Buying Euros

we still have massive problems in the US that could derail the stock market and fuel greater fear - rational fear, not irrational

Thu, 26 Feb 2009 18:17:53 +0000

Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook

The US budget deficit will be $1.75 trillion, and that the US dollar did not fall on this horrendous amount is a tribute to faith in the US economy and perhaps also the government's recovery initiatives. We don’t like the opposition GOP outright wanting the US to fail - why is that not unpatriotic? - but we admit that if there is too much pork in the stimulus and if the plan fails to deliver some significant signs of recovery by year-end, they will have proven the point that government is a bad actor on the economic stage and its role needs to be severely limited. Are we getting a return of attention to hard economic data? We propose that developments in Japan are making it unavoidable. The giant trade deficit yesterday shoved that point home painfully. The comparison of zombie banks between the US and Japan is on everyone's mind, too.

Japan acted too slowly and got a lost decade.

Comparsons of other countries with the US favor the US - "it's worse elsewhere." Meanwhile, Europe has yet to deal with what some critics called its subprime - Eastern Europe, which barely has a foothold on coming up to western standards. As far as we can tell, Western Europe feels responsbility, having initiated integration talk, but (as with the wars in the former Yugoslavia), lacks the guts and political will to take real action. How long will it be before we hear of US aid to (say) Croatia or Hungary? It should be someone else delivering aid.

But before these big-picture issues ripen,

we still have massive problems in the US that could derail the stock market and fuel greater fear - rational fear, not irrational.

We could get a bombshell from AIG, as rumored yesterday. Today we have General Motors reporting a worse-than-expected quarterly loss for a full-year net loss of $30.9 billion for 2008. Reuters says "That ranked as the second largest annual loss for the 100-year-old automaker on record behind only the $38.7 billion loss recorded for 2007. Revenue plunged by more than a third, and the pension plan is underfunded by about $12.4 billion as of the end of 2008. "GM said it could receive a 'going concern' notice from auditors, who will assess the risk that the automaker might not be able to continue as a going concern." The failure of GM - is that fully priced in to the dollar? Be careful.

Pounds to US Dollars = 1.4313
Pounds to Euros = 1.1219
Euro to Pounds = 0.8906
Pounds to Australian Dollars = 2.1901

Bye For Now

Bye For Now

IMS Foreign Exchange

Foreign Exchange Trading Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

We wonder if confidence in the UK government is coming back

Thu, 26 Feb 2009 17:47:43 +0000

Foreign Exchange - Currency Outlook

The US Dollar Exchange Rates made a solid gain yesterday against the euro and this spilled over to other currencies as well. The euro rate made an overnight high at 1.2900 but failed to hold it, sinking to 1.2688 by mid-morning in New York. The euro has flopped around since then and risen to just over 1.2800 by 8 am today, but despite choppiness in a wide range, the euro exchange rate is on the defensive now. We need the euro to fall under the twice-hit 1.2680 area to confirm the downtrend. If we get it, the next move would be a test of last Friday’s low at 1.2555. With the ECB expected to cut rates next week, this may seem a no-brainer but nothing is ever a no-brainer in such a nerve-ridden market.

The dollar vs japanese yen is the highest since last November, breaching the round number 98 for a few minutes overnight. Bloomberg says gloom about another lost decade is rising, with fear over tomorrow’s unemployment and CPI data. Some foreign exchange analysts note an area of resistance at 98.90, which is the 50% retracement of the dollar drop from last Aug (110.66) to the Jan low of 87.13. We say it's an obvious target but with conditions in Japan worsening by the minute, why stop there?

A level of 110 can easily be imagined.

Pound Sterling closed lower on the day yesterday, making a big jump down from 1.4663 on Monday to 1.4171 on Wednesday during US hours, but is recovering a bit this morning on what Market News says is demand from a macro hedge fund. We wonder if confidence in the UK government is coming back, too. It just announced a very big and complex rescue plan for RBS that involves everything but the kitchen sink - capital injections, a bad bank, insurance, and on the side, a BoE commitment to quantitative easing, which can entail buying some of RBS’ toxic paper as well as others’.

Pounds to US Dollars = 1.4313
Pounds to Euros = 1.1219
Euro to Pounds = 0.8906
Pounds to Australian Dollars = 2.1901

Bye For Now

Bye For Now

IMS Foreign Exchange

Foreign Exchange Trading Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

GM may not be a going concern

Thu, 26 Feb 2009 17:43:08 +0000

Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook

The US dollar exchange rate is firmer this morning across the board as traders try to digest far too much information from hard economic data and other markets, including equities and oil. Risk aversion may be falling as specific plans are announced (in the US and UK), which normally would be viewed as dollar-negative, so for the dollar to rise on a drop in risk aversion is a good thing. It means foreign exchange traders are looking at growth prospects, something that developments in Japan are bringing back to the forefront.

Today it looks like GM may not be a "going concern," though - surely a US dollar risk.

Pounds to US Dollars = 1.4417
Pounds to Euros = 1.1260
Euro to Pounds = 0.8870
Pounds to Australian Dollars = 2.2330

Bye For Now

Bye For Now

IMS Foreign Exchange

Foreign Exchange Trading Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

The Pound rallies again on bad news? Why?

Tue, 24 Feb 2009 18:02:54 +0000

Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook

In the UK, the government statistics office reported that investment by manufacturing and non-manufacturing companies in the three months to December fell an estimated 3.9% q/q and 7.7% y/y. Combining both private sector and public sector investment, the drop was 11% q/q and 15.7% y/y. This is huge. The ONS also revised downward the investment in calendar Q3 to -2.1% (from -1.3%).

That was the bad news.

Also bad were job losses at retailers, reported in the CBI survey, down at a record pace. The employment index fell 49% from 16% in the Nov quarterly survey. But the Feb sales balance was a lot better, only -25% after -47% in Jan. The expected sales balance was also less bad, -33% from- 52%.

This was seen as sterling favorable for reasons that escape us.
Pounds to US Dollars = 1.4417
Pounds to Euros = 1.1260
Euro to Pounds = 0.8870
Pounds to Australian Dollars = 2.2330

Bye For Now

Bye For Now

IMS Foreign Exchange

Foreign Exchange Trading Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

The Geithner plan is actually a good one - it avoids creation of a government bad bank, it avoids nationalization

Tue, 24 Feb 2009 17:47:50 +0000

Foreign Exchange - Currency Outlook

The big question on the table today is "Where is Tim?" Geithner is disappointing the market by not disclosing details of the plan to lend money to the private sector (vultures) to make a market in toxic assets. It looks like he is part of the problem rather than part of the solution, and critics are calling him an empty suit who has never placed a trade himself.

This is a terrible thing.

Remember that Rubin had instant credibility on the Street because he had been a trader.

The Geithner plan is actually a good one - it avoids creation of a government bad bank, it avoids nationalization (a semantically loaded word), and most of all, it avoids the government putting a price on assets at taxpayer expense. So where is it? Market News says "The market is anxiously awaiting the Fed's rollout of its Term Asset Backed Lending Facility (TALF) which has the potential to lend up to $1 trillion against assets and loans to spur lending in autos, credit cards, student and small business loans and commercial mortgage backeds. Bernanke said last week the facility should open any day."

When the history of this period gets written, we will find out the cause of the delay, but right now, nobody cares. If it turns out to be a legal constraint, the Street will issue the Shakespearean scream "let's kill all the lawyers." And yet it really is preferable to resolve these problems without writing new laws or twisting the capitalist principles on which the country is (more or less) founded. This is why letting judges arbitrarily re-set the principal of mortgages is such a contentious idea. We need flexibility and adaptability, yes, and fortunately laws can be amended, but delay is a bad thing in its own right, at least if you are a saver/investor today.

It's likely that Geithner is side-tracked by the Citigroup problem. Citi, along with about 20 other banks, is supposed to undergo the stress test this week. Presumably it will fail, despite big downsizing actions already taken. Converting the government’s preferred shares to common stock would solve some capital adequacy issues (while creating massive moral hazard and a competitive advantage for Citi).

The other question of the day is "What will Ben say?" Bernanke starts the semi-annual Congressional testimony today. He wants to talk about the economy but is going to get button-holed on bank nationalization whether he likes it or not. Congressmen will have their usual opportunity to look stupid and partisan on TV, although Bernanke is more gentle than Greenspan used to be. The real question, although it's conceivable no one asks it, is what is the Fed’s exit strategy, i.e., how will it halt inflation after all that Fed-created money at the banks is no longer used for capital and is used for lending? The obvious answer is to pull a Volcker—to raise interest rates so high that lending is choked off. This is obviously a long way in the future, probably years, but it's important for the inflation - obsession crowd that Bernanke acknowledge this is the expected outcome and assert that he will deal with it. After all, expectations of future inflation from money supply creation is why a Chinese official said

"We hate you."

Some foreign exchange analysts want Bernanke to state out loud that the Fed will adopt an inflation target. This would supposedly reduce fear of upcoming inflation and add confidence that the Fed knows what it’s doing by ballooning its balance sheet. But we say inflation targeting is still too hot a potato and Bernanke will be cagey about it. The downside among politicians outweighs the upside among market players.

Institututional factors tend to trump economic data and this is a huge week for institutional factors. The fiscal responsbility summit that kicked off yesterday - with Obama promising honesty in government accounting plus efforts to reduce the deficit - and meetings go on all week. This is probably an effort to woo those idiotic Republicans who want basically to secede from the rest of the US (with some governors rejecting federal unemployment money for its citizens - good luck in the next election). Tonight Obama will pre-empt our regular TV shows with an address to Congress and the nation on the budget, which is formally released on Thursday. Tomorrow the banks’ stress tests begin. The White House is no doubt hoping to get through the week to Friday’s GDP revision without having to nationalize anything.

Finally, we do get data although probably no heavy surprises. Today it's the Case Shiller home price index, backward looking to December, and Thursday, durables. We suspect the dolar could ping-pong around and perhaps weaken today if stocks recover, but looking ahead, the ECB will be cutting rates next week and we have to ask whether that is fully built in.

The trend is your friend and the foreign exchange traders continue to sell euros and buy US dollars and trend remains downward.
Pounds to US Dollars = 1.4417
Pounds to Euros = 1.1260
Euro to Pounds = 0.8870
Pounds to Australian Dollars = 2.2330

Bye For Now

Bye For Now

IMS Foreign Exchange

Foreign Exchange Trading Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

The US dollar exchange rate fell victim to a selling frenzy Friday afternoon that no one can explain

Mon, 23 Feb 2009 15:29:13 +0000

Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook

The US dollar exchange rate fell victim to a selling frenzy Friday afternoon that no one can explain. On the hourly chart it is a shocking move, from 1.2560 around 9 am to 1.2884 by 1:30 pm ET, or 324 points in under four hours. The Dow-Jones newswire reported that the move was triggered by the break of a key resistance level that set off a flurry of stop-loss selling, but other than that, the press ignored the move. The WSJ says there was a euro spike (but the US dollar remains set to rise), while the FT website doesn’t even have a currency story update as of 5:30 am ET.

Market News says the move was set off by a big hedge fund trade that triggered a series of cascading stop losses.

On Sunday night as Asia came in, the euro exchange rate took another jump upward to 1.2992, perilously close to the round number 1.3000, but then started to fall back. So far today, the euro is at 1.2781 at 8 am, or down about 50% of the upmove from early Friday. If it continues past the 62% Fibonacci level, about 1.2738, the whole thing could be over.

What is not over is the dollar/yen rise.

On Friday, the US dollar slumped against the yen along with everything else. But as the Asian day progressed and especially after Europe came in today, the dollar spiked to 94.95 - twice. This was a 200+-point rally is under 12 hours, or in the bigger picture view, 780 points since Jan 21, about one month. Again, note the reluctance to print a round number. In this case, the US dollar high is higher than on Friday and over the highest high so far this year (Jan 6 at 94.64).

Might the dollar/yen get back to 110.67 from last August?

Some foreign exchange forecasters say so.

The 50% retracement of the dollar’s downmove/yen upmove from 110 would be 98.86, or nearly 99. Again, near the key round number of 100.

You have to wonder if foreign exchange traders are fighting their inner OCD, like Mr. Monk.

Pounds to US Dollars = 1.4619
Pounds to Euros = 1.1400
Euro to Pounds = 0.8765
Pounds to Australian Dollars = 2.2600

Bye For Now

IMS Foreign Exchange

Foreign Exchange Trading Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

the public is in no mood to bail out Citibank and its rich shareholders.

Mon, 23 Feb 2009 14:28:16 +0000

Foreign Exchange - Currency Outlook

The financial crisis is made worse - prolonged - by the talk of US bank nationalization if nationalization is not a real possibility today, and we say it's not. It’s just smoke. On one side we have a bank that wants to protect important foreign shareholders and on the other we have a wide array of interests that want to protect the US reputation as a capitalist country that believes in private property ownership. Nationalization was always a last-ditch prospect and we are not at the last ditch, although with its stock at $2,

Citi thinks it is.

But the Geithner plan, which relies on lending government money to vulture speculators to make a market in toxic paper, is actually a good one. It’s a market solution only a little contaminated by government interference. The Paulson plan (the first version of TARP) was to buy toxic assets to free up the capital to let the banks operate properly again.

Paulson had to draw back from that plan because he had not appreciated the sheer size of the questionable paper. But the questionable paper remains at the heart of the financial crisis and the Geithner plan does address that, while simultaneously addressing bank capital levels and protecting taxpayer interests. The government is not setting the price on toxic assets, as TARP would have done. The Geithner plan is the one viable alternative to the "bad bank" plan that was rejected by the Obama Administration.

To nationalize Citigroup (which contains a lot more than Citibank) would be to throw a monkey wrench into the Geithner works. Not only would it destroy the credibility of the Treasury, it would create suspicion that more nationalization is to come - the famous "slippery slope" of the lawyers. And it almost certainly would entail creation of a mini-bad bank, an idea already rejected by the Administration and Congress as too expensive and involving too much government interference in markets (price-setting). So, what leverage might Citi have to get it done anyway?

This story has a way to go to ripen and it’s always possible that Citigroup gets broken up with a heavy dose of government money that is not quite nationalization (which would be majority ownership and management duties). But we have no reason not to believe Obama and Congressional leadership, including the hilarious Barney Franks, when they say this is not the road they intend to go down. It’s not insignificant that before the nationalization story got going, the story on Friday morning was Rick Santelli’s rant on CNBC the day before that the Obama mortgage bailout plan was rewarding the bad behavior of people who bought more house than they could afford and took on more debt than they could afford to buy luxuries. This got a large and favorable response, except for the rebuke from the Obama spokesman, who said Santelli didn’t understand the mortgage plan and didn't know what he was talking about. The favorable response is the voice of the people, who are mad as hell at bankers as well as their irresponsible neighbors. It’s not unrelated that disapproval is running really high over the woman who deliverately set out to have octuplets (while already having 6 children), which is seen as irresponsible (at best).

In this social environment, the public is in no mood to bail out Citibank and its rich shareholders.

All this story has done is distract attention away from the plight of the debtors in Eastern Europe, including a vast number of Poles and Hungarians with mortgages denominated in Swiss francs.

The nationalziation story is going to hold imaginations until something else comes along. Tomorrow and Wednesday, Bernanke gives the usual twice-yearly testimony to Congress on the state of the economy. He is likely to say what the Fed has been saying recently, that even if the financial sectors starts loosening up credit and seeing signs of recovery by year-end, it will still be a jobless recovery, the third jobless recovery since 1991. The Fed thinks unemployment will not fall under 7% until 2011 or later. Bloomberg reminds us that the 1991 recession bottomed in March but unemployment kept rising for another 15 months, reaching 7.8% in June 1992. "Similarly, the last recession ended in November 2001, and unemployment didn’t peak until reaching 6.3% in June 2003." We seem to recall Greenspan excusing away the jobless recoveries as being due to improved productivity.

Another factor this week will be the "fiscal responsibility summit" tomorrow, at which Obama will announce more details of the plan to cut the budget deficit by the end of his first term to $533 billion, from the $1.3 trillion he inherited from Bush. The $533 would be about 3% of GDP - the Europeans will say the US is imitating them. Actually, the amount inherited is much larger because the Bush gang left out various chunks of spending that they didn't want to acknowledge, like the cost of the Iraq war. We get the actual budget details on Thursday (the same day we get new home sales). Signs of fiscal rectitude and honesty in the US "should" be US dollar -friendly.

Meanwhile, the March 5 ECB policy meeting creeps ever closer, and it's a surefire bet that the bank cuts rates, probably by 50 bp. We may also speculate that somewhere in the EC or ECB a plan is being hatched to buy the sovereign debt of troubled members like Portugal, Spain, Greece, Italy, and Ireland.

Maybe

Europe will come up with the equivalent of a plunge protection team, i.e., private players getting their arms twisted to buy this paper and reduce the spread against Bunds. Nobody seems to have noticed that Trichet, as of this morning, is changing his tune and is worried about the spillover economic effects of the financial crisis.

We call this a day late and a dollar short.

We get a lot of data this week, probably to be overshadowed by the Citi nationalization and Obama budget talk. Nothing will be much of a surprise, except possibly Friday's GDP revision from -3.8% in Q4 to possibly as much as -5.3%. Everyone is already thoroughly disheartened so it’s not clear that a downward revision is going to hurt much. Before then we get the Conference Board consumer confidence (tomorrow), existing home sales on Wednesday and new home sales on Thursday, and the University of Michigan consumer confidence on Friday. Also Thursday is Jan durables, probably the one other data point that can move the market this week.

We continue to like the dollar.

Watch gold - it’s not really a currency and its limitations are clear to even the most ideological of true believers. Secretary of State Clinton told the Chinese she wants them to keep buying dollars and dollar paper. So far we have no reason to think they will not, and you should, too. It is the safe-haven. Unless the stock markets rallies like crazy this week - and why would it do that? - the US dollar should recover smartly.

Pounds to US Dollars = 1.4619
Pounds to Euros = 1.1400
Euro to Pounds = 0.8765
Pounds to Australian Dollars = 2.2600

Bye For Now

IMS Foreign Exchange

Foreign Exchange Trading Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

The UK is the first country to admit out loud that it has nationalized some banks

Thu, 19 Feb 2009 16:28:55 +0000

Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook

The UK is the first country to admit out loud that it has nationalized some banks. According to the Office of National Statistics, it will start including the liabilities of Royal Bank of Scotland and Lloyds on the government balance sheet, meaning they are "public sector entities."

Technically this happened last October with the injection of capital giving the government a majority share. We don’t know how much this adds to the public debt just yet, but it’s probably on the order of £1 to £1.5 trillion, or 70-100% of GDP.

Pounds to US Dollars = 1.4340
Pounds to Euros = 1.1275
Euro to Pounds = 0.8865
Pounds to Australian Dollars = 2.2100

Bye For Now

IMS Foreign Exchange

Foreign Exchange Trading Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

OECD reports that all of its 30 members are officially in recession

Thu, 19 Feb 2009 16:16:58 +0000

Foreign Exchange - Currency Outlook

Contraction is the order of the day and it’s about time everyone acknowledges it instead of engaging in denial and wishful thinking. The OECD reports that all of its 30 members are officially in recession with two consecutive quarters of contract, a combined -1.5% q/q and -1.1% y/y in Q4. It’s the biggest quarter-to-quarter contraction since the OECD began keeping records in 1960.

Outside the developed countries of the OECD, conditions are worse and worsening fast. Russia admits it will get contraction of 2.2% and the ruble hit a new low yesterday. Recently China said unemployment is 20 million persons, more than the entire population of some countries. The Eastern European countries are talking about defending their crashing currencies, with Poland knocking on the EMU door but honestly not qualifying (the Polish zloty has fallen 19% already vs. a rule of no more than 15% variation in the two years leading up to membership). In the real basket-case of Zimbabwe, where banknotes of face value in the billions, the currency was abandoned in favor of the dollar.

We guess that while it’s noble and useful for the Germans to step up to the plate and try to defend the eurozone members that need fiscal help, the market is missing the point when it buys euros on the story - the real meaning is that the eurozone is on shaky legs and members NEED help. The structural shortcomings of the European economy have resulted in big premiums for some members’ debt over the benchmark German Bund, as the BBK acknowledges. This shouldn’t happen if the market really believes that the union itself is a safekeeping device against performance divergence. But it’s not. The lack of a union-wide fiscal capability is fatal, or might be.

Everyone said the eurozone would get its first real test when a giant recession came along, and here it is.

It’s actually pretty silly to buy euros when a eurzone-crisis is finally being ackknowledged!

We think the dollar exchange rate will recover from this correction, which was always going to happen after the big move. We happened to get a good story this time but there’s always a story that foreign exchange traders use as an excuse to form a correction. We will not get too worried unless the euro puts in a true breakout, like 1.3000. Note the round number.

Pounds to US Dollars = 1.4340
Pounds to Euros = 1.1275
Euro to Pounds = 0.8865
Pounds to Australian Dollars = 2.2100

Bye For Now

IMS Foreign Exchange

Foreign Exchange Trading Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

But for the moment, a new optimism about the eurozone is in the air

Thu, 19 Feb 2009 15:13:17 +0000

Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook

The US dollar exchange rate is correcting downward after a big move up earlier this week, in part as a purely technical response to an overbought condition and in part because German Finance Minister Steinbrueck announced yesterday that Germany may be stepping up to the plate to offer "emergency" financial aid and leadership to the rest of the eurozone countries. What form this might take is unclear but Chancellor Merkel is holding a press conference later today (4:15 GMT) with EC Pres Barroso, so we might get details.

From the midday low in New York yesterday at 1.2510, the euro has swooped up to 1.2723 or over 200 points in less than 24 hours.

A German initiative could be a watershed moment, since the ECB lacks the authority to and operating capability to assist on the fiscal front. The eurozone lacks institutional depth - it has no combined Treasury/Ministry of Finance, let alone a State Dept and the other functions of a political union. The eurozone is little more than a customs union with a common currency. To address this shortcoming is a major step forward.

The announcement may bode well for the future of the euro but perhaps a little less well for the idea that the eurozone is a band of equals. By Germany taking a leadership role again, as at the beginning of the customs union, it is again clear who has the most self-interest at stake in the survival of the euro. To be fair, Germany has already sacrificed much for the sake of the eurozone, chiefly in the form of the cost of reunification of East and West, and it looks like it will be doing it again. This is both pragmatic and idealistic at the same time. Since Germany was willing to spend only €480 billion in stimulus funds last fall, the willingness to take on massive new debt is also a sea-change - if that is what is happening.

Or are our imaginations running away with us? If the German "leadership" turns out to be weak, insufficient, or not accepted by the others, the euro exchange rate could be punished. We are also skeptical of a comment reported by Bloomberg from an analyst in Singapore that "The markets may begin to perceive that the U.S. economy will fare worse than those of other major countries. This is likely to be negative for the US dollar." We don’t buy it at all. The US economy is bigger, more robust and more adaptive than any other. That doesn't mean it makes the right policy choices or that it is destined to succeed - the probability of failure is not zero - but the idea that it will fare worse than other countries, even mighty Germany, is improbable.

But for the moment, a new optimism about the eurozone is in the air. The euro exchange rate correction has already gone to the limit of the usual correction after recognition of an oversold level, about halfway up the breakout bar. If the euro rate breaks the linreg channel of the current move at about 1.2950, the whole ball game could change.

A dose of skepticism is proper. Today the Bundesbank in the monthly report renewed its usual statements that the German government must promise to reduce deficits once the crisis is over to maintain investor confidence. Pump-priming is fine but will take time to get a grip, and in the meanwhile, a plan to reduce deficits has to be made and believed. "Past experience has shown that it is easier to reach a consensus on expanding deficit spending than on the necessary consolidation of public finances afterwards. After all, confidence in the long-term sustainability of public finances is a condition for the success of government stimulus measures."

So how would a German rescue plan line up with the BBK's strict ideas about keeping to the Stability Pact, since Germany is already at the 3% cap? Clearly if Germany is going to buy the paper of distressed countries (Portugal, Italy, Ireland, Greece, Spain), it will have to get a waiver from the EC and the ECB. This is kind of like a hall pass and doesn't address the source of the most recent crisis, Eastern Europe. It’s unthinkable that Germany would rescue Hungary, Poland, the Czech Republic and other non-members-isn’t it?

In other Foreign Exchange market news, Barclays says the Canadian Dollar is about to change direction (and recommends traders to sell the US dollar in a 9-month timeframe). Risk aversion could take the Canadian Dollar to 1.30, but that’s about it. "We see the Canadian dollar emerging with a cyclical growth profile that is as good as or better than that of the U.S. dollar, with far fewer structural and policy negatives." The Bank of Canada will start raising rates ahead of the Fed, and Canada will spend less on stimulus, too. We say it’s ridiculous to imagine that the Canadian economy can fare well when the US economy contracts. Canada is joined at the hip to the US.

Pounds to US Dollars = 1.4385
Pounds to Euros = 1.1315
Euro to Pounds = 0.8823
Pounds to Australian Dollars = 2.2170

Bye For Now

IMS Foreign Exchange

Foreign Exchange Trading Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

One in five subprime borrowers struggling with mortgage repayments

Thu, 19 Feb 2009 13:40:20 +0000

Mortgages Update

Five per cent or around 37,000 borrowers expect to have their homes repossessed within the next six months, while over a third of respondents or 260,000 householders said they would be unable to fully meet mortgage payments if their income fell significantly.

If their fears of repossession were borne out, it would represent a sharp rise in the rate of repossessions since last year.

The Council of Mortgage Lenders is expected to announce on Friday that a total of 45,000 homes were taken back by lenders last year. But 37,000 being repossessed in six months is equivalent to an annual rate of 74,000, and Shelter's survey covered only subprime borrowers.

"We believe the situation will get far worse, with thousands of subprime borrowers looking for new mortgage deals when their fixed-rate ends later this year," said Shelter.

"With subprime standard variable rates at 10.5pc and fixed rates of 9.5pc, thousands could be hit with a huge monthly payment shock. There are also only five subprime lenders in the market, compared with 22 a year ago."

If these borrowers have to pay more each month on a new mortgage deal, their finances will be stretched further, potentially bringing about repossession.

Shelter found that 22pc of respondents, or around 160,000 households, admitted to struggling or falling behind with their monthly mortgage payments. Sub-prime borrowers were taking drastic measures to pay their mortgage, including borrowing from friends and family, using credit cards and taking out loans, the charity added.

Adam Sampson, Shelter's chief executive, described the figures as "terrifying". He added: "Home owners who borrowed in good faith during the boom now finding themselves among the most vulnerable to repossession. "Now for the first time we can reveal the true extent of the credit crunch and the destruction sub prime is yet to have on the housing market."

Full story visit www.telegraph.co.uk

Pounds to US Dollars = 1.4385
Pounds to Euros = 1.1315
Euro to Pounds = 0.8823
Pounds to Australian Dollars = 2.2170

Bye For Now

IMS Foreign Exchange

Foreign Exchange Trading Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

We are having a hard time understanding why sterling is holding up so well,

Wed, 18 Feb 2009 17:54:04 +0000

Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook

The US Dollar exchange rate continued to gain against the euro rate to about mid-day yesterday in New York on the European bank story, but the power of the story had faded by the close. Overnight as Asia was handing off to Europe, some euro bulls tried a push to the upside, but it failed to go very far - only 1.2640 from the US closing low of 1.2556. Market News reports somewhat cryptically that "Early (euro) dips met with demand from a major German name and a semi-official entity, though this proved insufficient to halt further slippage as strong cable sales helped to drag euros to dollars lower." We take this to mean that the euro's bounce is merely a minor correction and doesn’t signal a change in sentiment.

Sterling is buffeted by opposing forces, including the Bank of England seeking permission to expand money supply to buy government paper and the minutes of the last meeting showing that the 50 bp rate cut would have been 100 bp if Blanchflower had had his way. The Policy Committee voted unanimously to ask for the power to carry out quantitative easing (buying government paper), which it is already doing - pretty darn fast for a government agency. We are having a hard time understanding why sterling is holding up so well, relatively speaking, in a flattish range of 1.4100 to 1.4300. It’s well off last week's weird high over 1.4600 but why is it not breaking 1.4000?

Evidently because the euro exchange rate looks worse.

The dollar/yen (and euro/yen) are highly controversial these days. Bloomberg reports that some foreign exchange analysts see 96 and others see 85 (whereupon we should expect intervention). We are following the chart, which shows Day 1 of an upside breakout. We switched the signal but are never really happy with a new signal until it surpasses the most recent extreme level, in this case the high of 94.64 from January 6. Considering that the Japanese economy is in the worst shape of all G7, the yen "should" be weak but considering that there is probably a trillion of two still out in the world to be repatriated to Japan and plenty of risk aversion triggers to come, the yen could resume its uptrend on capital flows or perception that capital flows "should" be occurring.

Pounds to US Dollars = 1.4287
Pounds to Euros = 1.1330
Euro to Pounds = 0.8817
Pounds to Australian Dollars = 2.2390

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial
down
Buying Euros? Buy Euros at the best Euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

investing in emerging markets or trading emerging market currencies

Wed, 18 Feb 2009 16:59:34 +0000

Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook

The US dollar exchange rate is resuming its uptrend against all the currencies, especially the benchmark euro, on a renewed round of risk aversion. The risk to the rising us dollar exchange rate scenario comes from deniers and wishful thinkers who imagine that the end is in sight and stock markets may recover after nearing or hitting the November lows. We believe the extent of the crisis is under-appreciated and new waves of catastrophic news are on the horizon, so the outlook for the US dollar remains bright, if for bad reasons.

