Unprincipled speculators are making billions every day by betting on a Greek default

Foreign Exchange - Currency Outlook

Euro Exchange rate Special: Without naming names, today the WSJ reports "Greek officials" saying the high premium Greece is paying to issue bonds is "unsustainable" and must come down in the next two months. "Greece may formally seek European Union financial aid if its borrowing costs don't fall sharply in coming weeks and, if that doesn't work, will seek a rescue from the International Monetary Fund, government officials said." The preferred form of aid is for European state-owned banks to buy Greek debt. "The officials said Greece needs the spread to tighten to around two percentage points before crunch time: Athens must redeem some €22 billion ($29.92 billion) of bonds in April and May." Greek yields are about 3% higher than German Bunds.

“The first official said Greece will seek to raise a further 10 billion Euros through one or two bond issues this month, and between $5 billion and $10 billion through an offering in March or April targeting investors in the U.S. and Asia.”

Today’s bombshell follows a busy visit to the US by Greek PM Papandreou. He was all over Washington, meeting Congressmen, the President, the TreasSec and the IMF. Papandreou said "Unprincipled speculators are making billions every day by betting on a Greek default," and Obama was receptive to the idea of regulating speculation and that means it will be on the next G20 agenda.

With really interesting timing, CFTC Chairman Gensler said, according to the WSJ, that the US could adopt new regulations for credit-default swaps. The EU said yesterday it may try to ban speculative trading in credit-default swaps on sovereign debt in Europe. The WSJ says the US wouldn’t go that far. Gensler outlined several approaches, including a central clearinghouse, swap activity directly linked to bank capital requirements, and reform of bankruptcy law. In other words, we will get restrictions on speculation when pigs fly. Gensler seems to be one of the heroes in all this but it remains for Congress to do something. Gridlock in Congress, not mention infuriating stupidity, is enough to drive support for executive orders.

In Europe, German Chancellor Merkel agreed that rules should be rushed to halt “the most speculative elements of derivatives trading, including so-called naked transaction, which do not hedge the value of real assets,” according to the FT. On another matter, the formation of a European Monetary Fund, the head of the Bundesbank and probably the next head of the ECB, Weber, said the debate over a monetary fund as “unhelpful” and “a sideshow that will distract from the necessary (fiscal) consolidation.”

As for the IMF, everyone agrees Papandreou didn’t ask for aid or loans or guarantees, just “technical assistance.” We have no idea what that means. Fast computers? Spreadsheets? A gaggle of green-eyeshade guys? If the assistance consists of human beings, how will they greet the Eurostat guys in Athens?

It’s hard not to think all of this is meaningless drama, but it’s hard also not to recognize that Papandreou is a very smart cookie and handling this all quite skillfully. Today’s news, that “Greek officials” are now demanding guarantees so that the cost goes down, may destroy whatever sympathy Papandreou has engendered. It seems likely Greece can continue to issue the rest of the debt at high prices. The last two issues were wildly oversubscribed. Now it doesn’t like the terms, a 3% premium over German issues. Well, too bad.

Pounds to US Dollars = 1.4918
Pounds to Euros = 1.10955
Euro to Pounds = 0.9125
Pounds to Australian Dollars = 1.6303

Bye For Now
Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

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solution for the Greek debt problem

Foreign Exchange - Currency Outlook

An announcement of a solution for the Greek debt problem is only that—an announcement. It will probably have the usual announcement effect - foreign exchange traders buying euros. A more positive tone and a sense of confidence that the EU/EMU will save Greece from itself is a good thing but only temporary. Words are good, in markets, but actions are better. Observers want to pore over specifics and if history is any guide, we are not going to get specifics today, or maybe ever.

Disillusion could set in very quickly. The bond and forex markets are not going to sit around for long basking the glow of apparent solidarity - they want details, and plenty of them. We remain deeply worried that the market will buy into a public relations exercise that will carry the euro exchange rate back up over 1.4000 to perhaps 1.4350. So far it looks like the market is being skeptical, but it’s never wise to count on traders making deep analysis on which to base trades.

Normally the shallow explanation is the one adopted, at least at first. If the market doesn’t accept the "accord" today, risk aversion will take off and and fx traders will be buying us dollars. This is what "should" happen but we have to wait and see.

Pounds to US Dollars = 1.5690
Pounds to Euros = 1.1466
Euro to Pounds = 0.8718
Pounds to Australian Dollars = 1.7624

Bye For Now
Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!
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Contact IMS Foreign Exchange + 44 207 183 2790

euro exchange rate recovery this week?

Foreign Exchange - Currency Outlook

We must always expect a bounce up off a big move down, and we may get that this week. On Friday, foreign exchange analysts used words like "panic," "frenzy," and "mayhem." Foreign Exchange Traders can’t sustain that level of adrenaline. A pullback is clearly in order. At the same time, it’s important to acknowledge that the US dollar trend has changed and that there are good and ongoing reasons for it. From a high around 1.5145 in late Nov, the euro fell to 1.4580 in mid-Jan, and further to 1.3852 on Friday. This is a huge move and unless something just as bad against the US dollar exchange rate comes along to stop it, we have to assume it will continue. That means we must evaluate the “reasons” given for any euro exchange rate recovery this week with a sharp eye. Just because something is oversold doesn’t mean it deserves to be bought for its own sake.

Deficit hawks have a strong case for disliking the dollar today. Commentators correctly point to gridlock in Washington, which is worse than wimpy presidential leadership, that will fail to resolve the US’ deficit dilemma. Yes, the US has a higher debt burden than Europe, if a bit less than Greece (about 10% vs. over 12% of GDP for Greece and about 6% for the EMU as a whole).

