Weekly Forex Currency Review

ADVFN III Weekly FOREX Currency REVIEW   Global Forex News from ADVFN Supplied by advfn.com   New Forex Platform Coming Soon From ADVFN ADVFN has been working behind the scenes on a new forex platform. It features a cutting edge user interface, probabilistic analysis and a new way of looking at forex trades. If you would like to help us develop the product further please click here Weekly Market analysis Monetary policies will continue to be watched very closely in the short-term with an adjustment in interest-rate expectations following the most recent statement. The ECB and Bank of Japan will continue to pursue aggressive monetary policies over the next few months with markets uneasy over the potential for competitive devaluations and interest-rate cuts. With persistent Greek concerns, overall volatility is likely to remain higher.   Key events for the forthcoming week Date Time (GMT) Data release/event Tuesday March 24th 09.30 UK consumer prices Tuesday March 24th 12.30 US consumer prices Wednesday March 25th 12.30 US durable goods orders Dollar: Confidence in a June interest rate increase has been dented by relatively dovish Fed comments in the latest statement. The Fed however, remains the option to raise rates at forthcoming meetings and sentiment will switch rapidly again if incoming data releases show stronger growth and increased underlying inflation. In relative terms, the US should continue to out-perform and the US is likely to tighten relative to other major economies. Overall yields will attract inflows, although this could be offset by overseas central bank bond selling. The dollar will remain vulnerable to corrections, but should have a firm underlying tone.      The dollar pushed to fresh 12-year highs early in the week with the trade-weighted index above the 100 level before being subjected to a violent correction. The US New York Empire manufacturing index was slightly weaker than expected at 6.9 for March from 7.8 previously.  There was a weaker than expected industrial production reading of 0.1% after a revised 0.3% decline the previous month while capacity use was weaker than expected maintaining some growth-related doubts. There were no surprises with the Fed decision as rates were left on hold and the statement removed references to being patient on raising interest rates. There was a slightly more cautious outlook on growth prospects and members saw slightly greater slack within the economy, although this may only be temporary. While inflation was also below target, members expected a gradual return to target and  the evidence still suggested that under-utilisation in the labour market had fallen further. The statement suggested that a rate increase was unlikely at April’s meeting with an increase seen as appropriate once the Fed is more confident over inflation meeting its 2% target. There was a significant downward revision to the interest-rate projections with the expected end-2015 rate lowered to 0.625% from 1.125% previously while there were some underlying concerns surrounding the dollar. Dovish elements within the statement and Yellen’s testimony had a significant impact on yields and a lowering of interest-rate expectations with most institutions not expecting a tightening in June even though the Fed has not ruled this out. The dollar dipped lower with the Euro initially moving to the 1.0800 area and there was then an aggressive short squeeze which briefly pushed the Euro above the 1.1000 level before the US currency found fresh support. US jobless claims data was slightly better than expected with a decline to 291,000 in the latest week from 290,000 previously which maintained underlying confidence in the labour market. The Philadelphia Fed index was weaker than expected at 5.0 from 5.2 previously, although underlying components were little changed and the data overall provided little in the way of fresh direction. Chicago Fed President Evans maintained his preference for the increase in interest rates to de delayed given the low-inflation outlook, but he is at the dovish end of the Fed spectrum and comments will remain under close scrutiny. FREE ADVFN Seminar: Introduction to FX and Level 2 Trading Wednesday 25th March at The Phoenix Club, London. Forex Trading plus an introduction to Level 2 data! Click here find out more Euro The ECB bond-buying programme will maintain underlying downward pressure on bond yields and the negative deposit rate will also continue to have an important impact in generating sustained capital outflows. There will be grater optimism surrounding growth and there is a substantial current account surplus which will slow and further Euro decline. The Greek situation will continue to be monitored very closely and there is still a very important risk of a Euro-zone exit given the underlying tensions. The Euro will correct sharply at times, but is likely to weaken further over the medium term. After a slide to 12-year lows below 1.0500, the Euro was able to secure a technical recovery. There was greater caution over Euro selling after the very rapid losses, especially after Bank of Italy Head Visco stated that the Euro’s decline had been faster than expected which increased speculation that ECB officials be wary over further very sharp currency declines on a short-term view.  