Forex Investment and Currency Trading

With the commodity price ‘bubble’ of 1H 2008 now fully reversed, the Canadian dollar has more than fully adjusted. Still, it leaves the Canadian economy potentially more exposed to US recession than before and, responding to this, more Ministers with an economics function in the new Harper cabinet are from Ontario. Canadian October jobs report due this Friday, just ahead of US numbers.
The Bank of Canada’s commodity price index, a mix of energy, farm and metals/minerals products, has fully retraced the apparent bubble-like conditions inspired by the global liquidity surge of 1H 2008 and is now consistent with the rather [...]

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The statement accompanying the unanimous decision to cut interest rates clearly signaled greater concerns about growth with inflation much less of a concern and expected to moderate in coming quarters. While not expect further rate cuts the risks are skewed to further easing in the months to come; Fed Fund futures are now pricing in a nearly 100% probability of a further 25bp cut by year end. In terms of price action, US equities seesawed for most of the day on light volume as investors awaited the FOMC announcement, but sold off sharply into the close and ended the day [...]

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October 31

Canada  - GDP
Consensus: -0.4%

Economics: Canadian economic activity is likely to be hit hard in August as the impact of a worsening U.S. economy, slumping commodity prices and weak manufacturing sector activity overwhelm the favorable support coming from the weakening domestic currency. Canadian GDP is expected to fall by a sizeable 0.4% M/M, following the brisk +0.7% M/M pace in July. Much of the weakness during the month is expected to come from the dramatic slowdown in manufacturing sector production, with sluggish retail and wholesale activity, and declining real commodity exports providing additional drag on activity. Looking ahead, the Canadian economy [...]

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The Fed duly delivered the 50bps that was widely seen as the most likely course of action.   The statement resembles the Oct 8th statement closely enough in sentiment but draws out in more detail the weakness foreseen in all of the major GDP components.  The Fed notes again they will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.  This leaves the door open to further rate reductions, though plainly they are running out of interest rate bullets, so the ammunition will have to concentrate on liquidity/capital provisions as they [...]

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The prospect of continued very weak economic releases, an increasingly international dimension to the economic and financial crisis and continued extraordinary volatility in financial markets will likely convince the Fed to lower its funds target a full 50 basis points to 1% today.
As the crisis has unfolded, recent releases have indicated that the psychological impact of the recent financial market disruption, including the declines in asset values, is the greatest in more than a half century. For example, this morning’s consumer confidence numbers were well below even the most pessimistic estimates of market participants. In this environment, incrementalism by the [...]

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