FXCM - FXCM.com

[FXCM-PR Rep]

Euro, British Pound Weakens Against U.S. Dollar as Risk Aversion Takes Center Stage

Risk aversion swayed the currency market during the overnight session, with the euro breaking below the 20-Day SMA (1.2208) to reach a low of 1.2177, and the drop in sentiment is likely to drag the single-currency lower going into the U.S. trade as equity futures foreshadow a lower open for the North American market.

Talking Points
• Japanese Yen: Rallies Across the Board
• Pound: U.K. Mortgage Approvals Hold Steady in May
• Euro: Economic Confidence Unexpectedly Improves
• U.S. Dollar: Consumer Confidence on Tap

Meanwhile, European Central Bank board member Ewald Nowotny maintained a dovish outlook for price growth and sees limited risk for inflation in Austria, and pledged to reduce foreign currency lending in Eastern Europe at a briefing in Vienna.

In addition, Mr. Nowotny argued that the tax plan for Hungarian banks are “way out of proportion” as it accounts for a “very high” proportion of GDP, and went onto say that the Governing Council will maintain its exit strategy as the central bank takes the appropriate steps to avert a credit crunch. However, as the governments operating under the single-currency struggle to manage their public finances and plan to tighten fiscal policy, the strains within the real economy could lead the ECB to support the economy over the coming months as it aims to balance the risks for the region. As a result, market participants may continue to sell the euro as the debt crisis weighs on the outlook for future growth, and the exchange rate may fall back below 1.2000 over the near-term as it breaks out of its narrow range from earlier this month. Nevertheless, economic confidence in the Euro-Zone unexpectedly increased in June, with the index rising to 98.7 from 98.4 in the previous month, while the gauge for business sentiment held steady at 0.37 following an upward revision in the April reading.

The British Pound halted the two-day rally and slipped to a low of 1.5012 during the European trade as investors scaled back their appetite for risk, but we may see the GBP/USD maintain the near-term rally from the may lows as policy makers in the U.K. turn increasingly hawkish. However, a report by the Bank of England showed mortgage approvals increased 49.8K for the second consecutive month in May amid forecasts for a 51.0K rise, while consumer credit increased GBP 0.3B during the same period to top expectations to a GBP 0.1B expansion, and the mixed batch of data could lead the central bank to maintain a neutral policy stance over the coming month as it aims to encourage a sustainable recovery. Nevertheless, mounting price pressures have certainly become a growing concern for the MPC, and BoE board member Andrew Sentance may continue to go against the majority as the stickiness in prices raises the risks for inflation.

The U.S. dollar gained ground against most of its major counterparts following the rise in safe-haven flows, while the Japanese Yen rallied across the board, which pushed the USD/JPY to a low of 88.52. As investors scale back their appetite for risk, the drop in market sentiment is likely to carry into the North American trade, and a drop in U.S. consumer confidence could fuel risk aversion throughout the day as investors weigh the prospects for a sustainable recovery in the world’s largest economy. The Conference Board’s gauge for household sentiment is expected to fall to 62.5 in June from 63.3 in the previous month as the nation struggles to emerge from the worst recession since the Great Depression, and the ongoing weakness within the private sector may lead the Fed to support the economy throughout the second-half of the year as Chairman Bernanke maintains a dovish outlook for future policy.

Will the BoE Look To Normalize Policy Later This Year? Join us in the Forum

Related Articles:

Forex Weekly Trading Forecast - 06.28.10

To discuss this report contact David Song, Currency Analyst: [email protected]

 

[FXCM-PR Rep]

Forex Options Markets Warn of Euro, US Dollar Volatility

Recent forex market moves have led to a sharp advance in forex options market volatility expectations, making short-term forecasts especially difficult and warning of large US Dollar moves ahead. Shifts in FX Options risk reversals have been especially dramatic in fast-moving pairs such as the British Pound/US Dollar and US Dollar/Swiss Franc.

Recent forex market moves have led to a sharp advance in forex options market volatility expectations, making short-term forecasts especially difficult and warning of large US Dollar moves ahead. Shifts in FX Options risk reversals have been especially dramatic in fast-moving pairs such as the British Pound/US Dollar and US Dollar/Swiss Franc. In both cases, our benchmark breakout-style risk reversals trading system would have gone short the US Dollar amidst noteworthy declines. Forecasts for the Euro are admittedly much more difficult to determine, however, and it will be critical to watch the next moves in the Euro/US Dollar currency pair.

