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 twin themes of Greek negotiations and Federal Reserve policy will continue to dominate sentiment. Any successful Greek deal would provide immediate Euro support, although confidence could fade quickly with a debt default would risk at least a temporary spike lower. The dollar will be hampered by diminishing Fed tightening expectations, but sentiment could shift quickly if there is evidence of improving US conditions.   Key events for the forthcoming week Date Time (GMT) Data release/event Tuesday May 5th 08.30 Reserve Bank of Australia rate decision Wednesday May 6th 08.30 UK PMI index services Thursday May 7th   UK general election Friday May 8th  12.30 US employment report Dollar: Confidence in the US outlook will remain weaker in the short-term following a run of disappointing data. There will still be expectations of a significant net improvement in the second quarter, especially with consumer spending set to advance. The Federal Reserve will now wait to assess economic developments with any forthcoming moves remaining strongly data dependent. Although market expectations over the timing of higher rates has been moved back further, there could still be a rapid shift in sentiment. The dollar overall should still find solid buying support on dips given policy developments elsewhere.      The dollar came under strong selling pressure against the Euro during the week with the biggest monthly losses for four years while it was more resilient elsewhere. Volatility was an important market feature on Thursday with sharp moves across all asset classes including currencies. There was an important element of month-end positioning with the on-going monetary-policy debates also important. Consumer confidence weakened significantly to 95.2 from an upwardly-revised 101.4 previously. There was also some deterioration in employment readings which will create some concerns surrounding the employment situation. The US Markit PMI services-sector index declined to 57.8 for April from 59.2 previously, although this was still significantly above the long-term average. The employment component increased at the strongest rate since June 2014 and the increase in costs was the highest since September 2014.   There were expectations of a weak first-quarter US GDP release and the actual data was even worse than expected at 0.2% from 2.2% the previous quarter. The commerce department blamed the usual culprits of adverse weather and west-coast port shutdown, but there was a further underlying deterioration in confidence. As expected, the Federal Reserve left interest rates on hold following the latest policy meeting. The statement acknowledged that growth had been weaker during the first quarter, but with references to this weakness being due to transitory factors. There were comments that the pace of job gains had slowed while the levels of underutilisation in the labour market was little changed. There was no specific references to the timing of any rate increase with the issue being data dependent. The Fed would lift rates when there had been a further labour-market improvement and the committee was reasonably confident that inflation was moving towards the 2% target level. From a longer-term perspective, there were comments that even when the Fed has achieved its mandate goals, it may be appropriate to keep rates below levels considered normal. There was relief in later US data with jobless claims falling sharply to 262,000 in the latest week from a revised 296,000 which was the lowest rate since 2000. There was also a 0.7% quarterly gain for the employment cost index with a 2.6% annual gain compared with a rate of 1.8% the previous year. Evidence of a stronger labour market helped offset the impact of disappointing spending data. The Chicago PMI index also recovered back above the 50.0 level. FCA regulated advice in FX, Gold and Silver Beta 2 is proud to offer personalised FCA regulated advice, completely tailored to your requirements. Attempting to yield returns in any climate, this is exclusive to ADVFN users! Click here to learn more! Euro There will be further confidence surrounding improved economic conditions in the short-term as monetary policy takes effect and deflationary pressures ease. Any Euro benefit will be limited ECB bond buying which will maintain overall downward pressure on yields.  The Greek situation will continue to be watched very closely with pressure continuing to build as the Athens government struggles to finance forthcoming payments. There will be further speculation over a default and potential eventual Euro-zone exit. Any resolution could provide a further sharp Euro boost and there remains an important risk of a squeeze on short positions, but rallies are still likely to attract selling interest. The Euro moved sharply higher during the week with moves triggered in part by a second-successive surge in Euro-zone bond yields. The benchmark 10-year German rate increase to 0.39% with sharp gains across the spectrum and the Euro pushed to two-month highs just below 1.1250 with further evidence of a short squeeze. Greek negotiations remained an important feature following the Eurogroup’s failure to reach a deal last week. There was a reshuffle of the Greek government’s negotiating team with confirmation that Finance Minister Varoufakis would have a less prominent role, at least in public. The government also indicated it was more willing to offer concessions on privatisations with the moves helping to bolster optimism that some form of deal could be reached, although there was still a high degree of uncertainty. Prime Minister Tsipras’ warning that a referendum could be called on any deal which drew a cool reception from Eurogroup officials. Latest Euro-zone money supply data was stronger than expected with a 4.6% annual gain while annual private lending also registered an annual increase for the first time in 32 months. The data maintained optimism that the ECB monetary policies were improving monetary transmission and supporting the growth environment. There were no surprises with the Euro-zone data as flash inflation for April met the consensus forecast at 0.0% with the core rate also unchanged at 0.6% while there was a further 8,000 fall in German unemployment. Euro-zone unemployment as a whole was unchanged at 11.3% while the Italian jobless total rose to 13.0% from 12.7%. Yen:    The Bank of Japan held policy unchanged at the latest meeting and is likely to be cautious over sanctioning even more aggressive quantitative easing even with evidence of a further weakening in inflationary pressures. There will still be expectations of medium-term fundamental-based yen losses. Although the trade position has improved, export competitiveness will also need to be sustained. Global yield trends will remain important and the yen will be much more vulnerable to selling pressure if there is any sustained increase in US and Euro-zone yields over the next few weeks. The dollar found support on approach to 118.50 against the yen before moving back towards the 120.0 level as the yen fell sharply on the crosses with the Euro above 134.   