Pound Goes Up on Outlook for Interest Rates Increase

The Great Britain pound rose today against the U.S. dollar and the euro on the speculation that the planned budget cuts wouldn’t damp the economic growth and after the Bank of England signaled that it might raise the interest rates.
The speculations say that the emergency budget, devised by, the Chancellor of the Exchequer George Osborne, should preserve Britain’s top credit rating without strangling the economic growth. According to the minutes of the recent BOE meeting, the policy maker Andrew Sentance expressed the opinion that the interest rates should be raised. This was surprising announcement as Britain has kept its main interest rate at the record low level of 0.5 percent since March 2009.
The economists say that this unexpected statement helped the pound to retain its strength. However we should consider that this statement was made before the emergency budget was accepted, so it’ll be interesting to see if Sentance would keep this opinion after the severe cuts in the budget spending.
GBP/USD rose to 1.4893 today as of 17:08 GMT from its opening price of 1.4811. EUR/GBP declined to about 0.8223 from the opening level of 0.8282.

Bank levy risks double-dip recession

The new levy to hit the banks could stunt the City’s growth spurt and take us back into recession.

Financial institutions have been under fire from all sides in recent months and following the Chancellor’s Budget speech, the size of the new levy could completely de-rail the financial recovery, according to financial author Lawrence Galitz – City expert and founder of the global financial training company, ACF Consultants.

"The large new levy on banks may be one step too far in terms of new financial restrictions and could cause a double-dip recession," he said.

"The Chancellor should just be taxing a bank’s profits. Taxing their balance sheet will have knock-on effects that could reverse the recent economic growth.

"Banks have had a lot of pressure applied since the start of the financial crisis and now they’re showing some green shoots rather than being protected, they’re being hit with more restrictions. Taxing the banks to raise £2billion is double the figure that was originally mooted."

Chancellor George Osborne’s Budget confirmed the new tax on banks, previously detailed at his Mansion House speech last week, would start from January 2011.

The levy is the latest restriction to hit the banking community following the bans on naked CDS trading announced in Germany and France earlier this month.

Lawrence said that although the banking sector was recruiting furiously, private institutions would not want to hire ex-public sector professionals - despite thousands of them expected to be out of work in the coming years.

"We are seeing an increase in banks recruiting this year, rather than the decrease we saw last," Galitz said.

"Even so it’s not surprising banks are not so keen to recruit ex-public sector employees – personality profiles are likely to be very different. I think it works the other way round too – putting an ex-banker in charge of a healthcare trust is unlikely to be a good fit."

Global Stocks Rise as S&P 500 Fluctuates; Gold Climbs to Record

The MSCI World Index of stocks rose for the ninth day, the longest rally in 11 months, and Spanish bonds rallied on speculation efforts to contain Europe’s debt crisis will succeed. The yen strengthened against the dollar and gold climbed to a record.

The world index increased 0.1 percent at 9:57 a.m. in New York. The Stoxx Europe 600 Index advanced 0.2 percent to its highest level in five weeks. The Standard & Poor’s 500 Index fluctuated as the expiration of U.S. futures and options triggered greater price swings. The MSCI Emerging Markets Index climbed 0.4 percent. The yen strengthened 0.3 percent versus the dollar, and gold rose as high as $1,258.25 an ounce. Oil fell a second day. Spain’s 10-year bond yield lost 17 basis points.

Spanish banks rallied as European leaders pledged to publish stress tests to boost transparency in the financial industry. Emerging-market equity and bond funds received net inflows in the week to June 16 as concerns over European deficits eased, boosting appetite for higher-yielding assets, EPFR Global data showed.

“Sentiment has changed to the positive after investors saw that the European debt crisis hasn’t spiralled out of control,” said Daphne Roth, Singapore-based head of Asian equity research at ABN Amro Private Banking.


