February 16, 2012
2012 is a big year for politics with 10 countries holding Presidential Elections. The potential leadership changes in the United States, France, Russia, Venezuela, Hong Kong, Finland, India, South Korea, Mexico and Taiwan are all important, but some more so than others. For example, the outcome of the elections in Hong Kong, Finland and Taiwan will only impact the markets domestically whereas the outcome of the U.S. and French elections could have global repercussions.
The Presidential battles in Washington and Paris mean that world leaders will be more focused on domestic developments than global cooperation. Unfortunately this comes at a dangerous time when countries around the world need to work together to help each other rise from the ashes. For the currency market, an inward focus could mean less global progress and more risk aversion / deleveraging / demand for safe havens like the U.S. dollar. Stocks usually perform well in election years – 2008 was different because we had the financial crisis but over the past five decades stocks fell only 4 out of 17 election years. Using the deutschmark as a proxy, we analyzed data on the EUR/USD going back to the 1970s which covers 9 election years in the U.S. As shown in the table below, we found that the EUR/USD weakened 8 out of the 9 election years by an average of 6 percent. In other words, the U.S. dollar tends to perform well against the euro in election years. No consistent election year patterns were found in USD/JPY or the Dollar Index. Although history does not always repeat itself, it is helpful to understand where the seasonal bias lies. The EUR/USD has performed extremely well in the start of the year, but eight out of nine times are very high odds and for this reason, we would not be surprised to see the EUR/USD reverse trend as the year progresses.
Posted in 2012 elections eurusd, 2012 elections us dollar
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February 16, 2012
Central banks have been particularly vocal since the beginning of the year, either by expressing their skepticism or satisfaction with the easing of credit conditions and incoming economic data. For some countries, this has changed rate hike expectations, for others it simply confirms existing views. As you may know, central bank rate hike expectations change often but here’s the latest. Find out which central banks are expected to keep monetary policy unchanged in the coming year and which ones are expected to ease below!
Federal Reserve - No Changes in 2012 (surprise, surprise)
European Central Bank - No more Rate Cuts in 2012 - upgrade from the pricing in of 25bp of easing in Jan
Bank of England - No Changes in 2012
Bank of Canada - No Changes in 2012
Reserve Bank of Australia - Mkt was pricing in 75bp of easing this yr back in Jan, now only 50bp expected
Reserve Bank of New Zealand - No Changes in 2012
And here are the details!
Posted in Bank of Canada, Bank of England, Bank of Japan, Reserve Bank of Australia, central bank rate hike expectations, rbnz rate decision, reserve bank of australia intervention, reserve bank of new zealand
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February 9, 2012
Just for fun, here’s the word cloud for ECB Draghi’s Press Conference Introductory Statement
Posted in ecb rate cut, ecb rate hike
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February 8, 2012
Both the Bank of England and the European Central Bank will be making monetary policy announcements on Thursday. The market expects the ECB to remain on hold and BoE to increase their asset purchase program by GBP 50 billion. A quick look at the following tables explain why the BoE is expected to ease and the ECB is not. Since the last monetary policy meeting, Eurozone economic data was neutral / mixed to bullish. U.K. data on the other hand was neutral / mixed to bearish.
Posted in Bank of England, BoE rate cut, ECB, ecb rate cut, ecb rate hike
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February 6, 2012
This morning, central banks around the world released their latest reports on foreign exchange turnover. These numbers are for October 2011. FX trading volume declined in every part of the world except for the U.S., where it rose to a fresh record high in October. The anomaly in the U.S. may have to do with the improvement in risk appetite in October - stocks rose strongly, which could have made US investors more willing to take on risk. In other parts of the world, trading volumes in the Swiss Franc and Japanese Yen could have suffered from central bank intervention, which capped volatility in those pairs.
London Link to Report
- Average daily reported UK foreign exchange turnover was $1,972 billion in April 2011, 3% lower than in October 2010, and 17% higher than a year earlier. This was off the highest level of turnover recorded since the survey began in April.
- The decrease in turnover was driven by a 9% fall in FX swaps activity. Spot turnover rose
2% to a record survey higher.
New York Link to Report
-ï€ Daily FX market turnover rose to a record $977 billion for the Oct 2011 reporting period, up 20% from prior year
Singapore Link to Report
- Average daily reported ‘traditional’1 foreign exchange turnover was US$308bn, a 1.1% decrease compared to April 2011.
- Average daily reported turnover in OTC foreign exchange derivatives2 was US$46bn, a 2.1% decrease compared to April 2011
Canada Link to Report
- On an average daily basis, total turnover declined by 14.4% from US$ 61.2 billion in April 2011
to US$ 52.4 billion in October. This was the first decline in traditional foreign exchange
turnover since April 2009
Australia Link to Report
- Total average daily turnover in all OTC foreign exchange instruments in the Australian market was US$167.9 billion in October 2011. This was a decline of 23 per cent from April 2011, and a decline of 14 per cent over the year.
- Average daily turnover in traditional OTC foreign exchange instruments (spot, outright forwards and foreign exchange swaps) in the Australian market was US$161.2 billion in October 2011. This was a decline of 23 per cent from April 2011, and a decline of 14 per cent over the year.
Posted in Uncategorized, forex volume
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