Pounds to US Dollars = 1.4289

Pounds to Euros = 1.1339

Euro to Pounds = 0.8815

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial
down
Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

Australian Homes most affordable in five years at Australian Mortgage Rates Fall

Wed, 18 Feb 2009 12:22:12 +0000

Australian Mortgages update

THE Australian dream of owning a home is more affordable now than it has been for five years following lower interest rates and greater Government subsidies, a report says.

The Housing Industry Association and Commonwealth Bank First Home Buyer Affordability index improved by 39.2 per cent to 153.6 points in the December quarter from 110.3 index points for the September quarter.

First home buyers last had housing this affordable in the March quarter 2003, according to the index. HIA chief executive Chris Lamont said lower mortgage rates and the boost to the first home owners scheme made it easier to buy a house.

"For would be first home buyers, conditions have improved significantly and clearly many Australians are taking up the opportunity to get into home ownership," Mr Lamont said in a statement."Cuts with interest rates and the first home owners grant have made a large impact.''

The Reserve Bank of Australia (RBA) lowered the cash rate by three percentage points to a six-year-low of 4.25 per cent in the last four months of 2008. And the central bank cut the cash rate another one percentage point to a 45-year-low of 3.25 per cent on February 3 in a bid to cushion the domestic economy from a possible recession. Commercial banks have lowered their standard variable mortgage rates by an average 3.75 percent points in response since September last year.

Repayments on an average home loan fell by 26 per cent to $2,056 a month by the end of the December, from $2796 the previous quarter.

In mid-October, the Federal Government doubled the first home owners grant to $14,000 for established dwellings and tripled it to $21,000 for newly built homes until June 30. Households would need an income around $70,000 to buy a modest home, the report said.

"Previously, a household would have to be earning in the order of $85,000 to afford a modestly priced home without going into severe mortgage stress,'' Mr Lamont said.

"The improvement in housing affordability means those on a more modest income can now contemplate a home of their own.''

Buying a home was more affordable in all capital cities and regional areas during the December quarter, the report said, with the largest improvement occurring in Perth, Brisbane and regional Western Australia.

Pounds to Australian Dollars = 2.2230

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial
down
Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

the UK has said it won’t nationalize the banks

Tue, 17 Feb 2009 15:42:32 +0000

Foreign Exchange - Currency Outlook

The US Dollar has plenty of its own bad news - Detroit, the insufficiency of the stimulus and upcoming mortgage plans, and Congressional nastiness - but "it’s worse elswhere." We have been preaching about the impending financial sector crisis in Europe from the beginning, albeit without much hard data. There is just no way that Citibank, BoA and the other powerhouses of finance could have gotten themselves in so much hot water while their European counterparts escaped. Giant hidden losses at European banks were always the only logical deduction. At the moment, Eastern Europe is the subprime of European banking, but at a guess, there are other sinkholes, too. And the ECB is keeping it all under wraps.

At 8 am today, we got the Wal-Mart earnings report, and it was better than expected. The stock market will like that. Later this morning we get the Treasury report on long-term capital flows, likely to get ignored unless there is a shock. Tomorrow we hear Bernanke’s testimony to Congress, although nobody is paying much attention to the Fed these days - althoigh they should, since the Fed is becoming the most powerful player on the planet. On Thursday we get Jan PPI and on Friday, CPI (and stock option expirations).

One of Rocky’s Rules is that institutional news trumps economic news and trumps the technicals. Today the institutional news where there is uncertainty pertains to the ECB and natioanl European governments, esepcially Germany and Austria. We are pretty sure we undestand what is going on in the US, and while there is rancor and an unbridgeable ideological rift, at least we know what the Obama Administration wants to do and how it wants to do it. So far the makret is signalling that it is willing to keep an open mind about Detroit, the final Geithner financial sector plan, and California’s looming bankruptcy, the Big Three of the day. these are undeniably huge issues and normally would be US dollar-negatives, but (not to beat a dead horse), it’s worse eleswhere.

Although the UK has said it won’t nationalize the banks, nationalization looks like a very real possibility in Europe, which means an end to the Stability Pact and potentially the Maastricht Trety, too. Germany or Austria can’t nationalize banks without a lot of consultation with the other European nations and the EC. This may not happen, of course, but Moody’s has stirred up a hornet’s next with its report overnight, and that will continue to dominate the news for a long time to come. The implications are vast.

Consider US investors with positions in European stocks or funds that hold banks.

We don’t need corporate welfare in the form of a tax break for repatriation of overseas earnings - let Europe nationalize banks and US investors will run for the hills of home. This may be an overreaction because "nationalization" is such a dirty word - dirtier as a word than as reality, probably - but scaring folks out of the euro all the same.

Pounds to US Dollars = 1.4400

Pounds to Euros = 1.1174

Euro to Pounds = 0.8947

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial
down
Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

exposure to Eastern Europe caused the Euro exchange rate to fall

Tue, 17 Feb 2009 15:05:32 +0000

Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook

The US dollar exchange rate held flat against the euro exchange rate yesterday in a range of 1.2725 to 1.2825 and without direction, but overnight the news that Moody’s may downgrade a slew of European banks because of their exposure to Eastern Europe caused the euro exchange rate to fall off a cliff from 1.2765 to 1.2656 in a single hour. After that the euro exchange rate has crept a bit lower to 1.2600 at the lowest. The euro rate went on the defensive also because of a new rise in risk aversion on falling equity markets worldwide yesterday.

Technically, it was helpful to the dollar exchange rate that the euro failed to match and surpass highs last week, putting in a series of lower highs. Some foreign exchane analysts now say the eurozone’s financial sector woes could take the euro rate down to test the Oct 28 low of 1.2329 in a flash. We note that the channel bottom on the hourly chart by 6 pm this coming Friday is 1.2126. Do not expect such a level at a speedy pace - prices never move in a straight line.

We are not getting the usual opposite effect in dollar to japanese yen, where the US dollar rose to 92.76, breaking last week’s high and possibly marking the beginning of a new move in the yen. Some forex analysts think that Japanese risk aversion has already been satisfied - i.e, everyone who was going to repatriate trading and investment money to yen has already done so. It won’t be long before we start hearing about the "normal" March repatriation flows that supposedly push the yen up as the Japanese fiscal year comes to an end on March 31. This is a myth. We get a rise in the yen in March less often than we get a drop, but a couple of years it was true and in size, so the story lingers. This time we have the dreadful GDP numbers yesterday to contribute drag to any yen rise.

Pounds to US Dollars = 1.4400

Pounds to Euros = 1.1174

Euro to Pounds = 0.8947

Moody’s is gearing up to downgrade banks

Tue, 17 Feb 2009 14:51:36 +0000

Foreign Exchange - Currency Outlook

The euro exchange rate and Japanese yen each fell on news related to their economic performance and financial sector outlook. In Japan, GDP contracted 12.7%, the most since 1974, and in Europe, Moody’s is gearing up to downgrade banks because of their unsustainable exposure to faltering Eastern European economies. In sum, the us dollar exchange rate is rising across the board on perception that "it’s worse elsewhere" than the US, which is taking aggressive measures against the global economic downturn. The US stimulus package was signed yesterday and the Obama administration will propose a mortgage bailout plan tomorrow.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial
down
Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

HBOS acquisition sends Lloyds credit rating down

Mon, 16 Feb 2009 13:42:11 +0000

HBOS acquisition sends Lloyds credit rating down

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

Euro to us dollar exchange rate is trading in a narrow congestion band

Fri, 13 Feb 2009 16:54:27 +0000

Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook

The US dollar exchange rate was moving sedately upward until late in the day yesterday, when a sudden rally in US stocks surprised the Foreign Exchange market. Foreign Exchange Traders rushed to sell the yen against everything and to buy emerging market currencies (including the Mexican peso), putting the US dollar rate on the defensive. The dollar/yen rose to a new high of 91.77. The new rule - Foreign Exchange traders need to follow equities - was proven. Overnight in Asia, the euro to us dollars was all but forgotten as attention and activity focused on euro to japanese yen, which whipped from 116.95 at the US close last night to a high of 118.54.

<

a href="http://www.imsfx.co.uk/">Euro to us dollar exchange rate is trading in a narrow congestion band of 1.2860 - the New York close last night - to 1.2943, the overnight high and 1.2853, the overnight low. This is under 100 points and may not mean anything. The euro exchange rate might have moved more but economic releases were just awful - eurozone GDP falling more than forecast. See below. Sterling is getting a boost from having been dramatically oversold and a rumor in the UK press that G7 will talk about it (of which there is zero chance, since the UK would squelch any such thing and the agenda was set a long time ago, anyway).

Pounds to US Dollars = 1.4400
Pounds to Euros = 1.1174
Euro to Pounds = 0.8947

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

we have faith in the world’s ability to produce more bad news.

Fri, 13 Feb 2009 16:25:57 +0000

Foreign Exchange - Currency Outlook

The most important comment today is from IMF Director Strauss-Kahn, the former French finance minister. Going into G7 today, he said "The problem is that the effect on the real economy, for the most part, is still to come." All the talk of better financial market regulation (the focus of French FinMin Lagarde as well as US TreasSec Geithner) is certainly needed, but we don’t have a clue as to whether G8 or G20 can coordinate initiatives and polices to get the global economy rolling again. It looks like differing priorities and ideologies are getting in the way. Everyone has a stimulus plan but each is independent of the others because of domestic political considerations. We find it curious that Germany is the most reluctant stimulator. This could be because the German banking system is in dire straits, worse than we know.

Some say that improving conditions in the housing sector are the key, chiefly halting the rising trend of foreclosures.

We do not agree.

Housing is a critical component but fixing it, even if that were possible, is no longer sufficient. Now the focus needs to be on the banking sector. Quite apart from the question of whether banks should survive horrendous management mistakes and in what form, the modern economy needs the multiplier effect of fractional reserve banking. Like it or not, it’s the bedrock of all modern economies. It’s why the North Dakota economy is okay and the economy of (say) Kenya is not.

Let's not get into whether fractional reserve banking is an evil thing, as some self-described Libertarians and various nut-jobs say. Evil or not, it's the way the world works and has worked for nearly a century, and there is no viable alternative (and certainly not gold). For all of us to have incomes, let alone "wealth," banks must lend. Fixing the credit system is Job One. It comes even before better regulation, much as it pains us to admit it. It comes before questions of trade protectionism and the distribution of hand-outs. If the banks are not lending, economies will continue to shrink. The UK, somewhat ironically, has been the leader in prodding banks to lend, followed by the US.

If all we do is follow risk aversion as measured by US initiatives or stories about initiatives and the stock market's reaction to the stories, we'd have to guess that the US will continue to deliver good news. This is not a vote of confidence in the Obama administration but rather a reflection on the way things get done in the US—fast, and changing fast if the response is not favorable. The problem for us in the Foreign exchange market is that good news means a drop in risk aversion and thus in the dollar. The dollar benefits from safe haven inflows that are much bigger than what we see in the bond auctions or even the Treasury's capital flow report. It’s hot money with a holding period of one day. If the financial world decides to invest in (say) higher-yielding and still-growing places like India and China, the US dollar is the thing that gets sold.

Having said that, the contraction in European GDP today means the ECB will be cutting rates (while the US is done with that one). Paring positions ahead of G7 was always to be expected. A weekend announcement of yet another financial sector problem - possibly in Europe - could change everything back to a loss of appetite for risk - and it "should." We are not willing to abandon a trend that is clear on the charts and clearly backed by realistic economic analysis for a flyer on other currencies whose countries have yet to admit to structural economic problems. In other words, we have faith in the world’s ability to produce more bad news.

Euro Exchange rate last at 1.2867

Pounds to US Dollars = 1.4400
Pounds to Euros = 1.1174
Euro to Pounds = 0.8947

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

US dollar exchange rate is on the defensive

Fri, 13 Feb 2009 16:03:27 +0000

Foreign Exchange Outlook : US dollar exchange rate is on the defensive

The US dollar exchange rate is on the defensive and may suffer more position-paring today as risk aversion fell back on the prospect of a housing market rescue initiative from the Obama administration that pushed stocks into a late-day rally. The G7 meeting starts today with a high probability of some shocking statements from finance ministers and other officials, although the actual communiqué tomorrow is not expected to contain anything new.

Pounds to US Dollars = 1.4400
Pounds to Euros = 1.1174
Euro to Pounds = 0.8947

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

Pound and Euro Exchange rate fall again against the US Dollar

Thu, 12 Feb 2009 16:49:48 +0000

Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook

Yesterday a draft EC paper, drawn up together with the ECB, was released. It recommends the "bad bank" approach to the crisis as the least budget-heavy way to rescue banks. This assumes the bad bank toxic assets can eventually be sold for a profit How to get started? "In order to limit this budgetary impact, one could consider combining a bad-bank approach and asset insurance whereby bad assets are transferred to a separate entity which benefits in some way from a government guarantee," the report suggests, according to Market News.

Meanwhile, officials in the UK are defending quantitative easing, aka buying Gilts, as the first line of defense. BoE Gov says the Bank has a mandate to hold inflation at around 2%--not zero. It’s a symmetrical obligation, meaning the Bank has to create inflation. The US Fed may end up in the same place, as Bernanke has suggested, but is holding off as long as it can. So far the ECB rejects any thought of quantitative easing, mostly because it has a "no bailout" clause and is technically forbidden to buy government paper lest it be charged with favoritism.

Pounds to Euros = 1.1087
Euros to Pounds = 0.9003

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

Australian Dollar - one Senator in Australia’s Parliament derailed the A$42 billion stimulus package

Thu, 12 Feb 2009 15:48:22 +0000

Foreign Exchange - Australian Dollar Outlook

In a shocking development - almost as shocking as the news that the wildfires were the result of arson - one Senator in Australia’s Parliament derailed the A$42 billion stimulus package because it neglected to contain provision for the Murray-Darling River system. To be fair, this area produces half of Australia’s farm products, although the focus of the plan was more on social spending with a little infrastructure spending.

The bill will be amended and re-introduced for a vote as soon as tomorrow.

Pounds to Australian Dollars exchange rate currently 2.1983

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

Foreign Exchange Outlook - Euro Exchange Rate falling again

Thu, 12 Feb 2009 15:41:58 +0000

Foreign Exchage Outlook

The dollar is resuming its uptrend across the board as the US Treasury refunding is going really well and dreadful economic news continues to come out of the woodwork in Europe. The market remains skeptical about the Geithner plan, especially in Japan, but the US may be taking the lead on regulatory and financial sector restructuring at the G7 summit that starts tomorrow.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

Trichet and his cohorts on the ECB policy board are smart guys

Thu, 12 Feb 2009 15:24:09 +0000

Foreign Exchange - Currency Outlook

The big release today is retail sales, probably a drop of 0.8%, according to the Bloomberg survey. We also get the usual weekly applications for unemployment beenfits, probably a horrifying 610,000 for the Feb 8 week after 626,000 the week before. Another Bloomberg survey finds that the consensus of economists is for the US economy to contract at an annual rate of 5% in Q1, with Q2 delivering a lesser contraction of 1.7% and the full-year coming in at –2% y/y. The slide in consumer spending will be the longest-lasting on record, says Bloomberg. One economist says all four quarters would be negative without the Obama stimulus plan. By 2010, we could see growth at 1.9%, with 2.9% in 2011 - but the odds are barely in our favor. "Economists estimated odds that the economy will be out of the recession in the next 12 months at 53 percent, down from 55 percent in January, the survey showed."

The unemployment rate will rise to 8.4% this year and 8.5% next year before recovering to 7.9% in 2011, and "the federal budget deficit as a percentage of GDP will average 10 percent this year, a postwar high." We say 10% is a mere bag of shells. Unless everything goes smoothly, it could be 20% or 30% or some other number.

Recounting the economic catastrophe in the US tells us something about what to expect elsewhere. The US is more flexible/adaptable than most other economies, especially in labor markets. If the US is going to contract a net 2% this year but be coming out of it by year-end, should we assume that the eurozone will decline by more and lag by (say) two quarters, if not more? Yes. This is our "it’s worse elsewhere" argument we imagine it still stands. We also think that Trichet and his cohorts on the ECB policy board are smart guys, and if they are reluctant to cut rates to zero, they must have a really, really good reason beyond stubbornness for the sake of stubbornness. (We might not have said that of Duisenberg but Trichet is a different color of cat).

Ironically, if the market starts believing that a delayed Geithner plan will be a better plan, and if he speaks well at G7 (squeaking to Congress was not awe-inspiring), confidence could come back and this is dollar-negative. Whether we like it or not, the US is taking the global lead on stimulus and on financial sector restructuring. The UK has a somewhat different model (entailing insurance/guarantees, Gilt-buying and probably bank nationalization) while the US is going for a free-market approach that will be messier but solve the problem of pricing toxic assets. We are inclined to believe that mid-year is a real possibility for a turn in the tide unless another wave of Alt A or other defaults comes along, and maybe by then we will have a mechanism in place to deal with it. Everyone else will still be lagging along

We like the US dollar again for the near-term, which is now on the order of only about 6-12 hours.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

GEITHNER SAYS TOXIC-ASSET FUND TO START AT $500 BLN *FED MAY EXPAND ASSET-BACKED SECURITIES PLAN TO $1 TRILLION

Tue, 10 Feb 2009 17:33:26 +0000

GEITHNER SAYS TOXIC-ASSET FUND TO START AT $500 BLN *FED MAY EXPAND ASSET-BACKED SECURITIES PLAN TO $1 TRILLION

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

Pounds to US Dollar rate rallies as things are worse elsewhere

Fri, 6 Feb 2009 15:44:57 +0000

Foreign Exchange - Global Currency Outlook

For stock markets to rally, even a little, on hope of an okay payrolls number and an acceptable Geithner plan is the triumph of hope over experience. The reduction in risk aversion is premature. A few points - Geithner was the NY Fed president who helped design the original $350 billion TARP handout that overpaid by 25-30%. What makes us think he can do a better job only a few months later? To be fair, maybe nobody can do a good job but that’s not what matters. What matters is that markets are so tired of fear and more fear that traders are grasping at straws. A little greed feels like relief.

But it’s just wishful thinking.

For another thing, the Jan payrolls number is not the only data point that counts. The combined totals over several months (and historical revisions) matter, too, not to mention the rest of the first quarter. Feb is a short month but it won’t be until the first Friday in April that we see the scope of the job losses. We could have had four months of 500,000+ losses, or over two million newly unemployed. This is going to scare the pants off everyone, and rightly. The Obama simulus plan is supposed to save or create 3 million jobs.

Well, two-thirds of it is probably already gone.

Foreign Exchange Analysts blythely say that if the payrolls number is horrendous (say 650,000), the us dollar exchange rate is expected to rise on renewed risk aversion (and presumably send the yen higher again). But back in the sane world, bad payrolls on this scale are bad for the US economic outlook and it’s simply ridiculous to expect a huge disconnect like this between growth and the currency to be long-lasting. At some point, the US and the US Dollar have to be punished for bad results. If your economy is getting a grade of F, your currency cannot thrive for long.

Unless "things are worse elsewhere." And they are. We still have not heard of all the scandals teeming under the surface of the European banking sector. Some of the European economies are in worse shape than the US, which must mean defaults and failures are about to hit the fan. Moreover, Trichet and the ECB are having a "profound" discussion of liquidity traps and why inflation is still a big risk. This is fairly dumb. The US, for all its faults, actually looks better. Whne the messy, inadequate, politically screwed-up US actions look good relative to others, the world is in truly, deeply bad shape.

No wonder gold is holding on to gains over $900 and clinging to the top of its channel. Many forecasters agree that another run to $1000 is inevitable given the high degree of uncertainty in the world today - regardless of the dollar rising or falling. UBS. For example, see demand doubling in 2009 from 2007, chiefly on the long-term inflation outlook. We say this is facile and simplistic. We will get economic contraction everywhere with falling incomes and falling wealth. Inflation is years away, not weeks or months. If this perception gains traction, gold is likely to fade back to the linear regression on the perception that yield is a desirable thing in a near zero-return world and that liquidity is a priority and not something to be shrugged off.

As always on payrolls date, we advise you clean your desk today and not hold any Foreign Exchange positions. This is a crapshoot, not high-level decision-making based on deep intellectual considerations. You may want to sell euros up around 1.2950 if the payrolls number is really bad on the expectation that the dollar exchange rate will gain on the day and into Monday. That’s a medium probability outcome but it’s still gambling.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

MOODY'S CHANGES OUTLOOK ON BANK DEBT GUARANTEED BY THE IRISH GOVERNMENT TO NEGATIVE

Thu, 5 Feb 2009 14:13:31 +0000

MOODY'S CHANGES OUTLOOK ON BANK DEBT GUARANTEED BY THE IRISH GOVERNMENT TO NEGATIVE

Bye For Now

Barbara Rockefeller

Pounds to Australian Dollars exchange rate currently 2.2700

Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

ECB kept the rate at 2,00%, unchanged as expected.

Thu, 5 Feb 2009 13:04:46 +0000

ECB kept the rate at 2,00%, unchanged as expected.

Bye For Now

Barbara Rockefeller

Pounds to Australian Dollars exchange rate currently 2.2700

Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

UK cuts rates 50bp in line with market expectations

Thu, 5 Feb 2009 12:14:27 +0000

UK cuts rates 50bp in line with market expectations

Bye For Now

Barbara Rockefeller

Pounds to Australian Dollars exchange rate currently 2.2700

Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

fiscal stimulus would help Australia avoid recession

Tue, 3 Feb 2009 16:13:30 +0000

Foreign Exchange - Australian Dollar Outlook :

The Australian Dollar was firm yesterday, rising off the early low of 6245 to an intraday high of 6357 on expectations of a rate cut and stimulus plan to be annoucned overnight. We expected a "buy on the rumor" effect and got it to a high of 6421 (or a 38% retracement of the previous downmove). But then the "sell on the news" effect kicked in, and the A$ sank back to 6334. The move may not be over now that the US dollar is in an overall corrective mode. We imagine the corrective move could reach as high as 6550 before it fizzles out. This is the channel top on the hourly chart and near the 62% retracement. But probably more important is the Australian Dollar vs Japanese Yen, which we don’t usually follow. It got a minor bit of support from the announcement but its still headed for a test of the lowest-ever low of 55.08 from last October.

The hard news is that the Reserve Bank cut rates by a full 1% to 3.25%, the lowest since 1964, and announced a new stimulus package of A$42 billion, to be focussed on infrastructure with some payments to consumers. Bloomberg says the packkage includes A$12.7 billion in grants to families and low-income earners and A$28.8 billion for infrastructure. It will help send the nation’s budget into an A$22.5 billion deficit, the first shortfall since fiscal 2001-02. The earlier Oct stimulus of about AUD $ 10 billion went mostly to low-income sectors like pensioners.

Treasurer Swan said The weight of the global recession is now bearing down on the Australian economy. Economic growth is slowing and employment will weaken. Unemployment will probably rise from 4.5% in Dec to 7% by the middle of next year, and growth will be lucky to hit 1% at the end of the fiscla year in June. The FT reports Mr Swan said the fiscal stimulus would help Australia avoid recession by boosting growth by 0.5 per cent in 2008-09, rising to 0.75 to 1 per cent the following year. The International Monetary Fund at the weekend forecast Australia’s economy would contract by 0.2 per cent in calendar 2009.

Bye For Now

Barbara Rockefeller

Pounds to Australian Dollars exchange rate currently 2.2700

Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

RBS, Other Banks Face Big Losses on Debt-Stock

Mon, 2 Feb 2009 14:45:51 +0000

Foreign Exchange - Australian Dollar Outlook

After the Reserve Bank of New Zealand cut rates by a mind-blowing 150 bp, the NZ dollar exchange rate fell dramatically by over 5%. Some Foreign Exchange analysts say the Australian dollar is next, with the Reserve Bank meeting next Tuesday (Feb 3) and probably cutting rates by 1% to 3.25%. After that another 1% cut is in store to 2.25%. Bloomberg reports 3.25% would be the lowest cash rate target since targeting began in 1990 and the lowest since 1964. A Standard Chartered foreign exchange analyst predicts the Australian Dollar will fall as much as 15% by end-June or about 60¢, before recovering to 72¢ by year-end.

http://online.wsj.com/article/SB123353475474137691.html

Bye For Now

Barbara Rockefeller

Pounds to Australian Dollars exchange rate currently 2.2700

Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

The Australian Dollar hit a 25-year high of 98.49¢ in July and has since plunged 34%.

Fri, 30 Jan 2009 17:46:23 +0000

Foreign Exchange - Australian Dollar Outlook

After the Reserve Bank of New Zealand cut rates by a mind-blowing 150 bp, the NZ dollar exchange rate fell dramatically by over 5%. Some Foreign Exchange analysts say the Australian dollar is next, with the Reserve Bank meeting next Tuesday (Feb 3) and probably cutting rates by 1% to 3.25%. After that another 1% cut is in store to 2.25%. Bloomberg reports 3.25% would be the lowest cash rate target since targeting began in 1990 and the lowest since 1964. A Standard Chartered foreign exchange analyst predicts the Australian Dollar will fall as much as 15% by end-June or about 60¢, before recovering to 72¢ by year-end.

The Australian Dollar hit a 25-year high of 98.49¢ in July and has since plunged 34%.

Bye For Now

Barbara Rockefeller

Pounds to Australian Dollars exchange rate currently 2.2700

Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

Factors for the euro exchange rates decline

Fri, 30 Jan 2009 17:38:38 +0000

Foreign Exchange - US Dollar, Euro and Pounds Sterling Outlook,

The US dollar exchange rate rose yesterday across the board - but only fractionally against the yen - on a flood of bad economic data just about everywhere and US stock indices falling back. Oil fell, too. It might be fairer to say the euro exchange rate was the center of attention rather than the dollar exchange rate, since the euro fell against the pound, yen and Swiss franc as well as the US dollar.

Factors for the euro exchange rates decline included its failure to reach beyond the early high around 9 am yesterday at 1.3179 to the previous day's high at 1.3328. Around noon the euro made a big jump down from 1.3079 to 1.2930, breaking the previous day's low, and then it was all over for technical traders - they had confirmation, however simple, of the next direction.

We don’t have the timestamp but evidently George Soros told an Austrian newspaper (Der Standard) that the euro may not survive unless the EU pushes for a global plan to deal with toxic debt. Bloomberg picked up the story and it apparently scared a sizeable amount of risk aversion back into market sentiment. Actually, Soros is not saying anything more drastic than the British, who are also appealing for a global solution (at G20), but such is the magic of the Soros name that traders didn’t want to be bothered with the facts. He didn’t say the EU needs a solution to its own toxic paper problem, although that is what the market heard.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

Sterling’s odd firmness against the Euro and US dollar is due mostly to firmness in the cross-rates

Fri, 30 Jan 2009 17:27:42 +0000

Foreign Exchange - Pounds Sterling Outlook

Sterling’s odd firmness against the euro and US dollar is due mostly to firmness in the cross-rates,including some fairly exotic ones like the pound/Swedish krona, recommended by Morgan Stanley.This is a strange outcome considering that the IMF just said on Wednesday that Britain will have the worst contraction in all of G7 this year, 2.8% (actually, Japan will be worse). Still, sterling was strong today after the Bank of England reported a rise in mortgage approvals, 31,000 in Dec after 27,000 in Nov and widespread forecasts of an additional drop. Probably the main point is that pessimism was overdone. We doubt the trend will reverse to upward for sterling. Overnight policy committee member Blanchflower said rates can still go to zero and the BoE may consider quantitative easing.

This was taken as sterling-negative but perhaps it can be twisted to be sterling-positive.

Confused? You are not alone.

Bye For Now

Barbara Rockefeller
Forex Trading Reports

Pounds to Australian Dollars exchange rate currently 2.2660 Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates! Contact IMS Foreign Exchange + 44 207 183 2790

US Dollar exchange rate put on some significant gains yesterday

Thu, 29 Jan 2009 14:14:34 +0000

Foreign Exchange - Summary of yesterday:

The US Dollar exchange rate put on some significant gains yesterday and early today on hope that a US "bad bank" initiative is imminent, even though the Fed failed to give clear guidance on quantitative easing (buying Treasuries). Good news on potential US recovery lately has been a US dollar negative but not this time. Although the pounds to us dollar is seeing a corrective profit-taking hit as the US opens, we think the dollar exchange rate can continue to improve. It needs to surpass 1.3050 or so against the euro to feel confident about ongoing recovery.

Bye For Now

Barbara Rockefeller

Pounds to Australian Dollars exchange rate currently 2.1700

Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

Australian Rents recorded their highest increase since 1988

Thu, 29 Jan 2009 10:57:51 +0000

Rent price rises at 20-year high
By Milanda Rout ,The Australian, January 29, 2009 12:00am

RENTS have recorded their highest increase since 1988 amid fears the rental crisis will only get worse as the impact of the global recession takes hold.

Latest figures from the Australian Bureau of Statistics show the annual rate of growth in rents across the country has jumped to 8.4 per cent in the year to last month, up 2 per cent from 2007, The Australian reported.

The statistics also reveal the increase in rents has jumped from 5.4 per cent to 8 per cent in Sydney, 11.2 per cent to 12.2 per cent in Perth and 8.6 per cent to 10.1 per cent in Brisbane.

Adelaide also recorded an increase in residential rental growth of 4.7 per cent to 5.4 per cent and Melbourne jumped to 6.6 per cent from 5.4 per cent.

BIS Shrapnel senior economist Jason Anderson said the rental market was only going to get worse as the country's economy faced a possible recession.

