Daily FX Report
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ECB and BoE will come into the foreground
Thu, Aug 7 2008, 08:11 GMT
by Varengold Bank Research Team
Varengold Wertpapierhandelsbank AG
Good morning from beautiful Hamburg. It is always a joy to cruise through the city along the harbour and see all the ships, because then you can see why we trade. Today the rate decisions from the ECB and BoE will come into the foreground. While the ECB is expected to keep interest rates on hold, the BoE is on a fine line because of their difficult economic situation.
Market review
As you can see in the chart below, the USD/JPY hit a 7 month high yesterday due to a lower than expected drop in machinery orders at 2.6% (previously estimated at 9.6%). The USD/JPY rose to a peak of 109.50, which was the biggest daily gain since the beginning of June. The one month implied vols slipped from 10.08 to 9.4.
The South Korean Central bank was the next to hike their interest rates, raising it by 25 basis points to 5.25%. This is the highest level since early Feb 2001 from BoK. The ECB is expected to keep interest rates on hold at 4.25% after the hike last time to a 7 year high, despite record inflation of about 4.1 percent. ECB economists see a possible decrease in inflation, due to the 20% drop in oil over the past few weeks.
The NZD is in a downward trend, while hitting a 11 month low at 0.7160 on investors’ expectations of further policy easing due to the slowing NZ economy. The NZ unemployment rate in Q2 is the highest since March 2006. Economists foresee a rate cut of about 25 basis points on September 11 this year.
USD/JPY
The USD/JPY broke the resistance of 108.49 for the first time this year, but fell short of 110. This break is a sign that the currency pair could continue the upward trend, if it does not fall in a side range.
GBP/USD
The cable lost ground because of the good USD performance. In a technical view, the trend could stop at the support of 1.94 and rebound against the losses with new gains. What happens will largely depend first and foremost on the BOE rate decision today.
Published on Thu, Aug 7 2008, 08:23 GMT
Archive
- The USD/CAD rose from 1.1496 to 1.1630 at its closing
Published On Fri, Jul 3 2009, 08:26 GMT - The deficit climbed from A$282mln in April to A$556mln in May
Published On Thu, Jul 2 2009, 10:45 GMT - The EUR/GBP has been trading close to a downward trend-line during the last quarter
Published On Wed, Jul 1 2009, 08:54 GMT - The currency pair traded in a bearish environment and triggered thereby its lowest monthly level
Published On Tue, Jun 30 2009, 09:00 GMT - In the middle of June, the currency pair slumped down and fell to 131.43
Published On Mon, Jun 29 2009, 08:54 GMT
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