Read a how-to guide on understanding our Forex Options Weekly Forecast report or view a video on the same. Discuss outlook for individual currency pairs in our forex forums.

Euro/US Dollar Options Analysis

Extremely choppy Euro/US Dollar price action has produced similarly indecisive shifts in FX Options and Futures sentiment, making short-term forecasts difficult. Medium-to-long-term bearish momentum and net-short COT Non-Commercial futures positioning leaves broader trends in favor of EURUSD losses. Yet a more recent bounce in Forex Options Market risk reversals show that many traders are betting on and hedging against short-term EURUSD gains. If anything our bias remains weakly bullish, but we prefer to wait for clarification in trends before taking a stance with more conviction.

British Pound/US Dollar Options Analysis

Impressive British Pound strength has been met with a similarly strong shift in FX Options sentiment, leaving our short-term bias plainly in favor of further gains. Our benchmark risk reversals trading “breakout” strategy, which buys and sells on FX Options sentiment extremes, would have gone long the GBPUSD as the 1-week risk reversal hit its highest highs in the previous 90 days on June 14. A more recent pullback in said risk reversals suggests momentum is waning, and as such now may not be the best time to enter a long position. Yet the clear sentiment shift suggests that buying GBPUSD dips may work in our favor through upcoming trade.

US Dollar/Japanese Yen Options Analysis

Forex options sentiment has very recently turned in favor of further USDJPY losses, leaving short-term momentum to the downside. The pair’s break below the psychologically significant 90.00 mark seems to have encouraged many to hedge against and bet on further USDJPY weakness. Though our risk reversal percentiles are still a noteworthy distance from bearish extremes, overall momentum and FX Futures positioning favors continued Japanese Yen gains (USDJPY losses). We remain cautiously bearish and may look to sell rallies through upcoming trade.


US Dollar/Canadian Dollar Options Analysis

Volatile and choppy price action in the US Dollar/Canadian Dollar pair has made for similarly indecisive shifts in FX Futures and Options sentiment, making short-term forecasts difficult to establish. The pair’s recovery from multi-year lows had previously left us firmly in favor of medium-term USDCAD gains (Canadian Dollar losses). Yet the more recent sharp correction to the downside gives us pause, and the USDCAD’s next moves are admittedly unclear. We will remain in “wait and see” mode until we see clarification in sentiment and trends.

US Dollar/Swiss Franc Options Analysis

Dramatic Swiss Franc advances (USDCHF declines) have left FX Options risk reversals plainly in favor of further USDCHF losses. Our benchmark breakout-style FX Options risk reversals system would have gone short the USDCHF as the 1-week 25-Delta Risk Reversal hit its lowest levels in the previous 90 days on June 14. Dramatic weakness leaves clear risk of short-term corrections, but it seems that the tide has turned in favor of continued CHF appreciation (USDCHF declines).

Australian Dollar/US Dollar Options Analysis

Our short-term bias for the Australian Dollar/US Dollar currency is quite similar to that of the Euro/US Dollar pair; mixed sentiment and intensely choppy price action makes it difficult to establish any short of conviction in short-term forecasts. The pair’s very recent dramatic downturn suggests that momentum favors continued near-term losses. Yet neither FX options risk reversals or Futures positioning show any real clues as far as sentiment is concerned. We may need to wait until further clarification before making any calls on the short-term trajectory for the AUDUSD.

New Zealand Dollar/US Dollar Options Analysis

Our short-term trading bias on the New Zealand Dollar/US Dollar pair is, perhaps surprisingly, quite different to that of the AUDUSD. A noteworthy turn lower in FX Options risk reversals shows that many traders have begun hedging against and betting on further New Zealand Dollar weakness. Given the pair’s very sharp turn lower through recent trade and the shift in sentiment, momentum seems to favor continued declines.

