How low can EUR/USD go? - FXTM

Over the previous week, the EURUSD has recorded several fresh 2014 lows and the pair registered a further one yesterday. The EURUSD continued to be sold in anticipation of the latest German CPI data, but it was the US GDP announcement which triggered bearish movement.

The latest figures from the US Department of Commerce showed that the US economy expanded by an annualised 4% between April and June, far surpassing all expectations. The EURUSD fell as low as 1.3369 on the news, its lowest valuation since the 13^th November 2013.

Where this pair movesfrom here will be largely dependent on how the markets react to today’s German employment report and EU CPI. Although on headline it would appear that the EU CPI is higher risk, it is worth keeping a close eye on the German employment report. Although it is widely expected that EU CPI remained at 0.5% for the third successive month in July, it does appear that the ECB are prepared to offer their recentstimulus measures time before considering the possibility of implementing QE. As long as EU CPI refrained from further decreasing last month, this might provide the EURUSD with some breathing space.

In reference to the German employment report, this is where investors looking for downside moves could find more opportunities. The German economy has been a casualty of the geopolitical conflict in Eastern Europe, with their recent IFO data representing a third consecutive decline. Additionally, the Bundesbank recently warned that there is a possibility that the German economy stagnated in Q2.

It is currently expected that the German employment sector contracted by 5,000 jobs in July and if this is confirmed, it will add additional pressure on the EURUSD valuation. Potentialupcoming EURUSD support levels can be found located at 1.3365 and 1.3335.

Written by Jameel Ahmad, Chief Market Analyst at FXTM.

For more information please visit: Forex Time

Is GBPUSD oversold and ready for a rebound? - FXTM

It is difficult to understand how the GBPUSD has sharply transitioned from registering a new 5-year high (1.7189) to recording eight days of successive losses for the first time since May 2010. The pair declined by a further 50 pipsand reached a six-week low on Tuesday after the latestUK Mortgage Approvals were stronger than expected. Bank of England (BoE) Governor, Mark Carney had previously expressed opinion that the UK housing sector posed one of the largest threats to the UK economy.

A major contributing factor behind the recent GBPUSD decline is not necessarily due to faltering UK economic optimism, but due to international geopolitical tensions attracting the attention of the financial markets. Over the past week, investors have been attracted to safehavens, such as the USD, and this has devalued the GBPUSD.

Looking at the Daily timeframe, as long as geopolitical tensions quieten down technical traders could now be observing an ideal time to look into this pair. Both the Stochastic Oscillator and RSI are each suggesting that the GBPUSD is oversold and looking at the historical correlation between these two momentum indicators, the price seems to quickly rebound after approaching the oversold boundaries. Additionally, the pair is now only a fractional distance away from a bullish trendline that has controlled the overall direction of the GBPUSD since November 2013. If the trendline is touched, it should either act as a dynamic support level or further support can be found at 1.6919.

In order for the GBPUSD to bounce back, the bulls need a reason to rally. Tomorrow afternoon, the US 2^nd Quarter GDP release may provide an opportunity. It is currently expected that the US GDP will be announced at around 3%, but the markets will be keeping a very close eye on what proportion of the 1^st quarter GDP contraction was recovered in the following quarter.

I remain unconvinced that the US economy recovered as much of the 2.9% Q1 contraction as currently expected. A large amount of the economic contraction was caused by reduced consumer expenditure and construction activity. Recent US consumer data can be considered soft, such as the past three Advance Retail Sales missing expectations, alongside average wage growth declining. This raises a threat that a proportion of the reduced consumer expenditure in Q1 (which reportedly accounts for 70% of the overall US GDP), might not have been recovered in Q2. In reference to the US construction sector, it is possible projects that were delayed during the atrocious winter weather period have since commenced, but only 6,000 construction jobs were created by the US economy in June. Furthermore, the US construction sector remains over 20% bellows its peak before the global financial crisis emerged.