Matk Harwood of Canberra He said the roots of the rental crisis before the economic downturn were the significant increase in immigration and high interest rates that left a shortage of about 100,000 houses.

But falling interest rates were yet to have an impact on the rental shortage because construction of much-needed properties had decreased because of worsening economic conditions and higher unemployment. "This means the shortages are going to get worse over the next two years," Mr Anderson said.

"And it will probably put more pressure on the outer suburbs because that is where the cheaper rentals exist."

Mr Anderson said the rental rate increase of 8.4 per cent was well above the average 4 per cent wage increase, which made it even tougher for people facing difficult financial times.

The figures come as the rental vacancy rate decreased in Melbourne to 1.2 per cent last year from 1.6 per cent in 2007.

Read more on this at The Australian.

Pounds to Australian Dollars exchange rate currently 2.1700

Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

ECB Trichet: Does not exclude cutting rates below 2.00%

Thu, 29 Jan 2009 09:40:38 +0000

ECB Trichet: Does not exclude cutting rates below 2.00%

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

haraka haraka haina baraka - hurry, hurry has no good fortune

Wed, 28 Jan 2009 18:00:41 +0000

Foreign Exchange : Today the US House is supposed to vote on the stimulus bill, now up to $816 billion. Then it goes to the Senate. Everybody and his brother is urging fast action.

There is an adage in Swahili, "haraka haraka haina baraka," meaning "hurry, hurry has no good fortune." Yes, the word "baraka" is the same root as Barack Obama’s name. It's a splendid adage and perfectly true. The stimulus package is likely to be a dog’s breakfast and it may not work. Even if it were carefully designed, it still might work and nobody can accuse the plan of being carefully designed. Experts don’t really know whether Roosevelt’s stimulus plans would have worked if the war had not come along. (Two recent books feature the uncomfortable fact that many of Roosevelt’s plans were really hatched by Hoover, by the way.)

But set aside doubts about the stimulus plan and even the upcoming Fed announements or the "bad bank" rumored for next week. The three big initiatives may be badly designed and may not work, but the market is starving for good news and optimism. Unfortuantely for trend-followers, optimism and a renewed appetite for risk are US dollar-negatives. The trend could be breaking.

Gee, that means we need more bad news if we want to be buy US Dollars - how bizarre is that?

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

today the Fed starts the policy meeting

Tue, 27 Jan 2009 16:38:41 +0000

Foreign Exchange : In addition to data like Case Shiller home prices and the conference Board consumer confidence index, today the Fed starts the policy meeting. We can perhaps expect two outcomes. One is a revision of the Fed's forecasting time horizon. Retired member Mishkin said "Interest rates are no longer what monetary policy is about. A much more important part of policy now is managing expectations, and, in an environment like the one we are in now, having more clarity on inflation objectives becomes critical." In other words, we could get an inflation target but it would apply for a longish timeframe, like 3-5 years. The other big subject is managing the balance sheet, already ballooned out of all recognition. We are pretty sure the Fed is going to buy Treasuries, in part to manage the long-term rate, but how is it going to get out of the market-manipulation business? In other words, what’s the exit strategy? We’d like to know that at the beginning, before the entry. We say it's much too early to consider fear and more fear to be losing its grip. If bad debt really is $2-3 trillion and only $1 trillion has been disclosed and addressed, more shocks are to come. The US dollar exchange rate remains a good bet even if it’s not straight-lining anymore.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

pounds to us dollar made a strong showing on the Barclay's news

Mon, 26 Jan 2009 16:38:07 +0000

Foreign Exchange : The US dollar Exchange Rate is losing ground this morning across the board on a reduction of risk aversion, which was occasioned (oddly enough) by Barclays' saying that it had such strong earnings last year that it doesn’t need to ask the UK government for a capital injection. The foreign exchange market is very thin because of the Chinese New Year that has closed most markets in Asia, and foreign exchange traders are also somewhat confused by the giant rise in oil and gold on Friday. This seems to be the key reason for the Canadian dollar to be coming back strongly against the US Dollar rate.

On Friday the market pared short euro positions for no particular reason we can find except profit-taking and the desire to be square in case something happened over the weekend. During the day, the euro exchange rate rose from 1.2763 before the New York open to a high of 1.3035 in the afternoon before leveling off. Today it slumped until Europe came back in and caused a recovery to 1.3022 so far. If the US market mimics the European market, we could get a test of last week's intermediate high just shy of 1.3100 or 1.3386 from the week before.

Similarly, pounds to us dollar made a strong showing on the Barclay's news, but as the US starts getting active around 8 am, the upmove is already fading. The Japanese yen remains firm although on the north side of a pivot around 88.75, but soft against the euro exchange rate around 116. Sakakibara sees the equivalent of parity (100 yen per euro) at some point soon, so these are counter-trend corrections.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

US dollar exchange rate is softer at the start of the week

Mon, 26 Jan 2009 15:24:12 +0000

Foreign Exchange : The US dollar exchange rate is softer at the start of the week, led by the Canadian dollar for once, as the prospect of a US stimulus plan and perhaps formation of a "bad bank" encourages less risk aversion. Both oil and hold rose strongly on Friday, too. But this week we get an overwhelming amount of new data and information, nearly all of it bad, including a flood of US company earnings reports. The market has recently retreated from panic mode - and panic favors the safe-haven dollar - but panic could or should be building again this week.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

US Congress discussing and passing the Obama $800 billion stimulus plan

Mon, 26 Jan 2009 15:13:46 +0000

Foreign Exchange Outlook : This is a week of an overwhelming amount of information. Nobody can absorb this much information, let alone analyze it and put it into perspective. Aside from the US Congress discussing and passing the Obama $800 billion stimulus plan, nearly all the news is going to be bad. As we have seen recently, bad news is US dollar favorable because risk aversion rises.

Tomorrow is the start of a 2-day Fed meeting.

With the target rate range already zero to 0.25%, what can the Fed say to impress anyone? The FOMC needs to make a powerful statement lest anyone notice that it has run out of ammunition, presumably more talk about quantitiative easing. This will probably take the form of expanding the TALF (Treasury Asset-Backed Liquidity Program) to include not only Treasuries but also CMBS (commercial-mortgage-backed securities) or private-label RMBS (residential mortgage-backed securities), according to Market News. So far the government has not actually bought any Treasuries, let alone private paper, but we probably should expect it this week.

Also tomorrow Congress starts debating the Obama stimulus plan, which Obama wants done by the President’s Day national holiday on Feb 16, or two weeks from today. The Feb 16 holiday is a compromise date between Lincoln’s birthday on Feb 12 (also Darwin’s birthday, take note) and Washington’s birthday on Feb 22 (also USAF Col. Gary Rockefeller). We guess the stimulus debate will not be bi-partisan, judging from the Sunday TV talk shows where Republicans have one solution to everything, including athlete’s foot and the flu - tax cuts.

Also tomorrow is the start of the Davos World Economic Forum, for which the high and mighty pay a gaint fee to attend (Chf 42,500). The WSJ says 40 heads of state will attend this year, up from 27 last year, and some 1400 CEO's. Everyone will be talking about how bad conditions are and how much worse they can get, especially since the IMF is expected the next day to lower its global growth forecast to a mere 1%. The WSJ says that among the scheduled speakers is Richard Olivier, son of the late British actor Sir Laurence Olivier, who runs a motivational seminar company. Olivier says "The capitalist myth is lovely and youthful. It kicked off the industrial revolution, but maybe we need a new one." He will compare MacBeth to Lehman Bros.

Oh, good grief.

Anyone who thinks capitalism is a myth shouldn't take the stage in the first place.

Also tomorrow is US existing home sales and the Case Shiller home price index for November. Thursday brings Dec durable goods orders, taken as a leading indicator of everything from industrial production to employment. From an economics point of view, the biggie is Friday’s US GDP estimate and the Friday after that, the Dec payrolls number.

There probably is some good news in all this somewhere - some data last week was not bad, like the University of Michigan consumer confidence index (61.9% from 60.1 in Dec and the highest reading since Sept). But the ain’t over yet. We await other dire news, like German bank failures or the Chinese declining to buy US paper (they could buy Greece instead), and so on.

Bad news is US dollar-favorable. We do not have strong evidence of the trend failing, and the trend is our friend.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

nobody ever went broke shorting the pound

Thu, 22 Jan 2009 16:35:08 +0000

Foreign Exchange

Outlook for Pounds Sterling

The pound to US dollars staged a correction yesterday on perception that it was oversold, rising from a low of 1.3616 around noon to 1.4020 by the US close, but it couldn’t hold the level and slipped back to 1.3724 so far today. The low yesterday was a 23½-year low. The pound to euro, pound to yen has fallen to a multi-year low too, with a sense of crisis pervading the market.

According to Bloomberg, Merrill Lynch is saying that the pound's downfall reflects a perception that it will receive a downgrade to its Triple A rating. As noted below, the French FinMin complained about the British not being "efficient" in managing the pound better.

Tomorrow we get the Q4 GDP estimate, probably a drop of 1.2%, and on Feb 5, the Bank of England is likely to cut rates again by 50 bp to 1%. So much bad news is swirling around sterling that you have to wonder when it will be perceived as overdone. Having said that, the old saw has it

"nobody ever went broke shorting the pound."

This is not true, of course, but it is true that the bottom of the standard error channel is under 1.3000.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

Why are we not as afraid of potentially $1 trillion in toxic paper at German banks as we were on Tuesday?

Thu, 22 Jan 2009 16:18:14 +0000

Foreign Exchange Outlook : The US dollar exchange rate is not through rising, and we make that assertion on the grounds that the world is not through throwing unpleasant surprises at us. Why are we not as afriad of potentially $1 trillion in toxic paper at German banks as we were on Tuesday? Besides, various coutnries could actually intervene, if not this week, with the intent of driving their currencies down and "creating" inflation. We don't expect this outcome, at least not soon, but surely what they would be buying US dollars. And on the economics front, we concur with the Confederation of British Industry ,which said today it is stunned by the sheer speed with which things have fallen apart. The economic onsequences are deep and long-lasting. The analyst who said he expects recovery in Q1 is dreaming. In short, we haven’t hit bottom yet.

More Shocks are in store, and as we have seen, shocks favor the dollar.

At a guess, though, confirmation of Geithner and upcoming announcements of bailout/recovery plans, if accepted as worthy by the market, are ironically US dollar exchange rate negative. Still, the overall trend is in place and we do not see a reason to expect it to come to a halt.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

Portugal's long-term sovereign credit rating cut to A+ by S&P

Wed, 21 Jan 2009 17:00:10 +0000

Portugal's long-term sovereign credit rating cut to A+ by S&P

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

Pound to US Dollar fell in a straight line from 1.4900 on Sunday night to 1.3915

Tue, 20 Jan 2009 16:45:42 +0000

Foreign Exchange Outlook :

Foreign Exchange Outlook : The US dollar exchange rate resumed a strong rise across the board as bank and political crises erupted in the UK and Europe. The euro exchange rate fell yesterday from the high after the open Sunday night at 1.3386 to 1.3055 by the end of the day yesterday in the US, which saw hardly any trading since the banks were closed for the Martin Luther King holiday.

Overnight the euro exchange rate plunged right out of the gate in early Asian trading to 1.2986 and thence to a new low of 1.2919 after Europe came in around 3 am ET. That’s 467 points in about 30 hours. The euro rate is bouncing to 1.2954 at 7 am today but it’s not hard to read the chart - a new phase of the downtrend has started. The euro exchange rate has already retraced more than 62% of the recent upmove and talk will soon begin again of a 100% retracement of the move up from the Oct low at 1.2329.

Pound to US Dollar fell in a straight line from 1.4900 on Sunday night to 1.3915 - almost 1000 points.

Holy cow!

It’s the lowest level since 2001, on renewed disarray in the UK financial sector, with Royal Bank of Scotland needing government rescue on Monday and stocks, especially Lloyd’s, down over 30% today. The government is injecting capital into RBS but an analyst told the FT "The further losses from the combination of deflation and deleveraging will consume these additional funds, leaving equity shareholders at risk of further dilution."

The only currency holding steady is the dollar to Japanese yen, which has been hovering in the low 90's since Sunday night. Euro to Japanese yen and pound to Jpanese yen are both weaker, however. See the charts.

It seems strange to see the pound soft against the yen when the UK still has a yield advantage and a more activist central bank and treasury than Japan during its own lost decade.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

We look forward to seeing the euro exchange rate at 1.2000 before the end of March.

Tue, 20 Jan 2009 16:16:51 +0000

Foreign Exchange Outlook :

Today is the inauguration of Obama and eyes will be glued to the TV most of the day, We didn't get a stock market rally on the Obama Effect and already commentators are warning that expectations are excessive - the guy can't pull a rabbit out of the hat.

The WSJ writes of the recession forecast "The bottom could be postponed if Mr. Obama's stimulus plans are hamstrung or prove ineffective. And improvement won't be lasting until bank balance sheets are repaired, clearing the way for more-normal financial markets."

We think this is exactly right.

All the tax cuts and public works projects cannot restore confidence and repair the economy until the banks are fixed. So far the consensus of opinion is that the Treasury has botched TARP, announcing it would buy toxic assets before finding out what they would cost and needing to withdraw the plan. Still, the US is activist and the US is a very rich country, and so the US dollar is getting the benefit of the doubt so far. We have been calling it the phenomenon of "it’s worse elsewhere." Events of yesterday and today are making that point.

Many commentators are trying to give the appearance of wisdom by saying that the US will have to get inflation and the US will have to face a refusal to buy its massive new paper issuance, and disapproval of giant budget deficits and a wall of debt must be US dollar negative. We say these things may turn out to be true but are not a useful basis on which to place Foreign Exchange market trades today.

It is an orientation or perspective, and not necessarily the right one. What if the US gets inflation and giant deficits but other countries get more inflation and bigger deficits?

Realistically, the folks who will make the judgment are central bank reserve managers, sovereign wealth fund managers and private fund managers like the South Korean pension manager who thinks it's time to sell US dollars. We'd bet $10 that somebody from the South Korean government has that guy out behind the shed right now. The US is the military ally and defender of the country against the Chinese and Russians, and has been since the early 1950's.

It’s not nice to say your defender's paper is junk. We expect a retraction and apology any day now. We saw it when a Japanese finance minister made a threat to withdraw from US dollar reserves back around 1997 or 1998 after a G7 meeting in the US. The poor guy had to break his trip home (in Guam) and issue the apology and retraction.

Conditions are very different with China, the biggest or second biggest buyer of US paper. Foreign Exchange Analysts are already saying that Beijing will be Obama's first stop on the usual foreign trip after the inauguration. In fact, the biggest things Obama can do in the first few weeks are

find a way to fix the banking sector without becoming the first "socialist" president
fix the housing sector and end foreclosures and
talk the holders of US Treasuries to keep holding and to buy more.

This last category includes US citizens as well as the Asians. Health, energy and reversing the damage of last-minute Bush directives are less important. Oddly, Gitmo is not leass important because it’s a symbol of the US as a nation of laws, not of men.

We keep saying that every time "it's worse elsewhere," the US dollar exchange rates benefits.

This will continue to be true until bottom gets hit, and even then, the dollar can benefit on "first-in, first out." We look forward to seeing the euro exchange rate at 1.2000 before the end of March.

<

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

Irish Fin Ministry says to NATIONALISE ANGLO IRISH BANK

Thu, 15 Jan 2009 20:15:49 +0000

Irish Fin Ministry says to NATIONALISE ANGLO IRISH BANK

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

Australian Dollar Exchange Rate Falls

Wed, 14 Jan 2009 16:27:03 +0000

Foreign Exchange - Australian Dollar Currency Update

Yesterday it was obvious on the hourly charts that some currencies had fallen too far, too fast and in too straight a line to keep going without a pause or corrective bounce. The Australian Dollar was the most glaring case, with the euro looking overdone, too. See the Australian Dollar chart. For foreign exchange trading purposes, when we see a corrective bounce coming, we guess a level where it would be safe to go short again. This time it was the previous intraday high of the previous day, or 1.3331. This time the correction went 7 points over that. Having succeeded in the guess one time doesn’t make it a good rule for every situation.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

foreign exchange traders sold the euro to 1.3099 today on more bad news

Wed, 14 Jan 2009 16:02:52 +0000

Foreign Exchange Outlook : The US dollar exchange rate rose again yesterday from 1.3282 at 8 am in New York to 1.3138 by mid-afternoon, but was already giving some of it back into the close at 1.3180. The euro exchange rate suffered yesterday from bad economic data and a dollop of worry over fiscal conditions that clearly will violate the Stability Pact and triggered ratings agency downgrades (Spain on top of Ireland and Greece), but then as the euro exchange rates fell under a critical level around 1.3250, foreign exchange traders got worried the euro exchange rate was getting oversold and the market was running out of sellers. The 1.3250 level is the 62% Fib retracement of the euro's upmove from the Oct low at 1.2329 to the Dec high at 1.4719.

Sure enough, the euro rate rose overnight to 1.3338, but when Europe took the trading baton from Asia, foreign exchange traders sold the euro anew to 1.3188 again, not quite matching yesterday's lows but having the virtue of creating a new hand-drawn resistance line on the hourly chart (at 1.3310). Reasons for the euro to dip again include a false rumor that Ireland was already going to the IMF (it's only threatening) and German GDP, which came in at 1.3% for 2008 when 1.4% was forecast and in contrast to 2.5% in 2007. Adjusted for working days, German 2008 growth was a mere 1%.

Sterling, dollar to japanese yen and euro to Japanese yen made a similar small corrective bounce. The correction may not be over, alas, and could turn into a bigger upmove - depending on what the ECB does and says tomorrow. Right now we think it’s a minor event but foreign exchange traders have their chaps and spurs on, and are ready to ride a bucking horse.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

ECB to cut rates - or Foreign Exchange Traders to sell Euros

Wed, 14 Jan 2009 15:46:02 +0000

Foreign Exchange Outlook : We get retail sales and various other bits and pieces of data today. We say the institutional landscape holds more importance for foreign exchange traders today. Bernanke gave a sane and reasonable speech yesterday that marks out the path forward - no surprise: more public money backing for banks. As noted above, Congress wants specific spending for homeowners and the Fed is not delivering that. To be fair, it's not the Fed's job to make a value-judgment spending decision like that with big fiscal implications. Still, the Fed and Congress are aggressive and activist, which is US dollar favorable, even if we have big doubts about the Treasury.

All eyes are on the ECB to see if it comes up to Fed standards, and so far the voting is that it does not. A Market News story yesterday says "ECB member opinions remain divided in terms of the magnitude of the cut (50 basis point cut or more/less) and there are still concerns about a rebound in inflation. Though deflation worries have crept in, many members of the Governing Council fret that inflation could sneak back into the picture over time if the bank is not careful with its monetary policy. One senior source stressed that if the ECB does cut rates, the central bank would not follow the U.S. lead and said, 'The two situations are different.' He said that it was 'possible' that the economy had already hit bottom. At the very least, 'things should not get worse,' he argued. 'The next six months will still be difficult for the real economy, then we'll see. It's difficult at this moment to make projections and premature to say what the ECB will do.'"

Well, no.

Such a view is 180 degrees away from the consensus view of private sector economists, nearly all of whom believe things are going to get worse before they get better. We have seen only one forecast of improvement before the second half of this year, and that’s for the US, not Europe. The comment from this unnamed "senior source" at the ECB reflects a mindset of denial and delay that has beset the ECB from the beginning. If the ECB does indeed cut by only 25 bp tomorrow - or not cut at all - the euro exchange rate will be punished. In fact, it looks like it would take a cut of 75 bp (the new whisper number) to overcome the refreshed dislike of the ECB that has emerged this week. Markets are rewarding activism - consider sterling last week.

We shall see if they punish ostriches.

We imagine the US Dollar exchange rate will recover smartly from the corrective pause/bounce and that new fretting and fussing over US deficits will fail to grip foreign exchange traders imaginations. That means the euro to us dollars exchange rate "should" fall under 1.3000, and this week.

Note to Readers: Next Monday, Jan 19, is Martin Luther King Day and a national holiday in the US. The market is closed and we will not publish any reports. The next day is the Obama inauguration, yippee.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

The US Dollar Exchange Rate continues to post gains for the 7th day

Tue, 13 Jan 2009 15:52:32 +0000

Foreign Exchange Outlook : The US Dollar Exchange Rate continues to post gains for the 7th day, with the euro exchange rate reaching a one-month low of 1.3220 overnight before Europe came in and engaged in a little profit-taking or perhaps less pessimism now that the German 50 billion stimulus plan is going forward. The consensus is firming that the ECB will cut rates by 50 bp on Thursday.

The Japanese Yen was stronger against everything.

Dollars to Japanese Yen fell yesterday from 90.33 at the open Sunday night to a low of 88.84 during the US session, and has gone sideways since then. The head of the Keidanren business association (who is also chairman of Canon) told the press that he thinks major countries should get together to intervene in the Foreign Exchange market to stop the rise of the Japanese yen.

He would like to see the Japanese Yen in a range of 5 yen on either side of 100. As we have noted before, Japan is suffering the biggest effects from the global downturn of all G7 or G20 countries - the biggest drop in GDP (12.1% in Q4) and the biggest drop in corporate sales and earnings. It's very strange for Japan to be the one country with a rising currency when everyone else is devaluing as fast as decently possible.

Pounds Sterling was hard hit by four bad data reports in single morning form the top reporting agencies (British Chambers of Commerce, Royal Surveyors, et al.) - housing, retail sales, a proxy for GDP, and trade deficit. The pounds to dollar exchange rate has straight lined from 1.5349 last Friday to 1.4536 so far today.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

UBS, which repeated yesterday that the euro exchange rate will fall to 1.2000 by year-end.

Tue, 13 Jan 2009 15:26:24 +0000

Foreign Exchange Outlook : As we wrote yesterday, a decline was the euros manifest destiny even as it was rising last week because it was inevitable that the ECB would not stand apart from the rest of the world, clinging to an outdated anti-inflationary stance in a disinflationary world. This was and remains the persepctive of major Foreign Exchange market players like UBS, which repeated yesterday that the euro exchange rate will fall to 1.2000 by year-end. The forecast itself from such an important name becomes a factor in its own right. Even if the ECB stays on hold or cuts by only 25 bp, the bank says, expectations of cuts next time will get built in. "Thus the euro rate is likely to remain a sell on rallies against both the dollar and the yen."

We say this is exactly right.

We expect an ECB surprise on Thursday. ECB chief Trichet said "this is no time for complacency." The current challenges are pressing and new challenges will arise. He was (evidently) talking about a "firm and credible implementation of the EU stability pact," i.e., fiscal restraint, but Trichet is a really smart guy and he must know that to complain about overspending (Germany will break the pact in 2010) is spitting into the wind. We expect Trichet to make some critical comments accompanying the rate decision.

In the background is some chatter, mostly from the lunatic fringe, about some countries being forced to leave the EMU (Italy, Greece, Spain, Ireland are the most-cited names). We say it's much too early to be thinking along these lines, let alone making trading decisions based on such speculation.

For one thing, there is literally no mechanism for a member to leave the EMU.

Nobody knows how that could be accomplished. Having said that, there is an explicit deal that the EMU will not rescue a failed member, either. This is not so odd - New York State doesn't have to step up and rescue Massachusetts, either. Still, stress on certain names is generally euro exchange rate negative, although Bank of New York economist Woolfolk says that a weak country leaving the EMU would be a euro exchange rate positive. Well, no. While pan-European integration has hardly been a full-scale success, leakage from a failed economy could be substantial, from loss of export sales to immigration. We think the EMU would indeed come up with a rescue plan… but for whom? Spain yes but Greece no?

Back in the broader market, there's almost too much data this week to keep it all straight, but we must pay attention to Bernanke's speech at the London School of Economics today. But again, it almost doesn’t matter what he says because "it's worse elsewhere." See all the grim data above in the UK, Germany, Spain (ratings). We have the secret weapon of Obama, of whom far too much is being expected but he is our secret weapon all the same.

Nobody else has an Obama.

Nobody else has a federal structure, either.

And finally, nobody else is willing to experiment as wildly as the US, badly managed as it seems to be. Keep the faith - the US dollar exchange rate is on a roll.

Note to Readers: Next Monday, Jan 19, is Martin Luther King Day and a national holiday in the US. The market is closed and we will not publish any reports. The next day is the Obama inauguration, yippee.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

We won’t get any more information about an ECB rate cut next week

Mon, 12 Jan 2009 17:26:38 +0000

Foreign Exchange Outlook : We get a ton of data this week, as usual for the second week of the month. The Big Event, however, is the ECB rate decision on Thursday. So far the ECB has been reluctant to acknowledge the extent of the likely downturn, let alone the vastly deflationary forces at work. It has also put forward a face of "we know better" that is starting to look less convincing with every data release. Logically, there is no way Europe can avoid contamination from the US and UK, as Ireland just found out with the withdrawal of Dell and its several thousand jobs, or German manufactuers of industrial equipment suddenly seeing Chinese orders fall off the cliff due to demand destruction in the US.

We normally get an odd pattern of currency market responses to upcoming rate changes, as we just saw with the UK pound and the BoE decision. Often a currency rises ahead of the decision, which is counter-intuitive, and doesn't fall until afterwards. This time it looks like the euro exchange rate is going to fall, perhaps overly so, ahead of the decision (suggesting it might rise on the Event itself). The ECB has nobody to blame but itself. As BoT-Mitsubishi analyst Halpenny says in the FT today, "We maintain that the financial markets remain much too optimistic over the ability of the eurozone authorities to manage the current downturn. Lack of coordination on fiscal policy and evidence of strains within the EMU will undermine the euro exchange rates."

Merrill Lynch says the forex traders would buy euros if the ECB decision not to cut rates but it would be short-lived. We say "short-lived" is a euphemism - it would last all of ten seconds. In other words, the euro rate is going to fall no matter what the ECB does. It is in a no-win situation, unless you consider that a falling currency is desirable (which of course it is, today).

As for the economic claendar, it’s enormous--the Nov trade deficit tomorrow and the TICS report on Friday. We also get retail sales, the Beige Book, the Empire State and Philadelphia Fed indices, Dec CPI and industrial production, and the University of Michigan consumer sentiment for Jan. We also get the Federal budget deficit and the World Economic Forum's Global Risk report for 2009. Stock market guru Sandi Lynn adds that the U.K. ban on short selling financials ends this week, too.

Sometimes of more importance than the data is the rhetoric. This week we get Feds Lockhart, Bernanke and Lacker along with Congressional hearings on Obama’s cabinet nominees. We say the public and markets are still in a state of shock over the developments since last March when Bear Stearns lost its way and September when Lehman was allowed to go under. Goldman Sachs chief economist O’Neill says the Goldman financial distress index is actually a bit better, mostly on activist policy proposals, but with fresh bad news sure to be coming, this is probably the calm before the storm. Such a perspective is also a dollar - favorable perspective ( buy us dollars), since severe distress is dollar-favorable on the safe-haven thesis.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

We won’t get any more information about an ECB rate cut next week

Thu, 8 Jan 2009 15:18:37 +0000

Foreign Exchange Outlook : The US dollar is gaining ground today despite yesterday’s horrible ADP Macro estimate of private sector job losses in Dec. From the US open at 8 am yesterday at 1.3595, the euro slipped to 1.3558 by the time Asia was coming in last night. This is a minor move but also a halt to the euro’s upward momentum on Tuesday.

We won't get any more information about an ECB rate cut next week. The FT reports today that the ECB is likely to leave rates on hold, but today starts the no-comment period so we have only old reports. Euros to dollars volatility is very high on the uncertainty.

In Asia overnight, falling stock markets and re-evaluation of the Obama Effect triggered a bout of risk aversion. The US dollar fell against the Japanese Yen in a continuation move from the day before, from 93.20 at 8 am yesterday to the now-customary plunge at the end of the Asian day to 91.80 and so far to 91.33. This is near the bottom of the linreg channel on the hourly chart and the move "should" stop any minute now. If not, we have a downside US dollar exchange rates breakout that risks a return to the Jan 1 low of 89.46. .

Nothing has been stranger than the rise in sterling ahead of today’s BoE decision. The pound stopped falling last Friday at 1.4375 and has risen to breakout levels on the hourly chart in fits and starts, even surpassing yesterday’s high of 1.5281 by reaching 1.5292 this morning AFTER the BOE Monetary Policy Committee cut the bank rate by 50 bp to 1.5%, a new historic low and exactly as forecast by just about everybody. Again we have no reason for such a counter-intuitive move except that there are serious dumpers of euro in the euro/pound cross and it is bleeding into the pounds to dollars.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

But overnight the price of oil rose 85¢ to $43.48 on the Lebanese attack on Israel

Thu, 8 Jan 2009 14:22:22 +0000

The Feb NYMEX oil contract closed at $42.63, down substantially from $48.58 the day before and under the 10-day and 20-day moving averages. The WSJ says the 12% drop is the biggest single-day drop in percentage terms since September 2001. One factor was the US dEpt of Energy report showing crude inventories rose 6.7 million barrels last week, many multiples of the forecast. The amount of oil stored at the Cushing,

OK delivery terminal rose to a record high, too, showing weak demand.