 

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Dollar Rate Forecast Anemic, Growth Outlook Dims, Risk Appeal Wanes

Dollar Rate Forecast Anemic, Growth Outlook Dims, Risk Appeal Wanes

The dollar is growing ever more dependent on its appeal as a safe haven currency – for better or worse. On the back of a seven-month advance, the burden to maintain the greenback’s steady climb has grown to be exceptionally arduous.

Be sure to join DailyFX Analysts in discussing their outlook for the Fed and its impact on the dollar in the DailyFX Forex Forum

The Economy and the Credit Market

The dollar is growing ever more dependent on its appeal as a safe haven currency – for better or worse. On the back of a seven-month advance, the burden to maintain the greenback’s steady climb has grown to be exceptionally arduous. Looking at the fundamental drive for such a trend, many of the bullish components of the currency’s climb have receded or completely vanished. At the beginning of the year, the comparatively strong forecasts for economic expansion from the world’s largest economy had provided the dollar with a long-term platform for strength. Covering a slightly more restrained time frame, interest rate expectations (though reserved) put the Fed on track to instigate a hawkish regime well before its ECB and BoE counterparts. And, providing the real momentum for the greenback’s climb was the building fear of an impending second financial crisis. In recent weeks, this tidy checklist has grown to be more speculative conjecture than fundamental forecast. The US housing market has taken a steep dive and this Friday’s NFPs are expected confirm reserved expectations for a recovery in employment and the consumers’ contribution to economic activity. Interest rates have been fully undermined by the Fed’s insistence that rates be held exceptionally low for an “extended” period and complete absence of inflation pressures. Now, even the currency’s risk appetite appeal may be on the decline. Should financial uncertainty in the Euro-region and China dissipate, speculative appetites could drown the greenback.

A Closer Look at Financial and Consumer Conditions

Risk appetite has wavered this past week; but investors and other market participants have not yet come to a conclusion on whether or not a market-crippling financial crisis will descend upon us. Today, the forecast improved modestly when the ECB reported a three-month lending facility aimed at providing Euro-region banks with liquidity and replacing the expiration of a 442 billion euro 12-month program, met a far lower than expected 132 billion euro draw. This seems a strong sign that banks are not at immediate risk of a credit crisis. On the other hand, it doesn’t necessarily alleviate fear either. Furthermore, Moody’s warning that Spain’s credit rate was under review reminds us Europe’s troubles run deep. And, it should be said that Europe isn’t the only region at risk.

Officially, the economic outlook for the world’s largest economy has dimmed over the past week. The third reading of the first quarter US GDP report unexpectedly cooled to a 2.7 percent pace of annualized expansion. A moderation in activity following the strong recovery period following such a deep recession was fully expected; but this data helps to move that time frame up slightly. Looking to the more critical components of the economy’s health, data this past week reported a steep drop in the health of the housing sector on the expiration of tax incentives; while consumers reported a sharp drop in confidence and made a tepid effort to spend. Another critical reading for growth is this Friday’s NFPs. There is still a long way to go to mop up the scores of unemployed and a negative reading would send the wrong signal.


The Financial and Capital Markets

While there has been some hesitancy in performance over the past week, the bearing on the speculative markets has been quite clear. A bearish bias received a major exclamation point on Tuesday when many capital benchmarks plunged to test or unseat meaningful levels of technical support. Just for a sense of how sharply the markets were moving, US crude dropped nearly three percent and the Nasdaq Composite collapsed nearly 4 percent. The catalyst for this dramatic event is debatable. Some have attributed to aggressive move to a negative revision for an indicator used to forecast Chinese growth six months forward; but even if this had been the ignition for the move, the fuel to keep it going would have to come from a deeper well. This fount of bearishness can likely be traced back to the unremitting fear that there is still a significant period of deleveraging ahead of us. Though there was a significant withdrawal from speculative endeavors through the 2007-2008 financial crisis; there was plenty of capital that could not be disengaged due to the risk it posed to the system. Then, in the bull wave of 2009, a significant injection of capital would push markets up once again. With stimulus being removed, economic activity cooling and financing costs rising towards normal levels, confidence will truly be put to the test.