But we say this doesn't pass the "So what?" test. The US can tolerate higher deficits because it has a more flexible and resilient economy that is more likely to generate the higher tax revenue needed to cut deficits. The US is already emerging from the crisis, as Bernanke will talk about on Wednesday when he tells the House Financial Services Committee about removing emergency liquidity supports. Meanwhile, the ECB had to cobble together an emergency liquidity plan that saved the banks, just barely, but is at a loss institutionally on how to resolve the sovereign debt crisis. There is a vast difference. We may criticize the Fed for failing to acknowledge that the financial sector is not adequately self-policing or its responsibility to prevent bubbles, but the Fed did that one job quite well and the incident is ending. This gives the US dollar rate a strong base of support.

This week the data is not very interesting. We get trade, Jan retail sales, Dec manufacturing, and the preliminary University of Michigan consumer sentiment index. There is nothing here to support or detract from the real action, the eurozone saga of what to do about its southern tier.

By Friday of this week, we expect the euro lower, although you never know - if a correction gets a grip, we could end up with a longer-lasting pullback. The worst case is also possible--a choppy sideways move. But keep the faith.

Pounds to US Dollars = 1.5578

Pounds to Euros = 1.1407

Euro to Pounds = 0.8763

Pounds to Australian Dollars = 1.8036

Bye For Now

Barbara Rockefeller

Foreign Exchange Trading

Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!

Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Buy Travel Money, Buy Holiday Money, Best exchange rates for Travel Money

Contact IMS Foreign Exchange + 44 207 183 2790

Chinese will re-commit to the US dollar exchange rate

Foreign Exchange - Currency Outlook

Everybody and his brother is calling for the Chinese to revalue, from the Philippines and Malaysia to the eurozone, US, IMF and World Bank. APEC finance ministers have so far resisted making the same call, but the summit isn’t over yet. The APEC chairman, Singapore FinMin Tharman Shanmugaratnam, said "From today's discussion, none of us were calling for, or thought it advisable, to have any sudden significant re-alignment of exchange rates." Asked about Chinese revaluation, he said "It's not a silver bullet for solving either the question of domestic demand or towards achieving balanced and sustainable growth."

Is everyone counting on Obama to pull the rabbit out of the hat?

Market News reports today that the Chinese say he won’t. The report says "China has no plans to allow the yuan to appreciate in the short term because the economy is still recovering from last year's global financial crisis, a source familiar with discussions among monetary policymakers told Market News International Thursday. The source said that the government expects to receive a message from President Barack Obama about the need for greater exchange rate flexibility during his visit here next week. Obama will be making his first official visit to China November 15 to 18. His visit will include talks with President Hu Jintao and Premier Wen Jiabao. 'China will not see Obama's requirement for more exchange rate flexibility as a key consideration,' the source said."

Well, of course the Chinese would not tip their hand ahead of time if they do plan to deliver Obama a big victory. And if they do deliver such a victory, what is the cost? The Chinese would not be giving it away for free. Another unnamed official told Market News that "China's exports are more important than U.S. deficits. The Chinese government will not ask for any specific U.S. announcement about an exit strategy but will simply mention it." This is the usual ploy of changing the subject to avoid talking about the elephant in the living room. Or maybe the Chinese will re-commit to the US dollar exchange rate and promise to stop talking about SDR's in return for keeping the US dollar peg a little longer.

Nobody knows what the outcome will be, but clearly something is afoot. Uncertainty about the size of the something is US dollar rate -favorable all by itself since it raises the idea of tectonic shift in sentiment and real flows. But we must not allow expectations to get too high. Summits hardly ever result in a big change. One of the few exceptions was the US TreasSec hounding China at G7 on revaluation a few years ago - and it worked, albeit not right away. The next two or three days will require nimble foreign exchange trading trading with close - in stops and a willingness to be open-minded. Adopt the Boy Scout motto and "be prepared."

Pounds to US Dollars = 1.6579
Pounds to Euros = 1.1071
Euro to Pounds = 0.8949
Pounds to Australian Dollars = 1.7968

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Buy Travel Money, Buy Holiday Money, Best exchange rates for Travel Money

Contact IMS Foreign Exchange + 44 207 183 2790

Talk of a drop in the euro rate due to foreign exchange traders selling euros below to 1.4900

Foreign Exchange - Currency Outlook

Yesterday Dallas Fed Pres Fisher said the decline of the dollar exchange rate has been orderly. We are stunned by this statement. For one thing, the Fed hardly ever talks about buying dollars, which is the Treasury’s turf. For another, it implies approval of the any decline as long as it’s not disorderly. Fisher went from an inflation hawk to now seeing more deflationary concerns than inflationary ones, suggesting that a falling dollar is a good anti-deflation tactic. The risk we run by maintining low interest rates is that it fuels the carry trade and eventually the Fed would have to "craft an appropriate remedy." Holy cow, is Fisher wishing for a US dollar exchange rate crisis so that the Fed can step in with anti-speculation measures?

The mind boggles.

Our favorite Fed, San Francisco Fed Pres Yellen, again said the recovery will be L-shaped, if with an upward tolt, with deflation a bigger risk than inflation and unemployment probably staying high for years to come. Atlanta Fed Lockhart is most worried about commerical real estate and worries the banking system ,not yet recovered, will face another blow.

More to the point, World Bank Pres Zoellick came right out and said emerging markets face a greater threat of inflation and asset price bubbles than developed one. Speaking on the sidelines of the APEC summit in Singapore, he said Asian "central banks need to look beyond just raising interest rates to constrain the amount of liquidity that has been injected into financial systems in response to the crisis,"according to Market News. Bubbles could undermine confidence, whereas "In the U.S. and Europe, because things are in relatively weak conditions, I don't see likely inflationary effects at this time. In East Asia if you start to get a strong rebound in growth and a lot of liquidity there is the question of whether one could start to face asset bubbles in particular markets."

