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Forex: Eurozone data shows need for ECB action

Markets were somewhat placid yesterday with equities managing to hold onto their levels following last week’s falls and FX seeing little in the way of any sharp moves. Investors look to be holding out for this Thursday where we will see not only the colour of Mario Draghi’s tie, but hope to hear what his latest plans of an asset backed buying program will actually entail. Will it be the outright QE that so many are hankering for or will it be something to grease the wheels of a stagnant ...

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Forex: Q3 draws to a close

The end of Q3 nears and we move into the final stretch of 2014. The last few months can be characterised by increased volatility, in some way helped by the Scottish referendum, but more so by dollar strength which has seen the dollar index appreciate over 7% in Q3. This has been an unprecedented move taking the dollar to four year highs as investors ready themselves for the end of tapering and prepare for higher interest rates from the FOMC. This will impact everyone from businesses and ...

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Forex: US GDP revised higher, in line with expectations

So annualised US GDP has been revised higher to 4.6% for Q2. This was bang on market expectations and the reaction from the dollar has been muted. There is however a tinge of dollar strength following the release as looking deeper into the numbers you can see that there are elements that show the US economy continues to gather pace. Corporate profits for example are the highest they've been since the third quarter of 2010, so we're just seeing EURUSD drift down to 1.2720, GBPUSD to 1.6295 and ...

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Forex: Market normalisation as volatility picks up?

Yesterday saw volatility spike in both equities and FX markets. The Vix index (which measures equity volatility) hit a one month high and FX volatility (as measured by the Deutsche Bank CVIX) rose sharply in the run up to the Scottish Referendum before pulling back, but yesterday spiked again to maintain levels not seen since earlier in the year. This volatility is coinciding with a broad sell off in equities and the US dollar continuing to make its way higher. The move cannot necessarily be ...

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Forex: The dollar’s upward march

Dollar strength was the continuing theme of Wednesday. The dollar index pushed above the 85.0 level and more decisively above the peak of 84.75 seen in mid-2013, putting the dollar (on this measure) at levels last seen mid-2010 when the euro was getting hammered in the early stages of the Eurozone crisis. We are now in our 11th consecutive week of dollar gains, something not seen since the start of floating exchange rates in the early 70s. Both sterling and the euro are bearing the brunt of ...

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Forex: Weaker German IFO adds to core slowdown story

The headline Ifo index was weaker than expected at 104.7 (from 106.3), with the underlying expectations balance leading the way lower. EURUSD reaction was limited to within 10 pips on EURUSD, but in the bigger picture the slowdown story in the core countries is becoming stronger and more sustained.

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Forex: Eurozone still in doldrums

Eurozone PMIs yesterday did little to enthuse investors and a number of concerns over the outlook from both a macro and corporate perspective caused a big sell off in risk assets. Even the likes of the commodity currencies were affected with AUDUSD continuing its downward trend hitting a new seven month low around 0.8830 but this morning it has seen a little bounce so far to 0.8885. Today the focus will be on the Eurozone again as we get IFO data from Germany which in the last four months has ...

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Forex: EUR nudging higher for now

The single currency is continuing the recovery seen just above the 1.28 level, with the better than expected PMI data from earlier today supporting the move. It's also clear that the ECB is going to struggle to expand its balance sheet to the degree that they want in the wake of the first round of bids for the TLTRO. This makes the prospect of QE more likely, but at the same time the impression given by the ECB head in recent comments is that that Governing Council are not there yet in securing ...

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Forex: Aussie finds some temporary support

The main standout overnight is the recovery in the Aussie dollar, which has recovered back above the 0.89 level after the latest data from China brings at least some relief at the margins. The rise in the HSBC manufacturing series was marginal (from 50.2 to 50.5), but was sufficient to take away some of the concerns that were prevalent at the start of the week. We’ve also seen iron ore prices stabilise after what has been a sharp decline so far this month (more than 6%). The Aussie has been the ...