Forex Investment and Currency Trading

2002-2004: Global money supply booms and the USD declines
Over the last decade there has been a clear connection between global money supply growth and the USD. Global M2 growth rallied from Q4-2000 to Q2-2003. The key driver was a massive rally in especially Eurozone M2 growth as US money supply contracted in this period after the burst of the dot-com bubble. The rally in global money supply eventually led to the massive weakness of the DXY from 2002-2004 – there is a lag time, but eventually the supply of USD told on the value of the currency.
2005: A temporary USD [...]

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Yesterday saw two major central bank events pass without huge surprises. The FOMC meeting
delivered a somewhat less dovish tone than the market had expected – but still provided a relatively firm signal that policy is firmly on hold for an extended period. The ECB’s widely anticipated 1-year financing operation saw a very large subscription of EUR448bn (though not as large as some of the more aggressive estimates floating around the market beforehand) and some downward pressure on front-end rates as a result. Analysts expect short-dated Eurozone borrowing rates to continue to grind lower in the next couple of months.
Equities managed [...]

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CAD continues to struggle today, with USD/CAD pushing higher after yesterday’s relatively hawkish FOMC statement. While the first part of the move can be attributed to a stronger USD, the last leg seems to be CAD-specific, as CAD softened against the crosses over the last couple of hours. EUR/CAD is trading at close to 1.62 at time of writing, nearing the two-plus month high of just under 1.6250 that we saw on Tuesday.
It is a quiet day on the data front as well and with liquidity continuing to dry up as the summer months are getting some legs, we will [...]

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With USD11bn in 30-year bonds on tap today, the US treasury auction will remain in focus; inflation-leery investors are keeping longer rates elevated and while the 10-year sale went OK yesterday, the general characterization of the auction was that it was a little “sloppy”. Fed Governor Lockhart, who suggested last week that further Fed Treasury purchases were possible, is speaking at 13.05ET, just after the auction is over. Inflation worries, Treasury supply and broader asset diversification concerns should keep the USD on the defensive for the moment and, as the recovery focus gets a little sharper, investors are liable to [...]

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