Out of all this, the Chinese potentially revaluing against the dollar by adopting a basket should have the biggest effect. Quite apart from the global political implications, it could be a giant boost to European exports, whereupon Europe's trade surplus will appear to be an issue. It already is an issue, but not as much as the US’ deficit. Then the question becomes whether China diversifies further into the basket currencies. On the whole, the news will be interpreted as dollar-favorable, but underneath, it’s only US-favorable. Talk of a drop in the euro rate due to foreign exchange traders selling euros below to 1.4900 and below is based more on technical ideas than on economic analysis. New euro exchange rates demand from China is the same thing as a weakness factor for the dollar, and a biggie. Fixing the global imbalance is a good thing for the world, but not necessarily for the US dollar itself.

Pounds to US Dollars = 1.6574
Pounds to Euros = 1.1060
Euro to Pounds = 0.9039
Pounds to Australian Dollars = 1.7813

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

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Contact IMS Foreign Exchange + 44 207 183 2790

Pound and Euro exchange rate outlook improves

Foreign Exchange - Currency Outlook

Unless something happens that is now unforeseen, most FX analysts expect a return of the status quo - rising growth nearly everywhere means the Great Recession is ending and it’s safe to seek yield in riskier places and in riskier assets (away from the US and the dollar exchange rate). We never had any right to expect that G20 and the IMF would be effective in pressuring the Chinese to revalue - they are weak organizations with no enforcement or compliance capability, and the Chinese know which side of the bread their butter is on.

It may well be that the US secretly took everyone aside and asked for reticence on China, since the weak US dollar rate really is good for the US economy, even if it’s not good for consumers, but then the US would have been risking a deeper drive out of the dollar as a reserve currency - so if it was some kind of ploy, it was a dangerous one. Does the US have a grand plan for the dollar? Almost certainly it does not, and any talk of US policy being designed to weaken the dollar deliberately is silly. Analysts suspected that was the not-so-secret Bush agenda but we have no evidence this is how the Obama Administration thinks. Still, "allowing" it to weaken (for a greater good like export industries) is another matter.

Clearly Washington is unfazed by the rise in gold (as long as it’s not fuelled by inflation expectations except by a few nutcases). That it is also fuelled by a bigger cohort who fret about budget deficits seems to be only slightly more worrisome. It seems that when it comes to matters pertaining to the dollar exchange rate and related matters like gold, the Administration is going to remain silent. We wonder if Obama even feels much pressure for results from the China trip this week. This is a laissez-faire approach that is not getting the attention and perhaps praise it deserves from those who think Obama is a control freak or a pinko or a big-government collectivist (to revive a Randian term now that two big Rand biographies are being reviewed).

We expect the US dollar Rate to embrace and surpass the 1.5000 mark now that it has kissed the level. Round numbers are nice, and will suffice - next stop, 1.5250.

Pounds to US Dollars = 1.6723
Pounds to Euros = 1.1148
Euro to Pounds = 0.8967
Pounds to Australian Dollars = 1.7997

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Buy Travel Money, Buy Holiday Money, Best exchange rates for Travel Money

Contact IMS Foreign Exchange + 44 207 183 2790

Australian Dollar Exchange Rate has everything going for it, from commodities to a higher yield.

Foreign Exchange - Currency Outlook

Among the large amount of data this week, including IFO business sentiment tomorrow, today we get the Case-Shiller home price index for June, forecast at a drop of 16.4% y/y in the Bloomberg survey or the smallest drop in nearly a year. The index was down 17.1% y/y in May but had risen 0.5% m/m for the first rise monthly since July 2006. Also this morning we get the Conference Board consumer confidence index, probably rising in Aug for the first time in 3 months to 47.9 from 46.6. Tomorrow it’s July new home sales, probably a 4th monthly rise.

It may seem that we have decoupling of the US stock market from the Shanghai Composite, with today’s outcome a test case. But foreign exchange traders everywhere have their own reasons to worry about having gotten into equities too far, too fast and making too rosy assumptions about recovery. If you want to feel optimistic, you can find green shoots to justify trying to get in early, whether it’s German industrial orders or possibly bottoming US housing construction (US homebuilder stocks are up 36% as foreclosures continue to rise—go figure).

But if you are looking for reasons to feel fearful, they abound, too. Bernanke said at Jackson Hole that major difficulties remain. Today the EC chairman Barroso said there is "still no firm recovery" in the EU economies. China is talking out of both sides of its mouth, with one official saying the recovery is too fragile to change anything and another one stepping up to say bubbles are forming and must be burst.

Similarly, we have a huge simmering debate just under the surface about whether we are going to get massive inflation or perhaps a bout of deflation comes first. Pundits opine that Bernanke may seize this moment to institute inflation targeting, which would probably be a good thing for public confidence but opens all kinds of doors for money and bond market shenanigans, the one good reason not to do it. The problem with the inflation/deflation argument, and the sideline story about the proper role of a central bank, is that just about everyone has an ideological slant and it’s really, really hard to get an unbiased grip on the true issues.

We say the most important things is not whether the Fed should have a dual mandate or only an inflation mandate, but rather explicit recognition that mostly free capital markets historically have an intrinsictendency to boom and bust, or mania and panic. Once we acknowledge that, it’s not much of a leap to say somebody ought to be in charge of managing institutional behavior in such a way to avoid the worst consequences of both mania and panic. Right now we have a mishmash of regulatory agencies, with more agencies proposed and a wild tangle of responsibilities. We don’t know whether it should be the Fed in charge of manias and panics or some other agency, but the independence of the Fed argues for it taking the job. This opens a can of worms, of course, with the extreme right wanting no regulation on the perfectly sound thesis that government interference always causes nasty unintended consequences, but the extreme left making the equally sound argument that panics harm the non-elite the most and for longer periods of time. See, you can't talk about this stuff without getting political!

