US employment data knocks investor confidence Inflation and confidence indices dominate traders’ thinking
Monday, 6 July 2009
Today's Highlights
US employment data knocks investor confidence Inflation and confidence indices dominate traders’ thinking
FX Market Overview
It’s odd that most people silently dread the thought of attending a funeral but Michael Jackson fans are clamouring for the chance to be within the throng at the man’s memorial service. I can’t help feeling it is a fitting creepy end to a spectacularly peculiar life. I, as you may have surmised, will not be jetting off to LA to star-spot at a funeral, I will be staying right here to watch a very lively market unfold.
Things are changing in the financial markets. I heard a conversation on radio 4 this morning where one financial ‘expert’ was likening the shape of the recovery to a saxophone. Not content with having a ‘W’ shaped, ‘V’ shaped or ‘U’ shaped recovery or even one that looks like the extended ‘U’ shape of a bathtub, this chap saw the recovery slowly changing direction and then flattening off. But whatever shape you like your recoveries to take, the fact is that we are at a very tricky stage of the financial cycle.
Have we bottomed out? No one knows yet. Are we in the first phase of recovery? Who can tell. Should we be careful about timing our transactions? Too flippin’ right we should. There can be few who doubt just how crucial this period is and just how risky it could be to assume the recovery is going to start from here. As Alistair Darling suggested over the weekend, we may just be in the first phase of a protracted and painful f 0% growth period and we would all do well to assume he is right and trade on spikes within this current pattern rather than assuming the worst is behind us as some commentators would wish us to believe.
Certainly Thursday’s US employment data showed that the worst is not over as US unemployment hit 9.5% and as 467,000 more Americans lost their jobs. This development has unsettled the markets; causing an unwinding of riskier trade positions and, by default, strengthening the traditional safe havens like the US Treasury markets and Swiss Franc. The Japanese Yen has also strengthened partly through safe haven buying and partly through repatriation of funds from those unwinding investments in Australia and New Zealand where interest rates are much more attractive than the 0.1% available in Japan itself.
This week will be, lively as US traders return from a long weekend break and a swathe of data hits the newswires. The big monetary events are the interest rate decision from the Reserve Bank of Australia (tonight) and the Bank of England (Thursday). Neither is forecast to be about to move their base rates but nervousness breeds rumour mongering and that could unsettle either or both currencies. We will also be treated to a wave of business and consumer sentiment indices as well as a barrage of inflation data; at both the producer and consumer level.
In addition, the price of oil has slumped again (you would never know it from pump prices would you) and crude oil is back down in the mid $60 per barrel range. That ought to have weakened the Canadian Dollar but the advance of the US Dollar (Canada’s major trading partner’s currency) and the weakness in the Pound, have conspired to drop the Sterling - Canadian Dollar exchange rate by 4 cents.
It is most certainly a lively start to what promises to be a lively week. It should certainly be enough to keep us all on our toes but hopefully not enough to see anyone curling into a foetal position with their thumb in their mouth.
And finally, I didn’t get to see the whole Men’s final at Wimbledon but those who did, certainly got their money’s worth. Roger Federer certainly deserves his record breaking 15th Grand slam but I am worried about his peculiar wardrobe decisions. With all that military stuff going on, my concern is that the next thing will be a single white spangled glove, short trousers and white socks and a rapidly darkening skin tone. I think we all know where that can end.
Things are changing in the financial markets. I heard a conversation on radio 4 this morning where one financial ‘expert’ was likening the shape of the recovery to a saxophone. Not content with having a ‘W’ shaped, ‘V’ shaped or ‘U’ shaped recovery or even one that looks like the extended ‘U’ shape of a bathtub, this chap saw the recovery slowly changing direction and then flattening off. But whatever shape you like your recoveries to take, the fact is that we are at a very tricky stage of the financial cycle.
Have we bottomed out? No one knows yet. Are we in the first phase of recovery? Who can tell. Should we be careful about timing our transactions? Too flippin’ right we should. There can be few who doubt just how crucial this period is and just how risky it could be to assume the recovery is going to start from here. As Alistair Darling suggested over the weekend, we may just be in the first phase of a protracted and painful f 0% growth period and we would all do well to assume he is right and trade on spikes within this current pattern rather than assuming the worst is behind us as some commentators would wish us to believe.
Certainly Thursday’s US employment data showed that the worst is not over as US unemployment hit 9.5% and as 467,000 more Americans lost their jobs. This development has unsettled the markets; causing an unwinding of riskier trade positions and, by default, strengthening the traditional safe havens like the US Treasury markets and Swiss Franc. The Japanese Yen has also strengthened partly through safe haven buying and partly through repatriation of funds from those unwinding investments in Australia and New Zealand where interest rates are much more attractive than the 0.1% available in Japan itself.
This week will be, lively as US traders return from a long weekend break and a swathe of data hits the newswires. The big monetary events are the interest rate decision from the Reserve Bank of Australia (tonight) and the Bank of England (Thursday). Neither is forecast to be about to move their base rates but nervousness breeds rumour mongering and that could unsettle either or both currencies. We will also be treated to a wave of business and consumer sentiment indices as well as a barrage of inflation data; at both the producer and consumer level.
In addition, the price of oil has slumped again (you would never know it from pump prices would you) and crude oil is back down in the mid $60 per barrel range. That ought to have weakened the Canadian Dollar but the advance of the US Dollar (Canada’s major trading partner’s currency) and the weakness in the Pound, have conspired to drop the Sterling - Canadian Dollar exchange rate by 4 cents.
It is most certainly a lively start to what promises to be a lively week. It should certainly be enough to keep us all on our toes but hopefully not enough to see anyone curling into a foetal position with their thumb in their mouth.
And finally, I didn’t get to see the whole Men’s final at Wimbledon but those who did, certainly got their money’s worth. Roger Federer certainly deserves his record breaking 15th Grand slam but I am worried about his peculiar wardrobe decisions. With all that military stuff going on, my concern is that the next thing will be a single white spangled glove, short trousers and white socks and a rapidly darkening skin tone. I think we all know where that can end.
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