Although production fell for March, the decline was smaller than expected. The Bank of Japan left policy on hold following the latest policy decision with an 8-1 vote. There had been some speculation that there would be further easing at this meeting and the yen gained fresh support following the announcement. Tokyo core inflation declined to 0.4% from 2.2% as last year’s tax increase came out of the calculation while unemployment edged lower to 3.4% and household spending fell slightly less than expected at 10.6%.  There was another weak reading for average earnings and underlying confidence in the domestic outlook remained fragile. 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.  Sterling Political developments will tend to dominate in the short-term with continuing uncertainty over the May 7th election outcome with the risk of a deadlocked result and unstable coalition government. There will also be further concerns surrounding the balance of payments situation and risk of financing difficulties if international sentiment deteriorates significantly. The Bank of England will be free to comment on policy once the election has been concluded and there will be some speculation over an earlier increase in rates which would provide near-term Sterling support even with inflation near zero.    Sterling was influenced primarily by international currency shifts with substantial gains to the 1.55 area against the dollar before a significant correction while there were losses to beyond 0.7300 against the Euro. Headline UK first-quarter GDP data was weaker than expected with a 0.3% quarterly advance compared with expectations of a 0.5% gain with the annual increase also well short of expectations at 2.4%. Services moved modestly higher, but there were quarterly contractions for both industry and construction. The data will dampen expectations surrounding the overall growth outlook and will also raise fresh concerns surrounding a lack of economic balance. There was a stronger release for mortgage approvals which maintained some confidence surrounding the housing outlook. The CBI retail sales survey was weaker than expected at 12 from 18 the previous month, but with little overall impact as attention was focussed elsewhere while consumer confidence held steady. CBI industrial orders moved lower to 1 for April from 4 previously with the manufacturing sector still struggling to make much headway. Political factors continued to be watched very closely with the election due next Thursday and opinion polls still showing no sign of a breakout in any direction. There was unease surrounding the post-election instability risks with volatility liable to increase, but no clear market impact. Swiss franc: Confidence in the economy will remain fragile in the short-term, but an improved euro-zone outlook should provide some degree of relief. Greek developments will continue to be watched very closely in the short-term and any escalation in tensions could trigger renewed capital flows into the Swiss currency, especially if there is a default. There will be further pressure on the National Bank to resist franc gains and help protect the economy. The Euro make headway against the franc during the week without being able to sustain moves above the 1.0500 level. The dollar pushed to highs near 0.9450 before dipping back below 0.9350. There was some speculation that the National Bank had been intervening to weaken the currency while some slightly greater optimism surrounding the Greek situation curbed immediate defensive franc demand. The KOF business confidence index weakened to 89.5 for April from a revised 90.9 previously, maintaining concerns surrounding the outlook and recession risks. 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 subjected to high volatility over the week with strong mid-week gains to a peak above 0.8050 against the US currency before a retreat back below 0.7900.  There were sharp fluctuations in the US currency and underlying unease over the Chinese outlook continued despite a rebound in iron-ore prices. Data releases had no major impact over the week while Reserve Bank of Australia Governor Stevens was generally cautious over the possibility of further interest rate cuts with caution ahead of next week’s policy meeting   RBA policy will be important with speculation over another rate cut which would tend to weaken the currency with concerns surrounding China’s outlook also likely. Canadian dollar: The Canadian dollar again exhibited sharp moves during the week as it briefly regained the 1.2000 level against the US currency before weakening again. There was support from a further net recovery in oil prices to 2015 highs. Bank of Canada Governor Poloz remained slightly more optimistic surrounding the outlook, but the latest GDP data was again disappointing. Although the Canadian dollar will find near-term support from higher oil prices and a more optimistic Bank of Canada tone, any further gains are liable to be limited. Indian rupee: The rupee dipped to four-month lows around 64.00 against the dollar during the week before recovering back to the 63.50 area in choppy conditions with no clear evidence of central bank intervention at this stage. There were further concerns surrounding capital outflows associated with retrospective taxation which unsettled the currency. A weaker US currency provided net relief over the second half despite continuing uncertainty over wider emerging-market trends with concerns over a lack of liquidity in key markets. The rupee has been unable to make significant headway even when the dollar came under wider pressure and it will be difficult for the currency to make sustained gains. Free Expert Signals & Exclusive Bonus It’s common knowledge that successful trading requires being connected to professional analysts. Sunbird FX is excited to offer you FREE market signals today with your registration, and exclusively for ADVFN users an added 30% start up bonus Click here to get started! Hong Kong dollar The Hong Kong dollar continued to trade near the 7.7500 strongest limit during the week, although was some evidence of an easing of pressure with the HKMA not having to intervene as aggressively. There was still evidence of capital flows into the local bourse with further capital inflows.   Further intervention may well be required to maintain the currency peg if equity inflows continue, but serious stresses on the peg should still be avoided at this stage.   Chinese yuan: There was an increase in yuan volatility during the week, but net moves were still limited with the dollar just stronger than 6.20. There was also further evidence of net capital outflows with the central bank having to intervene to maintain stability before activity declined ahead of the May 1st national holiday. There were further expectations that the PBOC would relax monetary policy further to help underpin the economy. The PMI manufacturing data was close to expectations at 50.1 for April while the non-manufacturing index retreated to 53.4 from 53.7, equalling the lowest level since early 2012. The PBOC will continue to resist more than limited short-term yuan losses. Regional pressures and overall economic trends still make long-term depreciation likely.   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