But it’s a welcome argument if we can keep the nutcases from dominating the story.

Back to the US dollar exchange rate. There is a small chance that it will get rewarded with a firmer tone as good data comes in, but it’s still the last week of August and with the market thin, we can’t trust any such move. We guess the stock market will continue to rise during the early fall, with everyone’s nerves getting shot to pieces by October 1, with the US dollar slinking lower, but the possibility of a surprise jump can’t be ruled out. This is not very helpful. The one thing we feel the least uncertain about is the ascendancy of the Australian Dollar Exchange Rate - it has everything going for it, from commodities to a higher yield.

Pounds to US Dollars = 1.6358
Pounds to Euros = 1.1414
Euro to Pounds = 0.8758
Pounds to Australian Dollars = 1.9521

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

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Contact IMS Foreign Exchange + 44 207 183 2790

US dollar rate is the beneficiary of flight to safety

Foreign Exchange - Currency Outlook

The US dollar rate is the beneficiary of flight to safety as declines in Asian stock markets, especially China, arouse fear of a really big equity market correction that might spill over to the rest of the world. Press accounts all say the Chinese market is expecting and waiting for government intervention to support it.

This is the main event but also undermining the euro is producer prices falling 7.8% when 6.6% was forecast, the most since just after the war. Fear of deflation is spotty at best - most foreign exchange analysts and investors are more fearful of inflation or hyper-inflation at some point down the road.

Pound exchange rate is whipsawing, down dramatically on Monday, recovering all of Monday's loss on Tuesday, and back down on Wednesday. Whew. This time the reason for sterling to drop (from 1.6593 just after the US close last evening to 1.6372 at 5 am today) is release of the minutes of the August BoE policy meeting. These indicate a spirited discussion about raising the amount of quantitative easing and a final vote of 6-3 in favor of the £50 billion increase.

According to Reuters, the market thought there had been consensus and more surprising, "The three dissenters, which included BoE Governor Mervyn King, had wanted an extension of 75 billion pounds."

Pounds to US Dollars = 1.6569

Pounds to Euros = 1.1730

Euro to Pounds = 0.8525

Pounds to Australian Dollars = 2.0100

Bye For Now

Barbara Rockefeller

Foreign Exchange Trading

Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!

Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Buy Travel Money, Buy Holiday Money, Best exchange rates for Travel Money

Contact IMS Foreign Exchange + 44 207 183 2790

Oil is down because the dollar exchange rate is up?

Foreign Exchange - Currency Outlook

We had the US stock market rise on a really stupid report that the unemployment rate was not rising (with the global market following). We say "stupid" because obviously the rate was a function of many workers falling out of the job market as the government defines it, so not exactly a rigged number but not an accurate one, either - and everyone knows it. Now we have the Shanghai Composite leading the world’s stock markets, with nary a reference to better-than-expected earnings or P/E ratios or any of the usual chatter about underlying, dare we say fundamental, conditions in the US or elsewhere. We like to joke that stock market traders are a bunch of flibberty-gibbet little girls, alternately hysterical or skipping madly down the street (and failing to look down). But never has such a description been more appropriate. Stocks are down because a butterfly flapped its wings in China, thousands of miles away? Oil is down because the dollar exchange rate is up? How old are these people?

The germ of truth in all this is that China has defied conventional wisdom and managed to make its stimulus package work faster and better than anything in the West (except Cash for Clunkers, which is wildly successful in Europe and the US). Growth will still be huge, 8% if not the 9.5% originally expected, while the rest of us will be lucky to see 1-3%. China still depends to some extent on the US consumer for export business, but has robust two-way trade with Germany and Japan, so maybe the US doesn’t lead the world, after all. But China doesn’t lead it, either. We all know that Chinese banks would be both involvent and bankrupt if they were not state-owned and the borrowers mostly state-owned, too. Property and other asset prices are almost certainly inflated. The Shanghai index is a bubble - again. Any kind of reality-check would have investors fleeing for the hills - and yet China is the best game in town. It offers unknown and unknowable profits as long as the state keeps the music playing and nobody has to run screaming for a seat. The widespread preference for a rigged market is stunning. No wonder the US dollar rate and yen are the beneficiaries when a whiff of control and sanity reaches our nostrils. From a historical point of view, the Shanghai is an accident waiting to happen.

And yet the Chinese are very, very good at managing the process. It may look like warp-speed from medieval conditions to modernity, but in fact the Chinese government acts with a lot of restraint, considering the pressure on it. Who is to say they will fail? We would never bet against them. So that is the tense situation—an awful combination of awful conditions but utter faith in the managers. It would seem the

Chinese government has more credibility today than the Fed. We also pay heed to the need to keep up the fiction that all is well. Pride is important, appearances are important. China manged to overcome one giant bubble burst in the Shanghai index and it can overcome a second one, if that is what we get.

We don’t know if this big-picture perspective is correct, but if it is, any safe-haven effect on the dollar from wobbly situations in China are likely to be short-lived. That in turn implies that the rise of the yen has limits, too.

Pounds to US Dollars = 1.6569
Pounds to Euros = 1.1730
Euro to Pounds = 0.8525
Pounds to Australian Dollars = 2.0100

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Buy Travel Money, Buy Holiday Money, Best exchange rates for Travel Money

Contact IMS Foreign Exchange + 44 207 183 2790

US dollar rate is losing ground against the euro exchange rate

Foreign Exchange - Currency Outlook

The US dollar rate is losing ground against the euro exchange rate and other majors this morning after the Fed statement calmed risk aversion and promoted risk appetite. On the hourly chart of the euro, you can see a spike to 1.4239 and a bigger spike down to 1.4120 in the Fed statement hour, suggesting that not everyone understood the statement immediately. Those who had been buying euros in anticipation of the outcome got their stops hit, and then the euro exchange rate turned into the close and started rising in earnest. From the 8 am New York open at 1.4142, the euro ended the day at 1.4201 - but after the US close, the euro took off higher at 1.4282 so far.

