Forex Investment and Currency Trading

Gone are the days of early 2007 when the Swiss National Bank (SNB) aired its discontent with the weakness of the CHF. In sharp contrast to worrying about currency weakness, SNB Governing Board member Jordan announced last Thursday when discussing ways to ease monetary policy once the key policy rate target had been reduced to zero that “we could engage in quantitative easing and we could intervene in foreign exchange markets [to weaken the franc] or we could buy bonds and try to influence long-term interest rates.” It is much more likely that the SNB would buy long-dated bonds
to influence [...]

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In Europe, ECB’s decision to ease by a 50bps cut, appeared at odds with the larger than expected UK. The ECB does have to have a consensus of 21 members, versus the smaller BOE, and the UK is in a worse position. Expect more cuts in Europe given the deteriorating outlook for EU growth. Next week, IP on Wed is the main release. In Germany, on Fri IP is out with a modest fall expected and then next week the main focus will be on the ZEW survey, which is out Tues. In the UK, PPI data is out on [...]

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Germany: ZEW survey (November), Tuesday, 11th, 10:00
The ZEW expectation index fell by almost 20 points to -63 in October, in the midst of one of the worst financial turbulence in history. Since then however, equity markets have recovered slightly, governments and world central banks have shown they are committed to ensure the stability of the financial system and ECB rates are likely to fall below the last cycle’s trough. Inflationary pressures eased on the back of lower oil and commodity prices. However, fears of the recession ahead are likely to dominate respondents’ expectations causing the ZEW expectations index to fall [...]

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European central banks have stepped up their activities, with the ECB extending the number of banks that can access its overnight liquidity provisions and the Bank of England broadening the range of collateral it accepts at its weekly 3-month cash auctions, to include highly-rated corporate and consumer loans. The focus now is to try to ease end-of-year funding strains. But overnight money market rates have hit a record high for 2008, term rates (3- and 6-month EURIBOR) have risen to new 14-year peak levels and wholesale money markets remain virtually paralysed.
To date, the ECB and Bank of England have separated [...]

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