ...

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Forex: Clawing into month end

FX markets are likely to see a subdued session today, with several European countries away for the Ascension day holiday.  As we mentioned in our daily, AUDNZD was the most interesting move overnight, pushing above the 1.0950 level to take it above levels seen in early February and to tackle levels last seen in mid-December.  This cross was the big mover of last year and with New Zealand having raised rates to 3.00% many were looking for continued downside, but the Aussie has continued to ...

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Forex: Aussie resilience

In terms of overnight trading, it’s the Aussie that has caught the attention, with a push just shy of the 0.93 level on AUDUSD helped by data on private capital expenditure, with the move more triggered by the move towards 1.0950 on AUDNZD after the break above the previous high of 1.0912 which was offering pretty stiff resistance. If we break above the 1.0950, then AUDNZD will be pushing levels last seen the middle of December. Once again, the Aussie is pushing against developments in China ...

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Forex: The Themes Driving Forex

There are three broader themes to consider in FX this week. Firstly, China is in the frame once again as the yuan weakens to a 4 week low. As always, there is not necessarily a specific trigger to the latest bout of CNY weakness, but as always concerns regarding loan quality in both the bank and non-bank sectors are never far from the minds of markets participants. USDCNY is back above the 6.2550 level for the first time in 4 weeks, this coming after a period of reversal of the yuan weakness ...

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Forex: Shifting sands in Europe

There is no escaping the change in political mood in Europe after the publication of European Parliament election results over the weekend. There were wins for a spread of parties with manifestos against austerity, further EU integration and also immigration. On the face of it, the impact of this on markets has been pretty minimal, not least because it was widely expected. But there is a wider message that European leaders will no doubt be discussing at their meeting in Brussels later today, ...

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Weekly Look Ahead 26 May

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Forex: Rolling into the weekend

The German IFO data was weaker than expected, the headline series falling from 111.2 to 110.4.  EURUSD moved down to the 1.3630 as a result.  There was also some follow through USD buying versus sterling, cable back to 1.6850.  Still, the series is near a 3 year high and the GDP data this morning confirmed the earlier estimate of 2.5% annual growth in the first quarter of 2014. Capital investment was shown to be strong.