Forex Investment and Currency Trading

CAD
Last night we had choppy overnight session, as stops above 1.2400 were triggered early in Asia, only to see aggressive selling in the London morning take us back down below 1.2300, triggering stops on the downside. We opened the day in North America somewhat in the middle of the range, with the market tentatively selling the USD across the board.
Today in Canada the focus will be on the trade data for September. With energy prices falling and a serious recession in its biggest trading partner, we could see a significant deterioration in Canada’s trade balance over the next few months. [...]

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Global  deleveraging  is  affecting  emerging markets  in  three  ways.  First, countries with substantial outstanding net external liabilities have been facing outflows from foreign investors repatriating their assets. Second, in the absence of abundant G10 capital, it will be for current account deficit countries to find funding for their external positions. Third, the higher cost of external funding is posing downside risks to local growth.
Eastern European economies are among the most exposed to global deleveraging. Asia is the
least exposed, yet there are intra-regional differences, with places such as Korea, India, Indonesia more exposed relative to China, Malaysia and Singapore.
Finally, Latin America [...]

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The GBP is the worst performing major currency in the overnight session, with the pound falling sharply in response to a very dovish Bank of England (BOE) inflation report. The BoE said the UK economy was in recession and forecast a sharp 1.8% drop in GDP in Q1 2009. As a consequence, inflation would fall “well below” the central bank’s inflation target by the middle of next year. Gov. King stated a willingness to cut rates again “if necessary” though the very weak message from the inflation report (and today’s soft employment data) seem to make lower rates a certainty. [...]

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Is the global financial system healing…or getting worse? In one sense there are multiple signs of reduced stress in the global banking system, a slowing in cross-border capital flows and, as a result, signs of a reduction of volatility in currency markets. At the same time, global equity markets remain weak, consistent with ongoing uncertainty about the breadth and depth of the global economic slowdown.
The signs of stabilization emanate from the major source of stress during the late summer – basic funding in the financial system. Commercial paper (CP) outstanding has jumped about $150bn in the first 10 days of [...]

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In recent weeks, global economic activity prospects have deteriorated significantly, leading to sharp revisions to GDP estimates worldwide. In particular, the worsening of the crisis in the US is now unavoidably having an effect on the Mexican economy and GDP growth prospects for 2009. The effects of the US slowdown in Mexico’s economic activity have now become evident in 3Q 2008 figures and seem likely to extend deep into 2009. In coming months the crisis in the US is likely to impact the Mexican economy through three main channels: substantial lower growth for Mexico’s manufacturing exports, diminished remittances flows, and [...]

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