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 The Greek situation will remain an important influence given an increase in underlying tensions and continued failure to reach agreement would increase fears over an eventual Euro-zone exit and widen underlying tensions. US growth prospects and Federal Reserve policies will also inevitably remain an important underlying focus after the forthcoming US payrolls data with a further debate surrounding interest rate increases.   Key events for the forthcoming week Date Time (GMT) Data release/event Friday April 3rd 12.30 US employment report Tuesday April 7th 04.30 Australia interest rate decision Wednesday April 8th 18.00 US FOMC minutes Thursday April 9th 11.00 Bank of England interest rate decision  Dollar: There will be further uncertainty surrounding Federal Reserve policy following the latest data releases. The manufacturing sector is liable to be subdued while the services sector and consumer spending are likely to be stronger given the trends in energy prices.  Overall, the Fed is still likely to stay on track for a rate increase within the next few months. In global terms, US dollar yield support should remain intact, especially given sustained downward pressure on Euro-zone yields.  The US currency will remain vulnerable to a significant correction given the favourable trends already priced in and strong bullish sentiment especially given the overall extreme positioning against the Euro.      The dollar held firm during the week, but was unable to move to fresh highs with confidence dragged down by further evidence of vulnerability in the economy. Fed Chair Yellen maintained her expectations that US interest rates would rise this year. There were important hints of caution with comments on the dangers of increasing rates too soon before real growth had become entrenched.  In contrast, there were also comments that the Fed should not wait for inflation to near the 2% target before raising rates as the overall balanced message continued   There were mixed US economic data releases with a much weaker than expected Chicago PMI index reading with only a marginal increase to 46.3 for March from 45.8 previously, maintaining some concerns surrounding the outlook. In contrast, there was a stronger than expected consumer confidence reading of 101.3 which was close to eight-year highs and should bolster expectations surrounding overall consumer spending. Latest ADP employment data was weaker than expected with an increase of 189,000 for March private-sector jobs following a revised 214,000 gain the previous month. The data will increase nerves surrounding Friday’s pivotal payrolls release, especially with uncertainty surrounding the weather impact. The ISM manufacturing data was also weaker than expected with a decline to 51.5 from 52.9 previously, the lowest for close to two years. Production was slightly stronger over the month, but the employment component dipped to 50.0. This release will increase doubts surrounding the manufacturing sector, although the equivalent Markit PMI survey strengthened to 55.7 from 55.3. The dollar dipped weaker following the releases, but was still resilient at lower levels, especially with no change in Fed rhetoric at this stage. Atlanta President Lockhart continued to refer to June-September as an appropriate time to raise rates while Cleveland head Mester who is a more hawkish member pointed to a potential June hike. The fastest growing market in London... Introducing The Oratory Apartments in London's regeneration programme. With Zone 3 prices 41% lower than Zone 2, this exclusive off-market Crossrail investment opportunity is one not to be missed. Click here to find out more and see why Canning Town is about to boom! Euro Overall Euro-zone growth indicators should remain firmer as the expansionary ECB monetary policy continues to have a positive impact. The central bank will maintain the bond-buying programme which will limit any Euro benefit as the overall yield structure will continue to encourage aggressive capital outflows. The Greek situation will remain an important focus with failure to reach a reform deal and a continued liquidity tightening in Greece increasing speculation that Greece will leave the Euro. Overall currency volatility is likely to remain significantly higher with the potential for a sharp position squeeze at times. Although the Euro was able to avoid major losses during the week, the currency continued to be sapped by overall yield considerations. It was unable to make a fresh attack on the 1.10 area against the dollar, but with support near 1.0700. There was a further decline in German unemployment for March, maintaining the run of robust German releases. There was also a rise in the annual inflation rate to -0.1% from -0.3% previously, but unemployment was higher than expected at 11.3%. There were further concerns surrounding the Greek situation with no agreement on proposed reform measures with Eurogroup representatives again unable to reach a deal on Wednesday. Although there were suggestions that deposit outflows had eased, there were still important concerns over the underlying situation. There were still important political reservations with German CSU member Gauweiler resigning from his post on protests over the Greek bailout programme. There was speculation that the government would not make the IMF payment due on April 9th. There were no major surprises within the revised Euro-zone PMI data with an overall modest upward revision to 52.2 from a flash 51.9 with slight improvements for the three biggest economies. Bond yields were again an important focus as German 5-year yields dipped further into negative territory at the 5-year auction while benchmark 10-year rates fell to record lows close to 0.15%. Yen:    Global yield trends will remain important with the further decline in Euro-zone and US yields providing net support for the yen. The Japanese currency will also gain some support when global risk appetite deteriorates. The Bank of Japan will maintain an expansionary monetary policy with some pressure for a further stimulus to be announced as inflationary pressures remain weak.  In this context, further yen weakness is likely over the medium term and capital outflows will tend to increase at the start of the fiscal year, undermining the yen. The yen was resilient during the week with a decline in overseas yields helping to curb short-term selling pressure despite longer-term concerns with the dollar unable to hold above the 120.00 level. Domestically, a slightly weaker than expected headline Tankan index was offset by stronger data from the non-manufacturing sector. The dollar dipped lower following the data, especially as there was a decline in Asian equities. There was, however, a stronger than expected Chinese PMI release which revived risk appetite. There will be expectations of increased capital outflows from Japan as the new fiscal year starts and the dollar edged back to the 119.70 area. The latest capital-account data recorded strong flows into overseas bonds which will tend to maintain underlying selling pressure on the Japanese currency. 