The Greek situation remained an important underlying focus with further tough rhetoric between Greece and Germany. Markets were extremely uncertain surrounding the underlying dynamics, especially as it will ultimately be a political decision from Chancellor Merkel whether to let Greece leave the Euro-zone. The Greek government promised fresh reform measures as underlying tensions remained high while there was a further exodus of funds from the Greek banking sector. There was a bigger than expected allocation in the latest ECB TLTRO at close to EUR98bn compared with an expected EUR40bn which maintained expectations of a more robust lending environment which would tend to boost economic activity. The Euro was still undermined by the overall yield structure and ECB bond buying which continues to trigger net capital outflows. Other data had no major impact. Yen:    Japan will tend to remain out of the limelight in the short-term with attention focussed on the Euro-zone and Fed policy. The Bank of Japan will maintain an aggressive monetary policy which will maintain underlying yen selling pressure and there will also be pressure to maintain competitiveness, especially if there is wider depreciation for Asian currencies. The overall rate of yen losses is likely to remain slower given the sharp decline in yields elsewhere. The dollar was unable to make fresh impression on the yen during the week with resistance above the 121.50 level. Regional currency policies will remain an important focus in the short-term and China’s PBOC move to push the yuan stronger will tend to limit the potential for near-term yen losses. The latest Japanese trade data was better than expected with a seasonally-adjusted JPY0.64trn February deficit as import demand was undermined by lower oil prices while exports secured a modest gain which will lessen demands for yen weakness. The Bank of Japan held policy steady at the latest policy meeting with the annual JPY80trn bond-buying programme sustained. Inflation forecasts were lowered due to the impact of falling oil prices which will maintain internal pressures for a more aggressive policy. There were concerns over bond-market volatility in the latest Bank of Japan minutes and some commentary that the bank shouldn’t rush to meet inflation targets, although the overall impact was limited as Governor Kuroda maintained the commitment to further policy action if required FREE FX Trading Webinar Authentic trading education -- See what they're saying about the MAX Trading System REGISTER HERE for FREE copy of our webinar, plus valuable BONUS GIFTS Sterling Political factors will be important with Sterling vulnerable to selling on fears over election deadlock in May. There should be further solid growth in the short-term with solid demand gains as low inflation boosts confidence. The Bank of England remains wary over potential inflation pressures from a tightening labour market, but is also uneasy over the risk of imported deflation via low energy prices and Sterling strength against the Euro. In this environment, the central bank will be very reluctant to tighten policy and deflation shocks could trigger a loosening as the bank engages in the currency wars.   Sterling partially reversed recent gains against the Euro with a move back above 0.7200 while there was a decline to five-year lows below 1.4700 against the dollar before a sharp corrective recovery.   The latest UK claimant count data was close to expectations with a further decline of over 30,000 for February while unemployment edged lower, although the rate was unchanged at 5.7%. Principal attention focussed on the earnings component which was significantly weaker than expected at 1.8% from 2.1% previously. The data dampened expectations of a tighter labour market which will also ease pressure for higher interest rates. The latest Bank of England minutes again stated that the case for higher interest rates was finely balanced. There were, however, also comments that further Sterling strength would undermine inflationary pressures and strengthen the case for leaving interest rates on hold for longer. There were potentially important comments from Bank of England MPC member and Chief Economist Haldane. There were further references to potential risks of deflationary pressures being imported with his personal view that inflation risks were to the downside. He also commented that the risk of interest rates being raised or cut were roughly balanced which was a significantly more dovish interpretation than from other members. There was no major reaction to Chancellor Osborne’s budget with most significant measures pre-announced, but higher growth forecasts offered some Sterling support Swiss franc: There is the potential for sustained