If the US GDP does disappoint, this will likely bring some risk appetite back into the currency markets. It will also allow an opportunity for the GBPUSD to begin rebuilding some of the previous week’s lost momentum. Due to the UK economic calendar being light this week, exactly how the markets react to the US GDP release will likely determine the GBPUSD’s next move. In regards to the next noticeable economic release from the United Kingdom, RBS are currently suggesting that Friday’s Manufacturing PMI for June will be recorded at a yearly high.

If this is confirmed, we can expect the GBP bulls to wake up.

Written by Jameel Ahmad, Chief Market Analyst at FXTM.

For more information please visit: Forex Circles 

UK. Regulators want reckless bankers to be criminally liable under new plans

The bosses of leading City firms are to be made more accountable for their actions under proposals that could make them wait up to seven years for their bonuses and potentially be jailed if their banks fail.

Responding to recommendations made by the parliamentary commission on banking standards, the two main City regulators on Wednesday set out lengthy consultations (pdf) aimed at framing a new licencing regime for bankers and the creation of a "potential criminal liability under a new offence relating to a reckless decision causing a financial institution to fail".

The Financial Conduct Authority and the Bank of England's regulation arm, the Prudential Regulation Authority, want the new regime to be in force by January next year and would force bankers to prove they had acted appropriately – a reversal of the burden of proof.

Bankers would be subjected to annual checks to ensure they comply with a regime which covers those involved in what is known as a "significant harm function".

"The behaviour and culture within banks played a major role in the 2008-09 financial crisis and in conduct scandals such as payment protection insurance mis-selling and the attempted manipulation of Libor. However, under the statutory and regulatory framework in place at the time, individual accountability was often unclear or confused. This undermined public trust in both the banking system and in the regulatory response," the regulators said.

But the regulators have stepped back from the idea of the parliamentary commission – set up in the wake of the Barclays' fine for rigging Libor two years ago – that bonuses be deferred for as long as 10 years.

"The PRA and FCA note that increasing the overall length of deferral is not the only way in which the typical present pattern of deferrals might be altered to improve risk alignment. There is scope to increase the proportion of awards that are held for longer within the overall deferral period, either by requiring a greater proportion of awards to be deferred, or by delaying the start of vesting, which typically starts a year following the initial award," the regulators said.

Instead, for the most senior bankers, bonuses must be deferred for seven years and for less senior staff for five years, according to the consultation.

But new rules coming into force will allow bonuses to be clawed back for up to 10 years. This would force bankers to repay bonuses already received as well as having deferred bonuses withheld.

The regulators are also looking at ways of stopping bankers being bought of their bonuses by new employers, and avoiding a repeat of scenario at Royal Bank of Scotland where former CEO Fred Goodwin's pension payments were eventually reduced.

The regulators note that the longer deferral periods for bonuses and tougher regime "may affect the labour market as risk-averse staff might be less willing to take on additional responsibility and progress to senior management level as a result".

Since the 2008 banking crisis changes have already been made to bonuses to ensure top bankers no longer receive payouts entirely in cash and that they are deferred for at least three years. New rules this year require bonuses to be capped at one times salary or twice if shareholders approve.

"While the PRA and FCA believe the new regime will deliver significant improvements, behavioural and cultural change must also come from individuals themselves as they carry out their roles," the paper said.

Source: The Guardian(UK.)

How to Grow a Site Into a Successful Venture With Just Content

Have you ever taken a long, hard look at the world of SEO and Internet marketing?  It can be a horrendously complicated place. There’s so much to keep track of, so much to make sure you do or don’t do, so many guides (both relevant and outdated) available to follow, not to mention the number of companies willing to do the work for you. All these moving parts, it becomes a bit overwhelming for entrepreneurs to determine where to start and how best to use their time.

After building a successful website, one thing I discovered is that while all the above can help build your business, what it really comes down to is good content. Good content increases traffic.

That said, while I was able to run a successful based on the power of content, I didn't completely ignore the rules laid down by Google.  I still pay attention to the mechanics of the site, the key phrases of the content and the tricky little issues that can escalate into Google penalties if left unchecked.  

