Forex Investment and Currency Trading

USD
The announcement that China’s State Council agreed on an aggressive fiscal stimulus package amounting to 4 trillion yuan over the next two years has triggered a rally in EM and commodity currencies.  The increase in the US deficit and consequent jump in Treasury supply has become a topic of interest for FX markets. This topic will be at the fore this week: as part of its usual Quarterly Refunding, the Treasury will issue $55bln of new and reopened issues. Going forward, the Treasury is likely to auction approximately $100bln of 2-year, 3-year and 5-year notes monthly, so supply will [...]

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The focus today is on the Chinese stimulus package that was announced over the weekend, and the comments coming out of the G20 meeting this past weekend. G20 finance ministers and central bankers spoke dovishly on interest rates and advocated taking further action. We could see more concrete measures come out of this coming weekend’s meeting of G20 heads of state. China’s stimulus package sent a wave of optimism through the markets, with equity markets up in Asian and Europe, equity futures up in North America, and commodity prices up across the board. Yen crosses are all higher as risk [...]

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Brazil: The Monetary Policy Committee (Copom) minutes from the latest meeting confirm the difficulties of being a central banker in the present environment. Copom kept the overnight Selic rate unchanged at 13.75% on October 28-29. This follows four rate hikes in 2008 and breaks a rate tightening cycle that many in markets believed would extend to a series of as much as 400bps in hikes. The global financial crisis factored prominently in the decision process with the freeze in credit markets being deemed to account for: 1) dented consumer and business confidence; 2) a higher level of uncertainty; and 3) [...]

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US Non-farm payrolls fell -240K in October and September’s decline was revised from -159K to -284K. The only sectors to see job growth were government, education and health jobs. The unemployment rate rose from 6.1% in September to 6.5%, which is above the peak reached after the 2001 recession and now the highest rate since March 1994. September pending home sales fell -4.6%. Although pending sales remain at a level consistent with September existing home sales of 5.18mn, credit market turmoil may have prevented contracts from making it to closing in October, providing downside risk to the October existing sales [...]

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CAD
The tone in USDCAD shifted over the last two days, and it’s now heading higher. The sharp downturn in equities and end to the brief risk-seeking rally has USDCAD looking upwards again. The stronger than expected Canadian employment number actually sent USDCAD higher, while there was little movement against the crosses. With no further data in Canada today, the focus is going to be on nonfarm payrolls and US equities.
Majors
Markets were fairly quiet overnight, awaiting today’s nonfarm payrolls report. The USD pared some of the gains it made yesterday and European equity markets spent the night in positive territory, though [...]

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