A Closer Look at Market Conditions

The Dow and other capital standards for speculative interests managed significant recovery rallies through the second and third weeks of June. However, put into context, this bounce could be branded a correction within a larger trend. Indeed, the advance for the Dow would essentially cover 50 percent of the initial tumble through May. Now we are the verge of taking out yearly lows and confirming the extension of a much more progressive bear trend in the process. Attempting to put exact levels on a shift in sentiment leads to undeserved confidence; but the 9,775 level for the Dow, $75 for crude and 1.1875 for EURUSD all stand as meaningful support levels.

Once again, we need to look beyond the simple and standard indicators for risk to garner a true sense of instability for the capital markets and the sentiment that directs it. For example, the S&P 500-based VIX index has only climbed to 35 percent while the tumble through late May facilitated a far more aggressive drive to 48 percent. The same restraint can be established in implied volatility readings for currencies and commodities. What are the true readings of concern? European credit default swaps are rising quickly and just off record highs due to financial uncertainties in the region. Libor rates are rising rapidly as banks are fearful of lending to each other. Then there is price action itself – on the verge of a major reversal.

 

[FXCM-PR Rep]

U.S. Unemployment Rate Falls to 9.5% Amid Decline in Job Seekers

The unemployment rate in the world’s largest economy fell to 9.5 percent in June from 9.7 percent the month prior, while nonfarm payrolls tumbled 125K. Meanwhile, private payrolls extended its five month advance as figures jumped 83K. Traders should take the decline in the unemployment rate with a grain of salt as the decrease was largely attributed to the massive decline in job seekers.

Taking a look at the breakdown of the report, government jobs retreated 208K, led by the unwinding of census workers as widely expected. Indeed, census employment dropped 225K, which gives reason behind the decrease in nonfarm payrolls. Moreover, the labor force contracted by 652K as confidence in the U.S. labor market continues to deteriorate. It is also worth noting that the average work week component continued its southern journey, while average hourly earnings lost 0.1 percent for the month. Looking ahead, the labor market is likely to remain weak as the federal government continues to slacken census employment. It is also worth noting that the extension of unemployment benefits was unable to get passed in the U.S. last week. All in all, the labor market in the world’s largest economy faces major headwinds going forward and the unemployment rate may rise to 10.0 percent during the second half of the year as workers re enter the labor force.

 

[FXCM-PR Rep]

Forex Weekly Trading Forecast - 07.05.10

Forex Weekly Trading Forecast - 07.05.10


US Dollar Declines Despite S&P 500 Losses, Next Moves Key

Euro Rally Defies Fundamentals, But Not for Long

British Pound Rally Poised To Gather Pace Ahead of BoE Rate Decision

Japanese Yen Trend Points to Slowdown in Gains

Gold to Decline on Fading Inflation Outlook, Portfolio Adjustment

Canadian Dollar May Find Bid on Strong Fundamentals

Australian Dollar Looks to RBA, Employment Data for Direction

New Zealand Dollar Stands as the Last Interest Rate Speculator

 

[FXCM-PR Rep]

ODL Markets offers No Dealing Desk Execution on forex trades

FOR IMMEDIATE RELEASE

06 July 2010—Clients of ODL Markets are now benefitting from No Dealing Desk execution on their forex trades, eliminating dealer intervention to provide you with transparent and fair execution.

No Dealing Desk execution provides greater transparency and fairer execution by removing the conflict of interest between brokers and traders as well as reducing the potential for market interference by price providers.

ODL Markets is taking a lead in the UK by offering FXCM’s No Dealing Desk execution on forex and spread bet transactions and no re-quotes on CFD trades. As a result, ODL Markets is able to stream competitive spreads that are provided by some of the world’s largest banks and financial institutions and streamed to traders with a small mark up. Spreads can be as low as 1 pip or less for major currency pairs.

The change affects almost 14,500 individual trading accounts and comes a month after FXCM agreed to terms to acquire the ODL Group. ODL clients are now benefitting from FXCM’s established relationships and can have the confidence of trading with one of the world’s largest and strongest retail forex, CFD and spread betting companies.

Drew Niv, CEO of FXCM, the global forex and CFD powerhouse, said: ““FXCM spearheaded the introduction of No Dealing Desk execution to the market in 2006 and ODL Markets clients can now benefit from No Dealing Desk execution on forex trades. Under No Dealing Desk execution, every forex trade is executed back to back with one of the world's premier banks or financial institutions. Banks compete with each other to offer FXCM the best bid and ask prices, which we pass onto our clients, resulting in low spreads and faster execution as there is no intervention from a dealing desk. Another major benefit is the ability to place orders within 1 pip of the market with no restrictions.

