Forex Investment and Currency Trading

With plenty of the “event risk” this week – the ECB policy meeting (a plunge in euro zone CPI today will give policy makers ample food for thought about a large rate cut), the G-20 meeting in London and the US payroll report at the end of the week – there is likely to be a lot more volatility in the markets in the hours ahead. More broadly though, it is worth noting that running into month end, the longer term chart does continue to suggest that the EUR has found a firm base around the pivotal 1.2550 area in [...]

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Some thoughts on a significantly weaker USD are:

The U.S. financial markets and economy led this global deterioration and recovery here will be important in leading us out.
A stimulative fiscal policy, a stimulative monetary policy, quantitative easing, current account deficit, expanding government deficit, global economic/savings imbalance etc. all argue for a weaker currency.
While not everybody can have a weaker currency, when it comes to the U.S. it is needed. It is stimulative and could even be inflationary. It makes U.S. assets cheaper. It can help devalue debt to assets rather than the present corrosive picture of assets deflating to debt and [...]

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A busy and potentially choppy week is in store for the markets with the next few days chock full of event risk – most of it back loaded into the back end of the week. Thursday’s ECB meeting, Friday’s NFP data and the G-20 meeting in the UK should provide the market with plenty of additional short term volatility at least. Overnight price action has been characterised by renewed risk aversion amid reports that the Obama administration has indicated that bankruptcy may be the best option for Chrysler and GM (whose CEO stepped down over the weekend) though it’s not [...]

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The CAD is off to a softer start against the USD this morning as risk aversion rears its head across the broader markets again, driving investors back towards the JPY and the USD “safe havens”. Short term trends will be determined by the markets broader risk appetite – slim this morning, so a net negative for the CAD – but beyond that, flows (month end), data (January GDP tomorrow) and BoC-speak (Governor Carney today) will also influence the CAD to a large extent. With month end flows perhaps lifting the CAD and GDP expected to be poor, short term trends [...]

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