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There will be important balance of payments vulnerability and political factors will also be negative ahead of the May 7th general election with concerns over potential capital outflows and near-term Sterling vulnerability.    Sterling was able to resist major losses during the week with solid economic data and concerns surrounding the outlook in other major economies with the Euro unable to make further headway above 0.7400 while Sterling held above four-year dollar lows with support below the 1.4700 level. Personal lending and mortgage approvals data was in line with expectations, but there was another weaker than expected release for money supply which will maintain underlying doubts surrounding monetary conditions. Consumer confidence edged higher to 4 from 1 previously and was the highest level for over 10 years which should support spending. Final fourth-quarter GDP data was stronger than expected with a 0.6% gain, supported by a stronger export performance, and 2014 annual growth was revised to 2.8% from 2.6%, the highest since 2008. The current account data was again weaker than expected with only a small deficit decline to GBP25.3bn from a revised GBP27.7bn previously. For 2014 as a whole, there was a current account deficit of GBP97.9bn, equal to 5.5% of GDP and the widest gap since records began in 1948. The latest manufacturing PMI survey was slightly stronger than expected at 54.4 from a revised 54.0 for February. This was the highest reading for eight months and there were some positive developments for exports with relative out-performance. Swiss franc: There is the potential for sustained capital inflows into the franc if Euro-zone stresses intensify further and Greece does exit form the Euro with tensions likely to be very high during the Easter period. The economy will also remain fragile on currency appreciation with exports under pressure. There will be pressure for the National Bank to intervene and weaken the currency, but it will remain extremely reluctant to target specific levels. Negative yields will continue to sap currency support when risk appetite is robust. The franc moved higher during the week with the dollar unable to make any impression on the parity area while the Euro lost further ground to lows near 1.0400 The Swiss PMI index remained in contraction territory despite a small monthly improvement to 47.9 from 47.3 and there was further domestic pressure on the National Bank to curb further franc appreciation.   The Swiss KOF business confidence index was stronger than expected at 90.8 from a revised 90.3 previously which eased fears surrounding an even steeper economic downturn with improved Euro-zone growth providing support. 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 The Australian dollar was put back on the defensive during the week as international developments remained generally hostile. Iron-ore prices continued to decline to fresh five-year lows which undermined the Australian currency with further concerns over the Chinese outlook. There was a slide to below the 0.7600 level against the US dollar and close to March’s five-year low. As far as the economic data is concerned, there was a slightly better than expected figure for building approvals while the manufacturing PMI index held below 50.0. The currency could gain temporary respite if the Reserve Bank holds policy steady, but there will be further concerns over weak commodity prices and net losses likely. Canadian dollar: The Canadian dollar initially weakened to lows near 1.28 against the dollar as oil prices were subjected to renewed selling before a sharp recovery towards 1.26 as the energy complex recovered ground. Canadian GDP data was slightly better than expected with a 0.1% decline for January compared with expectations of a 0.2%  decline under the impact of falling oil prices. Although a sustained recovery in oil prices would help support the Canadian dollar, there are likely to be important domestic reservations, especially surrounding housing. Indian rupee: The rupee initially was again broadly resilient against the US currency as it consolidated around the 62.50 level, registering its first quarterly advance in over a year. There was optimism surrounding an improved trade outlook and sustained capital inflows which continued to underpin the currency There was, however, also speculation that the Reserve Bank would look to prevent further gains to help protect export sectors, especially as the currency has appreciated strongly against regional rivals over the past year. Overall confidence in the domestic economy and rupee should hold firm. There will be little scope for rupee gains, especially given wider emerging-market tensions. 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 maintained a firm tone during the week and moved to the 7.7520 area against the US dollar as volatility remained lower. A decline in US bond yields helped ease tensions and the PBOC also maintained a strong tone for yuan. Concerns surrounding the mainland economy are liable to increase and could still undermine the Hong Kong currency as emerging-market volatility increases.   Chinese yuan: The yuan was again broadly resilient during the week and consolidated just stronger than 6.20 against the dollar with the PBOC continuing to resist currency depreciation. US Treasury Secretary Lew expressed important caution surrounding any yuan entry into the SDR basket. After a weaker than expected HSBC PMI reading, there was some relief with the small official improvement to 50.1 for March from 49.9 previously. Underling components were generally fragile and economic confidence remained weak. The PBOC announced that lending requirements on second homes would be relaxed to boost demand and the Shanghai stock market maintained a very strong tone under the influence of retail buying. Money market rates dipped to three-month lows with expectations of further monetary easing. The PBOC will deter speculation and maintain a firm yuan, but the underlying economic dynamics will make it increasingly difficult to resist notable depreciation.   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