Note that 1.4280 is about the midpoint of the downside 6-hour breakout bar last Friday. The euro rate has to surpass this level to form a convincing uptrend restoration. The announcement that European GDP growth is up has failed so far to get that effect, which is a little surprising. If the dollar exchange rate rose last week on seemingly good economic news (despite the smaller-than-expected drop in payrolls clearly a statistical fluke), why would the US dollar rate not rise on the Fed statement, which is pretty close to a proclamation that the recession is over?

Reuters reports that the dollar vs japanese yen, rising off yesterday’s low at 95.10 to 96.30 so far today, is influenced by “Japanese investors repatriating funds related to $27 billion in coupon payments on U.S. Treasuries due on Aug. 15. In addition, $61 billion in coupon securities mature on the same day.” This is capping the dollar's rise. Where does the dollar/yen fit in the risk appetite profile? The yen is supposedly a bigger beneficiary of risk aversion than the dollar, so dollar/yen is a duel for which currency gets more relief when fear abates. Besides, why would the Japanese will not turn around and re-invest proceeds back into foreign markets, as is their wont? Only if fear were really high, and rising global stock markets are not sending that signal. We have to go through this laborious process in thinking about the yen because some of the recent moves are so hard to understand.

Pounds to US Dollars = 1.6579
Pounds to Euros = 1.1610
Euro to Pounds = 0.86089
Pounds to Australian Dollars = 1.9690

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Buy Travel Money, Buy Holiday Money, Best exchange rates for Travel Money

Contact IMS Foreign Exchange + 44 207 183 2790

Euro Exchange Rate should make a new low before new high

Foreign Exchange - Currency Outlook

The best euro rates made a run-up on Friday to 1.4120 off the Thursday low at 1.3885, but the high failed to match the previous high at 1.4138.

Does such a small amount matter? Yes.

Failure to make a higher high usually implies that next we test the downside at the previous low, but this is a very strange market. It’s also a bad week with the US on holiday on Friday. This time the bond market doesn’t close early on Thursday but that probably doesn’t matter since the holiday mindset may hold sway all week. If the June pattern continues, we will get the us dollar rate up in the morning and down in the afternoon, or vice versa.

Overnight the euro exchange rate hit a low of 1.3980 as traders "probed for stops," according to Market News, but “Russian demand was then noted around the lows, with a UK clearer cited for the recovery back on to a $1.40 handle.” This suggests the market is thin and also reminds us that Russia is no friend of the us dollar exchange rate.

Pounds to US Dollars = 1.6330
Pounds to Euros = 1.1784
Euro to Pounds = 0.8489
Pounds to Australian Dollars = 2.0800

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

US Dollar exchange rate battles the Euro and Pound again

Foreign Exchange - Currency Outlook

The third week of every month is stuffed full of economic data. See the US calendar below. You can get a pretty good global economic calendar. This time, we also have major institutional changes to contend with, too, not to mention the abiding question of how the market will like the Treasury’s new $104 billion in debt issuance this week.

We live in perpetual fear of a failed auction - that the Treasury will hold a party and no one will come.

As for "announcement effects," Market News writes that "No one expects the Fed to expand its quantitative easing program beyond the maximum $1.75 billion already announced for potential purchases of Treasuries, Agencies and Agency mortgage-backed securities." The Fed might, however, alter the composition, or make a statement that it’s not targeting specific interest rate levels, or some other minor change.

As for overall risk aversion, the Foreign exchange market is dependent on equities and commodities. If they fall for whatever reason, the us dollar rate immediately gets the benefit. It may be tiresome to keep reminding, but remember that these intermarket correlations are unreliable. They are strongest when conditions are panicky and uncertainty is high, but they tend to fall apart when one group gets a grip. Part of the current problem is that Foreign Exchange volumes have been low of late. This raises the opportunity for a single player to have undue influence.

We are always skeptical when the dollar exchange rate looks strong, since the bias against the dollar is a long-lasting, deep and powerful one, if not entirely rational sometimes. See the "dueling channels" on the charts. Either interpretation (Buy us dollars or sell us dollars) is equally plausible. On the whole, a healthy dose of skepticism about green shoots is justified.

Whether fear “should” rise to the level of a dollar rally, however, is in question.

We would like to see more attention paid to the German deficit issue. Some foreign exchange analysts say a crisis is brewing in euroland. This is not the universal perception but if it were to get a grip, we’d have real risk aversion and a really good reason for dollar recovery, since US institutions are in better shape or at least at less risk. Watch for the euro to surpass 1.3750. If it does, we can expect 1.3420 or so.

Pounds to US Dollars = 1.6330
Pounds to Euros = 1.1784
Euro to Pounds = 0.8489
Pounds to Australian Dollars = 2.0800

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

things are getting worse at a slower pace

Foreign Exchange - Currency Outlook

Good economic data, universal expectations of recovery starting this year, and institutional change occurring without street riots are all favorable but in the new perverse world of risk-appetite driven exchange rates, "should" be causing the US Dollar Rate to fall. And yet the us dollar exchange rates has closed up on 8 of the past 15 days for a net gain of about 200 points over that two-week period. Wait a minute. This is backwards. The dollar exchange rates should be falling on good US news as the need for risk aversion abates. One explanation is that commodities in general and oil in particular look like a top is in, for the moment, so that if we get another surge in the uptrend, it will be more modest. This reduces dollar selling but doesn’t offer support for dollar buying.

