User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Friday January 6, 2006 - 15:51:19 GMT
BHF-Bank -

Share This Story:
| | Email

FX Briefing

FX Briefing 6 January 2006
• A good start to the year does not mean things will continue to go well for the euro
• US yield curve shaped by exaggerated growth pessimism
• Interest rate advantage will continue to be a pillar of support for the dollar

Dollar remains attractive

At the beginning of 2005, there was a turnaround on the forex market. Just as the world’s leading currency seemed to be collapsing under its growing current account deficit, the Fed’s regular interest rate hikes began to take effect. During the course of January alone, the dollar recovered from USD1.36 to 1.30 per euro, and in spite of the high energy prices in late summer, bounced back to 1.18 towards the end of the year. However, the US currency started this year with significant losses. The euro rose by 2.2% to around USD1.21. The Scandinavian currencies, the Swiss franc and the Polish zloty gained even more. The yen, which had already adjusted strongly upwards in the previous weeks, gained a more modest 1.5% to just under 116.

Is the way the year starts an omen for how it will continue? Judging by the historical performance of EUR-USD (and before 1999, USD-DEM), the exchange rate trend in January really seems to have a certain significance. In 20 of the last 32 years, i.e. in 63% of cases, the trend of the exchange rate in January corresponded with that of the rest of the year. But for those who feel tempted to take advantage of this, a word of warning: Firstly, January has just begun: the situation could turn around again by the end of the month. Secondly, it would probably be necessary to invest a great deal of time and money in order to reap any benefit from the 63% chance.

We do not share the sceptical view of the US currency. There are currently two main arguments against the dollar. The first is the expectation that the Fed will phase out its rate hikes and the US interest rate advantage will dwindle when the central banks in the other major currency areas, particularly the ECB and the BoJ, begin to tighten their monetary policies. The other argument, just like last year, is the structural widening of the US current account. In our opinion, neither argument is convincing. However, here we will concentrate on the monetary policy considerations.

At present, the market is expecting one more rate increase from the Fed in January and sees about a 50:50 chance of another one in the second quarter. At the same time the yield curve is extremely flat. Thus in our view, the market has put itself in an extreme position: it is speculating on an imminent weakening of the US economy. However, it is by no means clear whether the tightening cycle in the US has in fact come to an end. The Fed is of the opinion that monetary policy is now no longer accommodative, but still thinks that some further policy firming is needed. Nor do the minutes of the December meeting give any clear indication as to whether one, two, three or even more rate hikes are under consideration. All they say is that the number of steps will probably “not be large”.

But even if the Fed believes an interest rate of, e.g. 4.75% to be adequate at the moment, this does not mean it is committing itself to a medium or long-term interest rate policy. On the contrary, the Fed considers the risks to be balanced. It depends on the further economic development as to where the journey will take us in the end.

Some think that the US economy is in for a slowdown, the main argument for this being the presumed weakness of the US housing market. But obviously the US central bank considers the situation to be less critical – otherwise it would presumably not be thinking about raising interest
rates further.

It is true that the housing market has sent mixed signals over the past months. Sales figures are growing less buoyantly, the number of unsold units has increased and less households can afford to buy houses. But on the other hand, sales are still at a very high level, house prices are more than 12% higher than last year and almost 70% of private households now own their homes, which is about 5 percentage points more than 10 years ago.

You cannot make an omelette without breaking eggs. Nor can you contain the risk of a housing market bubble without dampening demand and thus price increases. Even if the US real estate market is really calming down, this is still no reason for the central bank to contemplate interest rate cuts. Moreover, given the volatile nature of the market, it is by no means a sure thing that the development is actually slowing. Speaking against this, for instance, is that American REITs (compared to broad indices such as the Dow Jones and S&P) are approaching new highs precisely at a time when the risks of the housing market development are being increasingly discussed.

Up to now the US economy has proved surprisingly robust again and again. Employment growth is consistently strong and consumer sentiment has improved considerably as gasoline prices have come down. Therefore private consumption is likely to continue providing substantial growth impetus. Moreover, companies are planning to step up investment given the favourable earnings situation. Additionally, the reconstruction activities in the Gulf of Mexico will support growth for some time. And finally, the economic recovery in Japan and Europe will also help to boost exports.

We therefore think that the pessimistic view reflected in the current shape of the yield curve is exaggerated. The risks might be somewhere else entirely: with a tighter labour supply, wages and unit labour costs might rise, higher costs might be passed on to a greater extent, or the increase in house prices could spill over into rents and thus find its way into consumer prices.

