Forex Investment and Currency Trading

The second estimate of Q2 GDP showed that the economy contracted 1.0% in the quarter, which is unchanged from the advance estimate. This is an upward surprise relative to consensus expectations of -1.5%. Consumption was surprisingly revised to show a smaller drop of -1.0% compared to the previous estimate of -1.2%, suggesting a likely upward revision to June consumption and therefore kicking Q3 off to a healthier start. Also on the upside, exports were revised to show a smaller drop, leaving trade to add 1.6pp to growth. In addition, government expenditures, residential investment and equipment and software investment were all [...]

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Overnight risk aversion spurred partly by concerns about Chinese authorities’ consideration of measures to curb overcapacity eased along with generally firmer European equities in morning trading. The Nikkei Newspaper’s article citing several multinationals’ HIA repatriation caused USD-JPY to break below the trend support at 93.66, but the pair held the 22 July low at 93.10 and rebounded. Eurozone M3 growth slowed to a lower-than-consensus 3.0% yoy in July from 3.6% yoy in June, and growth in loans to the private sector slipped to a record low of 0.6% yoy in July from 1.5% yoy in June. However, M1 growth as [...]

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Deputy Governor Charles Bean last night delivered the first speech from any BoE MPC member since early July. However, the content of the speech revealed little new information relevant to the immediate monetary policy debate beyond the observation that “The initial responses in the United Kingdom to [central bank purchases of assets] have been moderately encouraging. Government bond yields fell significantly on the commencement of the programme of asset purchases, and yields appear to be some 50-75 basis points lower than the would otherwise be”.
The unexpected dovishness from the BoE has been an important factor behind GBP’s recent underperformance - [...]

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USD/CAD has had a big turn-around over the last 24 hours; after making new marginal lows yesterday morning of 1.0719, we’ve now drifted back above 1.0990. Weaker natural gas and crude oil prices (oil bounced hard after reaching $75 yesterday) are hurting CAD, as are the latest comments from China that came out this morning.
Yesterday’s comments from Bank of Canada Deputy Governor Lane also weighed heavily on CAD, making it one of the worst-performing major currencies overnight. It wasn’t that Mr. Lane said anything that the BoC hadn’t already said; the script was essentially the same as what Governor
Carney said [...]

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