As stated in the Summary section, we have a pretty good grip on the economics - things are getting worse at a slower pace and Bernanke was right, we do see some green shoots here and there. The only really big issue on the economic front is whether deflation should be a worry, but for the moment, deflation-deniers are holding their line and inflation fear-mongers, apart from the perpetual lunatic fringe, are quiet.

The real action and the real thought-provocation is coming from the institutional side. The BBA, for all its 19th century faults, is fostering greater transparency in the money market. Switzerland is leading the way on addressing "too big to fail." Europe is failing to achieve regulatory coherence, let alone excellence, revealing its fatal flaw as a potential reserve currency issuer. China is putting more eggs in the US basket and the US is at almost no risk of a ratings downgrade. The US president may be contemplating regulating the oil market and squashing the destructive speculation that has doubled the price of oil in just a few months, threatening the global economy.

Wow!

These are really big developments. The next chapter is the Fed meeting and everyone will be glued to the TV next Wednesday at 2:15 pm ET to hear whether the Fed is changing anything.

We guess it will not, and will issue a cautiously optimistic outlook.

On the whole, aside from some hot spots like Iran and N. Korea, things are actually looking pretty good, or at least better than they have looked in a long time. Don’t laugh, but in the New York region we have sunshine this morning for the first time in over a week, too. It has rained so hard for the past week that you can almost see the grass grow. If we were a gambling lady, we’d place a bet on the US stock market rising this morning, which should be US dollar-negative, of course. But more rain is forecast, so we can't predict anything about this afternoon going into the close. Again we counsel "just say no" to taking a position in the Foreign Exchange market, unles you can stick to the screen and keep your trade to under 30 minutes.

Pounds to US Dollars = 1.5512
Pounds to Euros = 1.1805
Euro to Pounds = 0.8465
Pounds to Australian Dollars = 2.0400

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

US Dollar Exchange Rates may be hanging on to gains today

Foreign Exchange - Currency Outlook

The US dollar exchange rate may be hanging on to gains today on a renewal of risk aversion as oil is dropping and stock index futures predict a rocky opening. Confidence in the US as economic and financial leader may be rising as the Obama Administration announces new regulations today. The euros to us dollar exchange rate is see-sawing in a narrow range and we are looking for a breakout.

Pounds to US Dollars = 1.5305
Pounds to Euros = 1.1752
Euro to Pounds = 0.8050
Pounds to Australian Dollars = 2.0600

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

the euro exchange rate is capped around 1.4620

Foreign Exchange - Currency Outlook



The drop in oil, commodity index, and equities yesterday could be the start of a bigger corrective move—or not. The Reuters-Jeffries CRB index closed down 2.24% after posting a 7-month high on Friday. Oil has doubled this year. Everyone pretty much agrees that such big price rises were unjustified on the basis of any sane review of fundamentals and driven by too much "green shoots" optimism. For the price correction to last only one day would be unusual, given the size of the move - but alas, not unheard of.

We tend to think the corrective move will continue but confess our reasoning is inductive - the giant sell-off in the Australian dollar, enough to break the trend channel. We hear from Australia that domestic conditions may look okay on the surface, but in reality, this is a lot of PR on the part of the government and regular folks are losing jobs and cutting back spending just as in the US. Old-timers say the Swiss franc is what leads the market, but we have found in recent years that it’s the A$, possibly because it’s a commodity currency and a high-yielder, to boot. If traders are dumping the Australian Dollar ezxchange rate maye it’s because they want less risk, whether funded by yen or US dollars.

The important point here is that the makret is equally divided between those who see the euros to us dollars at 1.4500-1.5000 and those who see it down around 1.2000-1.2500. As we wrote yesterday, it’s fairly easy to make the case for either scenario. What’s galling is that every day we get a reversal based on a new interpretation of Big Picture factors. This is unsustainable - isn't it? Technically, it’s hard to know what timeframe to look at. You get a totally different trading recommendation from the daily chart (sell euros) than from the hourly (buy euros) or the weekly, which also shows a rising trend. What may seem a false breakout in one timeframe is a legitimate breakout in another. It’s odd and unsustainable to have a sell signal in the Australian Dollar Rate but not to get the same signal to sell euros in pretty short order.

We are inclined to think the euro exchange rate is capped around 1.4620, about a two-thirds retracement of the big euro rate drop from 1.6037 last July at the height of crisis perception. But while we can make the argument for the dollar to recover to the end-Oct euro low around 1.2329, we don’t believe it, mostly because of the long-standing anti-dollar bias that uses any and every factor as “evidence” the dollar should be weak, even if the evidence points at exactly the opposite conclusion. For example, we just had China, Japan and Russia (well, the finance minister) offer powerful support for the US dollar as lasting reserve currency - but one comment by the Russian premier cuts it all down? This is not reasonable. The market’s response to European banking sector woes is equally lame. This is a big problem that the ECB is brushing off (and possibly under-counting), and the market is willing to let it go. We say prejudice is a powerful thing and the market finds it safer and more reliable to sell dollars when in doubt. It will take a shock, like a big equity/commodity correction, to change this bias, and even then, dollar rallies are shallow and short-lived.

From a trader’s persepctive, unless you can trade on the 10-minute chart, the wise thing is to stand aside. Trading on a 24-hour timeframe is proving to be too costly.



