- PPF Points
- 1,067
The markets are back to “normal” after some being closed for various holidays. Risk appetite is the play today, as the Euro is rebounding against the dollar on thoughts that the Euro may have slid “too far, too fast”. Also, news out of Australia from the Reserve Bank minutes hinted that further rate hikes were in order should the Australian economy extend its recovery.
Also to note is that commodity prices are higher as which is consistent with an increase in risk appetite.
On to the currencies:
Aussie (AUD): The Aussie is higher on new from the RBA minutes. Analyst expectations are for the Aussie to gain to .91 vs. USD by the end of March. Should the economy continue to expand, then further rate hikes could be in order. The current benchmark rate is at 3.75%, making the Aussie a popular destination for carry trades.
Kiwi (NZD): The Kiwi is moving in tandem with its South Pacific partner the Aussie. While growth has not been as robust in New Zealand, the Kiwi will also benefit from increased commodity prices and a higher benchmark interest rate as well. That rate is currently 2.5%.
Loonie (CAD): The Loonie is trading higher this morning on the risk trade as well as the fact that oil is back over $75. Canada is in the spotlight right now as host of the 2010 winter Olympics as sometimes they get lost in the shuffle in the risk trade hierarchy. The Loonie is up to 1.043 vs. USD this morning, its highest level this month.
Euro (EUR): The Euro is higher against all but the commodity currencies, paring back some of its losses from the previous week. There is tough talk coming from the EU finance ministers regarding Greece, as news has surfaced that Greece may have used derivatives to “fudge the numbers” in order to gain entry to the EU. The fact that Goldman Sachs was involved should come as a shock to no one. Also contributing to the Euro gains this morning is the reading from the German Sentiment Index this morning which was lower than previously reported, but ahead of analyst expectations which net-net is positive for the Euro.
Pound (GBP): The Pound is lower this morning across the board as consumer prices rose 3.5% from a year earlier. A deviation of more than 1% from the target rate of inflation (2%) requires a letter from BOE Governor King as to how he intends to get back to the goal rate. Inflation volatility is to be expected, and this reading was not a surprise to analysts. This could put more Quantitative Easing back on the table for the UK, which would be Pound negative.
Dollar (USD): The Dollar is down this morning as risk-taking is the flavor of the day and stock futures and commodities are higher. The dollar is down 1% vs. the Kiwi and Aussie.
Yen (JPY): As is expected on a risk-taking day, the Yen is down against all but the Pound as the threat of deflation keeps rate hikes off of the table and provides the fuel for carry trades in Aussie and Kiwi despite the good GDP numbers from yesterday.
In overnight markets, the Nikkei closed higher but the Hang Seng closed lower. European markets are higher as are US stock market futures. Oil is back over $75.25 (+1.5%) and gold is up to around 1115 (+1.38%).
As you can see, there is always something happening in the currency market that can influence sentiment and thus market direction. Following the news is extremely important in understanding how market participants view world events.
Also to note is that commodity prices are higher as which is consistent with an increase in risk appetite.
On to the currencies:
Aussie (AUD): The Aussie is higher on new from the RBA minutes. Analyst expectations are for the Aussie to gain to .91 vs. USD by the end of March. Should the economy continue to expand, then further rate hikes could be in order. The current benchmark rate is at 3.75%, making the Aussie a popular destination for carry trades.
Kiwi (NZD): The Kiwi is moving in tandem with its South Pacific partner the Aussie. While growth has not been as robust in New Zealand, the Kiwi will also benefit from increased commodity prices and a higher benchmark interest rate as well. That rate is currently 2.5%.
Loonie (CAD): The Loonie is trading higher this morning on the risk trade as well as the fact that oil is back over $75. Canada is in the spotlight right now as host of the 2010 winter Olympics as sometimes they get lost in the shuffle in the risk trade hierarchy. The Loonie is up to 1.043 vs. USD this morning, its highest level this month.
Euro (EUR): The Euro is higher against all but the commodity currencies, paring back some of its losses from the previous week. There is tough talk coming from the EU finance ministers regarding Greece, as news has surfaced that Greece may have used derivatives to “fudge the numbers” in order to gain entry to the EU. The fact that Goldman Sachs was involved should come as a shock to no one. Also contributing to the Euro gains this morning is the reading from the German Sentiment Index this morning which was lower than previously reported, but ahead of analyst expectations which net-net is positive for the Euro.
Pound (GBP): The Pound is lower this morning across the board as consumer prices rose 3.5% from a year earlier. A deviation of more than 1% from the target rate of inflation (2%) requires a letter from BOE Governor King as to how he intends to get back to the goal rate. Inflation volatility is to be expected, and this reading was not a surprise to analysts. This could put more Quantitative Easing back on the table for the UK, which would be Pound negative.
Dollar (USD): The Dollar is down this morning as risk-taking is the flavor of the day and stock futures and commodities are higher. The dollar is down 1% vs. the Kiwi and Aussie.
Yen (JPY): As is expected on a risk-taking day, the Yen is down against all but the Pound as the threat of deflation keeps rate hikes off of the table and provides the fuel for carry trades in Aussie and Kiwi despite the good GDP numbers from yesterday.
In overnight markets, the Nikkei closed higher but the Hang Seng closed lower. European markets are higher as are US stock market futures. Oil is back over $75.25 (+1.5%) and gold is up to around 1115 (+1.38%).
As you can see, there is always something happening in the currency market that can influence sentiment and thus market direction. Following the news is extremely important in understanding how market participants view world events.