The home straight

We are entering the last week of the current quarter, which has turned out to be one of mixed fortunes for FX. The general thinking was that tapering from the US Fed would see the dollar continue to gain at the expense of other currencies, especially the euro given the potential for further ECB easing. The dollar story has not panned out as expected, currently almost exactly at the same point at which it started the quarter on the dollar index.
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24/03/2014 @ 08:26 GMT

The new reality of higher rates

There is reason to take some comfort from yesterday's price action. After the re-pricing of interest rate expectations (higher) in the wake of Yellen's clumsy verbal acrobatics, equity markets managed to stage a respectable recovery on the back of better economic data, which offers some comfort that the prospect of higher rates (the implication from better data) is not going to lead to a drastic re-pricing of equities. We saw a similar tone during Asia trade, with Chinese equities staging a decent bounce back of nearly 3% on the Shanghai composite.
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21/03/2014 @ 08:41 GMT

Time to get used to a world of rising rates

The FOMC meeting gave the dollar a big boost last night as the new Federal Reserve Janet Yellen made it clear that interest rate hikes can be expected in 2015 and probably the early part. Investors that have been debating over when the rate hikes will start are clearer now and so the knee-jerk reaction was to buy the dollar. Few currencies were safe as EURUSD, GBPUSD and AUDUSD all sold off and USDJPY spiked, with one of the most pronounced move coming against the Yen.
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20/03/2014 @ 08:25 GMT

Sterling eyed ahead of Budget, then FOMC

Sterling lost ground yesterday ahead of today’s annual Budget from the UK Chancellor’s Budget, but it still has come way to go to unwind its recent strength, in particular against the dollar after GBPUSD hit a four year high last month.
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19/03/2014 @ 08:16 GMT

Gold bugs tested

Gold is softer again this morning as its attempt to run up to the $1400 level falters. Yesterday saw the precious metal decline some $20 bringing it back from its six month high to the mid $1360 area and this morning it’s below this level at $1358.
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18/03/2014 @ 08:25 GMT

Fighting euro strength

Yesterday, the single currency appeared to be on a relentless push towards the 1.40 level on EURUSD before Draghi put his oar in. The ECB President suggested that the ECB’s policy of forward guidance may help to weaken the currency and lower real interest rates, which had the impact of knocking around 60 pips from the currency at the close of European trade. A stronger currency has the effect of making exports more expensive and reducing the price of imports, bringing inflation lower. This is not what the Eurozone needs, with inflation already running below 1%.
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14/03/2014 @ 08:15 GMT

Watching the crosses

The dollar has been on a slow and measured recovery over the past few sessions in the wake of the four and a half month low in the dollar index seen at the end of last week. This has curtailed uptrends on several majors, most notably against the euro and sterling. Of course, the better than expected US employment data last week had something to do with this, but events in China continue to play a role in FX market developments. Overnight, we’ve seen Asian stocks weaker, with the Nikkei down more than 2.5% as China fears continue to pervade markets.
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12/03/2014 @ 08:32 GMT

GBP firmer after data...

GBP slightly firmer after UK industrial production data, headline rising 0.4%, with prior month revised higher. Cable 1.6630. EURGBP 0.8332.
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11/03/2014 @ 09:35 GMT

Supporting the euro

The euro is coming under some pressure early on during the European trading session, but this follows from what has been a relatively strong performance, which saw EURUSD push more than 2 year highs at the end of last week. There have been two principle drivers to this move. Firstly, the ECB last week gave no strong indications that further easing was on the cards at their monthly press conference. Secondly, the depreciation of the Chinese yuan has seen the euro benefit on the perception that the central bank is shifting reserves away from the dollar.
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11/03/2014 @ 08:13 GMT

Remaining nervous

As always, the desire is for clarity from the US jobs numbers. The reality is that we are only slightly wiser after the event. The headline establishment survey number was stronger than expected at 175k, with positive prior month revisions, whilst the unemployment rate (based on a survey of households), nudged higher to 6.7%. The underlying details suggested that the weather did not have a major impact.
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10/03/2014 @ 09:10 GMT

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