Forex Investment and Currency Trading

A day of choppy price action and ugly US housing market data ended yesterday with slightly stronger stocks. But there were also signs of renewed financial stress. Widening agency bond spreads were a particular market focus. Comments by Treasury Secretary Paulson that he prefers keeping some TARP ammunition dry and by Fed Chairman Bernanke that did not contain any strong commitment to keep Fed rates low for a long time was seen as catalysts for the volatile price action.
Yesterday also saw the release of the latest TIC data for September, which showed strong US inflows of about $66bn. While this [...]

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FX Update

Consumer Price Index (MoM) (Survey: -0.8%, Actual: -1.0%)
CPI Ex Food & Energy (MoM) (Survey: 0.1%, Actual: -0.1%)
Consumer Price Index (YoY) (Survey: 4.0%, Actual: 3.7%)
CPI Ex Food & Energy (YoY) (Survey: 2.4%, Actual: 2.2%)
Housing Starts (Survey: 780K, Actual: 791K)
Building Permits (Survey: 774K, Actual: 708K)

Capital flows into the US jumped in September and the monthly TIC data support the notion that safe-haven demand accounted for much of the USD’s gains in September. Foreign investors continued to load up on Treasuries (if not as much as in July and August) and cautiously expanded their holdings of Agencies. Meanwhile US investors continued to [...]

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USD
Senate Democrat leadership proposes $25bln auto aid bill; loans would have 10-year terms; US government would get warrants or senior debt instrument in recipient company; Senate bill would also allow loans to auto industry component suppliers. Secretary Paulson noted solid progress has been made in stabilizing US financial system but it will take considerable time to restore it to health. European equities are trading lower, in sympathy with the overnight losses in Asia and the Americas. However, despite this, JPY has not made the kind of gains that have been seen recently following sharp equity losses. Though the core trading themes [...]

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CAD
We saw a fairly wide range overnight in USDCAD, as stops were cleaned out on either side of the market in both Asia and London. After the G20 summit provided little for the market to digest, stops were triggered above 1.2400 and we once again stalled at the 1.2425 level in Asia, only to see much of this move retraced in London. With no data out of Canada today, we’ll be focused on the North American equity reaction to the G20 statement. Later this week we get a speech from BoC Governor Carney as well as CPI for October. While [...]

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MBA Mortgage Applications (Actual: 11.9%)
Trade Balance (Survey: -$57.0B, Actual: -$56.5B)
Initial Jobless Claims (Survey: 480K, Actual: 516K)
Continuing Claims (Survey: 3825K, Actual: 3897K)
Monthly Budget Statement (Survey: -$200.0B, Actual:)

USD
The dollar continues to outperform as risk aversion and headline risk dominate the FX markets. In a global economic downturn where every country’s economic data is weak, comparative fundamentals are key and the market sees the US coming out of recession first. The market reacted badly to Treasury Secretary Paulson’s proposed changes to the TARP. Paulson abandoned plans to purchase troubled mortgage assets with the allocated fund and instead, the Treasury and Fed will look [...]

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