But overnight the price of oil rose 85¢ to $43.48 on the Lebanese attack on Israel, the fear starting to grow that a pan-Arab alliance could grow against Israel and ultimately get reflected in a 1983-style embargo for Israeli allies. We say the probability of such an outcome is low. The miscreants are fringe groups, even if they hold power or high influence in Gaza and Lebanon, neither of which is an oil producer and both of which are failed states The question is whether real states want to make trouble and join up with these losers.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

Europe just starting to feel the pain already much in evidence in the UK and US

Thu, 8 Jan 2009 10:18:41 +0000

Foreign Exchange Outlook : The market is flirting with a return to risk appetite that is most visible in price rises in some commodities (copper, oil) as well as equities. At the same time, traders are girding their loins against really bad economic data, of which Friday’s payrolls is the most important. Market News reports the median number in its survey is a drop of 490,000, with a forecast range of 450,00 to 567,000. This comes after 533,000 job losses in November and 320,000 in October.

Offsetting the economic gloom is a rising sense that a can-do Obama administration really can create growth in some areas and that the reduction in fear is itself a pro-growth factor. Market News reminds us that when Reagan came into office in 1981, the US Dollar Exchange Rate was just coming up off a crisis level of 1.7250 against the DM. The previous Oct (1980), Fed funds had reached 20%--remember Mr. Volcker? While the US Dollar was already rising off the lows of the 1980 year when Reagan took office, he gets credit for the can-do attitude, even if Reaganomics had very little valid underpinning. Persisting today is a near-worship of Reagan by some but even those who thought the supply-side ideas were dumb have to admit that sheer attitude and the force of Reagan’s personality and charm were effective in restoring confidence. (He could also construct a whole sentence, too.)

Foreign Exchange Analysts point out that it’s impossible to untangle the psychological factors and the "real" economic and market forces at work. We say three things are critical. First is Obama convincing foot-draggers in Congress to shut up and go along with his plans. He will make a major speech tomorrow on recovery initiatives.

The second is greater confidence in the institutional infrastructure. The Fed's US mortgages market actions are already seen as a huge success two days into the initiative, if not grabbing headlines in the financial press just yet. Now we need success like this on every front, including the SEC. Numerous articles are appearing reviewing what happened, who or what is at fault, and how to prevent it next time. A lingering worry is that the guys who got us into the mess (Geithner, for example) are still the guys in charge of getting us out. We need to see a change in mind-set and not just personnel.

The third thing is perception of "how much is enough." This is one of the lessons every junior banker learns in credit school - is the borrower asking for the optimum amount of money to make the new business plan workable?

Right now it looks like the Obama plans will encompass $1-2 trillion, with $775 in stimulus spending and $300 billion in tax cuts (so far), on top of the $700 billion in TARP money plus whatever the Fed is doing.

Is that enough?

If the markets perceive that it is, they will open their wallets. A ton of money is sitting on the sidelines. In particular, corporations are stuffed with cash and refusing to invest in capital spending. So we not only need to see corporate bonds become acceptable paper again, we need to see corporations spend some of their own money.

Nothing spells confidence like capital spending.

We say that tax and other incentives to boost capital spending (as opposed to consumer spending) are the key to the success of the Obama plans. If tomorrow we start getting confidence in this aspect of the recovery initiatives, the payrolls number the next day will lose its sting. Yes, this means we think the psychological factor (returning confidence and hope) can outweigh bad data. The psychological factors are forward looking while the data is, by definition, backward-looking. Markets like to anticipate, and none so more than the Foreign Exchange market. With Europe just starting to feel the pain already much in evidence in the UK and US, hope is more likely to arise on this side of the Atlantic. So far Asians seem to be willing to believe in the Fed, and let’s face it, Asians are the ones with the money these days. Meanwhile, Middle East sovereign wealth funds and other official and semi-official asset managers are licking their wounds and watching the oil price fall but they will be back someday, if only because of the dearth of safe investment opportunities in their own region.

Now let’s look at the calendar. Jan 19 is a national holiday in the US and the inauguration is the next day (not a holiday). Analysts say mid-Feb is the earliest we can expect Obama initiatives to hit the streets, but we guess the can-do effect will hit before then. This could be wildly US Dollar - favorable.

We just need this dratted correction to end first.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

Time to buy Pounds to New Zealand Dollars?

Wed, 7 Jan 2009 09:17:31 +0000

Buying New Zealand Dollars? Moving to New Zealand?

NZ commodity prices fell for the fifth consecutive month in December in a broad-based slide, a survey by ANZ Bank showed. ANZ's commodity price index fell 7.4% on the previous month, a sharper drop than in November, and was down 24.4% on a year earlier.

Commodity prices falling will be negative with NZ looking to the farming community to prop up a slowing economy.

I like buying GBPNZD - technically a well defined risk reward (target 2.80, stop 2.44) as commodity price fall flows through to the real economy in NZ and we see a dramatic slow down in spending (on a year on year basis) and further increase in unemployment.

This also plays a bounce in GBP from its currently depressed levels.

Buy for now

IMS Foreign Exchange

Contact IMS Foreign Exchange + 44 207 183 2790

Pound rallies against the Euro exchange rate - at last

Wed, 7 Jan 2009 08:47:14 +0000

Foreign Exchange Currency Outlook : The US dollar rate is rising strongly this morning pretty much across the board, from a high of 1.4719 on Dec 18 to 1.3918 at the Friday close in New York to 1.3657 so far this morning. The move breaks the linreg channel drawn on the hourly chart and also the 50% retracement of the December move up in the euro. The 62% Fibonacci retracement comes out at 1.3377 - but that’s just the recent move. If we go back to the lowest euro exchange rate low last Oct 28 (1.2335), the 62% retracement is 1.3246.

The euro rate is suffering in part on expectations of really bad data this week, including retail sales, and also on a dovish comment from ECB VP Papademos, who said over the weekend that rate cuts might be needed to guard against recession.

Might be?

We have a flood of bad eurozone data today and it’s only Monday.

The odd move is the US dollars rise against the yen, priportedly on a cascade of carry trade unwinds, also breaking the linear regression channel on the hourly chart and actually touching the 62% retracement of the move down from the intermediate high on Nov 25 (97.42) to the low in mid-Dec at 87.19. The 62% level is 93.51. If we expand the timeframe back to the August dollar high of 110.67, the 62% retracement is 101.68. As you know, Dear Reader, we think Fibonacci numbers are superstitious crap, but a lot of people observe them so we must be vigilant.

We have a 3-week dollar high against the euro and a 4-week high against the yen. Sterling is not as weak, which Market News explains as "the pound able to take full advantage of general pressure on the euro. Sterling strength was aided by a euro-sterling sell recommendation by Goldman Sachs, along with expected sterling demand to emerge at the 1100GMT fix linked to HSBC's quarterly dividend payments and UK oil companies' sterling repatriation needs."

Bye For Now

Barbara Rockefeller Foreign Exchange Trading Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates! Buying Dollars? Buy US Dollars at the Best Dollar Rates! Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

falling oil prices that set the stage for the us dollar currency recovery

Tue, 6 Jan 2009 17:07:44 +0000

The Feb NYMEX oil contract closed at $48.81 from $46.34, breaking the 20-day moving average to the upside as well as the linreg channel top. This is quite frightening since it was falling oil prices that set the stage for the us dollar currency recovery. Overnight it went to $50.04, not seen since Dec 15, on reduced Russian supply of natural gas to not only the Ukraine, but Southern Europe, too. The FT names Turkey, Bulgaria and Romania. Oil is the alternative. Separately, Bloomberg reports that Kuwait and Qatar plan to cut oil shipments to Asia starting in January, fulfilling the cuts promised at the OPEC meeting on Dec 17. Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

Buy US Dollars - Even the strongest rally doesn’t move in a straight line

Tue, 6 Jan 2009 16:59:28 +0000

Foreign Exchange Outlook : We get some US data today, including the ISM service sector index for Dec (probably a decline to 36.5), existing home contracts, factory orders, and the minutes of the Fed Dec 16 meeting. The Fed minutes will be interesting because they will disclose the reasoning behind taking rates to a range of zero to 25%. Today is also probably the day that Friday’s payrolls come onto the radar screen.

Still, the overriding factor is the ECB rate cut now universally expected next week and the associated rhetoric as well as the amount (25 bp or 50 bp) and the pace of future cuts. Bloomberg reports that ECB policy member Constancio said yesterday (before today’s inflation numbers) that the bank is prepared to cut interest rates if necessary to keep inflation on target. If price growth slows below the goal of "just below 2%," the bank will respond with rate cuts. This is nothing more than confirmation of what we already know, but central banks have their own intricate dance with the market and it's necessary for the bank to disclose its intentions out loud. We can’t wait to hear from the BBK's Weber. As for the extent of cuts, Bloomberg says its survey shows ECB rates down from 2.5% to 1.5% by end-June, or a total of 100 bp in cuts. We think the market may reward the euro exchange rate with a bump up if the first move is a biggie, at least 50 bp.

Also, we need to look at two intermarket factors, the rise in US 10-year note yields and the price of oil. We are seeing a rise in yields and steepening of the yield curve in part on hope that the Obama team can drive recovery. As a general rule, this is US dollar rate - favorable. But not to the mind of former Bank of England policy committee member Buiter, who says Americans must prepare themselves for a "massive collapse" in the dollar as investors around the world dump US assets, according to a piece in the Telegraph newspaper. This is a tabloid newspaper that loves shocking headlines, although Buiter is a reputable source. Buiter says there will be increasing disenchantment with the US economy and thus an exodus of foreigners.

Well, probably not. Recently both the Japanese and Chinese have affirmed that they will continue to buy US government paper for reserves, even though China has already said Q4 reserves will show a drop because of the dollar's decline late last year. Some forex analysts say this is no big deal - these reserve managers have a distinct lack of other good assets to choose from. Even European bonds are not a real alternative to US paper since the European bond market is made up of individual country paper and some of it is getting the benefit of the doubt from the existence of the euro exchange rates and not because of good underlying fundamentals (like Italy). We are inclined to accept the no-good-alternative argument. If Buiter were right and the dollar exchange rate gets dumped as the Treasury holds auctions and nobody comes, the global financial system would face a bigger Shock than anything we have seen so far. We may not like it, but as goes the US economy and the US government bond market, so goes the rest of the world.

Oil is a more immediate and pressing problem. We complained all last year that the inverse correlation of the dollar and oil was silly (beset by circular reasoning whereby oil traders said they were buying oil as a speculative asset because the dollar was falling and currency traders said the dollar was falling because oil was rising). This correlation is not a necessary one we have had periods when the dollar and oil moved the same way and not inversely. But the speculative psychology could easily come back and give us wildly higher oil prices, and perhaps a wildly lower dollar, on very little evidence. We still want to see greater regulation of the oil market in some way - when oil is treated as a financial asset and not a commodity, it becomes less linked to valid supply and demand determinants and takes on the irrationality of financial markets. Oil is too important to be controlled by greedy, nasty yuppies at Goldman Sachs. But critics are right that regulating this market may cause more trouble than it cures. Who exactly would be qualified to do it, and how? Net-net, we see oil as the biggest threat to the dollar rally, not US economic fundamentals (and we are not certain that the Obama rescue plans will work in the first place).

Finally, today is Tuesday and we often get a pullback on Tuesdays, or so market lore has it. Even the strongest rally doesn’t move in a straight line. But keep the faith - it’s a true new trend and unless something comes along to derail it, we have more time to enjoy it.

Bye For Now

Barbara Rockefeller

Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!

Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

commodity price bust is going to keep going, and so will the stock market decline, and these moves will not be orderly

Thu, 4 Dec 2008 17:11:12 +0000

Foreign Exchange Outlook : Analysis of the day’s rate cuts will occupy most of the morning today, but by midday foreign exchange traders will probably turn their attention to the payrolls report at 8:30 am tomorrow. Yesterday ADP forecast the private sector component at a loss of 250,000 and other estimates are all over the place, with some whisper numbers as high as 400,000.

The problem will assuming that a really bad number tomorrow will be dollar exchange rate negative is that it’s already built in - isn’t it? Usually we get a two-way spike, both down and up, on the release. Payrolls is the most unforecastable of all the economic numbers, and so has become the most important. It’s not clear that the Fed views it as the most important, but never mind. This time we already know the news is going to be bad, and revisions will probably be worse. Depending on what happens to the automakers, it could get a lot worse before it starts getting better.

We are guessing that a bad payrolls number might have a US dollar rate -negative effect in the US dollar to Japanese yen exchange rate but not elsewhere. After all, falling employment is "good" in that it means the race to the bottom is proceeding at a rapid pace in the US, while it lags everywhere else. This is the FIFO argument from a few weeks ago (first-in, first-out) and while there’s a lot wrong with this idea, it can have a powerful grip on traders’ imaginations. Foreign Exchange Traders always try to anticipate. Obama has said employment is key and recovery plans will aim to create millions of jobs. So far we believe him.

Not getting enough attention is the report from the Government Accountability Office, which said on Tuesday "There is heightened risk that the interests of the government and taxpayers may not be adequately protected and that the program objectives may not be achieved in an efficient and effective manner." In other words, the Treasury has been throwing money out of windows, perhaps more than $3 trillion so far and easily another trillion or two to go, without being able to pin down exactly who got it and why. Someday the US dollar rate is going to fall on the blazingly obvious incompetence and mismanagement of this ad hoc rescue effort.

But we also think the commodity price bust is going to keep going, and so will the stock market decline, and these moves will not be orderly. Fear of volatility alone may suffice to support the US dollar exchange rate. Dollar bulls do not want to see commodity prices and stocks to rise, which is surely a bad thing in its own right.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

risk aversion is rising and rising risk aversion is dollar exchange rate favorable

Wed, 3 Dec 2008 14:56:51 +0000

Foreign Exchange Outlook : The USM service sector report is due today, probably a drop to 42 or the lowest since the index was invented in 1997. We also get the ADP Macro forecast of private sector jobs ahead of Friday’s critical payrolls report. This is oddly not much on the radar screen yet, even though on Monday the DJ Newswire reported a median estimate of 200,000 jobs lost. Potentially disturbing is a story in the WSJ asserting that Paulson is thinking about asking for the other half of the 700 billion in TARP money authorized by Congress. Originally his idea was to leave half of it for the incoming Obama administration. He would act next week if he acts at all (he leaves for China today or tomorrow, a wasted trip if ever there was one). This raises the question of what Paulson knows that the rest of us do not. We hate to say it, but if stocks are down today, that implies risk aversion is rising and rising risk aversion is dollar exchange rate favorable. Bah. This is no way to run a currency market. With average daily ranges shrinking and little directional guidance, we have to expect a breakout at some point - but probably not today. We may have to wait for Friday’s payrolls for that, unless tomorrow’s rate cuts do the job.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

Reserve Bank of Australia cuts Australian Mortgage Rates 1%

Tue, 2 Dec 2008 09:22:49 +0000

THE Reserve Bank of Australia has slashed interest rates by 100 basis points to 4.25 per cent.

Interest rates are now at a six and a half year low, and more cuts are on the way, economists say. CBA chief economist Michael Blythe said the RBA was likely to cut by a further 50 basis points in February. "It's a brave call to say there aren't any more rate cuts out there but you need more negative data to get large, rapid-fire rate cuts."

Last month the central bank cut interest rates by 75 basis points to 5.25 per cent. This followed on from a huge 100 basis point cut in October, and a 25 basis point reduction in September.

Most economists had tipped a 75 basis point cut today.

Minutes after the decision was announced, a spokesperson for Commonwealth Bank told news.com.au the bank would pass on the full rate cut, effective December 12. National Australian Bank followed suit, announcing it would pass on the full rate cut effective December 12, while Westpac said it would cut rates by 80 basis points. ANZ cut rates by 0.83 of a percentage point, effective December 12.

The central bank will be hoping today's rate cut encourages Australians to pull out their wallets, after data released this morning showed spending remained stagnant, despite recent figures showing that prices have started to fall.

RBA governor Glenn Stevens said although government and central bank stimulus packages had begun to take effect, global financial market sentiment remained "fragile".

"With confidence affected by the financial turbulence and a decline in the terms of trade now under way, more cautious behaviour by both households and businesses is likely to see private demand remain subdued in the near term," Mr Stevens said.

"With that outlook, and with capacity pressures now easing, it is likely that inflation in Australia will soon start to fall."

Macquarie Group interest rate strategist Rory Robertson said the RBA had, with its latest cut, reversed some six years of monetary policy tightening in just four board meetings.

Economists believe rates still have a way to fall, with some looking for a cash rate of 3.25 per cent next year. It is only the second 100 basis point rate cut since May 1992 - following a 100 basis point cut in October this year. The total 300 basis points worth of cuts since September is also the deepest set of rate cuts since early 1990, when the RBA eased monetary policy ahead of a recession.

Taking into account today's cuts, Australians will head into the Christmas season around $700 a month better off, according to experts.

Full story visit www.news.com.au

Pounds to Australian Dollars is currently 2.3255

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading

Forex Trading Reports - Click for a free trialBuying Euros? Buy Euros at the best euro Rates!

Buying Dollars? Buy US Dollars at the Best Dollar Rates!

Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

Australian Dollar falls than goes up and than goes down than it goes up

Wed, 26 Nov 2008 22:18:16 +0000

Hi All

Australian Dollar falls, than goes up and then goes down, then it goes up and i am now getting very confused!!!

Today the pounds to australian dollar rate opened at 2.3800 than went down to 2.3500 before going back up to 2.3900 before ending at 2.3300. This is getting very confussing and messey and show the importance of using limit orders to acheive the best exchange rates. today were buying Australian dollars at 2.3850 for a client which saved the client £3,459.12 or almost 2% just on the exchange rate alone.

So if you are migrating to austrtalia or just an expat looking for the best australian dollar rate give us a call + 207 183 2790

Good Luck and buy for now

Damian George IMS Foreign Exchange

Buying Australian Dollars call for the best exchange rates + 44 207 183 2790

Euro exchange rate needs to match and hold the end-Oct high at 1.3300 to believe that the dollar rally is really over

Wed, 26 Nov 2008 22:02:16 +0000

Foreign Exchange Outlook : The US dollar is starting to make some gains this morning after losing 648 points in the euro exchange rate from last week to yesterday morning (1.2433 last Friday to 1.3081 at 9 am yesterday). This could be a function of the foreign exchange traders buying euros to an overbought level ("too far, too fast"), in which case it’s a correction that reaches support around 1.2860 and a 50% retracement around 1.2760.

That’s if the euro rate upside breakout is the real deal, which is the outcome we get in two of three model systems.

If the euro move up was itself a correction of the bigger and longer-lasting euro downtrend, we may have seen the end of the correction. How you see it depends on the timeframe of the chart you are looking at. In the model system shown in the charts in this report, we do not yet have a true upside euro breakout, although it’s pretty scary. Looking beyond the euro, we see prices crossing over the short-term moving average, linear regression, or previous intermediate high in many cases.

One thing that a lot of analysts agree on-we need to see the euro exchange rate match and hold the end-Oct high at 1.3300 to believe that the dollar rally is really over. The high yesterday was 1.3081, or about 220 points under the benchmark. We would need to see it get hit and held before next Monday, which is going to make the rest of this week and Sunday night a fingernail-chewing, hand-wringing ordeal. The US closes shop early today for the Thanksgiving Day holiday tomorrow and while banks are open on Friday, it’s another short day. So here’s the question: do the Asian and European markets have the guts to set the trend in the absence of the US?

Market News sums up the situation neatly: "Foreign exchange market players do not trust the stock market rally seen last Friday and Monday, and therefore have little faith that the gains seen this week in the euro, sterling, Australian Dollars and Canadian dollars will be sustainable. The rise in stocks was being viewed as a "bear market correction," with renewed equity slippage likely when the rally has ended." According, the dollar exchange rate should come back up when these markets fall back down.

A second factor is emerging - old-fashioned fundamentals. For once we are seeing the Foreign Exchange market react to economic data and institutional responses to the economic crisis and not only knee-jerk reactions to developments in related markets like stocks, the so-called risk aversion theory of exchange rate determination. Pounds Sterling, for example, is well down from its high of 1.5534 yesterday to a low of 1.5290 so far on the 0.5% drop in Q3 GDP and associated gloomy data that reinforces the prospect of some big rate cuts to come.

Risk aversion still has a good grip, though, and as usual, it can be seen best in the Japanese yen. Dollar vs Japanese yen slumped from the Monday high at 97.42 to 95.45 at the US close yesterday and thence to 94.69 overnight, although it’s bouncing upward ahead of the US open. Sterling to Japanese yen is right on its hand-drawn support line on the hourly chart and probably breaking it today. A 50% retracement would take sterling down to 143,10 from the high of 148.61 yesterday. Euro to Japanese yen is also floppy, having run up from 116.39 last week to 126.24 on Monday. So far it has touched the 38% retracement at 122.48 and may do it again today, in which case the expectation would be for a further correction to 121.32 (50%).

This doesn’t make the Japanese yen a runaway or a screaming buy. If Foreign Exchange Traders like what they see as a necessary and sufficient government response to crisis - i.e., if confidence is at least partly restored, the US dollar will be rejected as the safe haven as Forex traders feel comfortable taking on more risk. The yen will get sold as the other half of carry trades into the higher yielders.

But Market News Asia reports this morning that "The failure of Asian stocks to continue their recent rally led to concerns among investors, who then cut positions inyen crosses. UBS said "At present we continue to see firm market demand forsafe-havens and the general flight to liquidity remains intact and there doesnot appear to be any shift in the perception of U.S. paper to serve this purpose. In addition, the overwhelming force of de-leveraging is firmly in place,especially in a weak growth environment."

Confused? You’re not alone.

Seeing the dollar/yen or any other yen cross rates a barometer of risk aversion or risk appetite is not working out too well these days.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

Berlusconi government will announce a €80 billion stimulus package

Wed, 26 Nov 2008 21:37:21 +0000

EurosExchange Rate Outlook: German import prices fell 3.6% m/m in Oct, the most since records began in 1962. Import price inflation is just 2.9% y/y, the lowest in a year.

The EU is going to reveal a region-wide stimulus plan today, but the FT carries a confusing story on it that doesn’t contain any hard information other than that the EU will not follow the UK in cutting VAT. Bits and pieces are dribbling out. On Friday, the Berlusconi government will announce a €80 billion stimulus package, with an emphasis on employment. This week Sarkozy promised the French auto industry that he wouldn’t let them down.

French consumer confidence rose today while business confidence crashed yesterday. INSEE’s French revised consumer confidence index rose to -43 from -46 in Oct, a 6-month high. The Italian business confidence index dropped to 72.2 from a revised 76.9 in Oct, a 15-year low.

Euro Pounds exchange rate currently 0.8400

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

Bank of England will cut interest rates to 2.5% at the Dec 4 policy meeting

Wed, 26 Nov 2008 21:29:49 +0000

Pound Sterling Exchange Rate Outlook : GDP fell 0.5% in Q3 from Q2, the fist drop in 16 years, although as expected. Consumer spending led the way, down 0.2% (the most since 1995) and fixed investment fell a whopping 2.4%. On the year-over-year basis, consumer spending rose 1.1%, though. This is the least since 1995 but not negative. The GDP report results in revisions to previously reported data like industrial production, now seen down 1.1%, and manufacturing, down 1.3%, in both cases worse than -1% initially reported. Construction fell 0.7%, less bad than -0.8% in the initial report.

Bloomberg points out that unemployment rose at the fastest pace in 16 years in Oct and jobless benefits are being paid to the highest number of people since 2001, while inflation fell the most in 11 years (to 4.5%). Therefore, the BoE will cut rates to 2.5% at the Dec 4 policy meeting, according to the consensus forecast.

Pounds to Euros 1.1905
Pounds to Dollars 1.5348
Pounds to Australian Dollars 2.3440

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

We can't name the event that will end the US Dollar rally, but at a guess, we haven’t seen it yet.

Wed, 26 Nov 2008 21:10:38 +0000

Foreign Exchange Outlook: At last the Treasury and Fed have launched an initiative that the market likes and is responding to. At last the government is doing something about housing directly and not indirectly through credit default swaps or capital injections to banks. At last the government is listening to the market, since the structure of the TALF was something proposed by player (according to Market News). This is tremendously good news. Unable to force banks to lend—the one big missing ingredient in the Citi bailout and the earlier capital injections-the government has found a way to "incentivize" the banks. And it took only three months, if we count from end-August. For a country as big as the US with so many conflicting lumps of self-interest, this is actually not too bad.

Ironically and perversely, though, a workable initiative is dollar exchange rate negative, since it means global risk is down and opportunity is up. It’s nice to have greed plus fear back again and not just fear and fear, but some issues do remain-not the least of which is "Is it enough?"

We may get a hint today in the form of personal income and spending, with spending expected down a big 1% after -0.3% in Sept, according to the Bloomberg survey. Who ever heard of the US consumer reducing spending? We say the UK is about 9 months in front of the US on this and many other fronts. Household spending fell to a multi-year low in the UK and we probably have to expect it here, too. We also get data on durable goods order, new home sales and consumer confidence.

The other big factor is prospective interest rate cuts in the UK, Europe and US in December. Remember that rate cut were a currency favorable event in Australia (with the Australian Dollar exchange rate ralling) and the UK a few weeks ago, since they showed "responsiveness." If the ECB is seen as recalcitrant or dragging its heels, the euro exchange rate could get punished for that lack of responsiveness more than rewarded for having a favorable yield differential. (Foreign Exchange Traders dont need a reason to Sell Euros at the moment)

This is a topsy-turvy world.

Similarly, Foreign Exchange Traders will buy pounds if the Bank of England is aggressive, as seems likely. We are holding to our story that all the bad news is not out yet and any fresh instance of systemic failure will fall to the US dollars favor. This includes a retreat in equities, renewed weakness in commodities (especially oil), a big bank failure somewhere (anywhere), and so on. This doesn't even include all the terrible things that can happen in the political or natural world-riots, assassinations, earthquakes, and the like. It seems improbable that a giant rate cut in China will restore everything to conditions before. In fact, we think it really is a new era.

Downsizing is serious business.

We can't name the event that will end the US Dollar rally, but at a guess, we haven’t seen it yet.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

the US dollar is not a dead duck

Tue, 25 Nov 2008 19:04:38 +0000

Foreign Exchange Outlook: Risk aversion could come flying back in the window when we get two bits of data this morning, the Q3 GDP revision (8:30 am EST) and the Conference Board consumer confidence index (10 am EST). GDP will likely be rived from -0.3% to -0.5%, while the confidence index was probably steady at 38 in Nov, the same as Oct, according to the Bloomberg survey. This is not a deterioration but still the lowest since records began in 1967.

It’s notable that while we all hear Obama talking about infrastructure spending as a big component of the stimulus package, focus remains on the consumer. Even the finance guys at the Fed and Treasury moved from saving their buddies at the banks first to consumer credit second (not the housing sector, which would have been more logical). But consumer spending is not going to get us out of this thing. The only way for that to have been true would have been Helicopter Ben throwing $24,000 out of the sky for every person in the country. The Obama approach calls for the industrial sector to be revitalized by government spending, whether it’s wind farms or road-building.

This could be the post-industrial industrial revolution. Nobody has the slightest idea what it will look like, but given technology advances, it will probably result (in five-ten years) in a tremendous increase in labor market productivity. We tend to think of productivity as how many widgets a worker can churn out in an hour, but in practice, the US is a service economy and it runs on trucking. Better roads and bridges, together with an improved national electrical grid, are a tremendous injection of value into the economy (buy UPS and FedEx). Besides, it will be fun to see whether it’s really true, as we saw with Eisenhower’s interstate highway system, whether government is sometimes the solution and not always the problem, the old Reagan mantra.

This is to a certain extent the basis of the new optimism - one way or the other, all these experts, under Obama’s leadership, will fix things. Well, no. These are the same experts who may have warned us of impending doom but failed to get action (Summers) or to instigate action (Geithner). It ain’t over yet and nobody can even tell us what inning we are in. It’s the proverbial black swan situation and optimism-in the form of giant stock index rises-is unwarranted. We believe in trends. The Dow was up but has not reached red resistance. It could be an aberration. The same thing is true of oil, although gold has a pretty scary chart-two gap openings in a row.

Assuming more dismal new releases are out there waiting to hit us over the head with some calamity or another, the US dollar is not a dead duck. As noted above, the case for the dollar exchange rate demise has not yet been proven. We do not doubt that it will be one day, but not yet. Keep the faith.

Bye For Now

Barbara Rockefeller Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

New Star suspends redemptions on International Property fund.

Tue, 25 Nov 2008 17:24:50 +0000

By Dylan Lobo

Difficult market conditions have forced New Star to suspend redemptions on its £470 million International Property fund.

The group said the move had been prompted by withdrawals, mainly on the institutional side, which has impacted the fund's liquidity.

New Star said the suspension is designed to restore sufficient liquidity to the fund for meet redemptions once it re-opens for dealing. It said it intends to minimise the period of suspension.

However, it emphasised the importance of getting a fair value for investors when disposing of assets, and given the weak market environment, it would be difficult to estimate how long the suspension would run for.

Full Story visit CityWire

Well it pretty much confirms that property prices in spain and france especially are falling rapidly due to the fact getting a spanish mortgage or french mortgage is virtually impossible

Buy For Now

IMS Foreign Exchange

Buying Euros? Buy Euros at the Best Exchange Rate with IMSFX

contact IMS foreign Exchange + 44 207 183 2790

Spanish and French Mortgage Interest Rates to Fall by 1 percent?

Mon, 24 Nov 2008 15:49:44 +0000

Euro Exchange Rate Outlook : The IFO Nov index of the business climate fell more than forecast to 85.8 from 90.2 in Oct, the lowest in nearly 16 years (Feb 1993). The "current assessment" fell to 94.8 from 99.9 in Oct, while "business expectations" fell to 77.6 from 81.4 in Oct. IFO’s Nerb said he doesn’t expect a rapid increase in unemployment, although there will be some, and he expects the ECB to interest cut rates by 100 bp.

