Forex Investment and Currency Trading

While UK economic growth has remained resilient compared to the US, the British economy continues to show signs of the potential for a sharp deterioration in the months ahead. However, surging inflationary pressures will likely prevent the Bank of England from cutting interest rates again ahead of 4Q 2008. Since the MPC’s May 8th meeting, when the BoE somewhat unexpectedly kept rates on hold at 5.00%, the market has dramatically altered its expectations of UK interest rates in favor of tighter monetary policy. However, the GBP has thus far failed to strengthen in reaction to the market’s changed interest rate [...]

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The latest inflation and trade data from Vietnam have yet to show improvement and this has triggered strong reaction from overseas investors. Sentiment is likely to remain cautious until there are convincing signs of turnaround in both sets of indicators. Meanwhile, the Vietnamese dong (VND) is likely to come under downward pressure as markets remain focused on the country’s ability to meet the sizeable trade deficit.
Inflation and trade deficit staying high
Consumer price index rose 25.2% in May on the year-on-year basis, or 3.9% month-on-month. Food, which is over 40% of the CPI’s weighting, rose 67.8% y/y, or 22.2% m/m. Building [...]

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Eurozone Data from five German states suggest that the CPI in May rose 0.6% mom, which implies a 3.0% yoy reading for the domestic CPI and 3.1% yoy for the harmonised index, up from 2.4% (domestic) and 2.6% (HICP) in April. In turn, this points to a significant risk that Euro area inflation this month will rise to 3.7% from 3.3% in April – higher than the 3.6% peak that was reached in March. A separate release showed Germany’s import prices growing 5.7% yoy in April, unchanged from March.
Meanwhile, French consumer confidence continued to drop in May, with the balance [...]

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Oil drives the currency markets, UK Truckers take to the streets plus Qantas and Air New Zealand tighten their belts, reducing plane sizes and hiking fares…
 
 JPY  - For days the local banks have reported heavy selling interest from Japanese exporters above 103.50 but its currently just acting as liquidity to dollar-oil junkies and those prepping themselves for the long summer haul of quiet markets and carry trades. Stops went off through 104.40, Fridays high and the attention now turns to 105.10 (downtrend on the dailies and the January support) - still favour a sale towards 85/90 with close stop but momentum [...]

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