Forex Investment and Currency Trading

GBP has the unenviable distinction of being the only G10 currency to underperform the USD over the past month and a half. The GBP has been responding to local events more than general USD weakness and remains the G7 currency most highly correlated with its domestic data surprise index. Analysts attribute this correlation to GBP’s heightened sensitivity to the outlook for UK monetary policy and the influence the local data rollout has on this outlook. CPI data on Tuesday will be an important event for GBP this week – inflation, along with activity data, will be key to determining whether [...]

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USD/CAD just doesn’t seem to want to head higher; after a much weaker than expected retail sales report yesterday morning funds initially shot sharply higher, but were met with selling interest above 1.07, and couldn’t manage to stick up there for long. The overnight session was very quiet, and we remained in a tight 1.0665/1.0695 range for a large majority of the Asian session and London morning.
We’ve seen all sorts of Bank of Canada news over the last 24 hours. Yesterday afternoon the BoC announced that “Reflecting the improved conditions in funding markets, as evidenced by lower market-based funding costs [...]

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The AUD had another strong week - albeit primarily against the embattled USD - posting fresh 2009 highs. The surge in equity prices via “the recession is over” from Fed Chairman Ben Bernanke, surging commodity prices, and ongoing talk of Australia leading the interest tightening cycle well ahead of its OECD peers are largely responsible. AUD currently stands at $US0.8740 convincingly broke through the $US0.8650 resistance level, after a few failed attempts in recent weeks, and is revisiting levels not seen since late August 2008.
While some are more cautious on the outlook for the global and local economies, Australia’s relative economic outperformance cannot [...]

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So, after the dust has settled from this week’s focus on BoC policy, we are left with an overnight rate that the central bank has pre-committed to keep at 0.25% until the middle of next year (providing inflation behaves) and a framework for additional policy measures should they be needed. The read between the lines though is that the central bank perhaps doesn’t think these additional credit and quantitative easing (CE/QE) initiatives will be needed, if its latest growth estimates are on the money. The CAD was under a fair amount of pressure running into this week’s BoC policy announcement [...]

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