Forex Investment and Currency Trading

Deputy Governor Charles Bean last night delivered the first speech from any BoE MPC member since early July. However, the content of the speech revealed little new information relevant to the immediate monetary policy debate beyond the observation that “The initial responses in the United Kingdom to [central bank purchases of assets] have been moderately encouraging. Government bond yields fell significantly on the commencement of the programme of asset purchases, and yields appear to be some 50-75 basis points lower than the would otherwise be”.
The unexpected dovishness from the BoE has been an important factor behind GBP’s recent underperformance - [...]

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UK CPI/RPI - Release Aug 18
As alluded to by the BRC, High Street promotional activity underpinned sales in what proved to be the wettest July on record. Sharp price reductions for seasonal goods such as summer clothing and outdoor furniture can therefore be expected. Against the backdrop of this discounting, market looks for a 0.4% dip in CPI inflation in the month, taking the annual rate down from 1.8% to 1.4% - which would be the lowest rate since November 2004. RPI inflation, meanwhile, is expected to slip to a new record low of -1.8%.
Canada CPI
After tilting into negative territory [...]

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USD testing key support
The DXY index is testing critical support at 77.69, which marks the low of 18 December 2008, having earlier broken the 2009 low of 78.33 from 2 June. Technically, downward momentum remains strong, with indicators such as MACD, RSI, and stochastics all pointing lower. Fundamentally, increasing signs of stabilisation in the US economy – including the US Q2 GDP report – are bearish for the greenback. USD is a counter-cyclical currency, rallying in economic downturns and declining in recoveries. When global economic expectations turn up, the USD is used as a funding currency for investing abroad. This [...]

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RBA Rate Decision - Aug 4
While a steady rate decision is expected next week, the market appears decidedly nervous following the steady raft of better than expected data and recent upbeat commentary from the RBA. Analysts expect the RBA to shift to a firmly neutral bias, paving the way for the start of a normalisation of rates in early 2010. Uncomfortable with the cash rate so far below neutral, it is clear that the abnormally low level of cash is becoming increasingly inappropriate. The short accompanying statement is likely to acknowledge the continued improvement in the functioning of global markets, the [...]

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