The daily flow of Signals cover six major pairs, plus Eur/Jpy and Gbp/Jpy. They are generated each day in response to specific global market set-ups that follow the ebbs and flows of each 24 hour global trading period. Signals come with guidelines and email updates.
Trade Signals and Trade Plans are professionally formatted for member and trade desk use, they are designed for all skill set levels to provide a structure to start the global market trading day.

US markets mixed on quiet trading, Dollar consolidating losses

US Markets have opened Friday's session mixed around opening levels, amid improved market sentiment on eased concerns about Eurozone debt, yet following rather quiet trading sessions in Asia and Europe. In FX markets, the Dollar continues trading at multi-week lows

Dow Jones Industrials Index edges 0.1% down, while the S&P500 and the Nasdaq Indexes remain practiccally flat in the first minutes of trading.

On the macroeconomic domain, in absence of key US data, Canadian leading indicators have increased at 0.9% pace in May, posting the 12th consecutive monthly advance and beating market expectations of a 0.7% growth. Furthermore, Foreign investors have bought a total net C$12.36 billion worth of Canadian securities in April, following a net sell of 640 million in March.

Dollar at multi-week lows

EUR/USD rally from 1.1875 low on Jun 7 attempted further appreciation at European session and reached a fresh 3-week-high at 1.2415, but, unable to hold above 1.2400, the pair has eased to 1.2355 session low ahead of Wall Street opening.

GBP/USD rallied on European morning and extended its rebound fro 1.4645 low yesterday to a 5-week high at 1.4885, to ease later on to session low levels right below 1.4800.

USD/JPY has been pulling down from resistance level at 91.10 -previous support- hit on Asian session opening, and the pair dropped back to fresh 3-weeks low at 90.45, to pick up at US opening and reach levels around 90.70.

Forex Moves Dominated By Equities

Going into the last full trading session of the week, the major forex pairs are showing Usd weakness, in-line with global equity futures that have held support and Wall Street stocks that have moved off the lows of the day and in-line with the sentiment that has soured on long-Usd trade in the near-term. If equities continue to contain the sellers the dollar index will struggle to move higher.

The near-term European pair reads are long Eur/Usd with 1.2350 a main swing point, Short on Usd/Chf with 1.1100 and 1.1200 the main price points, and long Gbp/Usd if 1.4850 can be taken out soon. Aud/Usd is long, but struggling to get past 0.8700, short on Usd/Cad past 1.0245, and short on Usd/Jpy with a daily chart close under 90.50 seemingly pivotal to the short side of trade holding.

The next main equity price points of note that will generate market-wide momentum are 1105 short on the S/P allowing the Usd to get bought, and 1115 long on the S/P likely to draw in further major currency buying.

It is a boring theme, but the reality is that whatever direction equities move will have a major impact on forex trader; long equities/short Usd is the theme.

Declining U.S. Retail Sales Boosted U.S. Currency

The U.S. dollar rose against other major currencies today after the report showed the decrease of the retail sales, causing the doubt whether the global economic recovery would keep its pace.
The U.S. retail sales provided an unpleasant surprise by declining 1.2% in May, while they were expected to increase by 0.2%. While these news might hurt the U.S. currency, the greenback managed to appreciate. The experts say that the currency actually benefited from the ensuing risk aversion sentiment.
The markets are on the look-out for the bad news, always ready to shy away from the risk and stick to the safety. And the U.S. brought the bad news today, yet the U.S. currency profited from them as it’s still considered the safe currency.
EUR/USD traded today at about 1.2070 as of 17:07 GMT after opening at 1.2122. USD/JPY rose to 91.62 from the opening price of 91.34.

Euro Strengthens as Industrial Production Expands

The euro strengthened today against the U.S. dollar and the Japanese yen as the report was released, showing that the industrial production grew in the European Union.
Eurostat, the statistical office of the European Union, reported that in April 2010 compared with March 2010, seasonally adjusted industrial production grew by 0.5% in the European Union and by 0.8% in the euro area. The European Central Bank reassured that it would continue purchases of the government bonds until the sovereign-debt crisis would be resolved, adding to the confidence on the financial markets.
EUR/USD traded near 1.2251 as of 9:37 GMT today, going up from its opening level of 1.2118. EUR/JPY traded at about 112.62.

