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04:46
Sajid Ali
This morning markets are rallying as the Euro zone moves one step closer toward a solution to the debt crisis that has been plaguing them and the global markets in general. The Greek Finance Minister came out and said that an agreement on debt is “attainable” and the ECB seems ready to deal as well.
News in the US today has the Republicans largely going through the political motions of introducing a bill on the debt ceiling debate that will be vetoed by the President if it passes the House, but rumors of a “secret meeting” taking place have raised hopes that a compromise can be reached.
The global markets are in need of some sort of stability as these crises have left Central banks around the globe in limbo as they need to allow these situations to play out before they can potentially raise interest rates to cool off their own expanding economies. At least that’s the thought in Australia and Canada as the release of the minutes from the RBA rate policy meeting and the BOC interest rate decision confirm.
Rounding out the morning are US Housing Starts and Building Permits figures which are likely to beat expectations as the bar has been lowered so much after last month’s dismal reports. So the markets are in risk-taking mode this morning, with global stocks higher, as well as oil and gold.
In the forex market:
Aussie (AUD): The Aussie is mostly higher on risk appetite as the minutes from the RBA rate policy meeting confirmed that the RBA was in “wait and see” mode with regard to the Euro debt and US debt ceiling crises. Inflation is a mild concern but does not outweigh the overall risk to global economic stability.
Kiwi (NZD): The Kiwi is also higher this morning on risk appetite and the carry-over effects of the CPI data that was reported earlier this week. The RBNZ may want to “normalize” rate policy to slow down inflation.
Loonie (CAD): The Loonie is also higher this morning as oil is trading higher despite the fact that the market expects the BOC to leave interest rates unchanged this morning at 1%. The reasoning behind this is similar to that of the RBA, but the market is expecting at least 2 quarter point rate hikes before the end of the year, the first of which could come at the September meeting. (Click chart to enlarge)
Euro (EUR): The Euro is also trading up despite the weaker than expected ZEW economic survey figures that were reported earlier this morning. The big news is that Euro zone ministers are moving closer to finding a solution to the debt crisis, as the ECB has indicated it may be more “flexible”. Yields on a Spanish bond offering soared from just 1 month ago. (Click chart to enlarge)
Pound (GBP): With no news on the docket, the Pound is drifting higher ahead of tomorrow’s release of the BOE rate policy meeting minutes.
Swissie (CHF): The Swissie is lower across the board as demand for safe-havens has decreased due to increased risk appetite. Gold is also trading slightly lower, though still above $1600.
Dollar (USD): The Dollar Index is falling this morning after much better than expected Housing Starts and Building Permits figures showed that the housing market may not be dead just yet. Improving economic data may mitigate fears of QE3, but we’re not out of the woods yet.
Yen (JPY): The Yen is mostly lower on risk themes and department store sales came in better than expected, showing signs that domestic demand may be improving as a result of the devastating natural disasters.
It’s not over until it’s over, as the saying goes, and these words couldn’t ring more true with regard to the Euro debt crisis and the US debt ceiling debate. While markets may believe that solutions are near, risk still abounds.
Meanwhile, just to update, the BOC did indeed leave rates unchanged, but the hawkish tone could mean a rate hike at September’s meeting.
Until that time, watch the economic data to see signs of economic improvement globally and whether or not Central bankers will be able to address their own domestic economies.
News in the US today has the Republicans largely going through the political motions of introducing a bill on the debt ceiling debate that will be vetoed by the President if it passes the House, but rumors of a “secret meeting” taking place have raised hopes that a compromise can be reached.
The global markets are in need of some sort of stability as these crises have left Central banks around the globe in limbo as they need to allow these situations to play out before they can potentially raise interest rates to cool off their own expanding economies. At least that’s the thought in Australia and Canada as the release of the minutes from the RBA rate policy meeting and the BOC interest rate decision confirm.
Rounding out the morning are US Housing Starts and Building Permits figures which are likely to beat expectations as the bar has been lowered so much after last month’s dismal reports. So the markets are in risk-taking mode this morning, with global stocks higher, as well as oil and gold.
In the forex market:
Aussie (AUD): The Aussie is mostly higher on risk appetite as the minutes from the RBA rate policy meeting confirmed that the RBA was in “wait and see” mode with regard to the Euro debt and US debt ceiling crises. Inflation is a mild concern but does not outweigh the overall risk to global economic stability.
Kiwi (NZD): The Kiwi is also higher this morning on risk appetite and the carry-over effects of the CPI data that was reported earlier this week. The RBNZ may want to “normalize” rate policy to slow down inflation.
Loonie (CAD): The Loonie is also higher this morning as oil is trading higher despite the fact that the market expects the BOC to leave interest rates unchanged this morning at 1%. The reasoning behind this is similar to that of the RBA, but the market is expecting at least 2 quarter point rate hikes before the end of the year, the first of which could come at the September meeting. (Click chart to enlarge)
Euro (EUR): The Euro is also trading up despite the weaker than expected ZEW economic survey figures that were reported earlier this morning. The big news is that Euro zone ministers are moving closer to finding a solution to the debt crisis, as the ECB has indicated it may be more “flexible”. Yields on a Spanish bond offering soared from just 1 month ago. (Click chart to enlarge)
Pound (GBP): With no news on the docket, the Pound is drifting higher ahead of tomorrow’s release of the BOE rate policy meeting minutes.
Swissie (CHF): The Swissie is lower across the board as demand for safe-havens has decreased due to increased risk appetite. Gold is also trading slightly lower, though still above $1600.
Dollar (USD): The Dollar Index is falling this morning after much better than expected Housing Starts and Building Permits figures showed that the housing market may not be dead just yet. Improving economic data may mitigate fears of QE3, but we’re not out of the woods yet.
Yen (JPY): The Yen is mostly lower on risk themes and department store sales came in better than expected, showing signs that domestic demand may be improving as a result of the devastating natural disasters.
It’s not over until it’s over, as the saying goes, and these words couldn’t ring more true with regard to the Euro debt crisis and the US debt ceiling debate. While markets may believe that solutions are near, risk still abounds.
Meanwhile, just to update, the BOC did indeed leave rates unchanged, but the hawkish tone could mean a rate hike at September’s meeting.
Until that time, watch the economic data to see signs of economic improvement globally and whether or not Central bankers will be able to address their own domestic economies.
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