For those looking for a little assistance, here are a few tips.

Create a powerful foundation. If you want to grow a site through content, you need a powerful platform to put it on.  Essentially, your site needs to meet two basic criteria:

Easy to use.  This is everything from a mobile-friendly design to a simple, clean theme.

Fits Google's requirements. This means minimal advertising, an appropriate use of meta-robots directives, clean code and a fast-loading host.

All of this is a one-time investment with a revaluation every year or so.

Pure quality content can, to a certain extent, counterbalance a few of these aspects.  Users will tolerate a longer load time to get to content they find truly valuable or forgive a slightly wonky layout, as long as they can find what they need. Google is a little less forgiving: attracting them with content isn’t necessarily going to save you if the crawlers can’t reach it through broken code. 

Focus on high-volume content. Once you have the site set up, you need to produce content.  I have high standards for the content I publish on my sites. 

I aim for a length of more than 1,000 words, though rarely beyond 2,000.  Longer content gives more space to talk about the reasoning behind decisions, the history behind trends and the like.  That said, I don’t focus on the length. I write as long as it takes to cover the subject without fluff and with sufficient depth.

I have a fairly tight focus on the content topics.  I have an industry focus, and I stick with it. 

I have zero tolerance for typos and grammatical errors. 

I will sometimes let casual language slide. To make a point or to make a phrase stand out, the technically correct grammar sometimes falls behind. 

I jumped into publishing seven posts per week immediately.

The last point is really the key to thriving on content.  Every piece of content is an opportunity.  It’s a chance to talk about a new subject, to attract new readers and to gain incoming links. 

Have all-natural organic links. At this point, you’ve read pretty much my entire SEO strategy.  I publish content and that content does the work for me. Due to their length, depth and value, they’re often among the top ten in search results. 

Let it be known that valuable content can stand on its own and attracts readers – some of them other blog writers. Some of these blog writers are going to be interested enough in the content to share it in a post of their own.  These are valuable links. They aren’t paid for, published by me on another site or part of link directories. They’re entirely organic.

Once again, it comes back to the idea that every post is an opportunity.  I want to gain the attention of fellow bloggers who will link to my content, but I don’t want to do it by shoving my blog in their face at every turn.  Instead, I learn what they’re interested in reading about, and I write valuable content on those topics. 

Don't have SEO be your main concern. Link building isn’t the only part of traditional SEO that I set aside.  I also don’t pay much attention to keywords. The idea of focusing on specific keywords for value has been on the decline for some time, and Google’s interpretive search has further diminished it.  I use Google's Authorship (a service that allows people to link their content to their Google+ profile), but I don’t go out of my way to share every post I make on Google+.

The reason being is every step Google has made is designed to emphasize valuable content over search-engine techniques.  They’re slowly devaluing links, they’re putting the squeeze on Authorship, they’ve diminished the power of keywords, all while promoting content that meets the various requirements and standards they set for relevance and value.

Culled: from www.entrepreneur.com

Apple, IBM partner on mobile devices for business

IN a “landmark” partnership to win over business customers, Apple and IBM have offered iPhones and iPads that are specially tailored to the corporate world.

   The tie-up on Tuesday between what were historically rivals aims to boost Apple’s share of the market for mobile devices for businesses and will offer custom-made apps which bring the power of IBM’s supercomputing analytics to a mobile workforce, a joint statement said.

  “The landmark partnership aims to redefine the way work will get done, address key industry mobility challenges and spark true mobile-led business change,” the statement said.

  “Apple and IBM’s shared vision for this partnership is to put in the hands of business professionals everywhere the unique capabilities of iPads and iPhones with a company’s knowledge, data, analytics and workflows.”

  The companies plan to release more than 100 industry-specific enterprise solutions including apps developed for the iOS platform, along with IBM cloud services, security and analytics.

    The Agence France Presse (AFP) said that as part of the deal, IBM would also sell iPhones and iPads tailored to specific industries.