Euro Maintains Rally as Policy Makers Raise Economic Outlook, British Pound Halts Two-Day Rally

The Euro maintained the short-term rally from earlier this week and pushed to a high of 1.2140 during the overnight trade, and the exchange rate may continue to trend higher going into the U.S. trade as European policy makers hold an improved outlook for the region.

Germany’s central bank raised its economic assessment for Europe’s largest economy and projects GDP to expand 1.9% this year versus an initial forecast for 1.6% rise in the growth rate as the recovery gathers pace, but went onto say that inflation is expected to stay moderate over the medium-term despite the recent depreciation in the euro.

At the same time, European Central Bank board member Juergen Stark said that the Governing Board’s asset purchase plan Is “temporary in nature” during a speech in Frankfurt, and noted the financial markets are “overshooting and overemphasizing” the fiscal turmoil within the region. In addition, ECB council member Nout Wellink voiced his support for the government bond purchase scheme and said that the extraordinary measure is “a good idea,” and went onto say that the decision was “necessary” during a conference in Vienna. Meanwhile, the economic docket showed wholesale price in Germany increased 0.3% in May to top forecasts for a 0.2% rise, while the annualized rate advanced 6.2% from the previous year, which marked the fastest pace of growth since August 2008.

The British Pound halted the two-day rally and slipped to a low of 1.4626 during the European trade as the economic docket reinforced a weakened outlook for the region, and the Bank of England may look to support the economy throughout the second half of the year as policy makers continue to see a risk for a protracted recovery. Producer prices in the U.K. increased 0.3% in May, which failed to meet forecasts for a 0.5% rise, while the annualized rate slipped to 5.7% from a revised 5.9% in April. In addition, industrial outputs unexpectedly weakened 0.4% in April versus projections for a 0.4% advance, while manufacturing slumped 0.4% during the same period to mark the first decline in three-months. As the economic outlook for the U.K, remains clouded by the uncertainties surrounding the prospects for future policy, the GBP/USD may trade within its recent range going into the following week as market participants speculate the BoE to support the economy throughout the second-half of the year.

The greenback strengthened against most of its major counterparts, with the USD/JPY extending the previous day’s advance to reach a high of 91.77, and the reserve currency may continue to gain ground during the North American trade as the economic docket is expected to reinforce an improved outlook for future growth. Household spending in the world’s largest economy is expected to rise 0.2% in May after expanding 0.4% in the previous month, while the U. of Michigan consumer confidence survey is forecasted to rise to 74.5 in June from 73.6 in the previous month, which would be the highest reading since January 2008. Moreover, business inventories are projected to expand for the third consecutive month in April, with market participants forecasting a 0.5% rise, and the data could spur expectations for a Fed rate hike later this year as the outlook for future growth improves.

Euro Forecast to Recover Against Dollar on Shift in Forex Sentiment

EURUSD – Euro Forecast to Recover Against US Dollar
GBPUSD – British Pound Outlook Bullish on Sentiment
USDJPY – Japanese Yen Expected to Decline against USD
USDCHF – Swiss Franc May Strengthen against Dollar
USDCAD – Canadian Dollar Forecast Calls for Gains
GBPJPY – British Pound Forecast Remains Bullish Against Yen

Forex trading crowds have suddenly shifted towards buying the US Dollar against the Euro, British Pound, Swiss Franc, and Canadian Dollar—giving contrarian signal to go short the previously high-flying US currency. The shift has been especially pronounced in the EURUSD; the number of traders short jumped by an impressive 39% since just a week ago. Given that crowds had been steadily net-long the Euro against the US Dollar amidst sharp declines, the sudden shift suggests we could see a noteworthy short-term bounce. The noteworthy exception to calls for US Dollar weakness is on the USDJPY pair, where a dramatic shift towards selling gives contrarian signal to buy the USD against the Japanese Yen. Watch for noteworthy corrections across the board as sentiment shifts rapidly across forex trading markets.