Pounds to US Dollars = 1.5305
Pounds to Euros = 1.1752
Euro to Pounds = 0.8050
Pounds to Australian Dollars = 2.0600



Bye For NowBarbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

US dollar exchange rate remains on the defensive for many reasons

Foreign Exchange - Currency Outlook

Today we get the producer price index, probably a rise on the commodity price improvement over the past month, according to Bloomberg, which sees PPI up 0.2% after a drop of 1.2% in March. The forecast range is -0.6% to +1%. Tomorrow it’s CPI, also probably a positive number. We also get the usual weekly jobless claims, probably a rise by 610,000 in the week ended May 9 from 601,000 a week earlier. A big chunk will come from the Chrysler closing. This reminds us of another Shock on June 1, the due date of General Motors reorganization plan. This is only two weeks away and yet it’s not causing a stir. Some say a bankruptcy by GM is not "systemic," but we say that politically, it sure is systemic.

We know that uncertainty over the timing and extent of recovery is in doubt, and now the stock and oil markets are pulling back in recognition of it. The price of gold went way up, breaking a downchannel, and closed at $925.50, triggering the perpetual forecast of $1000. The problem with pooh-poohing that forecast is that it’s probably correct if we believe that many economies, including the US economy, will by-pass deflation and head straight for inflation.

Nobody ever knows how long a correction will last or how far it will go. Now that risk-aversion is driving the foreign exchange traders to buy dollars again, we need to watch equity prices and oil to figure out what happens next. We guess that the stock indices will continue to drop and yesterday’s move was not a one-day event, but the US dollar exchange rate remains on the defensive for many reasons. Covering short US Dollar positions is not the same thing as buying dollars outright, from a sentiment point of view.

We need to be nimble.


Pounds to US Dollars = 1.5230
Pounds to Euros = 1.1158
Euro to Pounds = 0.8957
Pounds to Australian Dollars = 1.9999

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

German banks have $1.1 trillion in losses yet to be recognized

Foreign Exchange - Currency Outlook

Bloomberg has a story saying the US dollar exchnage rate wins whether it’s on the basis of risk aversion/ safe haven or the basis of FIFO (first-in, first-out). We are not so sure it’s that easy. For one thing, there is a component of market sentiment consisting of "confidence." Everyone likes Obama and the new robustness of Congress, with those saying they think the country is moving in the right direction at the highest level in 5 years. But criticism of the TreasSec Geithner is severe (that latest is that he's just a "bureaucrat") and it's not clear that the PPIPS program is a good one that will work. Alternatives are flying around the ether, and from reputable guys.

Meanwhile, Europe will be taking action at the policy meeting next week (May 7). The market has rewarded an active stance, paradoxically even if it entails a rate cut and what is really an admission of systemic failure by adoption of "unconventional measures." Unconventional measures are quantitative easing by another name, and we worry that the market will cheer the euro exchange rate when the ECB finally caves in and joins the rest of the developed world with both rate cuts and quantitative easing.

To complicate matters, we have more data and information this week than anyone can possibly absorb, let alone slot into a decent perspective. Tomorrow we get the Conference Board consumer confidence survey. We get first quarter advance GDP on Wednesday, along with a Fed policy meeting and the Treasury’s refunding announcement, which follows the Q2 and Q3 estimates the day before. Chrysler may declare bankruptcy on Wednesday ahead of the Thursday deadline for a deal with Fiat.

Wednesday is a day to stay in bed with your head under the covers.

The rest of the week is pretty awful, too. Thursday brings the first quarter Employment Cost index, a harbinger of the payrolls report on May 8. Friday gives us March factory orders, the April ISM report, and vehicle sales. Throughout all this, we continue to get earnings reports from all over the map. Considering that the stock market ended the week on an upbeat note, you have to wonder if US equity traders are just determined to plough ahead, refusing to be confused by any facts. The one fact that everyone plans to looks at is inventories. The idea has taken hold that if business inventories are really, really low, that's a good thing because it means business will soon start producing more.

We are suspicious of the US dollars move up on the swine flu story. We find the technical story more convincing, but of course a fresh fundamental can always trump the technicals. Since the stock markets seems determined to go up - while a related market, oil, is determined to go down on discouragement over the outlook - we have cognitive dissonance all over the place. The Foreign exchange market is where these controversies and conflicts get settled.

If the us dollar exchange rate continues firm today, that may mean the world is in worse shape than we thought last week. We are impressed by the story that German banks have $1.1 trillion in losses yet to be recognized. We have always said losses were being concealed in Europe. If this story is true and if it grows legs, we can see a good case for the dollar to recover in a more permanent way. Otherwise, watch out. The dollar can go back on the defensive in an hour.

Pounds to US Dollars = 1.4634
Pounds to Euros = 1.1143
Euro to Pounds = 0.8870
Pounds to Australian Dollars = 2.0444

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

we can see no fundamental basis for a stock market recovery

Foreign Exchange - Currency Outlook

The Empire State Index from the New York Fed summarizes the situation as well as anything - it was less bad in April at -14.65 from -38.23 in March. This is not as bad as the -30 that was forecast, which would have been less bad than March but by less than the actual really-less-bad number.

Got that?

Remember that in a diffusion index, +50 is the dividing line between expansion and contraction, so an outright negative is really, really bad, even one in the teens. The sensible way to put it is to say the economy is still contracting but at a slower pace, but that fails to disclose and describe the true condition, and let's people grasp at the straw of "less-bad."

Evaluating these numbers is a bit like reconciling a falling income statement with a contracting balance sheet. At some point the numbers have to go positive just because the earlier numbers were so low, but that doesn't mean conditions are good.

We sometimes criticize "stockbroker economics" for misrepresenting economic truth, and this is one of them. What equity and some commodity markets are missing is that "less bad" doesn't mean "good." We like to assume that P/E ratios actually mean something. How can stock prices be rising while earnings are, or should be, or will be falling? We don’t care about equity prices for their own sake, but because they are the canary in the coal mine for the US dollar exchange rate. Rising stock indices in the US feed rises elsewhere in the world, with the odd exceptional Event like UBS' earnings announcement yesterday (that affected European bourses but not the US market, or by a lot less).

