G8 Posts on Forex Blog
Euro Drops 200 Pips on NFP, Trichet
Jul 3, 2008
With all signs pointing to a possible EURUSD rally - the events let traders down.
After briefly hitting a high of 1.5910, the EURUSD pair has dropped to the lower end of 1.57.
In his morning conference, Trichet repeatedly stated the central bank has "no bias". However, he cautioned that the absence of phrases such as "heightened alertness" and "strong vigilance" was not significant.
In a possible sign for the upcoming G8 summit, Trichet stated "We are convinced that sharp fluctuations between major currencies could have implications for economic and financial stability".
With energy and food inflation high on the G8 agenda, and world leaders gathering next week in Hokkaido Japan, their is some chance of either a forex or energy market intervention.
Meanwhile, in the states, the Non Farm payroll report came close to expectations, losing 62k jobs. and unemployment held steady at 5.5%. Hourly wages grew 0.3% as expected, indicating wage inflation is still not a factor.
However, the ISM service sector slipped back into contraction (48.2 vs expected 52), while the April and May NFP reports were revised down.
Expect the majors to stay range bound until the G8 summit concludes.
Greenback, ECB, G8, EUR, Trichet, USD
G8 Disappoints, Merely Urges More Oil
Jun 13, 2008
WTF is wrong with the G8?
After 2 weeks of central banker warnings of 'upside risks to inflation' and 'heightened alertness', they have failed to act in a meaningful way. At 11:45pm est they had the balls to issue a communique. A communique! Who are they kidding?
Surely they have seen the endless stream of headline inflation numbers rising to 4% and beyond. They must realize that recent Midwest flooding in the US will only further raise energy prices as corn (and ethanol) literally washes away. Certainly the ministers must grasp the geopolitical realities of continuing problems in Nigeria (light sweet crude) and the Middle East.
Perhaps the famous energy trader Phil Flynn said it best, "talk is cheap and the dollar is cheaper"
So what was the G8 thinking by merely putting out a communique? I am not sure, their is certainly time left for them to act. But IMHO, prospects for a substantial policy shift may have passed. If so, this lack of action will contribute to a weaker USD (and higher oil prices, and thus higher inflation) next week.
As for the communique, the G8 stated that,
""On the supply side, we urge oil producing countries to increase production ...In addition, the oil market can be made more efficient by promoting greater transparency and reliability in market data including on oil stock."
Ha! Officials from all over the world have been saying the same thing for months. Fat good that has done.
G8, oil
Greenback Moves on Retail Spending, Trading Flat Ahead of CPI
Jun 12, 2008
Bush and Congress can pat themselves on the back - at least temporarily. Consumers armed with extra cash from the stimulus package and a jump in energy prices sent retail sales higher in May.
Sales rose 1%, 1.2% excluding autos. That beat expectations for +0.5% (0.7% excluding auto) rise in retail sales.
The positive retail sales combined with InBev's $46 billion bid for Anheuser-Busch and continued down playing of ECB rate hikes across Europe lead to a strong daytime rally for the Greenback. (Notably, French Finance Minister Christine Lagard again took a pro USD stance suggesting a Euro rate hike might be off the table after this weekends G8 meeting).
The EURUSD fell to €1.542, the GBPUSD to £1.9477. On the other side, the greenback rose to $107.69 against the yen.
In early hours of the Asian session (1am est) the USD appears to be trading flat. The EURUSD (-0.09% to 1.5435) and GBPUSD (-0.06% to 1.9465) are trading slightly to the down side. The Yen is flat at 107.77.
Watch the inflation numbers at 8:30am EST! Headline year-over-year should come in at 4%, while core (excluding energy and food) should come in at 2.3%.
After your done trading the inflation report - you should probably get out of the market ahead of the weekend G8 meeting. Unless you have Trichet on speed dial, in which case, your probably not reading this blog.
G8 meetings can produce massive fundamental swings 5 factors strongly suggest a major policy shift this weekend.
1. A bullhorn like proclamation from the Fed and US govt that inflation is the top priority
2. The (not so) subtle backing down of the ECB from Trichet's comments last week
3. The dual storm of economic downturn + inflation numbers in the UK (and people worry about stagflation in the US!)
4. Softening of the Aussie and Kiwi economies.
5. The Gulf Cooperation Council's affirmation that they will peg to the Dollar when they form a monetary union.
Greenback, inflation, G8, CPI, USD
Inflation a Global Concern - Canadians Hold at 3%
Jun 10, 2008
The Bank of Canada joined a global chorus of inflation fears today, holding rates steady at 3%. Most traders had forecast a 25bps cut after the last 2 policy meetings featured 0.5% rate cuts and April inflation came in below 2%. But the writing is on the wall as the Bank stated:
"If current levels of energy prices persist, total CPI inflation will rise above 3% later this year...Against this backdrop, the bank now judges that the current stance of monetary policy is appropriately accommodative to bring aggregate demand and supply into balance and to achieve the 2% inflation target. There continue to be important downside and upside risks to inflation in Canada, which the bank will monitor closely."
The BOC joins the US, Euros, and Brits on warning of impending inflation concerns. New Zealand alone seems likely to cut rates in the near future among the major currencies.
Interestingly, Axel Weber of the ECB seemed to soften his tone from the previous week. At a speech in England, he stated that a mild winter may have exaggerated Q1 growth. Last week he was a Euro bull, repeatedly stressing the ECB was seriously considering a 25bps rate hike in July. German Q1 GDP growth came in at 1.5%, thanks in large part to unusual construction spending according to Mr. Weber.
With the recent wave of central bank warnings - watch for an interesting G8 Finance Minster meeting this weekend. The meeting, in Osaka Japan, kicks off on Friday June 13th at 7pm local (3am est). Since Forex markets will still be open, Cash does not expect a major announcement until Saturday At 1:30pm local Saturday (9:30pm est Friday), will be the Chairman's press conference. Given the spike in oil and chatter of central banks recently, it may be worth getting to the bar later than usual Friday.
Loonie, CAD, inflation, G8, interest rates
