Forex News

Beware falling BRICs

With the dollar making all of the running over recent weeks, it has been interesting to observe just how much pressure the currencies of the BRIC economies have been under. Elsewhere, we have remarked upon the recent decline in the Chinese yuan, a function of domestic financial weakness and accelerated capital outflow. The Brazilian real has been hit hard as well, down 4.4% for the month to date, while the Russian ruble has dropped 5%. Read more

16/05/2012 @ 09:46 GMT

RMB continues to lose ground

Overnight the Chinese currency has continued to lose ground against the dollar, with yuan forwards declining to a four-month low. The explanation for the continuing softness in the renminbi is twofold – the dollar is in high demand at a time of enormous uncertainty over Europe’s future, and domestic economic conditions in China have been much weaker than expected. Twelve month NDFs are trading at a 1% discount to the onshore spot rate, which implies that the forward market expects a depreciation of the yuan over the next year. Read more

16/05/2012 @ 09:17 GMT

Italy back in intensive care

After a two-month respite from financial turmoil at the start of this year, Italy unfortunately is back in intensive care. The 10yr yield touched 6.0% this morning for the first time since early March; in the past two months the yield has risen by 130bp. Certainly, the very problematic situation in Greece is not helping – bond yields for all of Europe’s fiscal miscreants are climbing sharply at present. Read more

16/05/2012 @ 08:47 GMT

Turbulent time for commodities

With the bulk of Europe in recession and China clearly slowing more rapidly than anticipated, it is no surprise to see commodity prices under sustained downward pressure. Read more

15/05/2012 @ 10:20 GMT

The shifting eurozone growth debate

As Europe pushes back against austerity, and the new pro-growth French president Hollande is sworn in, never before has there been such a focus on the growth numbers across Europe. The good news is that there is something for everyone. The optimists (and headline writers) can rejoice at the fact that Germany grew five times faster than expected at 0.5% QoQ (it’s a good job the market was not expecting zero quarterly growth…). We have to wait until next week for the more detailed breakdown of the principle drivers. Read more

15/05/2012 @ 09:58 GMT

More vengeance from Europe’s bond vigilantes

Europe’s bond vigilantes are wreaking further havoc in the markets today, with the weak and vulnerable sovereigns being castigated mercilessly at the expense of the fiscally responsible. In general terms, it is the bond markets of those electorates rebelling against austerity that are taking a beating. Spain is being singled out for particularly harsh punishment, the 10yr yield climbing 30bp to around 6.25% and 5yr CDS at a record high of 540bp. Italy is also being spanked, the 10yr yield 25bp higher at 5.75% with the spread to Bunds wider by 35bp. Read more

14/05/2012 @ 11:06 GMT

Dollar benefits from global financial suffering

May has been very kind to the greenback, with a gain of nearly 2% in the dollar index. Indeed, given the rapid re-intensification of concerns regarding the eurozone and clear signs that China is experiencing a very bumpy landing, it could be argued that the dollar ought to be performing better than it has done. After all, Q1 growth in the eurozone (due to be released tomorrow) is expected to show a decline in comparison to the solid growth registered in the US in the quarter. For dollar bulls, they will be eyeing a sustained break of the mid-January high around 81.50. Read more

14/05/2012 @ 09:19 GMT

Aussie bulls raise the white flag

Against the backdrop of a harsher landing for the Chinese economy and an equally bumpy ride for the local economy, it is not surprising to see the Aussie bulls raising the white flag. According to the CFTC, net longs in the AUD fell by over 27K to 25,104 in the week ended May 8th, the lowest for six months. When the CFTC releases Aussie positions for this latest week, we are likely to see another sharp reverse in net longs, judging by the price action over the period. Read more

14/05/2012 @ 08:06 GMT

Greece pulled in opposite directions

There were some more solid hopes for the formation of a government in Greece today, but indications so far are that it’s still proving to be tough going. The third party (Pasok) is pushing for a unity government, in the hope of a further election which would no doubt raise the prospect of more demands from international lenders. Read more

11/05/2012 @ 12:59 GMT

China monetary easing becoming more urgent

Increasingly clear is that policy-makers in China will soon sanction a further easing of financial conditions in response to mounting evidence that the economy is struggling. Growth in industrial production fell back to high single digits in YoY terms last month, the weakest performance in three years. Retail sales were softer than expected and home sales fell 16% MoM in April. Earlier in the week the Customs Bureau reported that there was essentially zero growth in imports in the year ended April. Read more

11/05/2012 @ 12:37 GMT

FxPro
Insights Team

Michael Derks

Chief Strategist

Simon Smith

Chief Economist