Forex Investment and Currency Trading

The communiqué published by world leaders at the conclusion of the G20 summit in Pittsburgh offered few surprises. Of interest, the communiqué referred to the G20 as the “premier forum for our international economic cooperation”. This effectively represents an acknowledgement that this expanded group of countries (representing 90% of global GDP and two-thirds of the world’s population) will be the key forum to discuss economic issues in the future.
Reflecting this shift, world leaders pledged to re-allocate at least five percent of the quota representation of the IMF to emerging and developing economies by January 2011. Reassuringly, world leaders also pledged [...]

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Today’s Statement, following the Fed’s meeting was very much as expected. It noted the pick up in economic activity but warned of constraints, particularly in the household sector and reiterated that economic activity is likely to remain weak for a time. As expected it retained the phrase that the Funds rate will stay low for an extended period and also repeated that inflation will remain subdued. The four factors constraining households listed after the last meeting – ongoing job losses, sluggish income growth, lower housing wealth and tight credit – were all retained, though the Fed did acknowledge that activity [...]

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Existing home sales fell to 5.10mn in August, down from 5.24mn in July and below consensus (5.35mn) estimates. The move lower does not change the underlying trend of improvement, however, as sales in August were well above readings in H1 09. The release also showed that the inventory of existing homes on the market continues to trend lower.
August sales declined in both single-family (4.48mn from 4.61mn) and condominiums and coops (0.62mn from 0.63mn). Sales fell in three of the four regions, with only the West showing an increase. The number of homes on the market fell to 3.622mn in August [...]

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The link between positive US data surprises and the USD has been at best tenuous in past months. Although data surprises have been broadly positive since the beginning of August, the one-month change in the TWI has barely been positive during the same period. The link with the US equity markets, however, has been much stronger - with the psoitive data surprises reflected in equity market gains. Why has this been the case? The waning foreign appetitie for US assets has been a crucial factor in its decline. The TIC data yesterday made for sombre reading - showing net private [...]

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