13:00 GMT- July
30 (global-view.com) Forex Trading centered around the release of
the first estimate of 2Q10 GDP early Friday. the data were even weaker
than expected and reinforced concerns that the U.S. economy has recently
been in a slowing pattern. The news came on the heels of comments by St.
Louis Fed president Bullard Thursday, who has generally been thought to
be one of the more hawkish Fed policy board members. Bullard warned
about the RISK of the U.S. heading into an extended Japanese-like
deflationary period and raised the possibility of another round of
quantitative easing by the Fed.
These concerns hit
U.S. equity prices yesterday and spilled over into Asian trading Friday.
End of month JPY demand saw the JPY gain vs. the USD and EUR and weighed
on the Nikkei. Keep in mind the line in the sand for USDJPY is the 85.00
level, although below 90.00 in uncomfortable for many.
CALENDAR
UPCOMING DATA HIGHLIGHTS:The Far East will see Chinese PMI data. In
Europe
, EZ, Swiss and U.K. PIM Data are due. In
North America,
U.S.
manufacturing PMI and construction data are awaited
Canada
will be closed for a holiday.
The
EURUSD is now steady on the day and the GBPUSD is up. The EURGBP cross
is down Traders still are aware of the European
sovereign debt situation.
In the GBP,
the U.K. new government is always politically vulnerable.
The
EURCHF is down. The SNB strong stand in supporting the EUR against
the CHF has waned after massive FX losses.. Flows out of the EUR into the CHF remain an issue for the SNB.
The USDJPY is lower and the
EURJPY cross is down sharply. While Japanese public finances are
a mess, analysts point out that most JGBs are owned by Japanese, so Japan is
not dependent on foreign investment. The government
has been pressed the BOJ to promote growth and favors a lower exchange rate.
Some traders focus intently on the
Japan vs. U.S. 2-yr note spread (only the U.S. 2-yr moves
much).
The
risk trade continues to be turned on and off almost daily. As
for the commodity currencies (CAD,
AUD and NZD),
they are stronger vs. the USD. The Bank of Canada recently hiked interest rates
by 25bps.
The BOC sent mixed signals afterwards. A strong CAD eases the pressure on the
Bank of Canada to tighten. In Australia,
RBA is unlikely to tighten in August. The RBNZ is now in a reduced tightening mode.
Oil
and gold
are mixed. Gold is still favored as as refuge from paper money.
We have favored AUD, CAD, gold and oil recently, but doubts are creeping in as deflationary pressures mount.
EQUITIES
& INTEREST RATES
Equities and Bonds are also risk trades. Far East equities closed
lower. European bourses were mixed. U.S.
equities are mixed. The U.S. 10-yr was last 2.92%, -7 bps.
Bonds are a counter to risk trades because risk
investments must be financed. When the cost of money moves up (higher
interest rates), the return and allure of risk trades such as equities
falls.
See ECONOMIC CALENDAR
for a complete list of future forex market events and consensus data
estimates. Go to the forex
forum for up-to-date market developments and technical trading ideas.
John M. Bland is an author and co-founder and partner of Global-View.com.
Prior to Global-View.com, he was a forex trader and a private-label forex
analyst for a top Fed watching service in NYC. He has been a corporate
forex advisor and
also worked in international liability management for a major N.Y. money
center bank. John holds
an MBA from the University of California at Berkeley and
a B.A. in International Economics from that school.
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