Forex Trading

An expensive festive season cost the pound a net three cents against the Australian dollar and a net seven cents against the New Zealand dollar. It could have been worse: on Monday, while Britain was celebrating New Year’s Day, sterling was five cents down on the Aussie and 11 cents down on the Kiwi in comparison to pre-Christmas levels.

Sterling versus the Aussie

The spread trading markets saw the Australian dollar do well during the holiday period, taking advantage of investors’ renewed appetite for risk and high-yielding currencies. Its winning streak came to an end on Monday. Investors came to the conclusion that the widespread flooding in Queensland would have a serious impact on agricultural production and overall economic output.

Their misgivings about the Aussie were intensified when the Australian Industry Group’s performance of manufacturing index fell by more than a point in December to 46.3. Anything below 50 indicates a contraction in activity. Although inflationary pressures suggest rising interest rates in the foreseeable future, nervousness about the Australian economy is, for the moment, overriding the usual enthusiasm for higher yields.

Sterling versus the Kiwi

Despite appearances, the NZ dollar did not exactly have a free ride in the forex markets. Just before Christmas the figures for New Zealand’s third quarter GDP gave it a bit of a shock. Investors were steeled for a weak number, perhaps zero growth or a tiny increase, but the -0.2% they had to deal with was worse than most analysts had predicted.

The NZ dollar fell by about a cent on the news but it was only a minor dent in what was otherwise a solid performance by the Kiwi.

By MoneyCorp.

CFDs, Forex and Financial Spread Trading carry a high level of risk to your capital and can result in losses larger than your initial stake/deposit. These forms of trading may not be suitable for everyone so please ensure you fully understand the risks involved. Where necessary, seek independent financial advice.

GBP versus ZAR

UK inflation 3.3%, South African inflation 3.6%; UK Bank Rate 0.5%, South African repurchase rate 5.5%.

The pound fell steadily, losing 20 cents between Monday morning and Friday evening. It was off its lows when London opened this week but was still the net loser of 15 cents on the week.

Inflation was also one of the week’s main items for the rand. It edged upwards in November rising from 3.4% to 3.6%, higher than the 3.5% investors had been expecting.

As in Britain, food and beverages were a major contributor to the overall price increase. It now looks as though inflation is on the rise once again after the September cyclical low.

Standard Bank is predicting an average of 4.1% in 2011.

For those who wonder why the rand is so strong at the moment, consider the inflation/interest rate situations in Britain and South Africa.

UK inflation is 3.3% and the Bank Rate is 0.5%. That represents a negative real interest rate of -2.8%.

In South Africa the South African Reserve Bank’s “repo” rate is 5.5% and inflation is 3.6%, producing a real interest rate of +1.9%. Leave money in a sterling deposit account and you will lose money in real terms; put it into a rand deposit and its buying power will increase.

GBP versus CAD

Canadian dollar looking overvalued according to some analysts.

After a cent-and-a-half dip on Monday the pound staged a two-cent rebound before setting off lower again on Tuesday. It bottomed out the following day after a four-cent drop and spent the last two days of the week edging higher. By the time London opened on Monday the pound was wearing a net loss of two cents on the week.

At least two measures of Canadian industrial activity were able to show an improvement last week. Capacity utilisation rose from 76.% to 78.1% in the third quarter of the year. Manufacturing shipments were up by 1.7% in October, more than making up for the previous month’s -0.5% decline.

Although existing home sales were up for a fourth successive month their number was still appreciably lower than the near-record levels last year.

The Canadian dollar benefited from improved risk appetite among investors in the early part of the week but analysts now argue that the currency is overvalued by something like 15% as a result of its 20% climb over the last two years.

By MoneyCorp.

CFDs, Forex and Financial Spread Trading carry a high level of risk to your capital and can result in losses larger than your initial stake/deposit. These forms of trading may not be suitable for everyone so please ensure you fully understand the risks involved. Where necessary, seek independent financial advice.

The Markets This Afternoon:

It was rather flat day in all, the FTSE100 has gained 30 points, Dow Jones is flat and S+P is down 2 points. Most of today’s rise has been in the FTSE.

With lack of economic data, there is little to drive markets today. Perhaps the main theme has been inflation: Bernanke’s comments that he could increase the next round of asset purchases above the $600 mark is increasing the likelihood of inflation and devaluing the dollar.