In economic data, eurozone new industrial orders for Sept fell 3.9% m/m and 1.1% y/y.

On Friday, the flash estimate of manufacturing PMI fell to 36.2 in November from 41.1 in Oct and an estimate of 40.5. Today Bini-Smaghi said the eurozone was holding up pretty well and the new euro exchange rates level was pretty good for exports.

We don’t quite know what to make of such remarks.

Pounds to Euros last 1.1720 Pounds to us dollars last 1.5098 Pounds to Australian Dollars last 2.3300

Buy for now

Barbara Rockefeller Forex Trading Reports - click here for a free trial

Need to Buy Australian Dollars? Buying Euros get the best exchange rate -

contact IMS foreign Exchange + 44 207 183 2790

Foreign Exchange Outlook for the Pound Sterling

Mon, 24 Nov 2008 15:36:04 +0000

Foreign Exchange Outlook for the Pound Sterling : PM Brown has said monetary policy is not the only tool and it’s time to engage fiscal policy. The FT has a hysterical headline about Chancellor of the Exchequer Darling targeting the rich with a new 45% top tax rate to offset what will be massive government spending, together with a cut in the VAT of £12.5 billion to goose consumer spending. Darling presents a "pre-budget report" to Parliament today. Bloomberg says it will entail new bond issuance of £138.1 billion (an all-time high).

The NIESR says the UK economy will grow only 0.8% this year and will shrink by 1.5% in 2009 for 6 consecutive quarters of contraction. It recommends injecting around 10% of GDP into the banking sector (from 2.5% so far) and cut rates by 100 bp (or more). It advises a stimulus boost of £30 billion, or 2% Of GDP.

Pounds to Euros last 1.1720 Pounds to us dollars last 1.5098 Pounds to Australian Dollars last 2.3300

Buy for now

Barbara Rockefeller Forex Trading Reports - click here for a free trial

Need to Buy Australian Dollars? Buying Euros get the best exchange rate -

contact IMS foreign Exchange + 44 207 183 2790

We guess the US dollar will survive this round, too

Mon, 24 Nov 2008 15:24:30 +0000

Foreign Exchange Outlook : Everyone is looking at institutional factors like the Citibank bailout and hardly anyone is looking at macroeconomic indicators, but today we get existing home sales, probably a drop by 3.5% to an annual pace of 5 million. It will be the biggest monthly drop since Sept 2007, according to the Bloomberg survey. In the absence of a plan to stabilize the foreclosure rate and housing prices, the focus is in institutional failure rather than the economic consequences of the data itself. This is US dollar exchange rate negative. But can it be overwhelmed by an Obama spending plan due this week? Yes, but perhaps only temporarily. Spending itself is not enough you need a wide, deep and intelligent plan that everyone can believe in. Already we are seeing "anti-Keynesian" diatribes. Poor Keynes. He is getting blamed for a lot of things he never said or recommended. He did not say "spend your head off, debt doesn’t matter." Of course debt matters.

Without going further down that ideological road, consider the advice from some currency gurus who say "buy currency of creditor countries (like Japan) and sell the currency of debtor countries (like the UK and US)." This is like buying stocks of companies whose book value is greater than their stock prices. But countries don’t have book values. What counts is not the balance sheet, but the ability to generate cash. And here we have to consider not only the government and its ability to tax, but also the ability of private institutions, mostly banks, to generate the cash to pay the monthly bills and survive one more month. In the US, the TED spread (the 3-month Treasury rate vs. interbank LIBOR) is widening out again to 216 bp (according to Bloomberg), from the low in May of 76 bp and the worst-case high of 464 bp on Oct 10. The Fed is making funds available to just about every central bank in the world, including the Swiss and the Mexicans, but who comes first? US banks.

Longer run, the US printing all that money is an evil thing that will come back to haunt us. But in the immediate futures, like this week and next, it’s a powerful argument for the safe-haven status of the US to continue. Institutionally, perhaps the US doesn’t deserve the crown of safe-haven. The US is blundering badly. But in this matter of the crisis, it is still the leader-liquidity comes before solvency. We can worry about credit quality later.

How much money are we talking about? Bloomberg added up all the government programs and arrives at a figure of $7.4 trillion, or about half of US GDP. "Bloomberg News tabulated data from the Fed, Treasury and Federal Deposit Insurance Corp. and interviewed regulatory officials, economists and academic researchers to gauge the full extent of the government’s rescue effort." The bailout includes the $700 billion in TARP; $2.4 trillion in commercial paper; $1.4 trillion from the FDIC to guarantee bank-to-bank loans; $29 for the JP Morgan takeover of Bear Stearns; $122.8 billion in addition to TARP allocations for AIG, and now $20 billion directly to Citi plus $306 billion of government guarantees for troubled mortgages and toxic assets.

Bloomberg writes "The money that’s been pledged is equivalent to $24,000 for every man, woman and child in the country. It’s nine times what the U.S. has spent so far on wars in Iraq and Afghanistan, according to CBO figures. It could pay off more than half the country’s mortgages." Moreover, the Fed is responsible for $4.4 trillion of pledges, or 60% of the total commitment of $7.4 trillion-this is what we should be worried about, not the $700 billion in TARP. Bloomberg is miffed because the government won’t disclose the collateral taken, with Bernanke calling it "unproductive" to disclose it.

It goes without saying that this is the biggest bailout ever, dwarfing the Chrysler version, the steel companies, the S&L’s, etc. Is it quibbling to ask whether it’s "investing" or "spending"? Probably not, since the rule of deleveraging together with bad credit quality means downsizing, i.e., permanent losses. We are all going to be made poorer by this, but in the end, what counts is the ability of the US government to sell the paper to get the money it needs to save Citibank and all the others. Can we do it? Yes. Britain is neck-and-neck on aggressive stimulus and other plans. Paulson did a bad job but the job is getting done. We guess the US dollar will survive this round, too.

Bye For Now

Barbara Rockefeller Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790

Stark saying things are worse than we think in Europe

Wed, 5 Nov 2008 17:27:34 +0000

Pound Sterling is fascinating these days, first rising yesterday morning from 1.5598 at midnight to 1.6097 around noon, or 499 points in 12 hours - but then falling back to 1.5747 in the next 12 hours, only to bounce to 1.6047 again so far today.

What is causing these wild currency swings?

The reason seems to be that really bad data releases (see below) are inspiring forecasts of bigger-than-expected rate cuts tomorrow, maybe as much as 100 bp.

These days a big fat interest rate cut is currency-supportive (see Australian Dollar). Well, with Stark saying things are worse than we think in Europe, why isn’t the euro exchange rate getting the same boost? Possibly because nobody thinks the ECB would do anything as outrageous as surprise the market with a European interest rate cut of more than 50 bp tomorrow, and maybe not even that.

Maybe if the ECB cuts interest rates by 1pc we may see Spanish and French banks willing to issue spanish and french mortgages

Buy For Now

Barbara Rockefeller
FX trading reports - click here for a free trial

Need a french mortgages or just need to buy euros contact IMS foreign Exchange

ECB expected to cut interest rates tomorrow

Wed, 5 Nov 2008 17:13:09 +0000

Foreign Exchange Technical Analyst Outlook : The move in the Canadian dollar is starting to look like a reversal move, even though we don’t have a moving average crossover (which lags). Momentum, breaking the old low and other indications all point to a foray to the channel bottom, if not beyond. The upmove in the Australian Dollar is similarly strong. Remember, for reasons nobody understands, the Australian Dollar often leads the euro so soon you can see foreign exchange traders buy euros. If we were to superimpose a chart of oil and/or the commodity index on the Australian Dollar, we’d probably see a pretty good apparent correlation.

On the euros to dollars chart, we are going to fall back on the old adage that it’s still a downtrend until a key level is taken out. We judge that to be 1.3102, the midpoint of the breakout bar on 10/30, and the highest high in the current swing, 1.3298. With the ECB expected to cut interest rates tomorrow, this seems unlikely unless the market perversely rewards the ECB for doing the right thing economically. The probability is not zero - see the Australian Dollar again. We also have a really bad US payrolls number due on Friday.

Is it already priced in?

Buy for Now

Barbara Rockefeller Forex Trading Reports - click here for a free trial

Pounds to Australian Dollars - contact IMS Foreign Exchange for the best exchange rates

Bank of England to cut interest rates by 1 percent?

Wed, 5 Nov 2008 15:41:38 +0000

Pound Outlook : Ahead of the Bank of England action tomorrow, UK data continues to disappoint. Factory production fell 0.8% m/m in Sept for the biggest drop in 19 months. Output has fallen for 7 months for the longest losing streak since Thatcher (1980). Factory production is down 2.3% y/y. On the quarterly basis, output fell 1.3 q/q, the biggest drop since Q2 2001, which came right after 9/11.

In addition, the CIPS index of services fell from 46 in Sept to 42 in Oct, the lowest ever. The employment sub-index fell to the lowest since the survey began, according to Bloomberg. "Expectations"
also fell to a record low, 50.8 from 58.2 in Sept. Some foreign exchange analysts say these terrible numbers will prompt a rate cut of more than 50 bp.

Pounds to Euros currently 1.2346 Pounds to Dollars currently 1.6180 Pounds to Australian Dollars currently 2.3288

Buy for now

Barbara Rockefeller Forex Trading Reports - click here for a free trial

Need to Buy Australian Dollars? Buying Euros get the best exchange rate -

contact IMS foreign Exchange + 44 207 183 2790

Net-net, the US dollar Rate is at or near a turning point. It seems to be holding ground against the euro, pound and yen

Wed, 5 Nov 2008 14:54:18 +0000

Foreign Exchange Outlook : We get the US service sector PMI this morning, probably a drop to 47 from 50.2 in Sept for the 6th drop in 10 months, according to Bloomberg. We say the big picture will dominate today rather than data confirming the US slowdown. The big picture includes the reception of the US Treasury refunding, political things like Obama’s choice of TreasSec and/or intentions to propose a stimulus plan right away, and the new perspective on rate cuts.

Rate cuts first: The Australian dollar was rewarded with a rise after the Reserve Bank of Australia cut by more than expected. This is the opposite of the usual response under normal conditions. Commentary from the UK indicates that a larger-than-expected rate cut by the Bank of England tomorrow, even as much as 100 bp, would be sterling-favorable because it shows the government to be "pro-active." The market has priced in a 50 bp cut, but of 60 economists surveyed by Blomberg, 8 expect 100 bp and 6 expect 75 bp. A UBS analyst writes “In times of economic stress markets may become more concerned by future growth rates as a driver of future returns than movements in cash rates.

Evidently a global recession/possible Depression is sufficiently well-appreciated that rate cuts are seen as foreign currency supportive.

Might the same thing happen to the euro exchange rate tomorrow, and might the market be expecting just that response? Yes. Also, the following day we get the US payrolls report, expected to be bad but perhaps not fully priced in yet. We think the euro downtrend looks safe, but on the intermediate chart (360 minutes), the euro exchange rate is pressing against the linreg channel top and we need to see a level under the last intermediate low (1.2523) to feel confident. It’s not unheard of for a currency to move that much in two days, especially given the wild swings lately. In fact, the current average daily true range is 158 points, so over two days we could easily reach 1.2500. But everything has to go right for the us dollar to achieve the 1.2500 level before the mud hits the fan early Friday morning in the form of payrolls.

The Obama Effect: We may not hear before then of any Obama stimulus plan in the remaining months of the current Congress. (Congress remains out for another two weeks but technically has two months after that). The Obama plan is probably a $175 billion package including outright subsidy checks to consumers (which didn’t work all that well in April), a tax credit for job creation, and a big public works initiative - roads, bridges and schools.

Should we be worried that an Obama plan will also contain Hooverish measures against free trade or reactionary unionism? Probably not.

His advisors include former Fed chair Volcker, former TreasSec Summers, Warren Buffett, George Soros, and former TreasSec Rubin, who has said Obama understands that any government, especially one proposing big spending, needs to announce a commitment to long-term fiscal discipline. Failure to do so undermines the bond market and the dollar exchange rate. This was Rubin’s stance in the Clinton administration and he was right. As far as we know, Obama takes expert advice like this.

A funny monkey wrench is the works is the upcoming (Nov 15) summit of G20 in Washington, proposed by French Pres Sarkozy and hijacked by Bush. We expect nothing to come out of this meeting but hot air.

Net-net, the US dollar Rate is at or near a turning point. It seems to be holding ground against the euro, pound and yen, but not against the "riskier" currencies Australian Dollars and Canadian Dollars. If hope rises of a US recovery via Obama or anything else, the Australian Dollars and Canadian Dollars upswings will continue as risk appetite comes roaring back.
Does this lead the others?

Possible.

Ironically, the prospect of recovery in the US can be US dollar negative.

Buy for Now

Barbara Rockefeller Forex Trading Reports - Click here for a free trial

Need to buy Australian Dollars? Buying Canadian Dollars? Buying New Zealand Dollars?

Contact IMS Foreign Exchange + 44 207 183 2790

The US dollar put in some solid gains yesterday during the US session, reversing an early rise in the Euro exchange rate

Tue, 4 Nov 2008 20:22:26 +0000

Euro Exchange Rate Outlook :

The US dollar put in some solid gains yesterday during the US session, reversing an early rise in the euro exchange rate to 1.2893 to a low of 1.2572 by 6 pm. Market News says the market was exceptionally thin. But in Asia and Europe so far today, the euro rate is coming back up off the low to retrace about 75% of yesterday’s drop and we are suddenly newly wary of breaking yesterday’s high.

While we always have to be ready for a big countertrend moves, this one comes out of left field and we can’t find a decent explanation. Market News and Bloomberg both suggest that falling interest rate spreads and rising equity markets in Europe for the 6th day are a cause for acceptance of risk. But only yesterday the European Commission confirmed a diagnosis of recession. The ECB is expected to cut euro mortgage rates on Thursday. The US election will likely return a dollar exchange rate friendly Obama, although the prospect of a disputed vote may be causing harm, however small the probability of that outcome. To buy euros on rising stock markets seems a frivolous thing, doesn’t it? Calling it a "perception of risk reduction" is just putting semantic lipstick on what is still a pig.

The dollar to japanese yen is breaking yesterday’s high of 99.64 but only by a little. It’s a minor move up off the low late last night at 98.48, and barely worth mentioning except this is also the high from last week, and a higher high is always notable, even if the move lacks momentum. Many observers forecast a rise to the high before that at 103, and that would be a true breakout. Remember, a drop in risk aversion and embrace of risk is the only reason to believe in this scenario, and therefore a big new risk Event could reverse it in minutes. We say the market for yen crosses is not acknowledging the depth of the economic trouble to come.

The NKS has a story today on demand for "cheap euros" from Japanese retail investors. This accounts for a very big amount, unlike in the US. The European common currency traded above 160 yen until late August, but it slumped to the 113 yen range on Oct. 24, when a deepening financial crisis in the eurozone sparked panic selling. The sharp fall prompted many Japanese individuals to buy euros for yen. Some were planning to make a trip to Europe in the near future, but many others were looking to lock in forex gains, apparently in the belief that the euro will recover its value against the Japanese yen sooner than later. Some of these investors formed a long line at a foreign-exchange corner of a major bank here last week. Demand for the euro was so strong that the currency remained in short supply at the branch throughout the week." The writer of the article disapprovingly adds, "In any event, the fact that many Japanese are opting to hold their assets in cash, albeit in foreign currency, appears to demonstrate a serius loss of investor confidence resulting from the ongoing financial crisis."

Pounds to Euros currently 1.2300

Buy For Now

Barbara Rockefeller Forex Trading Reports - click here for a free trial

Buying euros? Buy euro pounds at the best exchange rates - contact IMS foreign Exchange

Foreign Exchange Outlook

Tue, 4 Nov 2008 17:13:37 +0000

Foreign Exchange Outlook : The US dollar has two big black clouds hanging over it. First is the election and then there is payrolls.

Today the US election is everything. If it’s an Obama landslide and/or if there is no dispute over the fairness of the counts, that would remove a black cloud hanging over the dollar from the last election. We also want to hear right away - this week - the name of the incoming Treasury Secretary and some broad outlines of the financial plan. A $1 trillion budget deficit is very big dollar exchange rate negative. Assurances of an effort to balance the budget would go a long way, even if they are not really credible.

Once the election is over, attention will turn immediately to ADP’s forecast tomorrow of the payrolls numbers on Friday. Market News gets a survey average result of a drop of 200,000 in Oct, but estimates range from –85,000 to –230,000. The jobless rate, the worst fiction in the data pantheon, will probably rise from 6.1% in Sept to 6.3% but perhaps as much as 6.4%. Realistically, it’s probably 8-10% already if the count were done properly.

There is a consensus of opinion from Foreign Exchange commentators everywhere on the US election. Calyon wrote "We think a decisive win in the Senate for the Democrats as well a win for Senator Obama, as the polls indicate, would boost risk appetite as the risk of political paralysis will be reduced going forward. Separately, UBS says the focus will shift to the "transition between administrations and how the president-elect handles the growing budget deficit."

Let’s say McCain wins and payrolls show a gigantic drop of 230,000 or more. The US dollar exchange rate would be toast by noon on Friday - to the recent high of 1.3298 - on the prospect of more shooting wars, endless deficits, and probably a disputed vote count. Can an Obama win offset really bad payrolls data? Yes, maybe. If Obama wins, the US dollar has a real chance of proceeding on its upward trend on "fundamentals" other than the safe-haven flow from deleveraging, or "forced liquidation," as Jimmy Rogers puts it. In other words, the US dollar would get a positive reason to be firm rather than a negative one. As we all know from the Economist’s poll and other surveys, the world would vote for Obama if it could. This is just a funny tidbit except in the context of confidence in US management of the economy and thus potential capital inflows.

We could name a third black cloud - Crude Oil.

With a new embrace of risk and stock markets generally unwilling to accept the recession/deflation/Depression scenario, it’s possible that oil stops falling. It’s hard to say how big a factor this might be. To sell dollars in a knee-jerk “because” oil is rising sounds stupid, but some folks do it. At the least it can have an effect for a few days. A bigger effect is on the US current account deficit (remember that?). We need oil prices to fall to avoid another round of twin deficit talk.

Even with falling oil prices, the current account deficit has structural characteristics that make it slow to fall. And with the appetite for a doubling of long-term debt unknown (hence talk of revising a 3-year note to bridge maturities), the US could actually face funding difficulties. The Treasury capital flow report has not been dollar exchange rate friendly lately, although it’s distorted by emergency cash raising, revulsion from Freddie/Fannie, and the like. But in the Big Picture, the US needs to show progress on the current account if funding needs are doubling. It’s not clear how that can be accomplished. Again, we have to say that longer-term, it’s all too easy to make the case against the dollar. But in the meanwhile, keep the faith. Things are worse elsewhere.

A big bad Event can easily restore the US dollars fortunes, and if we have learned anything over the past year, it is to expect surprises

Buy for Now

Barbara Rockefeller
Forex Trading Reports - click here for a free trial

Buying Euros? Buy euros at the best euro exchange rate - IMS Foreign Exchange

The Reserve Bank of Australia cut Australian Mortgage Interest rates by 75 bp to 5.25%

Tue, 4 Nov 2008 15:22:31 +0000

Pounds to Australian Dollar Outlook: The Reserve Bank of Australia cut Australian Interest rates by 75 bp to 5.25%, the biggest of the G7 bunch and more than 50 bp forecast as well as the third cut since September. The total drop in australian interest rates is now 200 bp. Despite a visible drop in demand from China and other emerging countries, Australia will probably have only a shallow recession this year and next, so the cuts are precautionary as well as a response to dipping domestic data like retail sales.

As a general rule, rate cuts are bad for a currency. This time the Australian Dollar rose from an overnight low at 65.97¢ to 68.29¢. The question is whether it will test the recent high at 68.93 from Oct 30. We don’t have a good explanation except that traders like decisive action, presumably think lower rates will work to keep the economy humming along, and the big move in a short while may suffice, leaving the Australian Dollar as the highest yielder in a world that generally seeks carry trade yield.

Market News offers an interesting contribution. Deputy RBA Gov Battellino raised questions about further rate cuts, saying "the cycle in the Australian housing market, rather than following the US market, is in fact at a more advanced stage; it is probably leading the US market by three years or so" The Australian housing market was at its hottest in 2003, whereas the US market peaked in 2006." Battellino also mentioned a "persistent inflation overhang" that makes it harder for the RBA to manage the economy.

We say this is interesting but not useful - regardless of the condition of the housing market, Australia cannot escape global consequences, including demand destruction for commodities.

Argh well at least Australian Mortgages are falling!

Pounds to Australian Dollars currently 2.3073

Buy for Now

Barbara Rockefeller Forex Trading Reports

Buying Australian Dollars? Buy AUD at the best exchange rates -

Contact IMS Foreign Exchange +44 207 183 2790

Euro Exchange Rate : The European Commission said growth will slump to 0.1% next year

Mon, 3 Nov 2008 16:42:02 +0000

Euro Exchange Rate : The European Commission said growth will slump to 0.1% next year, having entered recession this year. It’s the worst growth picture since 1993. GDP will contract for three consecutive quarters this year for a full-year total of 1.2%, European finmins are meeting today in Brussels to try to figure out what to do. Bloomberg notes that While France and Germany led European governments in committing a combined $1.7 trillion to protect the region's banks, and the European Central Bank now offers unlimited loans in an attempt to get credit moving, there has been no unified government response.

EU Commissioner Almunia said the EU needs better coordination in some areas. The situation is "precarious" as demand from emerging markets is easing (goodbye., exports), although inflation pressure is also easi

In fact, the weak pound has already delivered the equivalent of a rate cut.

Mon, 3 Nov 2008 15:48:40 +0000

Pound Sterling Outlook : head of the expected Bank of England interest rate cut this Thursday, the FT has a really interesting story on UK companies actually benefiting from the drop in the pound. If the Bank of England were to cut by more than the built-in 50 bp, it would boost stocks because of a currency effect. In fact, the weak pound has already delivered the equivalent of a rate cut. A rough yardstick suggests that every 10 per cent fall in the pound against the US dollar exchange rate equates to 25 basis points in monetary easing due to the beneficial effect on exporters and the pressure it takes off domestic manufacturers at home.

An astounding 41% of the FTSE 100 (market cap) report earnings in dollars, including oil companies, mining companies, banks and some pharmaceuticals. Calculating an Foreign exchange related rule of thumb for earnings is tricky, given the lack of information about the denomination of companies’ cost bases and financing requirements. However, for dividends it is much more straightforward: every 10 per cent fall in the value of the pound to dollars adds nearly 4 per cent to UK dividend growth, all other things being equal.

On the other hands, JP Morgan estimates that adverse foreign exchange movements have pushed annual UK retail inflation up from 7.7 per cent in June to 10.5 per cent. Retailers may try to pass on these increases to maintain margins. However there is every chance that, in a deflationary world, consumers will respond by trading down or buying less. This puts retailers such as Next in the firing line due to the comparatively high prices they charge. However, on balance, sterling’s weakness should be a boon for UK stocks, albeit a limited one given the air of gloom surrounding global asset markets.

Buy for Now

Barbara Rockefeller
Forex Trading Reports - Click here for a free trial

Buying Euros, Pounds to euros at best euro rates - Contact IMS Foreign Exchange

The US dollar will continue to benefit from the financial market crisis

Mon, 3 Nov 2008 14:35:24 +0000

Foreign Exchange Outlook : Foreign Exchange market analysts say the market will be "distracted" tomorrow by the US election but it won’t have a big effect on prices. We are not so sure. For one thing, the market likes big, decisive actions. A landslide by Obama, which is a real possibility, will be rewarded. But the longer-lasting effects of the election are yet to come. They pertain to political philosophy as much as economic outcomes, and here’s how:

We review a ton of headlines and skim hundreds of stories looking for the gold nuggets that form the basis of an foreign exchange outlook. Sometimes it’s all just noise, especially lately when it’s hard to know what is critical and what is not. The government "saving" Bear Stearns but allowing Lehman to fail was obviously a big deal but we didn’t see at the time that it would have such an enormous ripple effect. Now everyone blames the Lehman failure for consequences still coming out (like the HBOS write-down today and tomorrow’s data on credit default swaps). Today we have a tidbit from Economy.com that hadn’t sunk in yet but we now see as the single most important thing for the next 9-18 months. Here it is again: "Nationwide, 7.3 million American homeowners are expected to default on their US mortgages between 2008 and 2010, about triple the usual rate, according to Moody's Economy.com, a research firm. Some 4.3 million of those are expected to lose their homes."

With 111.16 million households in the US as of 2007, the default rate is 6.6% of all households. The number of new homeless households is 3.8% of total households. Quite apart from the effect on unemployment, retail sales, home prices and other standard economic variables, think about the effect of this many new homeless households on national health, crime rates, and the socio-political Zeitgeist.

The Far Right dislikesthe idea of a social contract-the US is a country of individualists. You can’t have individualism as your core ruling principle and then provide a nanny state, aka socialism. Bush One tried to soften this with "compassionate conservatism," and we saw how well that worked out with Bush Two in New Orleans. Nobody doubts that if Katrina had happened in (white, Republican) Orange County, the place would be rebuilt better than ever by now. The bottom line for the US is the question of what should the people expect of government in times of crisis as well as regular times? Some things can be provided only by government, like national defense, transcontinental highways, and so on. Should the state also "take care of" these 4.3 million people who will become homeless? We say the US is about to give itself a lesson in Political Science 101. We fondly imagined this debate would end with the election tomorrow, but surely we cannot brush under the rug such a high number of homeless households as 4.3 million.

We probably need to assume that a McCain presidency would mean a policy of letting the private market solve the homeless problem. Foreign Exchange Markets basically don’t like poor people, so this simply would not work.

Assuming we get Obama and assuming he believes in a social contract that deals with 4.3 million homeless households, the turmoil is going to be horrendous. Conservatives want to prevent the "Europeanization" of America. Economists worry, too - can it be done without the price distortion and misallocation of resources that are so prevalent in Europe? In France, for example, the state requires a failing company to remain in operation to provide employment.

This is bad business and stupid public policy. Surely the US wouldn’t go that far-?

Something very big is happening.

It’s not clear what effect it will have on the US dollar exchange rate, but longer run, a Europeanized America will have even bigger deficits and without the safety net of the Maastricht Treaty and Stability Pact, not to mention the single central bank mandate of controlling inflation. We complain that "Europe" lacks region-wide institutions, hence the scattershot national bank rescue plans, but the eurozone does have that one, giant, splendid thing named "fiscal prudence." With the world falling down around our ears, nobody much cares about fiscal prudence today, but that won’t last forever. And it can get worse. Maybe the number of homeless households is not 4.3 million but double that. Maybe the government rescue plans only delay getting the true housing market bottom and the end of bank consolidation, both prerequisites for recovery. Maybe sovereign wealth funds and others lose confidence in the US and stop buying all the trillions in new paper the US Treasury will issue to pay for it.

Longer run, you can see that we can easily make the case for the dollar exchange rate falling out of favor. In the meanwhile, falling commodity prices, impending recession worse in other places than in the more robust US, and additional shoes left to drop also outside the US all imply the US dollar will continue to benefit from the financial market crisis. In particular, we expect the emerging markets - including China - to get harder hit than anyone is now expecting.

If and when one of them hits the wall, the dollar will be the immediate beneficiary.

Buy For Now

Barbara Rockefeller Forex

Trading Reports - click here for a free trial

Buying Euros, Buy Euros at the Best Exchange Rates Contact IMS Foreign Exchange

iPod index reflects dive of Australian dollar

Mon, 3 Nov 2008 12:40:45 +0000

AUSTRALIA is the cheapest place in the world to buy an Apple iPod, according to a study to be released today, highlighting the dramatic fall in the Australian dollar in the past several months, The Australian reports.

CommSec will today release details of its "iPod index", which measures the price of an 8GB iPod nano in 62 countries to compare currencies.

CommSec chief economist Craig James said Australia had jumped to the cheapest spot after being placed 14th cheapest in July. An 8GB iPod costs $US131.95.

In July, a 4GB iPod (then considered the entry-level product) cost $US181.50.

"It's quite remarkable, we are the cheapest by a long way," Mr James said.

"Our currency has fallen dramatically."

It would be about 25 per cent cheaper for a British tourist to buy their iPod in Australia, rather than at home, Mr James said.

But while having an Australian dollar at US65c-67c was good news for manufacturers and other exporters as well as the tourism industry, Mr James said the iPod index shows the Australian dollar may have fallen too far too quickly.

Read more on this story at The Australian.

Pounds to Australian Dollars currently 2.3800

Retracements in foreign exchange are not as forecastable as some technical analysts would have you believe

Thu, 30 Oct 2008 19:09:29 +0000

Foreign Exchange Technical Notes : Retracements in foreign exchange are not as forecastable as some technical analysts would have you believe. We can make three or four estimates and one of them will be close to correct, but the next time, a different technique will be the right one. For the euro exchange rate, we can note that the last correction was 9/11 to 9/23 and a rise of about 870 points. The equivalent move today would be to 1.3254 by mid-November, although it looks like the level will be reached faster this time. Using the last intermediate high/low is a strong idea because we define a trend as a series of higher highs or lower lows. Breaking a high/low means the trend was broken - but not always.

