Daily Currency Insight courtesy of Halo Financial

(Helen Fox) #1

Enjoy the read....

Today's Highlights

• US October nonfarm payrolls

• US September pending home sales

FX Market Overview

The Bank of England (BOE) and European Central Banks left their interest rates on hold yesterday as expected. The pound got a slight boost on the absence of any talk of further asset purchases or Quantitative Easing from the BOE.

The pound and Euro both hit fresh 10-month highs against the US dollar as the greenback crumbled. Stock markets rallied to their highest levels since June 2008 and are 60% higher than the post-Lehman Brothers lows.

Risk is back on the table in a major way. Commodity prices are surging and riskier high-yielding currencies like the Kiwi and Aussie dollars are a few cents from their all time highs. AUDUSD is 113% higher and NZDUSD has doubled since the lows seen after 9/11.

GBPNZD is trading around the low since the Kiwi was freely floated in 1985 of NZ$2.03. A break below NZ$2.03 brings on the possibility of GBPNZD trading with a 1 in front of it. Ridiculous levels but rationality rarely applies in overstretched markets which can significantly overshoot before correcting to sensible levels.

GBPAUD is back below A$1.60 which raises the likelihood that the previous low since the Aussie was freely floated in 1983 at A$1.57 is broken.

GBPCAD is trading in an obvious range of C$1.58 to C$1.64 as the US economic weakness also weighs on CAD given the fact that 75% of Canadian exports end up in the States.

The US dollar is out of favour due to the QE announcement on Wednesday night but strangely enough a similar QE announcement last night by the Bank of Japan has not made a single bit of difference to the value of the Yen. Japanese exporters are hurting from a strong Yen which is at 15-year highs. Currency wars are just beginning and are likely to get nasty if currencies don’t realign. Currencies values are determined by the markets (except for currency manipulators such as China) and this makes it extremely difficult for central bankers and government officials to influence. The nasty part referred to above is the imposition of trade barriers and protectionist policies. Watch this space.

Its nonfarm Friday today which marks the extremely important monthly employment number which traders rate as the number one data release. The number today is forecast to show 60,000 new jobs were created versus September when 95,000 jobs were lost.

Good luck tomorrow to England and the All Blacks who meet in the first autumn rugby International at Twickenham. The All Blacks go into the match as favorites but fellow Kiwis will remember numerous tests in the past decade when the men in black were overwhelmed by the Twickenham crowd of 83,000 and players reacted like possums in the headlights.

Have a great weekend.

Rugby Quotes

Rugby is a beastly game played by gentlemen; soccer is a gentleman's game played by beasts; football is a beastly game played by beasts. Henry Blaha

Rugby is a good occasion for keeping thirty bullies far from the center of the city. Oscar Wilde

Rugby is a game for the mentally deficient... That is why it was invented by the British. Who else but an Englishman could invent an oval ball? Peter Pook

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