New York Session – June 30, 2009 4:53 PM

June 30, 2009

The NY session was characterized by month-end mayhem and the moves ultimately proved to be US dollar positive. Equities dropped -0.9% as consumer confidence in the US disappointed in size. Consumer confidence came in at 49.3 while the market was expecting a 55.3 print. This does not bode well for consumer spending going forward and given that it is nearly 70% of the US economic pie, the impact on corporate earnings will not be trivial. Gold lost some of its luster and shed – to 927/926 and now sees important support at the 914/913 trendline – below opens up obvious potential towards the psychologically important 900 level. Full text »

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Boris Schlossberg Sees Short-Term Rates Staying Low

June 30, 2009

A check on futures, the dollar and oil on CNBCMarkets, Oil & the Dollar

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U.S. Dollar Mixed in Forex Trading

June 30, 2009

Currency trading with the greenback

The U.S. dollar is mixed in forex trading today. While up against the Japanese yen, the greenback is down against the euro in currency trading. Even with euro zone economic data showing that deflation is becoming a concern, the euro has managed to maintain its hold in currency trading.

For the sterling in forex trading, though, the same is not true. The U.K. pound has moved into negative territory against the U.S. dollar. Thanks to GDP data that shows the biggest economic contraction in 50 years, the sterling is down in forex trading against the dollar, losing all of its earlier gains on the day.

Things are likely to remain a bit mixed today in forex trading. More data is expected, but the shortened holiday week for the U.S. means that many investors are not making dramatic changes.

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Euro Zone Inflation Drops Below 0%

June 30, 2009

What does this mean for euro zone economic stimulus efforts?

For the first time since 1991, the euro zone has seen a drop to inflation. Inflation has fallen to below 0%, introducing a definite trend toward deflation (although the economy is not in a state of deflation right now). The euro zone has been criticized in recent months for its lack of economic stimulus measures, and some see this information as proof that more should have been done.

However, euro zone leaders maintain that they are doing what is necessary. They have some economic stimulus measures in place, but leaders are concerned that they might overdo it, leading to high inflation. Indeed, euro zone leaders are taking a "wait and see" approach, reports the Financial Times:

The ECB believes the impact of its measures have still to feed through into the economy. But it faces a difficult balancing act. Even though the inflation outlook justified further action, the central bank feared “that more aggressive easing now could risk financial stability and or a too sharp acceleration of inflation over the longer-term,” said Nick Kounis, European Economist at Fortis Bank.

Even with this news, the euro is heading a little bit higher in forex trading against the U.S. dollar. On top of that, in the long term the euro is expected to do well. The U.S. has racked up a lot of debt, and there are concerns that America has gone too far with economic stimulus — increasing the probability of hyper-inflation.

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Sterling Heads Higher After Housing Data

June 30, 2009

U.K. pound in forex trading

The U.K. pound enjoyed a burst of energy this morning in forex trading. Thanks to housing data, the sterling moved up above 1.6700 in currency trading on the FX market. However, thanks to information on GDP, the U.K. pound has pulled back a bit in forex trading.

Sterling is in consolidation mode right now, sitting at a little bit above 1.6600 in currency trading. While the housing data is encouraging, the fact remains that there are still some economic concerns with regard to growth, as well as how quickly the British economy will be able to recover. More economic data will be needed in order to determine the short-term direction of the U.K. pound in forex trading. Boris Schlossberg reports in FX360 on the possibility of a break-out for the sterling in currency trading:

This week’s manufacturing and services PMI data will be crucial in determining whether GBP/USD could climb higher. Tonight’s break out opens the scope for a potential run to 1.700 but that scenario would require fundamentals to show further signs of recovery in economic activity. If the PMI surveys demonstrate some slippage cable is much more likely to hit 1.60 than 1.70 in the near term.

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U.K. Economy Shrinks Dramatically

June 30, 2009

British economy contracts most in 50 years

The U.K. economy shrank dramatically in the first quarter of 2009, reports the Office for National Statistics. Indeed, the British economy saw its biggest contraction in 50 years, with a 2.4% decline in gross domestic product. This decline was more than analysts predicted, and serves as a reminder that economic recovery in Britain is going to be a long, slow process.

Indeed, as the report was made, the Bank of England warned that prolonged economic weakness is to be expected. There were some upbeat comments, however. These comments revolved mostly around the idea that economic contraction is coming to a halt, and that at sometime expansion will begin.

As expected, the news did little to help the sterling in forex trading on the currency market.

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U.S. Dollar Forex Trading Forecast: Consolidation Ahead

June 30, 2009

Greenback likely to see consolidation in currency trading

The U.S. dollar forex trading forecast calls for increased consolidation. Going forward, the global economy calls for some cautious optimism, rather dramatic growth. This means that the greenback is unlikely to make very many major swings in currency trading. GFT’s Kathy Lien offers this forex trading forecast in FX360:

Growth will be negligible at best and therefore traders and investors will remain in wait and see mode as central banks keep interest rates on hold. There may be some talk of exit strategies, but nothing will be implemented until 2010 at the earliest. Therefore consolidation is the most likely trend in the currency markets with a bias to the downside for the dollar.

With things in slow-recovery mode, it is unlikely that we will see any major movements by the U.S. dollar in forex trading. However, long-term, there is likely to be downward movement for the greenback in currency trading.

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London Session – June 30, 2009 5:42 AM

June 30, 2009

A surge in risk appetite greeted the London morning with GBP, EUR, AUD and NZD all surging against the USD early on.  The gains for AUD and NZD can be associated with an increase in the price of oil but it was cable that again stole the show.  In a repeat of the trading pattern seen in recent sessions, cable pushed ahead aggressively higher early on.  Today’s move, however, was more significant insofar as it lifted the pound out of its recent range high at USD1.6700.  While it is possible that recent cable buying could be linked with month end activity, technically the break increases risk for more gains for cable.  However, the pound has not been able to sustain its upward momentum this morning on the back of poor UK GDP data.     Full text »

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Asia Session – June 30, 2009 1:49 AM

June 30, 2009

Risk appetite came screaming back into the markets today as higher stocks and surging crude oil prices punished the Dollar and the Yen as the warm rays of optimism helped nurture the so called “green shoots” of recovery we keep hearing about. As markets show increased signs of thawing with higher equities and oil as well as greater consumer confidence, traders become more convinced of economic recovery and they tend to flock to higher yielding “riskier” currencies as they flee the safer, lower yielding Yen and Greenback. This is the script that was played out today in Asia, as the dollar lost ground to all major currencies and the Yen was sold early against all but the Dollar. Full text »

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New York Session – June 29, 2009 4:37 PM

June 29, 2009

The NY session saw some classic directionless trading on the back of the upcoming holiday in the United States. Equities were better bid and broadly eked out a 0.9% gain despite a flat performance for the better part of the session. The bullish tone to risk assets saw the USD come under modest pressure as has been the case for the entire year thus far. Commodities were one of the big stories as oil jumped more than 3% to back above the level on new attacks by Nigerian militants. The fundamentals remain oil bearish and the IEA just cut its forecast for crude demand for the next five years. This should weigh on the currencies of the resource-based economies like Canada and Australia. Interestingly, oil prices have had little in the way of impact on the US dollar in the month of June, after witnessing an excellent negative correlation in May. So the strength in oil might not see commensurate weakness in the buck. Full text »

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