Forex Investment and Currency Trading

As the FOMC begins its two-day policy meeting, focus on the impact of quantitative easing on FX is higher than ever.
Since the Bank of England adopted quantitative easing earlier this month, the market has punished the Swiss franc, pound and dollar – the three currencies where some form of quantitative easing/monetary base expansion has been adopted.
The current weakness in these QE currencies and potential for more, are different in all cases. With sterling already at weak levels, the case for a sustained, further decline is not compel ling. On the flip side, the Swiss franc began quantitative easing at elevated [...]

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BRL: best positioned for the global shock to risk appetite
Traders expect BRL to strengthen for the year as a whole, boosted by an improvement of the global risk appetite in the last quarter. Beforehand, persisting global financial market uncertainty should maintain BRL’s performance broadly flat, highlighting the currency’s resilience to a challenging risk environment. BRL will outperform its peers in the context of a shock to risk appetite, a long BRL-MXN position is recommended.
Brazil’s balance of payments position had warranted a weaker BRL, but the currency is oversold at these levels. The economic slowdown and the weaker currency should slow [...]

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Commodities have not participated in the recent bout of USD selling. Weakness in the global economy clearly remains the key concern. Moreover, leading indicators of global activity suggest the first quarter of next year is unlikely to see much improvement. This is important from the point of view of the AUD, the best correlation with the A$ during global downturns is commodity prices.
The second factor is weak domestic data through Q1. To date the Australian economy has weathered the global downturn reasonably well. However, virtually all the leading indicators of employment are suggesting rising unemployment through the first half of [...]

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EUR/USD expected to fall to 1.20/1.25 in the first half of 2009, while GBP/USD is expected to test 1.40. The ECB and the BoE will cut rates further, with the ECB having the most work to do.
Both EUR and GBP will strengthen against the USD in 2009 H2 but neither currency is likely to re-visit its highs against the USD from earlier this year. Look to sell EUR/ GBP in Q2 of next year, as GBP should benefit more from global reflation and lower risk aversion across global markets.

FX Strategy - Sell EUR/USD to open the new year, looking for a move [...]

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