capital inflows into the franc if Euro-zone stresses intensify further. The economy will also remain very fragile in the short-term as the franc shock continues to reverberate through the manufacturing and tourism sectors. There will be further pressure for the National Bank to relax policy to combat recession and deflation pressures. Negative yields will sap currency support when risk appetite is robust. The Swiss National Bank left interest rates on hold at -0.75% following the latest policy meeting and there were no fresh moves to impose any franc limit or ceiling. Bank Chairman Jordan again warned that the could intervene in the market, but declined to comment further on bank interventions. Given that there had been some expectations of a cut in rates, there was some shift in expectations and the franc strengthened following the decision as the Euro retreated back below 1.0550 against the Swiss currency. The dollar was also unable to regain parity and settled near the 0.99 level. The ZEW business confidence index recovered to -37.9 in the latest survey  from -73.0 previously, easing immediate fears surrounding a prolonged downturn Join over 1000 Top Finance professionals in the forex industry's most important event. Forex Magnates London Summit 2014, Nov 18-19, Reserve your seat today! Click Here Australian dollar Australian dollar moves were dominated by global policy moves during the week. The currency rallied strongly following the US Federal Reserve statement before reversing course and losing most of the gains to settle near 0.7600 against the US dollar. Domestically, the Reserve Bank minutes stated that interest rates could be cut further, but there was little in the way of fresh information. The Australian dollar will remain vulnerable on fears over  a protracted Chinese downturn and weak commodity prices with only limited corrective recoveries.   Canadian dollar: The Canadian dollar was again subjected to very high volatility during the week. Initial selling pressure was compounded by a renewed decline in oil prices to near six-year lows. The currency then rallied very strongly following the Federal Reserve statement with gains beyond the 1.2500 level before weakening once again. The domestic data was weaker than expected with sharp declines for manufacturing and wholesale sales for the month. Oil prices will continue to have an important short-term impact in curbing Canadian dollar support with The housing sector also an important underlying concern. Indian rupee: The rupee remained vulnerable over the first half of the week with the twin themes of US dollar strength and emerging-market vulnerability. The Fed statement triggered a significant reversal and the rupee strengthened to two-week highs near 62.50 Net capital-account trends continued to provide some degree of protection with net inflows of just over US$11.5bn do far during 2015. Overall confidence in the domestic economy and rupee should hold firm. US Fed policies and wider emerging-market concerns maintain the risk of net losses. PROVEN Trading Strategy - Currently running at 70% success rate Earn a tax free income trading, from just 20 minutes a day – no experience needed.  Our powerful trading software will help you decide when to enter trades and how to maximise profits. Register for a FREE brochure and trading guide, Click Here.  Hong Kong dollar The Hong Kong dollar dipped sharply to lows beyond 7.77 against the dollar  during the first half of the week as wider dollar gains and emerging-market stresses had a significant impact. There was support at lower level and a recovery back through 7.76 following the Fed statement. There were still important concerns surrounding the mainland Chinese outlook Concerns surrounding the mainland economy are liable to increase and could undermine the Hong Kong currency as emerging-market volatility increases.   Chinese yuan: The yuan was again broadly resilient during the first part of the week and then moved to three-month lows beyond 6.20 against the US currency. There were further concerns surrounding a slowing economy and risk of capital outflows, especially after a run of disappointing data releases. There was speculation over further medium-term losses, especially with hints that monetary policy will be relaxed further. From a shorter-term perspective, the PBOC was looking to deter any increase in speculation by setting a string of higher fixes. The PBOC will continue to deter speculation and oppose sharp yuan losses, but the economic trends and looser monetary policy are likely to weaken it significantly.   New ADVFN Service - FREE Reports Get your free report on Isa's, Investment Trusts, Funds, Sipps Travel and Cars - FREE and Easy service CLICK HERE     To unsubscribe from this news bulletin or edit your mailing list settings click here. Registered Office/Accounts Dept: Suite 27, Essex Technology Centre, The Gable, Fyfield Road, Ongar, CM5 0GA. Customer Support +44 (0) 207 0700 961. Company registered in England and Wales: Number 2374988 VAT No. GB 549 2130 49