Forex Investment and Currency Trading

USD: The underlying asset market backdrop appears to have tilted decisively against the USD in light of technical breaks higher in the major equity indices and the recovery in the oil price. Safe-haven demand for USD denominated assets seems set to be limited over the near term as stronger data encourage markets to focus on the potential for a strong cyclical recovery. The risks associated with US policy settings may come into focus in this environment.
EUR: Reserve accumulation and subsequent “flow” diversification demand for EUR appears to be rebuilding on the back of strong capital inflows to emerging markets. This [...]

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AUD: RBA Stevens stops short of changing policy bias
In a speech on “Challenges for economic policy” RBA Governor Stevens stopped short of explicitly shifting the RBA’s policy bias (currently a modest easing bias), but was more upbeat on both the global and local economies. This led to a sell-off in local bills and gave the AUD a lift. The currency was also given a boost by Governor Stevens’ comment during the Q&A session that “… (there is) no rule that (the RBA) would wait for unemployment to peak before raising rates…” Many market economists forecast the unemployment rate to peak [...]

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USD/CAD slipped to a fresh cycle low overnight but there has been scant follow through interest in the CAD despite the gains in its commodity-bloc peers and the broader pressure on the USD. The CAD’s failure to thrive in this generally supportive environment suggests some risk of a short term correction in the CAD at least. Commodity prices remain generally supportive – metals and oil prices underpinned by the improving global growth outlook – but again, the CAD has failed to benefit significantly at the moment. We remain firm believers in the CAD’s potential to extend this run higher (fundamentally, [...]

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Risk appetite is a little stronger overall at the start of the week though – as we saw last week – things can change very quickly. Currency markets appear to be taking their cue from equities, where sentiment continues to improve as global growth optimism appears to be taking a little firmer hold following better data from Asia last week while for the CAD, upbeat comments from BoC Governor Carney have also helped. Though optimistic on the growth outlook, Governor Carney’s expression of concern on the CAD has raised speculation that currency intervention is on the cards here in Canada; [...]

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