If we keep in mind the possible risks for price stability, it is quite conceivable that the fed funds rate might reach 5% in the course of 2006. And, judging by the real money market rate for instance, even at that level monetary policy would not be exactly restrictive. But this would put paid to the notion that the interest rate spread versus the euro will narrow. Even if the money-market spread peaks some time in 2006, a difference of perhaps only 175 basis points (compared to around 200 at present) would still be a strong argument for the dollar. And this is all the more true for the yen.

Stephan Rieke +49 69 718-4114
Economics Department
+49 69 718-3642
[email protected]
Foreign Exchange Trading
[email protected]
Jörg Isselmann
+49 69 718-2695
Matthias Grabbe / Klaus Näfken
+49 69 718-2688

This report has been prepared by BHF-BANK Aktiengesellschaft on behalf of itself and its affiliated companies (together "BHF-BANK Group") solely for the information of its clients. The information and opinions in this document are based on sources believed to be reliable and acting in good faith, but no representation or warranty, express or implied, is made by any member of the BHF-BANK Group as to their accuracy, completeness or correctness. Opinions and recommendations are given in good faith but without legal responsibility and are subject to change without notice. The information does not constitute advice or personal recommendation, for which the duty of suitability would be owed, but may facilitate your own investment decision. Moreover, you should seek your own advice as to the suitability of an investment matter mentioned herein. Investors are reminded that the price of securities and the income from them can go down as well as up and that the past performance of an investment or a market is not necessarily indicative for future results. This document is for information purposes only. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete, and this document is not, and should not be construed as, an offer to sell or solicitation of any offer to buy the securities mentioned in it. BHF-BANK Group and its officers and employees may have a long or short position or engage in transactions in any of the securities mentioned in this document, or in any related securities. This publication must not be distributed in the United States.
© 2005 BHF-BANK Aktiengesellschaft
All rights reserved. Please mention source when quoting from it.


Forex Trading News

Forex Research

Daily Forex Market News
Forex news reports can be found on the forex research headlines page below. Here you will find real-time forex market news reports provided by respected contributors of currency trading information. Daily forex market news, weekly forex research and monthly forex news features can be found here.

Forex News
Real-time forex market news reports and features providing other currency trading information can be accessed by clicking on any of the headlines below. At the top of the forex blog page you will find the latest forex trading information. Scroll down the page if you are looking for less recent currency trading information. Scroll to the bottom of fx blog headlines and click on the link for past reports on forex. Currency world news reports from previous years can be found on the left sidebar under "FX Archives."

Actionable trading levels delivered to YOUR charts in real-time.

Register To Test Your Amazing Trader

GVI Trading. Potential Price Risk Scale
AA: Major, A: High, B: Medium

Tue 17 July 2018
AA 08:30 GB- Employment
A 13:15 US- Industrial Production
AA 14:00 US-Powell Testimony
Wed 18 July 2018
AA 08:30 GB- CPI
A 12:30 US- Housing Starts/Permits
AA 14:00 US-Powell Testimony
Thu 19 July 2018
AA 1:30 AU- Employment
AA 08:30 GB- Retail Sales
A 14:30 US- EIA Crude
A 12:30 US- Weekly Jobless
Fri 20 Jun 2018
A 12:30 CA- CPI/Retail Sales

John M. Bland, MBA
co-founding Partner,

Global-View Affiliate Program

We are starting an affiliate program to market some of our products.

Send me an email if you would be interested or if you know someone who would like to be an affiliate. Generous commissions payout for those accepted.

Put the word "affiliate" in the email subject line.

Contact us

Start trading with forex broker Markets Cube

Max McKegg's Daily Forex Trading Forecasts

Veteran FX Trader, Max McKegg, forecasts all the Major currencies and the Australasians; providing Daily and Medium Term Trading forecasts to subscribers, who include large Banks the world over, as well as individual traders in more than 30 different countries.

Request a TRIAL of Max's Forex Service.


Retail Forex Brokerage Changing!

Are you looking for your first broker or do you need of a new one? There are more critical things to consider than you might have thought.

We were trading long before there were online brokers. Global-View has been directly involved with the industry since its infancy. We've seen everything and are up-to-data with recent regulatory changes.

Our Best Brokers listing section includes:Forex Broker Reviews, Forex Broker Directory, Forex Broker Comparisons and advice on How to Choose a Forex Broker

If would like guidance, advice, or have any concerns at all ASK US. We are here to help you.