Pivotal USD Trading Day

Global equity markets have not just held support overnight, they have moved higher to test near-term resistance areas that have recently proved challenging. The S/P futures market breaking 1065 was a big move that could lead to a cash market test of 1075. If that price point holds at the close of trade of Thursday, the dollar index will lose further ground, and may close under 87.00 support, that in recent trade has been a solid area.

The major pairs started to signal a swing change on the 4-hour charts earlier in the week, and have spent time since then consolidating the moves, and building momentum to make a reversal move against recent Usd strength. Global commodity markets are also holding support, and adding to the short-Usd moves.

The one laggard at the moment, and the one pair that needs to break long to signal market-wide momentum, is Usd/Jpy breaking 91.50 going long, following equity and risk markets going higher. U/J is a long-Usd pair that will empower the major currencies, as it reflects a market that is comfortable in the near-term potential in long-equity trade, and by default, long-majors.

As from Jun 01 10 the signals posted each day will be inclusive of Trade Plan detail that the trade team see as having the best potential to move each day. No more separate reporting, all Signals issued from Jun 01 10 will now include the Trade Plan numbers that are being utilized and recorded each day. 

The Signal output to clients has been registered with MyFXBook.com so that clients can track and monitor the results in real time. Access to the results panel will be in place this week.
The daily flow of Signals reviews six major pairs, plus Eur/Jpy and Gbp/Jpy. They are generated each day in response to specific global market set-ups that follow the ebbs and flows of each 24 hour global trading period. Signals come with full-service guidelines and email updates.

Trade Signals will now include the daily Trade Plans that look to have the best potential to follow through on any given day, and highlight price action and momentum as it unfolds. No more time spent wondering what Trade Plans to place; TheLFB Signal service now analyzes eight Trade Plans and post out Signals on the most appealing.

USD Still In Control

Same story, same pattern of trade, just a different day. The global markets are absorbing many fundamental challenges that just did not seem important when speculative interest was pushing equities higher, albeit on low volume, and global growth was unquestioned. The consolidation of those moves and the positive thought process came in April, and in May the markets reversed gears, sold risk, saw global growth as tepid at best, and allowed the speculative interest to build on the short side of risk.

A short-sided global market, where stocks are more easily sold than bought creates a forex arena that will find it hard each day to break and hold the previous session high and low. It also creates volatility in the fact that pre-market trade, or futures trade, has all of the momentum that cannot be matched when the regional cash markets open.

The 21:00, 02:00, 07:00, 11:00, and 14:30 Et moves are volatile, and are reversing the pattern of trade that came just before, and that that is how things will stay until the inter-bank starts lending to one another, and the cost of insuring risk exposure reduces. Look to bank at 20-25 pips a percentage of any forex trade, and do not expect the previous session high/low to easily break.

The major forex pairs and the overall dollar index outlook remains the same going into the week of U.K. and Euro-zone interest rate decisions, and unless a break on S/P trade above 1075 or below 1035 can happen soon the currency markets will be buying support and selling resistance at the previous session high and low on each pair.  Usd/Jpy is at 91.40 support at the 100-day SMA, Usd/Cad has the 200-day SMA as support at 1.0460, but outside of those two, most forex pairs are now free and clear of Daily chart price points of note.

Euro Is Near 4-Year Low as Stock Drop Fuels Recovery Concerns

The euro traded within 1 cent of a four-year low against the dollar and near its weakest since November 2001 versus the yen as a slump in global stocks raised concern about the sustainability of the economic recovery.

The euro may extend this month’s 3.1 percent slide versus the greenback before a report likely to show exports from Germany, Europe’s largest economy, fell in April. Australia’s dollar ended two days of losses as a technical gauge showed the currency’s 4 percent drop this month may have been too rapid.

“Continued risk aversion means the yen and dollar will benefit and the risk currencies will be underperformers,” said Imre Speizer, a market strategist in Wellington at Westpac Banking Corp., Australia’s second-largest lender.