“Having multiple price providers is especially important in volatile markets when one or two banks may post wide spreads, or simply avoid quoting any price at all. With so many major banks quoting prices to FXCM there are competitive spreads, even during market-moving news events.”

To open a No Dealing Desk account through ODL Markets go to: http://www.odlmarkets.com/accounts/.

Risk Warning: Trading FX, CFDs and Spread Betting on margin carries a high level of risk, and may not be suitable for all investors. Read FXCM’s full disclosure: http://www.fxcm.co.uk/docs_pdfs/risk-disclosure.pdf

About ODL Group:
ODL Group is a leading, independent forex, derivatives, equity and commodity trading house. Headquartered in London, ODL Securities offers retail, IB and white label clients an integrated approach to trading diverse financial products. The ODL Group now trades under the names ODL Markets powered by FXCM.

ODL Group Limited (ODL) announced on 5 May 2010 that it has agreed on terms to be acquired by FXCM Holdings LLC (FXCM), a leading global forex broker that caters to both retail and institutional markets. ODL’s strong UK and European businesses will provide an excellent complement to FXCM’s sizeable operations in both the United States and Asia. The combined companies will operate as one of the largest non-bank forex brokers globally servicing over 200,000 live trading accounts with combined client assets in excess of US$800 million. The deal is still pending final due diligence review and regulatory approval.

ODL Securities Limited is authorised and regulated by the Financial Services Authority and is a member firm of the London Stock Exchange and NYSE Euronext, LIFFE. For further information please visit http://www.odlmarkets.com.

 

[FXCM-PR Rep]

Euro Maintains Range as Growth Prospects Deteriorate, British Pound Weighed By Shift

The Euro slipped to a low of 1.2553 during the overnight trade as the economic docket reinforced a weakened outlook for future growth, and the shift in market sentiment is likely to weigh on the single-currency going into the U.S. trade as investors scale back their appetite for risk.

Talking Points
• Japanese Yen: Benefits From Risk Aversion
• Pound: U.K. Shop Prices Grow At Slower Pace
• Euro: German Factory Orders Slump
• U.S. Dollar: Market Sentiment To Drive Price Action

A report by Germany’s Economy Ministry showed factory orders unexpectedly slumped 0.5% in April to mark the first decline in five-months, led by a 2.3% in demands for intermediate goods, while the annualize fell back to 24.8% from a revised 30.1% in the previous month.

At the same time, the final 1Q GDP report showed economic activity expanded 0.2% during the first three-months of 2010, with the annualized reading increasing 0.6% from the previous year, which was largely in-line with expectations, but the austerity measures are likely to weigh on future growth as the governments operating under the fixed-exchange rate system plan to tighten fiscal policy and scale back public spending. As a result, the European Central Bank is widely expected to maintain its current policy and hold the benchmark interest rate at 1.00% at its policy meeting tomorrow, and President Jean-Claude Trichet is likely to maintain a dovish outlook for future policy as he expects to see an uneven recovery paired with subdued price growth. However, a shift in the central bank’s economic assessment is likely to spark increased volatility in the exchange rate as investors weigh the prospects for a sustainable recovery,

The overnight decline in the British Pound appears to have stalled ahead of the 100-Day SMA at 1.4997 as price action bounces back from a low of 1.5081 to maintain the short-term rally from the June low (1.4346), and the exchange rate may continue to trend higher over the near-term as the new government in the U.K. pledges to cut the budget deficit. Meanwhile, a report by the British Retail Consortium showed shop prices in the U.K. grew at an annualized pace of 1.5% in June to mark the slowest pace of growth since November 2009, with prices contracting 0.1% from the previous month, and softening price pressures will certainly allow the Bank of England to maintain a neutral policy stance over the coming months as Governor Mervyn King expects inflation to fall back towards the 2% target. Nevertheless, the BoE is anticipated to hold its key rate at 0.50% and maintain its asset purchase target at GBP 200B in an effort to encourage a sustainable recovery, and the MPC may look to support the economy in the second-half of the year as households continue to face tightening credit conditions paired with the deterioration in the labor market.