  “For the first time ever, we’re putting IBM’s renowned big data analytics at iOS users’ fingertips, which opens up a large market opportunity for Apple,” said Apple’s chief executive, Tim Cook.

  “This is a radical step for enterprise and something that only Apple and IBM can deliver.”

  Ginni Rometty, IBM chairman, president and CEO, said the alliance “will build on our momentum in bringing these innovations to our clients globally.”

  The deal was the result of several conversations between Cook and Rometty over the last few months, the Re/code website said.

  “If you were building a puzzle, they would fit nicely together as puzzle pieces with no overlap,” Cook told Re/code of the two companies.

  “When you put our teams in the room together, we both have engineering cultures, so they feed off one another. And when you do that you end up with something better than either of you could produce yourself.”

  Rometty said of the relationship between IBM and Apple: “We both think of each other as the gold standard.”

  Industry analyst, Jeff Kagan called the tie-up between what were fierce competitors an “incredible turn of events.”

  “Apple is looking for growth in the business community for their devices like iPhone, iPad and iCloud services. IBM is the company who can help Apple do just that,” he said.

  “The mobile and telecom space is one of the hottest-growing segments. Apple really has not done a great job on the business side of the market. That’s why this deal with IBM seems to make so much sense.

  “We’ll have to see if this works, but the thinking behind it sure makes sense.”

  Apple will create a new service and support offering tailored help, while IBM will manage some of the functions like device activation and security.

  The deal also includes a private app catalog, and helps business customers transform IBM services for mobile devices.

  The new offerings will be pushed through Apple’s new mobile operating system, iOS 8, which was unveiled in June.

  The news comes with Apple seeking to boost growth amid a global onslaught of smartphones and tablets using the Google Android operating system. While Apple is popular among many consumers, its appeal to corporate users has been more limited.

  The research firm, IDC said it expects Android smartphones to remain ahead of the pack with an 80.4 per cent market share in 2014, and that Apple’s market share for the iPhone is forecast to be 14.8 per cent.

  A survey by Strategy Analytics said Android grabbed 65.8 per cent of global tablet sales in the first quarter, up from 53 per cent a year ago. Apple, meanwhile, saw iPad sales slump and its market share tumbled to 28.4 per cent from 40.3 per cent a year earlier.

Source: Guardian Newspaper

INVESTORS CONTINUE TO IGNORE EUROPEAN CENTRAL BANK (ECB) PRESIDENT

ECB President, Mario Draghi

Despite the EU economic sentiment remaining bleak and European Central Bank (ECB) President Draghi reaffirming his displeasure with an elevated EURUSD only last Thursday, investors remain undeterred from purchasing the EURUSD. The pair recorded a second consecutive day of gains and advanced to 1.3611.

This increase in valuation materialized despite disappointing economic releases. For the second day running, all spotlight was on Germany and in continuation with a recent unfamiliar pattern, their metric data raised a few eyebrows. On an adjusted monthly basis, imports contracted by 3.4% (sharpest decline in nearly two years) with exports also contracting by 1.1%.

The GBPUSD pair marginally increased in valuation to 1.7130; however, this was not withstanding a rollercoaster of volatility. Following last week’s Markit Manufacturing PMIs cataloguing its highest reading since November 2013 an assessment that the sector was currently “flourishing”, optimism was high for Tuesday’s Manufacturing Production reading. Unfortunately, the bulls were thwarted.

The GBPUSD dropped around 60 pips following the surprising news that on a monthly basis, manufacturing production contracted by 1.3%. Industrial Production followed a similar pattern, recording a 0.7% monthly contraction. As the day progressed, further losses were spared and the GBPUSD subsequently bounced back when June’s NIESR GDP estimate showcased that UK second quarter economic growth increased to 0.9%, up from 0.8% in the previous quarter.