We can also look at hand-drawn diagonal support and resistance, key moving averages like the 20-day, and Fibonacci levels. We would not be surprised to see an important correction like this one stop at an important Fibonacci/Gann level like 50%, mostly because everybody and his brother will be drawing them to set stops and targets.

We can also look to intermarket information and fundamentals for a clue as to when a correction will stop-or get confirmed as a new trend. Today we see oil and the commodity price index up quite a bit and since they are assumed to have a negative correlation with the dollar, that is itself a factor. Let us remind you that it’s a spectacularly unreliable one.

Buy for Now

Barbara Rockefeller Forex Trading Reports - Click here for a free trial

Buy US Dollars at the best exchange rate - IMS Foreign Exchange

UK interest rates need to fall a lot and need to fall soon to avert a deep and lasting recession

Thu, 30 Oct 2008 18:48:38 +0000

Bank of England policy member Blanchflower said UK interest rates need to fall a lot and need to fall soon to avert a deep and lasting recession. Blanchflower has been the sole voice on the MPC calling for rate cuts over the past year. He says growth will contract this year and next, with inflation falling to under 1% and perhaps even going negative - a wild statement in light of inflation at 5.2% in Sept. Blanchflower blames the Lehman bankruptcy for intensifying the credit squeeze. It has yet to really hit companies and households. Blanchflower makes the most important comment with this: The key economic policy over the last decade has been the unsustainable rise in asset and equity prices and the associated credit boom. Does mainstream theory have an adequate explanation of why things have gone so badly wrong? It is not clear that it does. It may well be time for a rethink.'' Chancellor of the Exchequer Darling agreed that upcoming stimulative actions can be taken without fear of igniting inflation.

In hard data, Nationwide reports UK house prices house prices fell by 1.4% m/m in Oct, for the 12th monthly drop and 14.6% y/y. The average UK house price is now £30,000 lower than it was a year ago but still around £30,000 higher than it was five years ago. We have no idea what this means.

Pounds to Euros Exchange rate to buy euros last at 1.2684

Pounds to Australian Dollars currently 2.4100

Pounds to US Dollars currently 1.6420

Buy for now

Barbara Rockefeller
Forex Trading Reports - Click here for a free trial

Buying Euro Pounds? Buy Euros at the Best Euro Exchange Rates visit IMS Foreign Exchange

We continue to think the dollar exchange rate will come back after this big and abrupt correction, which has by no means proven itself a true reversal

Thu, 30 Oct 2008 18:21:17 +0000

Foreign Exchange Outlook : The Fed funds rate at 1% matches the level of June 2003 and before that had not been in force since the 1950’s. That should suffice to scare everybody, not least because we have no idea what’s next-0.50%, or zero, as in Japan? The Fed is running out of traditional ammunition. Today we must expect Q3 GDP to be a negative number. The Bloomberg survey comes up with a drop of 0.5%. As always, we have to wonder if a lesser drop would be dollar exchange rate supportive and a bigger drop even more sharply dollar-negative. This gets tricky and tangled because a bigger drop implies lower oil and commodity prices, which should be US dollar-favorable. The scary rise in commodity prices, especially oil, on the US rate cut is probably doomed. It’s a bad assumption under current conditions to think rate cuts can goose activity and restore growth to its old path. The old path is gone. This should be welcome because we needed to break the circular link between oil and the dollar.

The big-picture reasons to think the US dollar will not reverse trends include that the unwinding of leveraged positions is not over yet. It took about 5 years to establish these positions. Surely it takes longer than a few months to unwind them all. In fact, those who put on carry trades five years ago are not in hot water yet raising the question of whether they need to get unwound. Besides, there are always some diehards. Even those positions that are not heavily leveraged may get undone. State Street said last week that US investments overseas total $5 trillion. Everyone fell in love with the idea of diversification, but maybe it looks less appealing today, especially in emerging foreign exchange markets.

Another big-picture idea is that US rates are now almost at rock-bottom, while Europe still boasts an overnight rate of 3.75%. As ECB chief Trichet warned, a rate cut next week is a real possibility-and the market thinks more are possible, too, for a total of 75 bp by year-end to 3%. This would give the eurozone an advantage of 200 bp, but in a global recession, higher rates are a drag, not an advantage. Besides, as we have seen, the rate for euros is no longer the key rate. Instead the key rate is the US Dollar rate among European banks, and since they won’t lend to one another, the US Fed is providing the funding, at a premium. In sum, European banks have a trust issue and can get credit only from their own central bank in a currency that the central bank does not issue. This is embarrassing and significantly lowers the status of eurozone institutions both private and public.

We continue to think the dollar exchange rate will come back after this big and abrupt correction, which has by no means proven itself a true reversal. Faith in the US dollar is based on the same factors as before-the safe-haven bid will return with a vengeance when the next Shock hits. At this point, despite the uneven implementation of the US rescue plan, the most likely location of the next Shock is outside the US.

Buy for Now

Barbara Rockefeller Forex Trading Reports - Click here for a Free Trial

Buying Euros? Buy Euros at the best euro exchange rate contact IMS Foreign Exchange

the ECB will cut rates next week

Tue, 28 Oct 2008 22:05:01 +0000

Euro Exchange Rate Outlook:

ECB chief Trichet did hint yesterday that the ECB will cut rates next week-it’s possible, he said. The market took no notice. This is the dog that didn’t bark in the night. For Trichet to say such a thing and the foreign exchange market not to move is remarkable. One foreign exchange trader said Trichet has been marginalized by events. We can’t buy that. Institutional events like central bank interest rate cuts are the top factor in short-term moves. What is going on? We deduce that either it was expected and so already built in, or that the unwinding of euro to japanese yen carry trades is a bigger force and since Trichet’s comment was with the wind, it was absorbed without the need for comment.

Pounds to euros currently 1.2520

Euros to pounds currently 0.7979

Buy for Now

Barbara Rockefeller Forex Trading Reports

Buying Euros? Call IMS for the Best Euro Exchange Rate +44 207 183 2790

We get the Crude Inventory report tomorrow, probably a sizeable build.

Tue, 28 Oct 2008 21:52:50 +0000

The Dec Nymex Crude oil futures contract closed at $63.22 from $64.15 on Friday, but rose back to $64.89 and is trading at $63.86 a barrel at 9:50 am GMT on the news that OPEC may hold yet another production-cutting meeting in December. Also, the dollar exchange rate fell and Mexico has had to close two facilities due to weather.

We get the inventory report tomorrow, probably a sizeable build.

Buy for Now

Barbara Rockefeller Forex Trading Reports

Buying Euros? Buy Euros get the best exchange rates from IMS Foreign Exchange

Thursday brings the first hard evidence of recession in the US in the form of the official Q3 GDP, probably a contraction of 0.5%

Tue, 28 Oct 2008 21:43:39 +0000

Foreign Exchange Outlook : Today seems to be a bit of calm before new storms, and do not doubt for a minute that new storms are coming. We have the probable bailout of the auto companies. We have potential currency and stock market intervention by Japan, Hong Kong, and others. More immediately, we have the Fed cutting rates-or not-this week, with the Bank of Japan on Friday probably following suit. In the current environment, he who cuts rates gets rewarded, not punished. Trichet already said the ECB will join. A major question is whether it’s a joint decision like last time. The markets seem to like coordinated action. A coordinated rate cut would (ironically) be US dollar-negative, because it would imply that somebody is in charge and knows what he’s doing. There isn’t and they don’t, but that would be the knee-jerk reaction.

Thursday brings the first hard evidence of recession in the US in the form of the official Q3 GDP, probably a contraction of 0.5%. The actual number doesn’t matter as much as confirmation of "recession," now no longer the official two quarters of contraction but pretty much whatever the speaker or commentator chooses it to be. The poor NBER-it lost its preeminence on this one after failing to name the last recession until after it was over.

Next Tuesday we have the US election and right afterwards, on Friday, the nonfarm payrolls for October, probably a lot more than 100,000. This week and forevermore we have massive new Treasury issuance. Meanwhile, the commodity bubble continues to deflate and China inches closer to the same global slowdown affecting everyone. The political fallout everywhere from worsening conditions trends to be authoritarian-keep the peace at any cost.

The only thing really supporting the US dollar exchange rate is flight-to-safety and panic selling of emerging market and commodity assets, whether forced by de-leveraging or by choice. This is not over and therefore we assume the dollar rally is not over. But boy, the rally faces a lot of threats, even bottom-fishing among the newly cheap assets. Keep the faith and watch the charts-the instant an intermediate top is seen in the euro exchange rate, we can buy dollars in size some more.

Buy For Now

Barbara Rockefeller
Forex Trading Reports

Buying Euros, Buy Euros at the Best exchange rate visit IMS Foreign Exchange

This is the sense in which the credit crisis will end when house prices stop falling.

Tue, 28 Oct 2008 12:36:09 +0000

Foreign Exchange Outlook : Deleveraging is a word that has now reached the mainstream. Call it what you like - capitulation, liquidation, contraction - cash is now king again. Heaven only knows how long it will take for "credit-worthiness" to be a viable concept again. Not to be overly simplistic, but if you can't lend on the word of honor of the borrower, how about lending against collateral? That works when the price of the collateral is known and there is a liquid market for the collateral.

This is the sense in which the credit crisis will end when house prices stop falling.

This gets a little tricky since we know prices always overshoot, but we may have some evidence-home sales rose 5.5% in the latest month, mostly due to unloading of foreclosed properties. The median sales price of single-family detached homes plunged from $405,000 a year ago to $239,000 last month. How much is enough? Rising sales are scattered across the country and it’s not a universal phenomenon yet and globally, foreclosures and price drops are just starting in some places, like China.

What about other forms of collateral, like high-value manufactured goods or even commodities like gold? They gain value only when the sale price is known, as in the form of a bill of sale or receivable that can be discounted. We are back to factoring and discounted trade paper, which they had in Babylon. This is not such a bad thing but it speaks volumes about modern embellishments to the credit scene-dross, all of it.

Nothing says this louder than the ratings agency executives testifying to Congress last week. They tried to weasel out of acknowledging complicity in putting a rating on paper that deserved to be rated zero quality. Yes, there’s plenty of blame to go around but the ratings agencies seem the most venal, alongside the originators.

To get back to cash, Business Week reports that in Dubai’s lush luxury real estate market, lenders are requiring as much as 70% down. At another extreme, after the stock market meltdown in Japan in the early 1990’s, citizens preferred cash and postal (government-guaranteed) savings. Bankers used to go door-to-door politely asking housewives to make a bank deposit from the nestegg under the floorboards. The US is not Japan but there might be a universal human impulse to embrace risk aversion. Business Week reports that sales of home safes are up 50% in the past 4 weeks and currency in circulation is up sharply in the last month for the biggest increase since Y2K in 1999. You can see the chart at the St. Louis Fed website (http://research.stlouisfed.org/fred2/series/WCURCIR). It’s worth a quick look.

Everyone knows the multiplier effect from Econ 101. Banks need deposits to make loans, even if they were willing to make loans in the first place. Deposits are the raw material of banking. We do not yet have the rising unemployment that will contract deposits naturally, but we already have hoarding of cash. This is not healthy for GDP. We get the preliminary Q3 GDP on Thursday, probably a contraction of 0.5% (like the UK). This is going to scare people even more.

But for once the US dollar exchange rate is not suffering from the grim outlook because conditions are worse elsewhere. Bloomberg reports that the deleveraging that already began in the US and Europe is now spreading to emerging markets. "Banks have extended about $2.5 trillion in foreign currency loans to emerging markets, according to Barclays, which cited data compiled by the Bank for International Settlements in Basel, Switzerland. Some 70% of the claims on developing nations in Asia mature in less than one year, while the amount for emerging European countries is 43%."

Barclays says “The increasing difficulty facing developing countries to roll over their foreign currency loans may set the stage for even greater strengthening of the US dollar.'' A sum like $2.5 trillion is not trivial. We need to start thinking of failed states. So far we have Iceland and Argentina, but soon we will be getting the list of the others from the experts. We will be surprised by some of the names-we always are. The Ukraine, the Baltic states-and who else?

Back in the US, we have unreasoning panic starting to develop. We don’t need the government to say "Liquidate! Liquidate everything!" as the Treasury Secretary said during the Hoover years we have individuals and the private sector doing that on their own. Pretty soon we will hear another round of blame laid at the doorstep of hedge funds, which will be unfair. Some 10,000 hedge funds hold some $1.7 trillion in assets and will have to contract to only a few hundred funds holding perhaps $300 billion in assets, but hedge funds are only the visible part of the contraction. Regular banks, regular pension funds and regular mutual funds are dumping assets, too. Again, as we wrote before, we don’t know who has the credibility and stature to bring this to a halt. Maybe Obama? But when?

Until we get leadership, the only thing to do is buy dollars and buy Treasuries.

Buy for Now

Barbara Rockefeller Forex Trading Reports

Need to Buy Euros? Need to Buy Australian Dollars? Best Exchange rates visit IMS Foreign Exchange

Euro Exchange Rate falling to a low of 1.2330

Tue, 28 Oct 2008 11:21:47 +0000

The US dollar continues to gain across the board, with the euro exchange rate falling to a low of 1.2330 around 5-6 am from 1.2622 at the close on Friday and the bounce up to 1.3007 last Wednesday. Sterling fell to 1.5274 in early European trading, nearly matching Friday’s lowest low at 1.5259. The Other Dollars are much lower, including the Australian Dollar, despite two interventions (Friday and today) by the Reserve Bank.

The real action is Japanese yen action. The yen has risen to a bit over 90 on Friday from 110.67 on August 15. Against the euro exchange rate, the yen has gained from 169.44 to 114.38 or 33%, in under three months (Aug 7 to today). Bloomberg says that in just the past month, the Japanese Yen has jumped 15% against the US dollar, 35% against the euro, 58% against the Australian dollar and 46% against the New Zealand dollar as foreign exchange traders slash carry trades.

Buy for Now

Barbara Rockefeller
Forex Trading Reports

Need Buy Euros or Buy Australian Dollars contact IMS Foreign Exchange for the Best Exchange Rates

Reserve Bank of Australia intervened today and were looking to Buy Australian Dollars

Tue, 28 Oct 2008 08:50:56 +0000

Bloomberg reports that the Reserve Bank of Australia intervened today and were looking to Buy Australian Dollars, following a similar intervention on Friday. The only comment we have from the RBA is that the bank provided more liquidity to the foreign exchange market.'' We don’t even know the name of the spokesman, let alone the amount. The NKS says Foreign Exchange Traders said the bank's entry level was US$0.6125. Yet, as of 0550 GMT, the pair is even lower at US$0.6088. The RBA confirmed the Friday intervention on Sunday, perhaps hoping to scare of Foreign Exchange traders when the market opened on Monday. It didn’t work.

Pounds to Australian Dollars currently 2.5100

Buy For Now

Barbara Rockefeller
Forex Trading Reports

Buying Australian Dollars - Get the Best Exchange Rates visit IMS Foreign Exchange

Sterling tumbles as 'currency market tsunami' sweeps markets

Mon, 27 Oct 2008 08:02:48 +0000

Sterling tumbled another two cents against the dollar on Monday and weakened against the euro exchange rate as foreign exchange traders speculated the Bank of England may deliver an emergency cut in interest rates and as investor’s poured money into the US dollar. By Rosie Murray-West and Jamie DunkleyLast Updated: 7:29AM GMT 27 Oct 2008 Full story visit The Telegraph

The pound to dollars fell to almost $1.56 in early trading and slid to almost 80p versus Europe's common currency as what one expert called a "currency market tsunami" continued to sweep the foreign exchange markets.

The weakness in sterling leaves the currency 13pc lower against the dollar this month alone as expectations that the UK economy is now facing a severe recession becomes the mainstream view. News on Friday the economy contracted 0.5pc in the three months to September sent the currency tumbling almost 9 cents at one point.

The increasingly bleak news from the economy is putting pressure on the Bank of England to cut interest rates before its schedule meeting next month.

Dr Lyons, chief economist at Standard Chartered, said: The economic data available to us shows that the UK economy is crying out for a further cut in the rate of interest. Mervyn King’s comments last week suggest that the Bank of England will do that at its next meeting, but I think action needs to be taken immediately.

However he added: I don’t expect this to happen, though, and think we will need to wait until the Monetary Policy Committee’s next meeting in November.

Pounds to Euros currently 1.2400
Pounds to US Dollars currently 1.5418
Pounds to Australian Dollars currently 2.5283

Bid-offer spreads have widened dramatically and the amounts that can be done at even widened spreads have shrunk

Thu, 23 Oct 2008 17:57:02 +0100

Hi All,

We asked the meaning of the phrase dire liquidityin a Market News report yesterday, and Market News obliged with a full report on worsening conditions in the supposedly liquid Foreign Exchange market. Bid-offer spreads have widened dramatically and the amounts that can be done at even widened spreads have shrunk. This phenomenon is across the board from majors to emerging market currencies. In the Mexican peso, the usual spread was 15 points and good for $5 to $10 million. Now it’s 100 points wide and good for only $1-2 million. In the Australian Dollar exchange rate, the normal 1-point spread used to be good for $10 million, but now it’s good only for $1 million. If a client wants AUDUSD 100 million, the spread goes from 9-10 points to 40-50 points. In the euro exchange rate, the spread for €50 million used to be 3 points and now its 5-7 points. Market News goes on to cite reports showing a big and steady unwinding of unhedged long-term investment positions in emerging markets -and also in Europe.

Buy for Now

Barbara Rockefeller Forex Trading Reports - click here for a free trial

This is probably going to go down in Foreign Exchange history as one of the dumbest trades ever

Thu, 23 Oct 2008 17:34:44 +0100

Australian Dollar Outlook

We were wondering about the bizarre behavior of the Australian Dollar exchange rate on some days in recent weeks.

Now we may have an explanation.

According to the WSJ, Citic Pacific, the bluest of the blue-chip Chinese companies in Hong Kong (called, naturally, a red chip), could lose HK$15.5 billion (US $2 billion), and possibly more, because of leveraged positions on the Australian dollar. Citic has a big investment in an Australian mining company.

The WSJ says the mining investment requires the company to buy equipment and supplies in Australian dollars. It isn't unusual for companies to hedge their foreign currency exposure. But Citic Pacific did something more: It turned to structured products dubbed "accumulators" that obligated it to buy a specified amount of Australian dollars"

In this case, about nine billion Australian dollars (US$6.1 billion at current exchange rates), at a fixed price.

The Australian dollar's sharp downturn in recent months, a side effect of the global credit crunch, has left Citic badly exposed. Already, the bets have cost the company HK$807.7 million in realized losses and would cost it HK$14.5 billion more if they were marked to market at current values. Because Citic Pacific retains open positions, the losses could deepen if the Australian dollar continues to slide against the U.S. dollar.

Bloomberg says CITIC stock fell 66% since the disclosure on Oct 20. It has four times more money riding on the Australian dollar than it earned last year [with a commitment] to buy as much as A$9.44 billion at an average price of 87 U.S. cents. The currency traded at 66.72 cents as of 7:54 p.m. in Sydney today. This is probably going to go down in Foreign Exchange history as one of the dumbest trades ever, along with VW and Bank Negara from the 1980’s.

Pounds to Australian Dollar exchange rate is currently 2.4473 and i you need to Buy Australian Dollars a good level at present is 2.4800 if you can get it

Buy for Now

Barbara Rockefeller Forex Trading Reports - Click here for a free trial

Buy Australian Dollars at the best exchange rates visit IMS Foreign Exchange or call +44 207 183 2790

Oil traders think it will go well under $50

Thu, 23 Oct 2008 16:38:39 +0100

The Nov NYMEX crude oil futures contract rolled to the Dec contract, which closed at $66.75. Overnight it rose to $68.50 on talk from the Iranaians of a 2 million barrel per day cut at the Friday OPEC meeting, but the market understands demand is falling… and the price fell back to $67.17 at 12:31 pm GMT. As Bloomberg notes, prices have more than halved since the record high $147.27 on July 11. The US Energy Dept report yesterday confirmed that demand elasticity is better than anyone expected, with fuel demand down 8.5% y/y. Demand for gasoline fell 4.3% y/y.

See the gold chart. We think it was necessary to erase the upsloping channel and restore the old downchannel from the peak in March (over $1000). As with oil, we have the chicken-and-egg issue of US dollar exchange rate up, commodity price down and vice versa. As we all know to our rue, gold is not really an inflation hedge-it keeps up but does not yield anything over inflation over long periods of time. This time, it’s obvious that after the recession starts bottoming (sometime next year, presumably), inflation is likely-and then gold will take off again. But you have to wonder where the gold bugs are today-why are they not buying ahead of massive uncertainty? If you can’t earn anything in a savings account or T-bill, you might as well have gold, right?

Buy for Now

Barbara Rockefeller Forex Trading Reports

Buying Euros? Buy Euros get the best exchange rates from IMS Foreign Exchange

We remain astonished that what started as $200 billion in failed US subprime mortgages could have turned into $3 trillion in global losses

Thu, 23 Oct 2008 15:40:38 +0100

Foreign Exchange Outlook : The global financial system is under severe stress, and so is the global economy. Ripple effects are only just now starting to appear in places like China, which was partly insulated from the free-market world but can’t hide forever. It’s interesting that the richest entities are the ones in the most denial that everything has changed-the oil producing Middle East as well as China. OPEC is busy trying to raise prices in a world of falling demand, which seems particularly foolish. Of course, these are the very countries that are getting richer by the minute as their dollar reserve values go up, but these reserves may be needed for domestic spending if their exports, whether oil or socks, start falling apart.

We remain astonished that what started as $200 billion in failed US subprime mortgages could have turned into $3 trillion in global losses, showing that even financial professionals are having a hard time grasping the extent of the leverage that was out there and still remains. It’s easy to see how non-professionals are bewildered by the collapse of pyramid-upon-pyramid, including our presidential candidates. We think only two things are clear;

the bottom will come only when US housing bottoms, no matter the state of deleveraging at the time.
And the US economy will survive, however tattered. It is literally too big to fail. But other sovereigns are not too big to fail.

We already have Iceland and Argentina. Well, Argentina is too easy a target for sarcasm. It always fails the minute the wind blows. The most interesting aspect of this whole debacle is that not one single analyst or commentator is calling on G7 or the new summit group (that will include China) to deliver a global rescue. Everyone seems to assume that no major Bretton Woods-level response is likely or maybe even possible. That’s because you need capital controls to enforce such things, and the US is against capital controls.

At some point in this trend the currencies will bounce up and at some point the trend will reverse, but in the meanwhile, keep the faith—the US dollar is the safe place to be.

Buy for Now

Barbara Rockefeller

Forex Trading Reports - Click her for a free trial

Buying Euros? Buying Dollars - Need to Buy Australian Dollars?

Contact IMS Foreign Exchange +44 207 183 2790 for the best exchange rates

New Zealand Dollar strengths as RBNZ cuts Rates - No further Rates Cuts is the current Outlook

Thu, 23 Oct 2008 15:13:48 +0100

Hi All,

the Reserve Bank of New Zealand cut rates by 100 bp to 6.5% yesterday, with Gov Bollard saying it’s a "frontloading" of future interest rate cuts. "One should not necessarily expect or build in further cuts of this magnitude. We've done quite a lot right now to try to get rates re-calibrated right down to where we think they should be. One should not assume we would continue in such radical fashion."

The Reserve Bank has meets scheduled for Dec 4 and Jan 29.

The Pounds to New Zealand Dollar Exchange Rate went from 2.76 to 2.71 and you can buy New Zealand Dollars at the moment at 2.7250

Buy For Now

Barbara Rockefeller
Forex Trading Reports - click here for a free trial

Australian Mortgage Interest rates heading lower - Australian Dollar Outlook bleak

Mon, 20 Oct 2008 19:49:05 +0100

Hi All,

The Australian Dollar is staying very volatile with the AUD exchange rate but showed a lot of fight late today climbing back over the 0.7000 against the US Dollar and the pounds to Australian Dollar exchange rate heading back to 2.4300 which was last weeks low.

The range on the pounds to Australian dollars range is what is alarming me the most as we started the day at 2.5100 and almost 3% lower. These ranges are normally what emerging currencies trade per day, not the humble Aussie dollar. Seams to me that the idea that Australia is a commodity currency and as the world slips into a recession the Australian economy is going to suffer is the main story - but wait the Australian Government hasn't yet to bail out a bank never mind 3-4 banks, our housing market is starting to pick up, you can still get a mortgage.

If I was a gambling man and it is fair to say i am by the nature of my job, the Australian Dollar may weaken yes! but against the US dollar, Swiss Franc, Euro and Japanese Yen, not against the Pound. The UK seams to be rewarded for the prompt action of the British Government rather than a sound economy!

The UK economy is one built on sticks - the banking sector delivered record bonus after record bonus that helped fuel London property prices and helped the economy boom. But what is going to happen now those bonuses are gone and the Governments non-dom tax hits home? Bankers and those in Hedge Funds are leaving the capital and those staying are going to rein things in. Money is leaking out of the loop fast and it will filter down the chain even faster as the banker earning £300k lets his nanny, cleaner and Aston Martin go as their income comes back under £60k as banks fail to pay bonuses this year. And this is only one industry the follow on effects will be huge!!!

Take care when you Buy Australian Dollars not to be to greedy the - remember that the exchange rate only 2 weeks ago was almost 2 to 1 and 2.5 to 1 is the bargain of the year as the Australian economy proves jow robust it actually is.

Good Luck and buy for now

Damian George IMS Foreign Exchange

Buying Australian Dollars call for the best exchange rates + 44 207 183 2790

Oil traders think it will go well under $50

Mon, 20 Oct 2008 17:02:53 +0100

The Nov NYMEX Crude Oil futures contract rose to $71.85 at the close on Friday after $69.85 the day before, but events are racing ahead. OPEC will hold its meeting early on Oct 24 and announce a cut of 1-2 million barrels per day, according to OPEC Pres Khelil. This sounds like disarray. Fear of production cuts took the oil price up substantially to $74 overnight and $73.86 at 11:10 am GMT.

ING says that if oil goes to $50 next year, the GDP of the Gulf Cooperation Council (including Saudi Arabia, United Arab Emirates, Kuwait, Oman, Qatar and Bahrain) would contract 25%. Bloomberg reports that put options on Dec NYMEX futures at $50 soared 28- fold in the past two weeks, meaning Contracts that allow holders to sell 1,000 barrels of oil for $50 each by December closed at $280 on the Nymex on Oct. 17, up from $10 on Oct. 3. This means some Oil traders think it will go well under $50. Deutsche Bank has a 2009 forecast of $60 on the possibility of a major world recession.

We may think that cheaper oil is a nice antidote to recessionary forces, but it’s also a disincentive to exploration and investment, not to mention investment in alternative energy.

Buy for Now

Barbara Rockefeller Forex Trading Reports

Buying Euros? Buy Euros get the best exchange rates from IMS Foreign Exchange

Bank of New Zealand and Canada to cut interest rates

Mon, 20 Oct 2008 16:09:32 +0100

Foreign Exchange Outlook : We have yet to get an October surprise, the attention-grabbing Event manufactured specifically to influence the election. Perhaps conditions are so bad today that collectively they are the October surprise. Or perhaps in a few days we will get another tape from Osama bin Laden, who sent one four days before the 2004 election.

Even without a terrorist event, we have plenty of potential surprises. Today we get the Conference Board leading indicators, and we know it will be dismal. Bernanke testifies to the House Budget Committee on the US economic recovery. Recovery? We can’t talk about recovery until we have hit bottom, can we? Tomorrow we get the Bank of Canada (and Reserve Bank of New Zealand) rate decision. Canada is seen cutting 50 bp and New Zealand to cut interest rates 100 bp. These are smaller economies but probably in the forefront of more cuts to come until there’s nothing left for savers at all, exactly as occurred in Japan.

We have far too much information in the world today. Nobody can digest it all. It’s tempting to forget about the world of finance and just watch the increasingly lurid soap opera of the US presidential election. But some things stand out-if Iceland really did commit a sovereign default, it doesn’t matter that it’s a tiny country with fewer people than a Manhattan block of apartment buildings. It’s the way of the market to ask "Who’s next?" and then try to get a self-fulfilling prophecy. Hungary? Ukraine? Russia itself? All the fine talk of recovery is PR smoke.

There can be no recovery until all the damaged planes have crashed.

We are not there yet.

Still to come are regional US banks that the Feds won't save, among other disasters. All in all, this is awful stuff but good for the US dollar exchange rate.

Buy for Now

Barbara Rockefeller Forex Trading Reports

Need to Buy New Zealand Dollars, Buying Canadian Dollars, visit IMS Foreign Exchange or call +44 207 183 2790

Crude oil futures contract fell $4.69, or 6.3%, on a good US crude inventory report,

Fri, 17 Oct 2008 15:12:42 +0100

The Nov Crude oil futures contract fell $4.69, or 6.3%, on a good US crude inventory report, to close at $69.85, which is the first close under $70 in over a year. OPEC is rattled, and will meet next week instead of November. Market observers now say OPEC will agree to a cut of one million barrel per day to get the price back up-and the market believed the story. The price rose sharply $73.02 before sinking back to $70.98 at 12:12 pm GMT, according to Bloomberg.

So now it’s a duel between producers determined to keep their budgets funded and a market that sees recession cutting demand by a great deal for a very long time. Mastercard said, for example, that demand for gas fell 9% in the latest week. Demand was not as inelastic as we all thought over the past year. The current thinking is that demand increases from booming economies like China will offset drops in the West for a net flat demand outcome.