The greenback bounced back against most of its major counterparts, while the Japanese Yen rallied across the board, which pushed the USD/JPY to a low of 87.01, and risk trends are likely to drive price action going into the North American session as the economic docket remains fairly light. Equity futures foreshadow a lower open for the U.S. market following the decline in the Asian and European benchmark indices, and the U.S. dollar may continue to appreciate throughout it day as it benefits from safe-haven flows.

Will the ECB Implement Its Exit Strategy Further Later This Year? Join us in the Forum

Related Articles:

Forex Weekly Trading Forecast – 07.05.10

 

[FXCM-PR Rep]

FXCM Australia - fxcom.com.au

Trade with No Re-quotes, No Debit Balance, and No Commissions*


Sydney—7 July 2010—FXCM Australia Ltd. (www.fxcm.com.au), a leader in the retail forex business, has launched new CFD instrument that combines forex, global stock indices, oil, and gold trading into a single easy to use platform.

Key features of online CFD trading with FXCM include:

 No Re-Quote Trade Execution
Some brokers re-quote their clients when trading CFDs. FXCM will not interfere in your trading by re-quoting your trades

 Access to Global Markets
Trade Gold, Oil, the ASX 200, Global Stock Indices, and Forex all from one platform.

 No Debit Balance
Unlike margin trading through other providers, FXCM guarantees that you will never have to pay a deficit balance as a result of trading!

 No Commissions,* Tight Spreads
Use less of your money to trade more. With FXCM, you will be able to trade commission-free with competitive spreads.

Dan Perry, Managing Director at FXCM Australia says:

“FXCM opened its Australia office in early 2009 to act as headquarters for the company's expansion into the South Pacific region. As it has expanded its local reach and global footprint into the Pacific, the company has hired staff locally to provide clients with quick deposit, withdrawal, and support services.

FXCM Australia Ltd currently provides a full package of currency trading products, services, and education, and is pleased to include CFD’s. Everything we do at FXCM is driven by client demand. Our clients have long asked to apply the no re-quote business logic we adopted for our award-winning forex service to the index, oil, and metals CFD marketplace.”

By trading CFD’s with FXCM, retail clients benefit from FXCM's close banking relationships with over ten of the largest and most aggressive price providers who supply clients with large pools of liquidity at highly competitive spreads, even during market-moving news events. Furthermore, FXCM believes that the new index, commodity, and precious metal CFD instruments will complement their existing forex business and appeal to more retail clients in Australia and New Zealand, enabling them to trade a range of products from a single trading account.

To Open a free practice account and begin trading CFD's with FXCM Australia. http://www.forextrading.com.au/free-forex-accounts.jsp

**Please Note: FXCM Australia Limited has released the following documents, it is important you familiarise yourself with all the documents before trading CFDs. **

A new CFD Product Disclosure Statement; View Here

Modified version of the FX Product Disclosure Statement: View Here

Modified version of the Financial Services Guide; View Here

And Modified version of the Terms of Business View Here

Should you have additional questions, please refer to: CFD Frequently Asked Questions.

About FXCM Holdings LLC
Forex Capital Markets (FXCM) is a leading global forex broker that caters to both retail and institutional markets. Founded in 1999, FXCM is one of the largest brokers, regulated by several of the world’s most respected financial authorities.

FXCM's CFD product† offers no re-quote trading and allows traders to trade oil, gold, silver and stock indices, along with forex on one platform. In addition to currency and CFD trading, FXCM offers educational courses on forex trading and provides free news and research through DailyFX.com.

† Please note that CFD accounts are not available to residents of the U.S. and its territories.

* FXCM is compensated through the bid/ask spread except where otherwise noted.