In sum, we can see no fundamental basis for a stock market recovery. If - a big if - the market starts seeing it that way, equity indices should fall. At this point they are being held up by an inaccurate assessment of economic conditions and unrealistic hope. The only possible rebuttal of this idea is that the Empire State also reported the six-month outlook jumping to 33.10 in April from 3.14 in March. Let's say the hopes of the survey respondents for improvement in six months is accurate. Therefore for stocks to rise as a leading indicator is okay, right?

No.

Expectations are exactly what the word says - expectations, not actual evidence, let alone proof. And 33.1 is a minority. It means the majority did not see an improving outlook in six months.
"Improvement" is a funny concept in economics. While we like the metaphor of the economy being organic and more like an animal than a machine, in this case the patient has the plague. It is getting big doses of antibiotics and being kept clean, warm and fed, but "improvement" is like saying the patient hasn't died yet and white blood cells are hard at work. Not dying is the good thing. Is this overly pessimistic? Maybe, but being overly optimistic is foolish. As Keynes is reported to have said, "The market can stay irrational longer than you can stay solvent."

Seeing an imaginary bottom is dangerous to your financial health.

Assuming more bad news is yet to come, foreign exchange traders will buy dollars as the dollar should benefit, even if the news is not as horrendous as what we already have seen (think of what we have already seen as the diagnosis of plague). To judge degrees of horrendousness is not really useful. Europe declining to be sufficiently scared is noticeable, though.

Weirdly, we expect pounds sterling to recover because the worst of all possible bad news is getting released.

Pounds to US Dollars = 1.4900
Pounds to Euros = 1.1292
Euro to Pounds = 0.8850
Pounds to Australian Dollars = 2.0685

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial
Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

buy us dollars as it is in an uptrend against the euro exchange rate

Foreign Exchange - Currency Outlook

We will continue to get important data today and this week, including the TICS capital flow report, industrial production (probably a drop of 0.9% for the 14th month), CPI (probably a minor rise of 0.1% after 0.4% in Feb), and the Empire State manufacturing survey (probably a contraction to –35 from –38.2). But we think the battle between the banks and the government is the key event.

Tomorrow we get the JP Morgan earnings report, and on Friday, Citigroup earnings report and GE Capital. Next week it’s Bank of America, American Express, Ford Motor, Credit Suisse and Morgan Stanley.

We should assume that all of these try to put lipstick on the pig.

Then it becomes a test of analysts' ability, and the government's ability, to spot the cooked numbers. This is absolutely critical for the long-term health of the economy. Banks and industrial companies cannot be allowed to lie anymore in their financial reports.

The whole world believes US accounting reporting is corrupt, rigged, dishonest - pick a word.

And they are right.

The financial sector became powerful during the last two decades, accounting for 40% of total corporate profits and populating Washington with lobbyists and lawmakers beholden to them. A financial elite was formed that has hardly been tamed by the humiliation of a few, and government has been in thrall to the money-men, exactly the conditions that brought about reform in the 1930's. This time, the financial elite is resisting restructuring with amazing muscularity, mostly by scaring people into believing they are too big to fail and the status quo must be maintained. Alas, we are more like Japan than we thought in this respect. In Japan, the banks were and are cross-shareholders with industrial companies, hence too big to fail. In the US, the fear of financial market chaos vies with loathing of using public money to bail out the very elite that caused it. This is more than an economic or financial issue - it’s a social and political one.

Obama is walking a tightrope, indeed.

We think its time to buy us dollars as it is in an uptrend against the euro exchange rate and never mind that the reasons are unclear. The commodity currencies are also strong ,which if we believe conventional intermarket analysis, should be a US dollar exchange rate negative. But overriding it all is a renewed sense that this is indeed a global recession and it's foolish to think otherwise.

In that case, the US dollar is the safe haven.

Pounds to US Dollars = 1.5000
Pounds to Euros = 1.1370
Euro to Pounds = 0.8789
Pounds to Australian Dollars = 2.0777

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

The ECB has seemingly rejected quantitative easing even if it were allowable under treaty

Foreign Exchange - Currency Outlook

Not to be a prude, but we disapprove of a government not only encouraging speculation in dodgy assets, but lending money - lots of money - for the purpose. Moralizing aside, the release of the PPIP marks the beginning of the end.

The equity market is not wrong.

The commodity markets are not wrong.

FIFO is alive and well… the US was the first to go into crisis and recession, and will be the first out. The implications for the US dollar are not yet clear. The US dollar rate can still tumble on the inflation/currency debasement conventional wisdom, or come back on the idea that “it’s worse elsewhere.”

The question remains of whether it really is worse elsewhere. On the whole, we think yes, it is. Europeans are downplaying both the financial sector problems and economic consequences, and to deny is to delay. ECB policy member Likkanen threw out a few drops of cold water, saying the ECB still has room for conventional monetary policy actions (translation—rate cuts) and if the slump gets worse, it can also introduce additional "innovative instruments." Translation - nobody knows. The ECB has seemingly rejected quantitative easing even if it were allowable under treaty, so we don’t know what innovation Likkanen may have in mind. But it’s clear that slow as the US Treasury was to get remedial action going, Europe is farther behind. This is the perennial structural difference between the US and Europe, and it accounts for perennially slower growth in Europe, if greater social stability. If the euro exchange rate is getting support from a relatively higher interest rate structure and that is about to be reduced to a tiny margin if not to zero, what is support for the euro rate, again? Thus there is a small glimmer that the US dollars rise may not be over, once this corrective bouncing is over.

Pounds to US Dollars = 1.4579
Pounds to Euros = 1.0790
Euro to Pounds = 0.9268
Pounds to Australian Dollars = 2.0907

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790