Well, maybe. The US consumes 24% of the world’s oil. The US Energy Dept report yesterday that fuel demand averaged about 18.6 million barrels a day during the past four weeks, the lowest since June 1999. US oil supplies rose 5.6 million barrels to 308.2 million barrels last week, and crude inventories are set to rise another 2.6 million barrels, according to the Bloomberg survey.

Buy for now

Barbara Rockefeller Forex Trading Reports

Buy US Dollars, best exchange rates call IMS Foreign Exchange +44 207 183 2790

This is puzzling - how can Europe’s biggest economy avoid recession while the rest fall into it?

Fri, 17 Oct 2008 15:02:36 +0100

Euro Exchange Rate Outlook: The German Econ Minister, Mr Glos, praised the newly weaker euro exchange rate as a good thing for exports. Most commentary continues to deny that Germany will fall into recession, even if the eurozone does, as is highly likely, having already marked one quarter of negative growth. This is puzzling - how can Europe’s biggest economy (40%) avoid recession while the rest fall into it?

Eurostat reported that construction activity inched up in August by 0.1%, the same July, for a quarterly drop of 3.5% q/q. Year-over-year, Aug was sown 2.5%, which is better than 03.3% in July.

In trade, the eurozone Aug deficit was €6.1 billion after €6.7 billion (revised) in July, with imports down 1% and exports down less, 0.6%. We remain a little confused about why Europe has a trade deficit at all.

Exchange rate to buy euros today against the Pounds is currently 1.2852

Buy for now

Barbara Rockefeller Forex Trading Reports

Buying Euros - Best exchange rates call IMS Foreign Exchange +44 207 183 2790

Government rescue of hedge funds is not going to happen

Fri, 17 Oct 2008 14:41:32 +0100

Foreign Exchange Outlook :

We keep running into some remarkably foolish commentary now that the world has blown up.

Stratfor claims that it can predict economies without actually knowing any economics, which a little like taking stock tips from the shoeshine boy, isn’t it? It predicted the Russian invasion of Georgia, which had no real effect on global markets and doesn’t pass the so what? test. Even if you can see the broad outline of upcoming events, that doesn’t mean you know how to trade it. Trading skills are entirely different from macro analytical skills.

Probably the most foolish idea of all is that those nasty hedge funds are going to get their comeuppance, with 30% of them failing (Credit Suisse). According to the WSJ, this is the worst year ever for hedge funds, collectively down 5.4% in September and 10.1% for the year (which is still better than indexing to the S&P, down 20% over the same period). This is because banks are pulling back credit and the funds have to reduce leverage, which means they must sell positions in everything-stocks, bonds, commodities, alphabet soup paper, currencies. That’s on top of having to sell positions to repay investors, most of whom had to sit through a long waiting period to get their money back.

We don’t deny that the contraction everywhere in the financial universe will cause hedge funds to contract, too, but we object to the imposition of a value judgment on the hedge funds as somehow predatory. A good hedge fund offers some protection against the market dropping the original raison d’etre of hedge funds-which means the investor is prudent and conservative. That’s a good thing, not a bad one. Hedge fund investors include giant massive pension funds, for example, as well as the savings of rich folks. As a value, we’d rather pension funds invest conservatively than be out flailing around speculatively, don’t we? Hedge funds are systematic, too, another good thing. The only thing we can really complain about is leverage, and that’s certainly the pot calling the kettle black. There is not a single financial entity out there not using leverage except maybe Aunt Millie, who doesn’t have a credit card and has paid off the mortgage.

We are not convinced that things have changed forever, government intervention or not, and will be convinced only when all governments everywhere agree to regulate leverage. (Even then the leverage-seeking can find haven in Jersey or somewhere.)

We know that Long-Term Capital had leverage of about 30x and Bear Stearns, 35x. But like the rain falling on the just and the unjust alike, the involuntary contraction of hedge funds due to deleveraging will wreak havoc across the whole industry. It is not necessarily true that the funds left standing will those the least leveraged-a highly leveraged fund can do better than a lightly leveraged one if it was invested in the right stuff. It’s wrong to take joy in the destruction of the hedge funds-that’s somebody’s retirement going down the drain. Unless you want the public to fund all retirements with government plans, we should be figuring out ways to help the hedge funds, too, not cheering their demise.

Government rescue of hedge funds is not going to happen, of course.

In fact, Paulson said there would be no money for unregulated companies, presumably referring to hedge funds but also perhaps with a gimlet eye on others auto companies? Therefore, the fate of hedge funds-whether 30% fail or 80%-depends on when prices stabilize in financial and commodity markets. We should assume that hedge fund managers really do know something the rest of us do not, including timing the economic cycle. TrimTabs, which tracks hedge funds as well as mutual funds, says hedge funds sold $43 billion in September and perhaps as much as $50 billion in Oct. In many cases, the funds seemed to be raising cash preemptively, says a TrimTabs executive. Hmm, preemptively. Does that mean rejigggering portfolios in the newly deleveraged environment is a worthwhile exercise? Of course. And it also means being less defensive. Gold and cash are both a crummy investment. They have no intrinsic yield and the opportunity cost is high. As Warren Buffett says in the NY Times, "Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value." Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: ‘I skate to where the puck is going to be, not to where it has been.’ Buffett is putting his personal money, previously all in Treasuries, into US stocks.

The other big Event to look forward to is the overall calming of panic and frenzy. Alas, panic and frenzy are US dollar -favorable. As the TICS analysis above shows, demand for dollars is an emergency thing. When things go back to normal, this demand will evaporate, and the US will have an unfunded current account deficit. The Middle East and China are sitting this one out, showing not the slightest inclination to rescue anybody. Unless everyone follows Buffett’s advice and the US stock market recovers lustily, we can’t count on foreign capital inflows to balance the deficit. Besides, the dollar exchange rate is not highly correlated to the stock indices. This is the nightmare scenario that so many doom-and-gloom analysts have predicted for so many years.

We take comfort and a strong US dollar exchange rate scenario from the idea that while screaming panic may be gone-overnght LIBOR at 10% for European banks is screaming panic-anxiety is not gone, and rightly so. The bailouts can fail. The bailouts can be insufficient and cause governments to pony up even larger sums. Other companies and industries "too big to fail"can emerge, like the auto companies or insurance companies or perhaps a black swan. The recession can be bigger, deeper and longer-lasting, and hurt other economies worse than the US.

We are sticking with the strong US Dollar scenario a bit longer.

Buy for Now

Barbara Rockefeller Forex Trading Reports

Buying Euros, best euro exchange rate call IMS Foreign Exchange

Australian Mortgage Interest rates heading lower - Australian Dollar Outlook bleak

Thu, 16 Oct 2008 17:32:43 +0100

Hi All,

Looks like the Australian Dollar exchange rate is set for another tumble as experts suggest that the Reserve Bank of Australia needs to cut rates further to fend of the r word. Macquarie Group interest rate strategist Rory Robertson was quoted in news.com.au that interest rates will be as low as 4.25% by next year.

Whilst this is good for picking up Australian property prices but this is not ultimately what the RBA seams concerned with. what seams to be the bigger worry is the high level of consumer debt in Australia which is now at alarming levels.

But enough of this doom and Gloom what this means for many of us in the UK is that if you are migrating to Australia you are now looking at a much better rate to buy Australian dollars and if you are an Australian Expat you have now have a chance to buy and home and send money home at a much better AUD exchange rate

Pounds to Australian dollars currently 2.5800

Regards

Damian George

Need to buy Australian Dollars call IMS Foreign Exchange for a free quote +44 207 183 2790

Buying Euros - watch the 1.3650 pivot against the US Dollar Exchange Rate

Thu, 16 Oct 2008 15:46:32 +0100

Euro Exchange Rate Outlook : The US dollar appears a little stronger this morning against the majors, with the euro exchange rate having dipped to 1.3347 from 1.3624 at 6 am ET yesterday. But this disguises a lot of choppiness. After the close yesterday, the euro rose from 1.3440 to 1.3517 and then fell again during Asian hours to 1.3343-only to rise back to 1.3518 by 7:40 am ET. This surpasses the interim high late yesterday and so is cause for concern, although we won’t get worried until the euro exchange rate matches a pivot level around 1.3650.

The US dollar to Japanese Yen is also soft as the US day begins, having firmed yesterday from 101.12 to 99.24 overnight. Fear of today’s US data and stock market are pressuring the dollar to Japanes yen higher 100.77 so far today, seemingly on the idea that the US stock index futures, which are rising this morning, will lead the dollar. This may be correct - currency traders are in thrall to global stock indices these days. Bloomberg says The Japanese Yen weakened on speculation that investors will slow carry trade reversals. That takes a minute to digest. Sterling, likewise, looks heavy on the re-emergence of risk aversion ands presumably the unwinding of quickie carry trades. Exchange Rate for buying euros against the pound is currently 1.2800

Buy For Now

Barbara Rockefeller Forex Trading Reports

Buying Euros, Buy Euros at the Best Exchange Rates call

IMS Foreign Exchange for a free quote +44 207 183 2790

Oil Prices are down 18% from a year ago and have dropped 51% from the record $147.27 a barrel reached on July 11

Thu, 16 Oct 2008 15:22:23 +0100

The Nov NYMEX oil futures contract closed lower at $74.53 from $78.63 the day before. It is now firmly under the $80 key level. Today it fell further to $71.21, the lowest since Aug 2007, and is trading on the soft wide at $72.30 at 11:09 am GMT. Bloomberg says Prices are down 18% from a year ago and have dropped 51% from the record $147.27 a barrel reached on July 11.

So, OPEC can hold an emergency meeting in November but it may not have any effect on the price of oil-fear of recession and demand destruction are stronger. Even Hurricane Omar, which caused a Virgin Islands refinery to shut down, is not having the usual effect.

Gold Futures are soft, having fallen to $835.50 from $836.30 the day before. Some analysts say gold is not thriving because some futures traders are getting hit with margin calls or otherwise need to raise cash.

Buy for Now

Barbara Rockefeller Forex Trading Reports

Buying Euros - best euro exchange rates call IMS Foreign Exchange +44 207 183 2790

Does this mean the Fed has room for another interest rate cut, or series of cuts? Yes.

Thu, 16 Oct 2008 15:05:27 +0100

Foreign Exchange Outlook: Everybody wants to know how deep the recession will go. Yesterday’s retail sales for Sept were worse than forecast, a drop of 1.2% (including a drop of 4% for autos), while every one of the 12 regional Feds reported a slowdown in consumer spending. The Empire State manufacturing index slumped to a shocking -24.6 from 7.5 in Oct. And inflation hasn’t really started falling much-the headline PPI fell 0.4% but ex-energy, rose 0.4%. PPI is up 8.7% y/y, and core PPI is up 4%. Some of this is the pig in the python and will eventually get digested, but the misery index is about to go up quite a bit, and moreover, everyone knows it.

Today we get CPI at 8:30 am ET, probably a rise of 0.2% (but with forecasters showing a wide range from 0.3% to +0.2%, according to Bloomberg). Core CPI is probably up 5% y/y, better than Aug at 5.4% y/y. Core CPI is probably 2.5% y/y, the same as August.

Does this mean the Fed has room for another rate cut, or series of cuts?

Yes.

It will be interesting to see how the Fed weaves together monetary policy, now in lights-flashing emergency mode, with a new willingness to consider bursting bubbles before they blow up too far. This seems to be the new Bernanke stance, after two decades of the Greenspanian hands-off attitude toward bubbles. Speaking to the Economic Club of New York yesterday, Bernanke said we need to take a fresh look at how regulation and monetary policy might take on the dangerous phenomenon of asset bubbles after the current crisis is past. It’s fun to note that when Greenspan held his first Fed board meeting, according to Woodward’s Maestro and other books about the Greenspan Fed, he asked why the Fed was doing nothing about the stock market at the time. This was just ahead of Black Monday. In other words, Greenspan was not always a hands-off guy on Randian principles.

Also today we get industrial production for Sept, probably a drop of 0.8% in the Sept month for the second month of decline.

The other important piece of data today is the August Treasury capital flow report, TICS. Bloomberg reports that forecasters expect foreign investors to have raised their stakes in US assets in August to $30 billion from $6.1 billion in July. We await the authoritative report from Bank of New York capital flow expert Woolfolk, who separates out the true long-term flows from the shorter-term hot money.

The sentiment in the oil industry is that the recession will be deep and long-lasting, hence the dramatically falling prices. With the US already having done a consumer stimulus in the spring, many interest rate cuts, and a bank bailout, is it running out of bullets? We say the oil gang lacks faith in the ingenuity of politicians newly motivated to keep their jobs. We tend to throw the bums out when they fail us so drastically. What else can the US do to goose growth and avert recession another day? Plenty. Congress could do an emergency tax cut for business, or another stimulus for consumers, plus the usual rate cuts. Poor Bernanke-he really is going to be stuck with the Helicopter Ben image.

Does this stuff work?

Yes, as we saw with the $300/$600 tax rebates.

Does it suffice to keep the economy rolling along for one or two more months? Yes. As Keynes said, the long-run is only a series of short runs. It’s a little like catching a cold-suppress the symptoms, and while you still have a cold, it does pass after ten days. The goal of the Fed and government is to prevent us feeling the symptoms-scratchy throat, runny nose, and coughs. Your head can rationally say conditions are terrible but an extra $300 in your pocket makes you willing to overlook what the brain is telling you. We don’t know nearly enough about behavioral economics, but we bet that some initiatives (like job creation in the alternative energy sector) will have a salutary effect even among people who could never get one of those jobs, because it gives the sense that somebody is doing something.

This brings us back to the election, now less than three weeks away.

McCain wants to give a tax break to rich people, which does trickle down but not to the extent he claims.

Obama wants to give a tax break to the working class, subsidize alternative energy, and spend big sums on infrastructure, among other things, which puts cash in more pockets right away.

It’s a no-brainer which is better for the economy and the prospect of the US coming out of recession. Foreign Exchange traders are opportunistic-even if they buy the old Reagan ideology, they can see which side of the bread has the butter. This is the sense in which Obama is dollar exchange rate favorable and McCain is not, quite apart from the cost of the war in Iraq. People don’t want ideology today-they want cold, hard cash.

Considering the state of the auto industry and the difficulty of getting a car loan today, we would not be surprised to see some new government program to subsidize the average Joe buying a new car. Maybe there can be a Freddie/Fanny for car paper guaranteed by the government? Quick, stop them before they invent another new program.

On the whole, the US dollar exchange rate looks good for a day or two, before the next Event.

Buy for Now

Barbara Rockefeller Forex Trading Reports

Buying Euros, need the Best Euro Exchange Rate contact IMS Foreign Exchange

Australian Dollar fell out of favour today after yesterday’s brief rally

Wed, 15 Oct 2008 19:10:43 +0100

Hi All,

The Australian Dollar fell out of favor today after yesterday’s brief rally. It appears the world got ahead of itself and realized that the sky is still falling and there is now a rush to "safe" money mainly US Dollars, Euros, Pounds and Japanese Yen.

Being the loyal Australian I am, I am finding this very difficult to understand why the market keeps selling Australian Dollars at every point but sometimes things done make sense even though you want them to. If you are migrating to Australia this really doesn’t matter too much.

Look for the Pound to Australian Dollar exchange rate to say in the 2.48-2.58 range until something else happens.

Good news for those wanting to sell Australian Property - the new bail out package and first home buyers grant increases are working and 1st home buyers are re-entering the market and will hopefully push prices up, stimulate investment in Australia and boost the Australian building industry. (Good to see also 1st home buyers can get a Australian mortgage - unlike the UK.)

Pounds to Australian dollars exchange rate currently 2.5500

Regards

Damian George

Need to Buy Australian Dollars? Best Australian Rates visit

IMS Foreign Exchange or call +44 207 183 2790 for a free quote

The dollar could dive a lot early in the week, especially if oil rallies as it appears likely to do

Wed, 15 Oct 2008 12:08:23 +0100

Euro Exchange Rate News The ZEW index of professional financial confidence slipped to 63 from 41.1 in September, although it’s a hair better than 63.9 in July. Bloomberg reports that economists had forecast a drop to only 51, so 63 is worse.

Market News reports that the Germany's leading economic research institutes cut their joint GDP forecast today from 1.4% to 0.2% for 2009. The 2008 forecast remains at 1.8%. Germany is on the brink of recession, they say, expecting a contraction of 0.7% in the first half of next year. They still say, all these years later, that private domestic consumption will pick up.

Separately, ECB official Stark told the press that inflation in the eurozone will fall to the ECB target of 2% by the second half of next year. Slowing economies and falling oil will help. Does this mean the ECB can cut again? Yes, although we are not yet to the point of forecasting it for the Nov 6 policy meeting.

Slowing economies and falling oil will help - ECB to Cut Interest Rates - Yes

Wed, 15 Oct 2008 12:07:59 +0100

Euro Exchange Rate News The ZEW index of professional financial confidence slipped to 63 from 41.1 in September, although it’s a hair better than 63.9 in July. Bloomberg reports that economists had forecast a drop to only 51, so 63 is worse.

Market News reports that the Germany's leading economic research institutes cut their joint GDP forecast today from 1.4% to 0.2% for 2009. The 2008 forecast remains at 1.8%. Germany is on the brink of recession, they say, expecting a contraction of 0.7% in the first half of next year. They still say, all these years later, that private domestic consumption will pick up.

Separately, ECB official Stark told the press that inflation in the Euro-zone will fall to the ECB target of 2% by the second half of next year. Slowing economies and falling oil will help. Does this mean the ECB can cut again? Yes, although we are not yet to the point of forecasting it for the Nov 6 policy meeting.

Bye For Now

Barbara Rockefeller - Forex Trading Reports

Buy Euros, Pounds to Euros at the Best Euro Exchange Rate - IMS Foreign Exchange

The dollar could dive a lot early in the week, especially if oil rallies as it appears likely to do

Wed, 15 Oct 2008 11:57:28 +0100

Foreign Exchange Outlook : The US may have lost some of the shine off its FIFO standing by having dithered a little, with Paulson changing his mind about direct investment in banks instead of just buying paper, now that the UK led the way with a big 3-part plan pretty much accepted by the rest of the world. What the US has that the ECB does not have is the ability to support the corporate world directly by buying/backstopping commercial paper. Other central banks have to keep the banks funded and hope they lend to the players in the real economy. Cold, hard cash is always nicer than hope in a panic.

On the whole, the US has better recuperative powers than other economies, so the FIFO story is not gone and forgotten. And the US has some problems that other economies do not have, namely Detroit and a discouraged consumer who is two-thirds of the economy. Germany, to take an example, can stimulate exports with subsidies and tax breaks. The US doesn’t have that option does it? Don’t ever think this is not a competition. It is certainly viewed as a competition in Europe, if not in Washington. We laughed until it hurt upon reading the first report that the combined European rescue plan is $1.4 trillion, exactly double the US number. You can just imagine those guys sitting around saying That’ll show ‘em who has guts. (The dollar amount of the combined European plans keeps changing in each report, but it’s true that it’s roughly double.)

As for the inevitable recession, pundits are now saying that the probability of a Depression has receded to a low level now that governments have acted (and the stock market voted them good guys again, at least for a day). Business Week says the recession will likely be long but mild. Past recessions since the War lasted 10.4 months, cut 2% from GDP from peak to trough, and unemployment rose about 3%. It’s interesting that inflation (ex food and oil) always falls in a recession. In retrospect, the NBER will probably date the current recession from Dec 2007. If it runs 16 months to April next year, that would put it on a par with the recessions in 1973-75 and 1981-82. If we consider what was going on in the world during those earlier recessions, especially the oil crisis in 1973 (and subsequent floating of the dollar), maybe what’s happening now is not that much more of a shock. After all, Warren Buffett was not the only doom-sayer. Plenty of people, including new Nobel laureate Krugman, said the housing bubble could have disastrous consequences. So let’s say the US loses 2%--we would still have growth around 1.5% by the middle of next year. Europe will be lucky to get 1%.

We’re not so sure that this recession is not different in some qualitative ways even if in the end the economic data puts it in the same class as other recessions. For one thing, the moral dimension is far bigger, broader and deeper. Individuals behaved badly. Banks and mortgage brokers behaved badly. Investment managers behaved badly, buying pie-in-the-sky stories from quants. Governments and their regulators behaved badly. The Fed behaved badly, if you accept that Greenspan’s Randian fantasies overruled common sense. If you cut interest rates to 1%, you need to take other steps, chiefly regulatory, to avoid abuse. How can the Rand/Greenspan libertarians not see that avarice is a powerful and anti-social thing? It’s not healthy for a society that so many people turned a blind eye to lying on mortgage applications and mortgage approvals. Subprime may be only a small portion of the overall problem but it’s a pernicious disease. In the old Soviet Union, there was a joke that “the workers pretend to work and the state pretends to pay them.” In the US, we have a similar joke "we pretend we are rich and the banks and brokers pretend to believe us."

Now the US faces a moral dilemma of the highest order the government will decide which financial institutions will survive and which will not. Capitalism is not supposed to work this way, but that’s not even the main point. This is how we’re doing it for the sake of expediency, so let’s accept it for a moment. The question then becomes HOW will the government decide who survives and who does not? The opportunities for fraud, corruption, error and injustice are nearly endless.

The other moral component is the punishment to be meted out to the miscreants. In Europe, executive heads are going to roll-that has been the sentiment all along and was featured in German FinMin Steinbrueck’s 8-point list of prerequisites for rescue plans. So far we have heard that the Royal Bank of Scotland CEO was given his walking papers, with no golden parachute. TreasSec Paulson has said he disapproves of government dictating executive pay, but these are not normal circumstances. He who pays the piper gets to call the tune, right? And it’s not just jettisoning the top executives. The public is pounding on the table for some of these guys to go to jail, certainly not to be allowed to stay in their jobs at high pay. Presumably we can spare them with over 100,000 former financial sector workers on the street and a great sector consolidation about to begin. Alas, we fear that the only charge available will be stupidity and you can’t send a guy to jail for that (can you?). When it comes to the moral outrage issue, it looks like the British and Europeans have a firmer grasp on the concept of the social contract that says people fortunate enough to rise to wealth and high social status are duty-bound not be to greedy cads.

But back in the real world of money flows, we need to note two developments. The first is that bond yields everywhere will be rising as governments issue new paper to fund the bailouts. Even if the US, UK and Europe engage in additional interest rate cuts on the very short end, the yield curve must steepen as new paper comes along. This is also a competition for the world’s savings, and as we know, the world’s biggest savers reside in Japan, China and other emerging markets. What about Middle East sovereign funds? We are getting silence on that front.

Panic and blood on the street always causes hot money flows. Market News reports a fascinating development, that during Sept, capital flowed out of China. Foreign exchange reserves hit a new record of $1.906 trillion at the end of September, up about $98 billion from the $1.808 trillion at the end of the first half. But a monthly breakdown of the quarterly increase suggests an estimated $20 billion to 25 billion left China in September, according to Stone & McCarthy. The $21.4 billion increase in September --much smaller than the combined $29.3 billion trade surplus and $6.64 billion foreign direct investment during that month -- could raise the spectre of capital outflows, rather than the inflows that the government has long been concerned with.

Exactly whose money is this? It could be private individuals, including wealthy Chinese and some living outside the country, who expected the crisis to spread to China, or it could be corporate money going home in the Western credit crunch. Remember, there’s a lot of Japanese money in the Chinese stock market, too. In a related matter, some analysts say the dollar exchange rate could be the beneficiary of repatriation flows for the same reason. How much money does (say) GM or GE have in China?

We expect the dollar exchange rate to seesaw early in the week as we await the market’s judgment on the various bailout plans. So far analysts are impressed by the Europeans lacking the institutional infrastructure to create a clear and coordinated master plan. We say this is wrong. It is a huge plan when all the pieces are put together and there is no reason it won’t work just as well (if not better) than a eurozone-wide plan. And the US plan to be announced in more detail today has many potential pitfalls. The dollar could dive a lot early in the week, especially if oil rallies as it appears likely to do. But by the end of the week, if real confidence is restored, the US dollar can come back on the FIFO growth story. We hate to say it, but we must watch the stock market as the symbol of sentiment.

Bye for now

Barbara Rockefeller - Forex Trading Reports

Buy Dollars , pounds to dollars at the best exchange rate - visit IMS Foreign Exchange

Australian Dollar Exchange Rate fights back against the Pound but Outlook suggests further Falls

Thu, 9 Oct 2008 21:41:29 +0100

Hi All,
The Pound to Australian Dollar exchange rate yesterday saw one of the most surprising rally's I have ever seen as the Dollar exchange rate went from 2.2700 to 2.7200 almost a 20% jump. The question everyone is asking is;

Why did the Australian Dollar fall by so much?

Simple answer the global economy is in melt down and foreign exchange traders around the world are having to take off complex carry trades which are bets on interest rates and now heading to the safe haven of US Dollars, Swiss Francs and Japanese Yen.

(The Australian Dollar and the New Zealand Dollar for the matter has been used as a high yielding currency and traders have been borrowing from Japan by buying Japanese Yen which current interest rate is 0.5% and investing in the Australian and NZ market at 7%+. )

Before you rush to buy Australian dollars there is further risk these trades will drag the Australian Dollar to US Dollar back to the 2001 levels 0.4775 this will correlate to a Pound to Australian Dollar Buy Rate of around 2.900/3.000 a level that most people didn't expect to see this year or next for that matter.

Traders will watch technical levels on the Australian dollar today, said Westpac's Rennie. The currency closed below 67.15 U.S. cents yesterday, a 61.8 percent retracement from its April 2001 low to a July 2008 high, according to a series of numbers known as the Fibonacci sequence. The close below that level could "open up a deeper sell- off and a long-term target to the 2001 lows at 47.75,'' wrote London-based Kevin Edgeley, a technical analyst at Goldman Sachs Group Inc. in a research note dated Oct. 8. source Bloomberg

So if you are migrating to Australia or just an expat sending money to Australia enjoy the bonus of a global meltdown/credit crisis - you are one of the very people that we benefit from the current market conditions.

Buy for now

Need to buy Australian Dollars at the best rate

Call IMS Foreign Exchange +44 207 183 2790 for a Free Australian Dollar quote.

Pounds to Australian Dollars now 2.5500 - why is the AUD outlook so bad?

Thu, 9 Oct 2008 19:28:14 +0100

Australian Central Bank last night expanded the liquidity assistance it provides commercial banks in its daily money market operations. The Reserve Bank of Australia (RBA) said it would ease restrictions on the types of residential mortgage back securities (RMBS) it will accept as collateral for loans. It will also offer 6- and 12-month repurchase agreements each day in its operations, essentially lending for longer periods.

The Australian Dollar again came under selling pressure across the board and is down 3% against most currency crosses today. Seams like we are shooting the messenger as the Australian Central bank seams to be acting responsibly compared to the ECB and the Bank of England.

Pounds to Australian Dollars exchange rate currently 2.5600

Why are the ECB and the Euro Exchange Rates not being punished for foolish policy choices?

Thu, 9 Oct 2008 14:35:00 +0100

Foreign Exchange Outlook : The IMF chief economist said this is the greatest shock since the 1930’s but should not turn into another Great Depression because the policy response this time will be the right one. The major countries will not raise interest rates and has instead cut them, trade protectionism will be resisted, and so on. But what about the public’s response? Is it possible that governments can do the right things and we get a Great Depression anyway? Bloomberg points out that yesterday the VIX, a measure of fear in the stock market, reached an intraday record high of 59.06.

Stock markets are not economies but have many of the same participants. Stock market participation in the US is exceptionally high, with well over 60% of individuals having some association with it, if only through a pension fund or IRA. At what point does the government, any government, intervene in the stock market to boost confidence? It is seldom done-the number of instances can be counted on the fingers of one hand (Hong Kong during the Asian crisis, Japan via state-owned entities at various times). We doubt that the US would do it-Congress would scream-but hey, you never know.

This is a new form of moral hazard-that once the Treasury decides it can buy preferred shares, it selects its investment targets according to the free-market fortunes of certain stocks. This would be truly awful and raise all kinds of questions about insider trading, stock price manipulation, backdoor deals, and so on.

The US reputation for honesty and transparency has already taken near-fatal stabs to the heart by Enron, WorldCom, various option pricing scandals, executive pay, and so on.

How much more can it take?

We agree that preferred shares are a better fix than buying toxic paper and praying, but it must be handled with kid gloves and in the middle of a well-lit stage.

Anyone pinning hopes on G7 tomorrow and Saturday is making a mistake. Treasury Sec Paulson said yesterday that "When we look at the G-7, we have very different countries, economies of different sizes, financial systems with different needs. And so it would not make sense to have identical policies." What he really means is that monetary policy has little to contribute now-although the coordinated action yesterday had a good effect and gave a nice appearance, as though somebody is in charge-but fiscal policy and institutional change are now the keys to a real and lasting fix. As noted before, the eurozone doesn’t have a joint fiscal position. There is no federal budget of any consequence. Therefore, it’s up to each country to fund their bailouts as best they can, and national differences and quirks are only to be expected.

Does this mean the euro-zone is in a weaker position than the US? Not necessarily. These guys are not second-raters. They have already accepted that budget deficit constraints (3% of GDP) need to be thrown out the window. What else do we need? Each country’s plan doesn’t have to be coordinated with everyone else’s plan to be effective. The real problem lies with the big multinationals that have fingers in every country, like ABN Amro, ING, Deutsche Bank and the British banks. As we saw with Iceland, we could end up with governments suing each other. Iceland doesn’t have the cash reserves but most EMU countries do, or the capability to tax it into existence. This will be fun but not fatal if it’s the UK suing (say) France, but it will be less fun if it’s Poland suing (say) Germany. We have no evidence that this will be the outcome, but it’s an interesting idea. More interesting is how Europe is going to reduce leverage without triggering failures. This is still under the radar but it seems obvious that leverage of 50x is a fire waiting for a match.

