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FX Blog- GVI Month Ahead Currency Forecasts

October 29, 2007

Forex Forecast of Major Currency Pairs


It would be a major surprise if the U.S. Federal Reserve does not cut its fed funds rate target and Discount Rate by at least -25bps on Wednesday. There is growing talk about -50bps cuts as many feel the central bank will want to get out ahead of a widely expected economic slowdown in 2008. The USD has been trading lower ahead of the decision in anticipation of lower rates. A -25 bp rate cut has been fully priced in, as well as a small risk of a -50bp rate cut. Ironically, it could be bad for the USD if rates are not eased because the markets will not be pleased if the central bank does not appear to be pro-active about addressing a slowing economy and reliquifying the financial sector. Another weight of the USD was the recent G7 meeting where no word on the weakness of the USD was taken as a tacit approval of further weakness in the unit. USD weakness seems to be centered primarily vs, Europe although the commodity currencies have been especially strong on what some say is a return to JPY carry trades.

Some of the sub-prime worries appear to be starting to fade, as interbank credit quality premia have finally started to ease. Nevertheless, these worries are expected to persist through the turn of the year.


UNITED STATES

SUMMARY
AUSTRALIA
CANADA
EUROZONE
JAPAN
SWITZERLAND
UNITED KINGDOM
UNITED STATES


FEDERAL RESERVE Policy Objective: The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.

ezcpi

The chart above shows year/year headline andcore PCE for the U.S. relative to its its reported "comfort zone for this key price index. 


s-t rates

The above monthly U.S. employment chart is included because its the most closely followed data release each month, and because one of the objectives of the Fed is to maximize employment.


s-t rates

The chart above shows the current three month libor rate, the current Fed funds target  and where the futures markets are currently trading three month rates for the specified periods in the future. The chart also includes comparisons of where these futures rates were trading most recently, a week ago and four weeks ago.  The chart provides a view on where the markets feel U.S. interest rates are headed.


interest rates

The chart above shows the U.S. Fed Funds rate target, three month libor, and two- and ten-year bond yields over the past twelve months.

Major Currency Pairs - Currency Forecasts- Monthly Perspective

foreign currency pairs

The ECB at its latest meeting sent a clear signal that its monetary policy is now neutral instead of accommodative. The ECB 4.00% target rate is expected to remain steady at least into the new year. Thus the interest rate differential between the E-Z and U.S. will likely narrow. This state of affairs is likely to be an ongoing weight on the USD. Policy decisions by most key central banks have been put on hold while the financial markets work their way through the credit crisis. Odds are the ECB will keep policy on hold for the rest of the year. There is growing speculation about a BOE rate cut and the BOJ cannot tighten. The European economic expansion has moved into a slowing phase. On November 8, the ECB will likely keep policy on hold.


EUROZONE

SUMMARY
AUSTRALIA
CANADA
EUROZONE
JAPAN
SWITZERLAND
UNITED KINGDOM
UNITED STATES


ECB Policy Objective: The primary objective of the ECB's monetary policy is to maintain price stability. The ECB aims at inflation rates of below, but close to, 2% over the medium term.

ezcpi

The chart above shows year/year HICP (Harmonized CPI) for the Eurozone relatrive to its "below 2%" target level. 


s-t rates

The chart above shows the current three month libor rate, the current ECB  "refi" rate target  and where the futures markets are currently trading three month rates for the specified periods in the future. The chart also includes comparisons of where these futures rates were trading most recently, a week ago and four weeks ago.  The chart provides a view on where the markets feel Eurozone interest rates are headed.


interest rates

The chart above shows the ECB refi rate target, three month libor, and two- and ten-year bond yields over the past twelve months.

forex forecast services The Bank of Japan would like to see a normalization of interest rates (higher rates) and a normalization of monetary policy. Nevertheless, the economy is not cooperating fully. The low level of inflation has been a persistent concern, and now the economy has started to slow. The return to JPY carry trades might be an indicator that financial markets are starting to resume business as usual.