A potentially devalued dollar has in turn lead to a rise in precious metals – Silver hit a 30 year high and gold neared its all time peak of $1424.1. Silver just below the $30 a troy oz mark.

Inflation is becoming a real problem, especially in China, where they are seen vegetable prices rise 20% – in a month.

No wonder precious metals keep on rising.

The Markets This Morning:

It’s a subdued morning despite some potential takeover activity. Due la rue, who prints banknotes, has had a speculative offer, and Riversdale, the Australian miner, is in talks with Rio Tinto.

Desire petroleum’s bad luck continues, its “find” announcement Friday transpires to be a duster. Dominium petroleum has plugged its field in Tanzania.

Markets are perhaps a bit softer as the strong words of unity last week by Trichet are showing some signs of cracks – Ministers at odds over the potential Launch of E-bonds (bonds issued by Eurozone) makes all to clear that tensions of how to deal with Europe’s problems could further escalate.

The Germans seem least keen on the idea, mainly in reality an E-bond will be German debt, and expected to offer an extra premium – which would make the Bund less attractive to investors.

It is quiet on economic data front, at present Dow futures are showing down 25 points and S&P futures are down 4 points.

Article by Spreadex.

CFDs, Forex and Financial Spread Trading carry a high level of risk to your capital and can result in losses larger than your initial stake/deposit. These forms of trading may not be suitable for everyone so please ensure you fully understand the risks involved. Where necessary, seek independent financial advice.

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With the UK GDP growth provisionally confirmed at 0.8% in Q3, Australian figures are due to be released this week and are likely to be lower. The New Zealand dollar is still struggling on the down of the country’s credit outlook just over a week ago.

The spread trading markets saw sterling and the Australian dollar roughly keep pace with one another, remaining within a two-cent range. At this week’s opening in London on Monday, they were almost unchanged against each other on the week.

A three-and-a-half cent range rather overstated the movement of sterling against the Kiwi last week. Most of the activity took place within a two-cent channel and the net change on the week was a one-cent improvement for sterling.

GBP versus AUD

If it was a dull week for UK economic statistics it was a deathly quiet one for Australian data. Construction work done in the third quarter fell by -2.1% after rising by 4.5% in Q2 and private capital expenditure over the same period increased by 6.2% after falling by -4.0% the previous quarter.

This morning the Housing Industry Association announced a 2.4% increase in new home sales after a -1.7% decline in September. Three steps forward and three steps back (not necessarily in that order) provided no useful guidance for investors.

With no figures to send it one way or the other the Australian dollar was left to struggle with the financial markets’ misgivings about North Korea firing artillery shells at the south and the imminent demise (according to some normally serious commentators) of the single European currency. In a week during which investors were rushing for the safety of the US dollar, the yen and the Swiss franc the commodity-oriented Australian dollar was never going to have a load of fun. And it didn’t.

The key statistics this week are purchasing managers’ indices from around the world – important indicators of where economies are heading – and Australia’s third quarter GDP figures, forecast to show growth of 0.5%.

GBP versus NZD

After last Monday’s unexpected and unwanted credit outlook downgrade from Standard & Poor’s New Zealand enjoyed a quiet and low-key week in the CFDs trading markets. The sole economic statistic was the Reserve Bank of New Zealand’s survey of consumers’ expectation inflations. At 2.6% the outlook was unchanged from three months’ earlier.

With no figures to send it one way or the other the NZ dollar was left to fester about its “negative” credit rating prospects. Oh, and of course the financial markets’ misgivings about North Korea firing artillery shells at the south and the imminent demise of the single European currency (according to some normally serious commentators).

In a week during which investors were rushing for the safety of the US dollar, the yen and the Swiss franc the commodity-oriented NZ dollar was never going to have a load of fun. And it didn’t, despite business confidence rising from 23.7 to 33.2 in November.

The key statistics this week are purchasing managers’ indices from around the world – important indicators of where economies are heading – and New Zealand building permits and commodity prices. It is unlikely that any of the figures will be astonishing enough to alter entrenched opinions. Buyers of the New Zealand dollar should continue to hedge half their requirement.

By MoneyCorp.

CFDs, Forex and Financial Spread Trading carry a high level of risk to your capital and can result in losses larger than your initial stake/deposit. These forms of trading may not be suitable for everyone so please ensure you fully understand the risks involved. Where necessary, seek independent financial advice.