Meanwhile, European banks are still bidding like mad for dollar funding from the ECB at rates reaching 10% yesterday, although it was down to 5% today. With Fed funds at 1.5%, this is an extraordinary premium. Usually overnight money is cheaper (due to the absence of reserve requirements), not more expensive. We will know that trust and confidence has returned to European banking when these rates come down. What if they do not come down? At a guess, it means the European banking crisis has further to go. European banks are almost certainly in worse shape than US banks at this point.

What does this have to do with the level

European Banking Crisis - US is entirely at fault for the global crisis due to irresponsible lending

Thu, 9 Oct 2008 13:26:49 +0100

European Banking Crisis : Britain’s PM Brown said the US is entirely at fault for the global crisis due to irresponsible lending. We have led the world today with a proposal to restructure our banking system. We are taking the steps that I believe other countries will take in the future. The three-part UK plan announced today entails £200 billion in a "Special Liquidity Scheme,"£50 billion in direct investment in 8 banks, probably in the form of preferred shares, and a guarantee of bank bond issuance of £250 billion. It might well be called a 4-point plan since it includes menacing remarks about executive compensation. There was no favorable announcement effect, which must gall Brown and Darling-stocks continued to fall, including bank stocks, and the pound to us dollars bounced only to 1.7665 before falling back (from the low of 1.7315 yesterday). But on the face of it, it’s a better plan than the Paulson plan more encompassing.

The Swedish Riksbank said it will lend up to SKr 5 billion to Iceland’s biggest bank, Kaupthing, to help it avoid liquidity problems (and protect Swedish depositors). In Spain, the government said it will inject €30-50 billion into the banks (buying up paper) and also raise the guarantee for bank deposits from €20,000 to €100,000.

The EU finance minsiters meeting yesterday agreed that bank deposits should be guaranteed up to €50,000 and on joint principles to guide bank bailouts, according to the WSJ. The orientation is to invest in the banks themselves rather than to buy their paper, the US solution.

The ministers noted the European approach is cheaper.

In the money market where the real action is today the ECB allotted $70 billion in a 1-day US dollar facility to Euro-zone financial institutions at a marginal lending rate of 9.5%. Not a typo, 9.5%. Market News reports that The operation, which had a pre-set maximum allotment volume of $70 billion, received 69 bids and the total bid volume was $122.03 billion. 96.04% of bids were allotted at the marginal lending rate, the ECB said. Today was the first time the ECB's applied a multiple rate auction method. The change from the single rate method means that "the auction method will be the same for the overnight US dollar operations and for the Euro system's euro credit operations," the ECB said yesterday. This is the 16th overnight U.S. dollar funding operation conducted by the ECB since the agreement on Sept 18.

Separately, the Bank of England allotted $8.564 billion in overnight money at a lowest accepted rate of 1.010%, and covered 0.86 times. The weighted average rate was 3.592%. It also allotted $12.49 billion in 1-week money at a lowest accepted rate of 1.210%, and covered 1.01 times. The weighted average rate was 3.286%. These numbers suggest that the stress in the UK system is a lot less than in the Euro-zone system.

And the US is doing even better, perhaps. Market News reports that the 85-day Term Auction Facility offered more money than the banks needed. The cover ratio was only 0.92, meaning banks bid for 92% of the $150 billion on offer. Well, maybe. The previous TAF was much smaller, $25 billion, and bank stocks still fell even with guaranteed funding.

Buy for now

Barbara Rockefeller - forex trading reports

Need to Buy Australian dollars or exchanging Pounds to Euros -

Call IMS Foreign Exchange on 0207 183 2790 for a free Quote

Crude Oil price fall could result in a production cut

Thu, 9 Oct 2008 13:07:27 +0100

The Nymex Crude Oil futures contract closed a bit higher than the day before at $90.06, from $88.96, although the chart is fairly clear-the crude oil trend is downward. We are sticking to our idea that a price of $80 is not a silly forecast. Oil economist Jim Williams points out that $80 may be a number OPEC has in mind, too anything under it (like $60, another number being tossed around in market chatter) could result in a production cut. Sure enough, the price rose to $90.99 overnight but couldn’t break the round number $91.00, and has fallen back to $88.99 at 12:16 pm GMT.

Gold Futures is another story. It is now moving independently of the dollar exchange rate, to a close of $878.40, near the high of $883.00.

Buy for Now

Barbara Rockefeller - Forex Trading Reports

US Dollar exchange rate 1.7385

The financial sector crisis is bad enough but a stock market meltdown is more than symbolic - it’s true wealth destruction.

Wed, 8 Oct 2008 12:53:33 +0100

Foreign Exchange Outlook : G7 will meet starting this Friday but it seems sensible to conclude from prices that the Foreign Exchange market has zero faith in G7 to take any action that will change the landscape. What we got instead was action from the central banks. This has a number of ramifications, not least that political institutions, including ministries of finance/treasuries, are shackled, whereas the least political institution, central banks, can take action.

In short, government gets in the way.

The best thing governments ever did was to make central banks independent.

What it also means is utter desperation. It is commonly accepted that interest rate levels have virtually no influence on trust and confidence, the lack of which is at the heart of the current liquidity and credit crisis.

What is important is whether European Interest Rates stabilize today and tomorrow. While the US banks are underbidding for special TAF money, the ECB, Swiss National Bank dollar offerings were over-subscribed with coverage ratios of 4.43 for the eurozone and 2.23 for Switzerland. The credit and liquidity issues are bigger in Europe than in the US and UK. It would be nice to think that the US and UK may now stabilize, each with its big plan, but if it is true that the world is flat, the US and UK need Europe to stabilize, too.

At some point the public is going to wake up to what the central banks undoubtedly already know -the US taxpayer will be rescuing banks in Spain and Italy. This doesn’t mean the US will take a loss -the ECB stands behind all its US dollar borrowings but at some point it will look like an expensive bailout at US taxpayer expense. Just as the Mexican Peso bailout ended costing the US taxpayer nothing, this one will likely not be a net drag, either, but politically it’s dynamite. Top officials in Europe, like Brown and Germany’s FinMin Steinbrueck, blaming the US for everything, is not wise. It was hardly the US that allowed/encouraged European banks to leverage themselves to 50x.

This crisis is worse than we thought. We are still grappling with the economic outlook now that credit is sure to be cut to vastly lower levels for a long time to come. We do not have an estimate of what proportion of firms in the US absolutely, positively need to borrow to buy supplies and make their payrolls, but it must be a big number. Let’s say it’s 50%. Does that mean activity (GDP) will contract by 50%? Not exactly, but it’s not 5%, either. And the more stock markets fall and the cost of overnight and short-term money rises, the longer it will take to dig ourselves out of this mess.

We don’t know why the governments do not simply declare for the stock markets the equivalent of a bank holiday, which was the tactic used in the 1930’s. It’s not a run on the banks, like then, but it’s a run on the stock market. So far today stock markets are responding favorably to the coordinated rate cuts, but in the end, it’s foolish. Economic contraction is still ahead and any analysis of the situation that doesn’t take that into account is simply wrong. Yes, some companies will do well in terms of ongoing business - those who don’t need to borrow and who peddle essential items (Cramer names household goods suppliers like Colgate - we still need to brush our teeth during a crisis).

But stocks are certainly headed thousands of points lower and any rallyette today is a time to sell anything still on the books. Note that getting money of hedge funds is hard they all have notification periods of 60-90 days, so that even a fund of funds, which faces the same notification criteria is stuck holding ever lower-priced assets. It’s not the job of the government to protect rich people who invest in hedge funds or funds-of-funds, but surely they are not offal to be kicked to the dogs. The financial sector crisis is bad enough but a stock market meltdown is more than symbolic it’s true wealth destruction. People who could tolerate and wait out the drop in home values are not going to be so calm about seeing their portfolios go to hell, too. There is an authentic wealth effect, even if we can’t measure it very well. People who feel poor simply do not spend. The consumer is two-thirds of the US economy. If industry is going down and the consumer is going down and finance is already in a hole, what is left? Government. What a terrible thing to be forced to say! Out of all this emerges the ultimate vote-of-confidence the dollar exchange rate. We continue to think that aside from the US dollar to Japanese Yen, the dollar will do very well against the other majors. Not because the US is superior in any way, but because the US is the biggest and the first and the most essential. We see the pound to dollars exchange rate down around 1.6500 (long-term)

US Fed Cut Interest Rates by 0.50%

Wed, 8 Oct 2008 12:35:01 +0100

US Fed Cut Interest Rates by 0.50%

ECB Cut Interest Rates by 0.50%

Wed, 8 Oct 2008 12:34:05 +0100

ECB Cut Interest Rates by 0.50%

Pounds to Australian Dollars now 2.5500 - why is the AUD outlook so bad?

Wed, 8 Oct 2008 08:28:24 +0100

Commonwealth Bank of Australia buys BankWest

Wed, 8 Oct 2008 08:10:55 +0100

Commonwealth Bank of Australia has agreed to buy British bank HBOS's Australian unit BankWest for A$2.1 bln, to boost its market share in fast-growing Western Australia. CBA said it would raise A$2 billion of Tier 1 capital in an institutional placement of securities to help fund the BankWest deal.

Well good on the CBA buying what i always thought was one of Australia's best banks - seams the biggest loser out of the credit crunch is the customer as choice and competition is disappearing out of the market. All we need now is a Crude Oil crisis and Shell and BP can merge funded by the tax payer and they can return billion pound profits.

This is just one big mess

But on a positive note if you are migrating to Australia the pounds to Australian Dollar exchange rate has rallied yet again today and you can Buy Australian Dollars at 2.5500

Buy for now

IMS Foreign Exchange

The RBA cut its official cash Interest rate target 100 basis points to 6.00%.

Tue, 7 Oct 2008 10:59:23 +0100

The RBA cut its official cash rate target 100 basis points to 6.00%.

Pounds to Australian Dollar now 2.4800

Mon, 6 Oct 2008 20:18:14 +0100

Hi All,

To everyone's surprise the Pounds to Australian Dollars exchange rate has rallied to the highest point this year. That GBPAUD Exchange rate is currently 2.4880 from 2.2800 a change of 9% change on the day, almost unheard of in the world of foreign exchange. I am at a loss to explain the massive change in the AUD exchange rate but the general sentiment is that it is outright panic and foreign exchange traders are running to the safe havens on the Swiss Franc and the Japanese Yen. ( Is the Australian Banking System really that bad shape that traders are scared about borrowing from Japan to invest in Australian government back bonds at 7% or 6.5% after the interest rate cut - it appears so)

Although the Reserve Bank of Australia is expected to cut Australian interest rates by 0.50% this response is ridiculous and I expect the the Australian Dollar to come back to the 2.3000 level shortly which is more realistic as the Bank of England. What has made matters worse is that there is Public Holiday in Oz that is leading to extremely thin trading conditions and exacerbated the move.

But for those of you in the UK thinking about emigrating to Australia or paying off an Australian Mortgage it is music to your ears as being in the UK makes sense again.

Don't be foolish - is you are buying Australian Dollars you have been given a gift horse here - Buy Australian Dollars while you can at these levels - when normality returns so will the Australian dollar strength.

Buy for now

IMS Foreign Exchange - Click here for Australian Dollar Trading Reports

Buy Australian Dollars at best rates - call 0207 183 2790 for a free quote

European Banking Crisis

Mon, 6 Oct 2008 19:29:52 +0100

European Banking Crisis: On Sunday, Germany issued a blanket guarantee of all its consumer bank deposits, or ⁈568 billion, together with a second, bigger bailout plan for failed Hypo Real Estate Holdings (⁈400 billion in assets). The FT notes that this follows similar announcements in Ireland and Greece. Greece? That one didn't hit the headlines because so much else is going on. Today Market News reports "Austria will follow Germany in guaranteeing deposits of retail savers."

Early today the Danish government guaranteed all bank deposits as part of a deal with banks to set up a Dkr35bn ($6.5 billion) liquidation fund. Market News says "Until now, deposits in Danish banks had been guaranteed up to DKr 300,000. In Sweden, the Riksbank announced an increase in lending to domestic banks, with an additional auction on Wednesday to ease liquidity problems. The Finnish government has said it stands ready to act if necessary.

The Fortis plan is still being worked on, too (⁈871 billion in assets), and in Italy, UniCredit, the second-largest bank, held a Sunday board meeting and announced a ⁈3 billion capital increase.

So what happened at the Saturday summit in Paris? Nothing concrete, although the leaders agreed on principles. These include keeping the lines of communication open, considering ways to amend international accounting standards, and lobbying for a softening of European rules that ban state aid and monopolies, according to the WSJ. Oh, and EU rules on budget deficits and debt limits may be loosened. May be? Finally, CEO's of failed institutions will be punished. Germany's Merkel was quite clear on that one.

Sunday night the Foreign Exchange and equity markets voted on "principles without a plan"-the euro exchange rate fell across the board. The Netherlands has proposed a plan whereby each country contributes 3% of GDP to a European rescue fund, or about ⁈350 billion, a proposal echoed by Italy's Berlusconi today (as though he invented it). The failure of the European countries to come up with a coordinated plan is the real drag on the euro rate. It heats up cross-border flows to boiling point, as Ireland found out last week with inflows to newly guaranteed accounts.

It also makes membership in the EMU less valuable - what good is it if it can't come to the rescue in a time of need? The Swedes are making their own way, having ready taken an independent course in interest rates. The failure to make a plan reveals the lack of institutional depth. The only real institutions are the ECB and maybe the Competition Commission.

Finally, even if a ⁈350 billion plan were agreed, is it enough?

The pan-European economy is about the same size as the US, and we have a $700 billion plan (actually $840 if you count the pork). Why does Europe need less?

In Iceland, the crisis has reached the point where the IMF may have to come in to bail out the financial system. Last week the government nationalized the third largest bank (Glitnir) for ⁈600 million, but by today, the question is whether the country has sufficient resources to backstop banks with foreign currencies liabilities totaling $120 billion. According to the WSJ, "Iceland has a population of just 300,000 and a gross domestic product in 2007 of around $20 billion..." The krona has fallen like a stone, over 8% against the euro in a week, and Iceland government debt insurance now costs an up-front fee of $1.5 million and $500,000 per year for something that cost $271,000 a month ago. In short, the Icelandic banks are over-leveraged. The other two big banks may need to be sold to outsiders. We wonder what it means that bank liabilities are 6 times GDP. What is the number in the US?

Market News reports that all the uncertainty surrounding the European banking sector was met again by the 14th ECB emergency dollar funding since the Sept 18 swap line enlargement. Today the ECB announced that it "allotted $50 billion in a 1-day US dollar facility to euro-zone financial institutions at a single rate of 4.00% in an effort to ease pressures in short-term US dollar funding markets. The operation, which had a pre-set maximum allotment volume of $50 billion, received 59 bids and the total bid volume was $90.8685 billion. This resulted in 77.467% of the bids being accepted at the marginal rate." So, demand still exceeds supply. We are still stunned by the statement last week that European banks have $10 trillion in dollar assets.

Can that be right? Were they kept in dollars or exchanged for Euros? Is it possible that the huge new demand for dollars against the euro is a mechanical effect of re-matching assets with liabilities?

Further, Market News reports, "LIBOR/OIS spreads in dollar, euro and sterling all moved to fresh record wides Monday, in the wake of another raft of negative news from the banking sector at the weekend... Dollar LIBOR/OIS three month spreads widened to a record near 292 basis points, sterling widened to 174.5 and euro spreads to 144 basis points."

Bye For Now

Barbara Rockefeller
Full Story visit Barbara Rockefeller Site and sign up for Forex Trading Reports

Best Euro Exchange Rates when you need to Buy Euros visit IMS Foreign Exchange

Pounds to Euros currently 1.2980

Pounds to US Dollars currently 1.7365

Crude Oil falling global recession arrives

Mon, 6 Oct 2008 18:52:02 +0100

The Nov NYMEX Crude oil futures contract closed three cents over the open at $93.88 from $93.85, but made a new low. On the chart, the red line denotes a price of $80, which is certainly attainable if the technical trend continues. The contract crashed to $89.07 before recovering to $90.43 at 10:56 am GMT. This is the lowest since Feb and a 5% drop in a single session. The universal sentiment is the "demand destruction" is really occurring as global recession arrives. Over the weekend, Iranian Oil Minister Nozari said the market is oversupplied.

Aramco cut its official selling prices for exports to Asia and the US, according to Bloomberg (a cut of 30¢ to a discount of $3.40 a barrel below the West Texas Intermediate benchmark). Bloomberg also points out that crude oil prices are now down 39% from the record $147.27 reached on July 11. Oil fell 12% last week alone.

Buy for Now

Barbara Rockefeller - Forex Trading Reports

US Dollar exchange rate 1.7385

Australia and Bank of England to Cut Interest Rates

Mon, 6 Oct 2008 18:31:00 +0100

Foreign Exchange Outlook TreasSec Paulson’s once-bright image is now more than a little tarnished after his plan gave the appearance of an arrogant power-grab, leaving Fed Chairman Bernanke as the sole standing hero. Bernanke speaks about the economy tomorrow and everyone is waiting breathlessly until we hear what he has to say about further federal government bailouts of everybody from General Motors (Detroit already got a little-noticed $25 billion in last week’s bailout) to the states (California Governor Schwarzenegger already applied on Friday). As noted by many observers, it’s a little silly that a state--with taxing authority--can’t peddle its bonds, or that companies with raw materials and inventory can’t get a loan at a sensible rate.

The total lack of trust is what is gumming up the works, and nowhere is the lack of trust worse than in our inability to price credit default swaps. As perpetual bear James Grant said on "60 Minutes" last night, we don’t even know the face value of the market, probably somewhere between $50-65 trillion. Credit default swaps were invented as insurance against default, but not named "insurance" because then the contracts would have to be regulated by the insurance regulators, not to mention being put on balance sheets. This is the market Warren Buffett said was pure poison a few years ago. It is also the market that put AIG on the block to the Feds. Solve the credit default swap problem, and a lot of other problems go away. We have no idea how this could be achieved and at a guess, neither does the Fed-yet.

The Reserve Bank of Australia meets tomorrow and the Bank of Enlgand meets on Thursday, with both banks forecast to cut interest rates by 50 bp. The Fed meets Oct 28-29 and the ECB next meets Nov 6, but chatter is going around that the central banks could coordinate rate cuts or at least all cut by the same amount. As noted above, monetary policy has exhausted its capability to goose markets, but never mind rate cuts are good for confidence because it shows the governments are not dithering. In fact, Market News reports that the Swiss newspaper Sonntag reported yesterday (without naming sources but claiming they are independent and credible) that the Swiss National Bank will cut rates 25 bp by December at the latest, and the action could come as a coordinated move with the BoE and ECB.

Other policy options, in the US at least, include promises to bail out just about anybody who asks, something the cartoonists have already latched onto. The problem is not whether this is "socialism" or against US principles-of course it’s against US principles-but how to fund it. The only people with national savings (reserves) are in the Middle East and Asia. These countries lack developed capital markets (not to mention the rule of law, getting a bit battered these days), and so we imagine that Paulson and others have already been burning up the phone lines to these countries asking for a form of petro-dollar recycling.

This was a big deal in the late 1970’s and early 1980’s as it became clear that countries with newfound wealth had no real place to stash the cash. This time we have Emirates building islands in the sea shaped like palm trees and skyscrapers going up in Shanghai, so opportunities to invest domestically are not as scarce as thirty years ago-but still not big enough or safe enough for all the savings.

Why should these people rescue us now? After all, we brought in on ourselves with over-spending and stupid math-based con games.

Well, it may be touch-and-go, but in the end, the mercantilist argument will probably win. These countries, from Saudi Arabia to China, are export-based economies. No exports, no economy. No exports, no revenue to buy off restive populations who have a newfound hankering for everything from indoor plumbing to a Mercedes Benz in every driveway. They will rescue us because it is their political self-interest to do so. But these people are very, very smart and can see that the price can be forced to a very high level. Buffett has shown the way and established a new benchmark for big deals-10% dividend plus equity options. By the time this is over, over half the US economy can belong to the Middle East and Far East. No wonder Western companies are wooing suitors in Japan so assiduously these days.And the US is out ahead of the pack with initiatives to fix the situation.

Citibank got a court to open up on a Sunday to press its case for Wachovia over a competing bid from Wells Fargo. This is crass, but imagine a court opening on a Sunday in (say) France. In Europe, Trichet said it all-"We are not a political federation. We do not have a federal budget."

So if a Middle East sheikh or Chinese agency wants to invest in "Europe," where do they send the check? This is an echo of Kissinger asking what telephone number to dial when he wants to negotiate with Europe. Well, perhaps this crisis today will nudge Europe toward greater federation, but we wouldn’t count on it.

Finally, where is G7 or G8? It was supposed to meet at the end of this week. The only validity the group can have going forward lies in expanding G8, which already includes Russia, to include China, and perhaps Brazil. We assume the British would never agree to inviting India, and the US may baulk at Brazil. Maybe we need a new kind of organization altogether, once that negotiates directly with OPEC, say. The Group has become increasingly toothless and irrelevant. If it is to survive, it must act this week. For that to be effective, Europe has to act as a single entity on the financial crisis, too. Until the rest of the world gets its act together, the US Dollar exchange rate will continue to be favored, even though it can hardly be said the US is doing a good job. In fact, it’s doing a terrible job, but it’s showing it can do something, even if it’s wrong. Action is better than paralysis, politically. We like the US dollar this week, and we also like the yen, especially in the old carry-trade crosses. The commodity currencies will be the hardest hit, since global recession hits commodities first. And we still await word from china about what it wants from all this.

There is no solution without China.

Bye for Now

Barbara Rockefeller - Forex Trading Reports

Best Euros Rates - Best Dollar Rates visit IMS Foreign Exchange

Bank of England to drop Interest Rates next week

Fri, 3 Oct 2008 08:10:54 +0100

BOE BLANCHFLOWER SAYS UK Interest RATES `MUST COME DOWN'

SPAIN ECON MIN SOLBES SAYS IRISH DEPOSIT GUARANTEE DECISION HAS CREATED IRRITATION

Thu, 2 Oct 2008 14:49:35 +0100

SPAIN ECON MIN SOLBES SAYS IRISH DEPOSIT GUARANTEE DECISION HAS CREATED IRRITATION......says a lot about working together for the greater good of the EU project

Nymex Crude Oil Futures contract failed to put in a higher high

Thu, 2 Oct 2008 13:48:43 +0100

The Nov Nymex Crude Oil Futures contract failed to put in a higher high and did put in a lower low, but closed up at $100.64-a bar that sends conflicting trading signals. So far today it has reached a new high of $102.84, over yesterday’s high of $102.46, but at 11:24 am GMT, it’s back down to $100.64, yesterday’s close.

We get the usual Wednesday US Energy Dept report today, probably showing a rise in crude stockpiles and a drop in gasoline because of storm-related refinery shutdowns and pipeline problems. Bloomberg says gasoline stockpiles probably fell 2.05 million barrels in the week ended Sept. 26 from 178.7 million barrels in the previous week, according to the median of 13 analyst estimates before an Energy Department report today. Supplies in the week ended Sept. 19 were the lowest since 1967.

Buy for Now

Barbara Rockefeller - Forex Trading Reports

Does the Congressional vote on the Paulson plan still matter?

Thu, 2 Oct 2008 13:16:34 +0100

Foreign Exchange Currency Outlook :

Does the Congressional vote on the Paulson plan still matter? Yes.

It’s a bad plan but better plans are not available for immediate action, and the top officials are telling us immediate action is needed. Let’s assume the plan gets passed this week. Meanwhile, the liquidity crisis in Europe will probably weigh on the euro exchange rate, so we have both a positive and a negative reason to see the US dollar exchange rate higher. It’s sad to say so, but worse conditions elsewhere are indeed saving the US Dollar. This will likely continue, too. Economic data from Europe is not good and seems to point to increasingly recessionary conditions but the ECB is likely not to respond with a interest rate cut.

As for hard data, it’s taking such a back seat it’s in the trunk of the car, but it can move the market, too, especially when it’s payrolls, the single biggest market-mover we have among all the data. We get it Friday morning. So far we have layoffs from Challenger, Gray today, up 95,094 in September from 88,736 in August. Nobody thinks the payrolls rate can be much better than 100,000, although we get the usual private sector estimate from ADP Macro today.

The US Dollar exchange rate may thrive on the grounds that the US is too big to fail and besides, it will come out of a recession faster than anyone else, even if the rescue plan is a bad one.

We have serious doubts about this reasoning, but never mind--things are worse in Frankfurt today than in New York and maybe even Washington. At least the US has a single government and is the issuer of the one currency everybody needs right now.

The contraction of the US banking sector is something the rest of the world’s banking sectors failed to plan for properly.

Golly, what will happen when China comes back from its National Day week-long holiday next week?

Some had suspected China would pull out of the US dollar as its main reserve currency. Now it’s looking like they will be scrambling to buy US Dollars like everybody else.

This is kind of fun, you have to admit.

We are getting more ocmfortable with a long US dollar posture.

Buy for Now

Barbara Rockefeller - Forex Trading Reports

need to Buy Euros or Buying US Dollars contact IMS Foreign Exchange

Is Germany as a leading indicator of whether Europe will go into recession?

Thu, 2 Oct 2008 09:02:11 +0100

Hi All,

The ECB announces interest rates today, with nearly everyone saying rates will be kept on hold at 4.25% and as usual, the only excitement to come from Trichet’s press conference. But Trichet is in a no-win situation. If he issues the same anti-inflation rhetoric, the euro exchange rate could suffer on the idea that the recession will get a deeper grip. If he sounds dovish, it's not only acknowledgement of recessionary tendency but also seeming capitulation to those who want growth as a central bank mandate and to hell with inflation concerns in a crisis. Trichet has to appear cool-headed in the crisis. Silly question - wouldn't the liquidity problem among European banks be alleviated by euro interest rates at the same level as US Dollar exchange rates?

Eurogroup chief Juncker said no government will allow a big bank to fail in Europe. "There is no threat, Europeans can have confidence." The response to crisis is Europe must be more systematic (than in the US). Separately, French officials said there will not be a bank crisis in France. There is a Eurogroup meeting in Paris on Saturday to prepare for G8 in two weeks. Yeah, sure.

Data is certainly taking a back seat to banking sector events, but today we got euro-zone unemployment rising unexpectedly in Aug to a 16-month high of 7.5%. The euro-zone Sept manufacturing PMI fell to 45 from the flash estimate of 45.3 (and 47.6 in August). It's the lowest since Dec 2001. In Germany, Sept manufacturing PMI fell to 47.4 from the flash estimate of 48.1 and 49.7 in Aug, the lowest since June 2003.

German retail sales were good, though, up 3.1% m/m in Aug (although y/y, sales fell 0.7%). But German Aug machine orders fell 10.0% y/y after falling 8 in July and 5% in June. All this attention falls on Germany as a leading indicator of whether Europe will go into recession.

So far it's not looking good for escaping that fate.

Full Story visit Forex Trading Reports

Best Euro Exchange Rates when you need to Buy Euros visit IMS Foreign Exchange

Pounds to Euros currently 1.2700

Pounds to US Dollars currently 1.7665

Australian Interest Rates to Fall, But not Mortgage Rates

Wed, 1 Oct 2008 13:25:22 +0100

Hi All,

Seams like the Reserve Bank of Australia is set to cut interest rates on the 7th October but word is out that the big four Australian Banks (Commonwealth Bank, NAB, Westpac and the ANZ) will not be passing on any of the interest cuts due to the current credit crisis and increased funding costs. We have written about this in the past about the greed of banks but nothing has been done to date and the current Australian Government seams to have raised the white flag on this issue with Wayne Swan the current Australian Treasurer conceding that;

"What we have seen in recent weeks is a very big spike in borrowing costs internationally and that will certainly have an impact on domestic institutions. I am not going to speculate about what the Reserve Bank will do next week, but we do know when borrowing costs go down rates should follow. Of course, the reverse also happens - when borrowing costs are pushed up and, particularly pushed up sharply, that has consequences."

And while Opposition Leader Malcolm Turnbull disagreed saying banks should pass on the full amount i believe this is more of a voter pleasing stance rather than political view point as he has nothing to lose in this argument.

So there you are, good news - those needing a Australian Mortgage the RBA is going to cut interest rates! Bad News is - Greedy Australian banks are not going to be cutting Australian Mortgage Interest Rates! - Super

Pounds to Australian Dollars currently 2.2370 Buy for Now

IMS Foreign Exchange - need to buy Australian Dollars call 0207 183 2790

BHP Billiton wins right to Bid for Rio Tinto

Wed, 1 Oct 2008 10:44:46 +0100

Hi All, For all of you that follow the Australian Dollar watch this story regarding BHP Billiton Ltd who last night won approval from Australia's competition regulator for its hostile $101 billion bid for Rio Tinto Group, boosting speculation that the world's largest mining takeover may succeed.

I would imagine this story would give the AUD exchange rate a boost as BHP would become a commodity - mining superpower which can only be seen as a positive for the Australian Economy.

Pounds to Australian Dollars exchange rate currently 2.2200

Buy for Now

IMS Foreign Exchange - Buy Australian Dollars at best exchange rates