JAPAN

SUMMARY
AUSTRALIA
CANADA
EUROZONE
JAPAN
SWITZERLAND
UNITED KINGDOM
UNITED STATES


BANK OF JAPAN Policy Objective: The Bank of Japan Law states that the Bank's monetary policy should be "aimed at, through the pursuit of price stability, contributing to the sound development of the national economy."

jacpi

The chart above shows year/year core nationwide CPI and the reported BOJ goal of between 0% and 2% for this price index. 


s-t rates

The chart above shows the current three month libor rate, the current BOJ overnight rate target  and where the futures markets are currently trading three month rates for the specified periods in the future. The chart also includes comparisons of where these futures rates were trading most recently, a week ago and four weeks ago.  The chart provides a view on where the markets feel Japanese interest rates are headed.


interest rates

The chart above shows the Japanese overnight rate target, three month libor, and two- and ten-year bond yields over the past twelve months.

major currency pairs There has been growing speculation about the risk of a BOE rate cut. The central bank has been subject to considerable criticism recently because of its slow monetary policy response to the sub-prime crisis. The BOE more than most other major central banks has surprised the markets with its policy decisions, but no rate cuts are expected on November 8.


UNITED KINGDOM

SUMMARY
AUSTRALIA
CANADA
EUROZONE
JAPAN
SWITZERLAND
UNITED KINGDOM
UNITED STATES


BANK OF ENGLAND Policy Objective: The Bank's monetary policy objective is to deliver price stability, low inflation, and, subject to that, to support the Government's economic objectives including those for growth and employment. Price stability is defined by the Government's inflation target of 2%.

ezcpi

The chart above shows year/year CPI for the U.K. relative to its 2% target for this key price index. 


s-t rates

The chart above shows the current three month libor rate, the current Repo Rate  and where the futures markets are currently trading three month rates for the specified periods in the future. The chart also includes comparisons of where these futures rates were trading most recently, a week ago and four weeks ago.  The chart provides a view on where the markets feel U.K. interest rates are headed.


interest rates

The chart above shows the U.K. repo rate target, three month libor, and two- and ten-year bond yields over the past twelve months.

forex currency market reports The Swiss National Bank is not pleased with the relative weakness of the CHF against the EUR. However, SNB President Roth has sent a clear signal that the final rate hike of this tightening cycle has probably been seen.



SWITZERLAND

SUMMARY
AUSTRALIA
CANADA
EUROZONE
JAPAN
SWITZERLAND
UNITED KINGDOM
UNITED STATES


SWISS NATIONAL BANK Policy Objective: The National Bank equates price stability with a rise in the national consumer price index (CPI) of less than 2% per annum. In so doing, it takes account of the fact that not every price movement is necessarily inflationary. Furthermore, it believes that inflation cannot be measured accurately. Measurement problems arise, for example, when the quality of goods and services improves. Such changes are not properly accounted for in the CPI; as a result, inflation, as measured by the CPI, will be slightly overstated.

ezcpi

The chart above shows year/year CPI and the Swiss goal of less than 2% for this price index. 


s-t rates

The chart above shows the current three month libor rate, the current three-month Euro-Swiss target  and where the futures markets are currently trading three month rates for the specified periods in the future. The chart also includes comparisons of where these futures rates were trading most recently, a week ago and four weeks ago.  The chart provides a view on where the markets feel Swiss interest rates are headed.


interest rates

The chart above shows the Swiss three-month Euro-swiss rate target, three month libor, and two- and ten-year bond yields over the past twelve months.

currency exchange forecast The Australian economy has been improving. A key focus for the Reserve Bank of Australia remains inflation, employment and commodity demand. The state of the financial markets precludes additional rate hikes. Also the Aussie economy also faces similar mortgage problems to those in the U.S. and U.K. Also al election has been called for November 24, with the Australian Labor Party (ALP) currently ahead in the polls. There is talk that the RBA will hike rates in early November.


