Forex Investment and Currency Trading

On all reasonable measures, the euro has been an outstanding success. Upon its 10-year anniversary, the ECB can celebrate a remarkable record. While the ECB has kept home-grown inflation tightly under control, the region has enjoyed a major rise in employment amid a series of structural reforms. New challenges are ahead. But the record suggests that the Eurozone can cope with these new challenges as well.
As the European Central Bank celebrates its 10-year anniversary on June 1, the bankers as well as the politicians who founded the ECB can look back at a remarkable decade. By any reasonable measure, the [...]

[Read more →]

Euro zone policy makers have given off conflicting signals in recent months over the ongoing strength of the EUR. To be sure, there are justifiable reasons for concern. Versus major currencies the trade-weighted EUR (Bank of England index) soared in the last 6 months to levels not reached since
the early 1980s, a period when, one could argue, the Euro zone economies were more competitive, with a more modern capital stock and less competition from global producers. And not only has the EUR been strong relative to major currencies, but the EUR (XEU prior to 1999) remains near its record high [...]

[Read more →]

Will the next ECB move be a hike? Within five weeks, the market has turned from pricing in two rate cuts by October this year to now expecting a 40% probability of a 25bp rate hike. At least half of this swing in market expectations makes perfect sense.

In February, markets had been too eager to believe that the ECB would simply follow the Fed and cut rates aggressively in response to a perceived credit crunch. The call for very aggressive ECB cuts ignored the fundamental differences between the two sides of the Atlantic, including the very different divergence of the [...]

[Read more →]

SEK and NOK are the star performers of 2008, but recommend staying short EUR/SEK and EUR/NOK.
Despite as expected Riksbank and Norges Bank outcomes this week, the risk is of significantly more tightening.
In contrast, this week’s unexpected fall in the German Ifo may well mark the watershed in ECB rates.

SEK and NOK the star performers of 2008
This week, Norges Bank delivered a 25bp hike taking rates to a five year high of 5.5%, while the Riksbank left rates at 4.25%. Both decisions were in line with expectations, but SEK and NOK are still first and second best performing G10 currencies over [...]

[Read more →]