Trading foreign exchange and CFD’s on margin carries a high level of risk, and may not be suitable for all

Risk Warning: Trading foreign exchange and/or CFDs on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange and/or CFDs offered by FXCM Australia Ltd. you should carefully consider your objectives, financial situation, needs and level of experience. FXCM provides general advice that does not take into account your objectives, financial situation or needs. The content of this Web site must not be construed as personal advice. By trading, you could sustain a total loss of your deposited funds and therefore, you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with trading in foreign exchange products and you should read and consider the Financial Services Guide, Product Disclosure Statement, and Terms of Business issued by FXCM Australia Ltd. before making any decision about whether to trade the foreign exchange or CFD products offered by FXCM Australia Ltd. Foreign exchange and CFD products are only suitable for those customers who fully understand the market risk. For any questions or to obtain a copy of any documents, contact FXCM Australia Ltd. at [email protected]. FXCM recommends you seek advice from a separate financial advisor

 

[FXCM-PR Rep]

Markets Await Comments by ECB Officials as Borrowing Costs are Expected To Remain..

Fundamental Outlook

The European Central Bank is widely expected to keep their benchmark interest rate unchanged at 1.00 percent amid the brewing sovereign debt crisis in the bloc. Indeed, inflationary pressures have been subdued, while the unemployment rate in the 16 member euro area remains at a ten year high of ten percent, with Spain leading the way at 19.9 percent. At the same time, it seems apparent that policy makers are uncertain about economic activity going forward as they recently announced a wide forecast for GDP in 2011 at 0.2 percent to 2.2 percent.

Ahead of tomorrow’s release, investors are weighing in a zero percent chance that the central bank will hike rates twenty five basis points, according to the Credit Suisse Overnight index swaps. With ballooning budget deficits, the European Central Bank will likely keep rates near zero longer than previously expected, and will unlikely raise rates until possibly the third quarter of next year. It is also worth noting that tomorrow’s decision precedes the euro-zone’s bank stress tests results. According to an article by Reuters, European Central Bank President Jean Claude Trichet is said to meet with banks on July 21st, two days prior to when the results will be released. At the meeting, Trichet will evaluate whether some of the commercial lenders will need to recapitalize their balance sheets as the banking system remains weak. This gives further reasoning for the central bank to leaves rates unchanged as uncertainty in the banking sector continues to push the Euribor rate higher.

Growth has been tepid at best in the euro-area and with the onset of the Greek crisis, the ECB has few tools at its disposal to prevent the region from slipping further. Indeed, the euro-zone has recovered from its worst downturn since WWII; however, the region may slip back into recession by the end of this year as boiling deficits lead governments to phase out stimulus measures. All in all, central bank President Jean-Claude Trichet’s post-announcement press conference is likely to stay firmly focused on the issues related to indebted countries in the bloc and the upcoming stress tests measures.

Technical Outlook

 

[FXCM-PR Rep]

ECB, BoE Leaves Benchmark Interest Rate Unchanged in July

The Bank of England held rates at 0.50 percent in July for the sixteen consecutive month. At the same time, policy makers refrained from expanding their asset purchase program as quantitative easing remained unchanged at 200 billion pounds. Meanwhile, the European Central Bank kept their key overnight lending rate unchanged at 1.00 percent amid ballooning budget deficits in the bloc. In approximately 45 minutes, ECB President Jean Claude Trichet is scheduled to speak about the state of the 16 member euro area.

As widely expected, the BoE left its key overnight lending rate and asset purchase program unchanged for the month of July as the committee maintains an accommodative monetary policy in order to support the lethargic recovery. Going forward, the BoE will likely keep rates low until next year as household spending slows on the back of fiscal policy tightening. Traders will now shift focus to the minutes of the meeting will be published on Wednesday, July 21st.

Meanwhile, the European Central Bank kept interest rates unchanged at 1.00 percent. Looking at the recent actions from policy makers in the region, the ECB began buying government bonds in May in order to battle speculation that the 11-year old euro would separate. Going forward, the European Central Bank may keep rates near zero longer than previously forecasted as boiling deficits lead governments to phase out stimulus measures. Markets await comments by officials which are expected to be released in the next hour. In particular traders are keen to gain further insight on EU bank stress tests, and on the formation of EU-wide financial regulators. As of late, Spain said 95 percent of their banks will be included in the stress tests measures. In addition, according to an article by Reuters, European Central Bank President Jean Claude Trichet is said to meet with banks on July 21st, two days prior to when the results will be released. At the meeting, Trichet will evaluate whether some of the commercial lenders will need to capitalize their balance sheets as the banking system remains weak.