The euro traded at $1.1929 as of 8:21 a.m. in Tokyo, from $1.1923 in New York yesterday, when it fell as low as $1.1877, the weakest level since March 2006. Europe’s common currency fetched 109.24 yen after sliding as much as 1.7 percent yesterday to touch 108.08 yen, the lowest since November 2001. The greenback bought 91.58 yen from 91.37 in New York.

The Standard & Poor’s 500 Index slid 1.4 percent and the MSCI World Index tumbled 1.8 percent yesterday.

Global Recovery Makes Yen Less Attractive

The Japanese yen extended today its yesterday’s decline versus the U.S. dollar and the euro as the signs of the accelerating global recovery diminished the appeal of the Japanese currency as the safe haven.
The forecasts about the improving situation on the U.S. labor market add to the signs of the widening economic recovery. In the same time, the speculations that the new Japan’s leader will encourage the depreciation of the yen make the currency less attractive to the investors.
USD/JPY rose to about 92.69 as of 12:12 GMT today from its opening rate of 92.12. EUR/JPY traded near 113.66.

Euro Pulls Back From 1.2300, British Pound Holds Within Previous Day’s Range

The Euro pared the overnight advance to 1.2325 and continued to hold below the 20-Day SMA at 1.2416, and the single-currency may trend sideways throughout the U.S. trade as European policy makers talk down the risks for contagion.

European Central Bank board member Lorenzo Bini Smaghi argued that the Governing Council’s bond purchase plan does not involve any “considerable risks,” and said that the extraordinary measures are “sterilized” by the ECB during an interview with an Italian newspaper.

At the same time, Standard and Poor’s said that the recent depreciation in the euro is likely to benefit the region as European exports become increasingly competitive on a global scale, but warned that the economy is “still running unhurriedly at two speeds” as the debt crisis weighs on the nations operating under the fixed-exchange rate system. As policy makers expect to see an uneven recovery this year, the ECB is widely expect to maintain a loose policy stance over the coming months in an effort to encourage a sustainable recovery, but the spillover effects could lead the Governing Council to support the economy throughout the second-half of the year as the nations tied to the single-currency struggle to bring their public budget back in-line with the stability pact. Meanwhile, the economic docket showed manufacturing and service-based activity in the Euro-Zone expanded at a slower pace in May, with the composite index falling back to 56.4 from a three-year high of 57.3 in the previous month, while retail spending unexpectedly slipped 1.2% in April to mark the biggest decline since October 2008.

The British Pound was little changed overnight, with price action holding within the previous day’s range, but the GBP/USD looks poised to retrace the decline in May as it carves out a near-term bottom above 1.4200. However, as Bank of England Governor Mervyn King maintains a cautious outlook for the economy and expects inflation to fall back to the 2% target over the medium-term, the dovish rhetoric held by the central bank could drag on the exchange rate as investors weigh the prospects for future policy. Nevertheless, a report by Nationwide showed home prices increased for the third consecutive month in May, with the index increasing 0.5% from the previous month to exceed expectations for a 0.3% rise, and conditions are likely to improve going forward as the economic recovery gathers pace. Meanwhile, a separate report showed service-based activity in the U.K. expanded at a faster pace in May, with the PMI reading increasing to 55.4 from 55.3 in April, which fell short of expectations for a rise to 55.7.

The greenback was mixed during the European trade, with the USD/JPY extending the previous day’s advance to reach a high of 92.72, and the reserve currency is likely to face increased volatility throughout the North American session as the economic docket is expected to foreshadow an improved outlook for future growth. The ADP employment report for May is anticipated to show a 70K rise in private payrolls following the 32K expansion in the previous month, while the ISM Non-Manufacturing index is forecasted to increase to 55.6 from 55.4 in April, which would be the highest reading since 2006. At the same time, factory orders are projected to rise another 1.8% in April after climbing 1.3% in the month prior, and the recent developments could lead the Fed to hold an improved outlook for the economy as the economic recovery gathers pace.