AUSTRALIA

SUMMARY
AUSTRALIA
CANADA
EUROZONE
JAPAN
SWITZERLAND
UNITED KINGDOM
UNITED STATES

RESERVE BANK OF AUSTRALIA Policy Objective: The policy objective is a target for consumer price inflation, of 2-3 per cent per annum. Monetary policy aims to achieve this over the medium term and, subject to that, to encourage the strong and sustainable growth in the economy. Controlling inflation preserves the value of money. In the long run, this is the principal way in which monetary policy can help to form a sound basis for long-term growth in the economy.

cacpi

The chart above shows year/year and the CPI target of 2% to 3% for this price index. 


s-t rates

The chart above shows the current three month bank bill rate, the current Cash Rate target  and where the futures markets are currently trading three month rates for the specified periods in the future. The chart also includes comparisons of where these futures rates were trading most recently, a week ago and four weeks ago.  The chart provides a view on where the markets feel Australian interest rates are headed.


interest rates

The chart above shows the Australian overnight rate target, three month bank bills, and two- and ten-year bond yields over the past twelve months.

us currency The CAD is underpinned by M&A flows, a steady economy and commodity prices. The Bank of Canada hiked rates at its July 10 policy meeting. Policy is on hold while the state of the North American economy is scrutinized.


CANADA

SUMMARY
AUSTRALIA
CANADA
EUROZONE
JAPAN
SWITZERLAND
UNITED KINGDOM
UNITED STATES


BANK OF CANADA Policy Objective: The Bank of Canada aims to keep inflation at the 2 per cent target, the midpoint of the 1 to 3 per cent inflation-control target range. This target is expressed in terms of total CPI inflation, but the Bank uses a measure of core inflation as an operational guide. Core inflation provides a better measure of the underlying trend of inflation and tends to be a better predictor of future changes in the total CPI.

cacpi

The chart above shows year/year CPI-X (core CPI) and the target of 2% for this price index. 


s-t rates

The chart above shows the current three month Banker Acceptance rate, the current BOC overnight rate target  and where the futures markets are currently trading three month rates for the specified periods in the future. The chart also includes comparisons of where these futures rates were trading most recently, a week ago and four weeks ago.  The chart provides a view on where the markets feel Canadian interest rates are headed.


interest rates

The chart above shows the Canadian overnight rate target, three month Bankers Acceptance, and two- and ten-year bond yields over the past twelve months.

John M. Bland is a co-founder and partner of Global-View.com. Prior to Global-View.com, he was a Vice-President and senior dealer in a forex inter-bank and futures trading arm of a subsidiary (ContiCurrency) of the Continental Grain Company in NYC. Previous to that, he was one of the early members of the Chemical Bank corporate advisory service in NYC, and also worked in international liability management for that bank. John holds an MBA from the Hass School at the University of California at Berkeley and a bachelor?s degree in International Economics from Berkeley.

 

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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."



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Amazing Trader EVENT RISK Calendar:

Tue 12 Dec
09:30 GB- CPI
10:00 GB- ZEW Survey
13:30 US- PPI
Wed 13 Dec
00:30 AU- Employment
09:30 GB- Unemployment
13:30 US- CPI
15:30 US- EIA Crude
19:00 US- Fed Decision
Thu 14 Dec
07:30 CH- SNB Decision
All Day- Global- flash PMIs
12:00 GB- Bank of England Decision
12:45 EZ- ECB Decision
13:30 US- Retail Sales
13:30 US- Weekly Jobless
14:45 US- Industrial Production

Forex Trading Outlook


Potential Trading Opportunities

  • POTENTIAL PRICE RISK: Mediun Tue--10:00 GMT-- DE- ZEW. Second Tier Sentiment Survey
  • POTENTIAL PRICE RISK: HIGH-Medium Tue--13:30 GMT-- US- PPI

  • POTENTIAL PRICE RISK: HIGH-Medium Wed--09:30 GMT-- GB- Employment
  • POTENTIAL PRICE RISK: HIGH Wed--13:30 GMT-- US- CPI
  • POTENTIAL PRICE RISK: Medium Wed--15:30 GMT-- US- EIA Crude
  • POTENTIAL PRICE RISK: High Wed--19:00 GMT-- US- Fed Decision


  • POTENTIAL PRICE RISK: HIGH- Thu --00:30 GMT-- AU- Employment
  • POTENTIAL PRICE RISK: Medium- Thu --All day-- global- flash PMIs
  • POTENTIAL PRICE RISK: HIGH-Medium- Thu --07:30-- CH- Swiss National Bank Decision
  • POTENTIAL PRICE RISK: HIGH-Medium- Thu --09:30-- GB- Retail Sales
John M. Bland, MBA
co-founding Partner, Global-View.com EXCLUSIVE: Global-View Daily Trading Chart Points Updated

EXCLUSIVE: Global-View Free Forex Database updated




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