SEE Our Best Brokers List

Currency Trading Tools

  • Live rates, currency news, fx charts. 

  • Research reports and currency forecasts.

  • Foreign Exchange database and history.

  • Weekly economic calendar.

Directory of  Forex trading tools

Terms of Use    Disclaimer    Privacy Policy    Contact    Site Map

Forex Forum
Forex Trading Forum
Forex Forum + forex rates
Forex Forum Archives
Forex Forum RSS
Free Registration

Trading Forums
Currency Forum Guide
Forum Directory
Open Forum
Futures Forum
Political Forum
Forex Brokers
Compare Forex Brokers
Forex Broker News
Forex Broker Hotline

Online Forex Trading
Forex Trading Tools
Currency Trading Tools
Forex Database
FX Chart Points
Risk/Carry Trade Chart Points
Economic Calendar
Quicklinks to Economic Data
Currency Futures Swaps
Fibonacci Calculator
Currency Futures Calculator

Forex Education
Forex Learning Center
FX Trading Basics Course
Forex Trading Course
Forex Trading Handbook

Forex Analysis
Forex Forecasts
Interest Rate Forecasts
Central Bank Forecasts

FX Charts and Quotes
Live FX Rates
Live Global Market Quotes
Live Forex Charts
US Dollar Index Chart
Global Chart Gallery
Daily Market Tracker
Forex News
Forex Blog
Forex News
Forex Blog Archives
Forex News RSS
Forex Services
Forex Products
GVI Forex
Free Trials
FX Bookstore
FX Jobs and Careers
Jobs USA
Jobs UK
Jobs Canada

Forex Forum

The Global-View Forex Forum is the hub for currency trading on the web. Founded in 1996, it was the original forex forum and is still the place where forex traders around the globe come 24/7 looking for currency trading ideas, breaking forex news, fx trading rumors, fx flows and more. This is where you can find a full suite of forex trading tools, including a complete fx database, forex chart points, live currency rates, and live fx charts. In addition, there is a forex brokers directory where you can compare forex brokers. There is also a forex brokers hotline where you can ask for help choosing a forex broker that meets your individual fx trading needs. Interact on the same venue to discuss forex trading.

Forex News

The forex forum is where traders come to discuss the forex market. It is one of the few places where forex traders of all levels of experience, from novice to professionals, interact on the same venue to discuss forex trading. There is also the GVI Forex, which is a private subscription service where professional and experienced currency traders meet in a private forex forum. it is like a virtual forex trading room. This is open to forex traders of all levels of experience to view but only experienced currency tradingprofessionals can post.

Currency Trading

Currency trading charts are updated daily using the forex trading ranges posted in the Global-View forex database. You will also find technical indicators on the fx trading charts, e.g. moving averages for currencies such as the EURUSD. This is another forex trading tool provided by

Forex Brokers

The forex database can be used to access high, low, close daily forex ranges for key currency pairs, such as the EURUSD, USDJPY, USDCHF, GBPUSD, USDCAD, AUD, NZD and major crosses, including EURJPY, EURGBP, EURCHF, GBPJPY, GBPCHF and CHFJPY. Data for these currency trading pairs dating back to January 1, 1999 can be downloaded to an Excel spreadsheet.

Forex Trading

Forex chart points are in a currency trading table that includes; latest fx tradinghigh-low-close range, Bollinger Bands, Fibonacci retracement levels, daily forex pivot points support and resistance levels, average daily forex range, MACD for the different currency trading pairs. You can look on the forex forum for updates when one of the fx trading tools is updated.

FX Trading

Global-View also offers a full fx trading chart gallery that includes fx pairs, such as the EURUSD, commodities, stocks and bonds. In a fx trading world where markets are integrated, the chart gallery is a valuable trading tool. Look for updates on the Forex Forum when the chart gallery is updated.

Forex Blog also offers a forex blog, where articles of interest for currency trading are posted throughout the day. The forex blog articles come from outside sources, including forex brokers research as well as from the professionals at This forex blog includes the Daily Forex View, Market Chatter and technical forex blog updates. In additional to its real time forex forum, there are also Member Forums available for more in depth forex trading discussions.



By using this website, you are agreeing to our Privacy Policy and Terms of Use, and Cookie Policy

Copyright ©1996-2014 Global-View. All Rights Reserved.
Hosting and Development by Blue 105