Moving onto the USDJPY and despite metric data releases from both countries being low, this pair collected its third day of consecutive losses. The USDJPY dropped 30 pips and concluded trading at 101.565. This was likely linked to Monday’s announcement that Japan’s Trade Deficit narrowed slightly in May, alongside Deputy Bank of Japan Governor Nasako displaying confidence during a speech in Tokyo that the Japanese central bank will be internally prepared to deal with withdrawing from Quantitative Easing.

The Aussie continues to show resilience in spite of dovish comments from RBA Governor Stevens last week that investors were underestimating the chances of a significant fall in the Australian currency. The Australian economy received a boost, following the announcement that Westpac Consumer Confidence rose 1.9% in July to 94.9 and the AUDUSD concluded trading at 0.9357.

Finally, the NZDUSD reached its highest valuation since August 2011 after credit ratings agency Fitch Ratings reaffirmed the country’s AA rating and upgraded its outlook from stable to positive. The NZDUSD increased as high as 0.8804 on the announcement and concluded trading at 0.8785. The 0.88 level has previously been viewed as a psychological resistance level for the pair and in April, a dovish speaking RBNZ threatened implementing currency intervention methods to prohibit investors purchasing their currency.

The New Zealand central bank are unlikely to verbally threaten currency intervention yet though, and will likely wait to see whether tonight’s Federal Reserve FOMC Minutes release inspires risk appetite into the currency markets.

This could be a story that develops as we head into the next trading week.

Written by Jameel Ahmad, Chief Market Analyst, FXTM.

For more information please visit: Forex Circles

Nigeria adds 11 non-oil products to export list

In line with the Federal Government’s efforts at diversifying the economy, the Nigerian Export Promotion Council said 11 more products had been added to the non-oil products that the country exported to the global market between 2013 and now.

The new products, according to the NEPC, are educational books, robusta coffee, double folded dust sheets, ice making machine, mica muscovite and leather furniture.

Others are high density polyethylene, aluminium ingots, reduced iron and iron pellets, garments and yam.

The primary markets and destinations for the products are Sierra Leone, Spain, the United Kingdom, Ghana, India, Republic of Benin, Japan, Bulgaria and the United States, while high density polyethylene is exported to the Economic Community of West African States member countries.

The NEPC said there was a steady growth in the non-oil exports, with a value of $2.97bn in 2013, accounting for 15.9 per cent increase over 2012, with a value of $2.56bn                             .

“We have about 11 new products, which we introduced from 2013 to various new markets in Africa and the world; these are products that give Nigeria competitive advantage; it is a very interesting development for the country,” the Executive Director, NEPC, Mr. Olusegun Awolowo, told our correspondent.

He added that the country’s exports were no longer limited to the traditional markets of Europe, especially the United Kingdom.

According to statistics by Cobalt International, other non-oil products that were exported from the country to other parts of the world in 2013 comprised cocoa and cocoa preparations, sheep and goat skins, sesame seeds, aluminium articles, rubber, tobacco products, cotton, yarns and woven fabrics, copper, cashew nuts, prawns, shrimp as well as fish.

The NEPC said at a recent workshop that the country’s participation in international trade fairs and exhibitions every year had contributed largely in exposing local companies to the international market and opened up new opportunities for foreign exchange.

It stated, “In the year 2013, 13 of such outings were spearheaded by the council. A total number of 126 companies, mainly Small and Medium Enterprises, benefited. On-the-spot sales and orders generated by these companies amounted to $627,108.23 and $3,716,920.51, respectively.

“Executed order as of the end of February 2014 that was reported to NEPC was $763,247.85. It is also on recorded that made-in-Nigeria products, especially in the West African sub-region market, elicited great demand.”

Awolowo said despite challenges in agricultural yield and the security issues in the northern part of the country, there were strong indications that the value of non-oil exports at the end of 2014 would be higher than the previous year’s.

“This is the second quarter, the year can be better and we feel we can do better with a little above the result we have in 2013,” he added.

Awolowo noted that the rebased Gross Domestic Product of the country had increased the confidence of other countries in the Nigerian economy.

“On the industry, there is an effect of the rebased GDP and we are using that as a wake-up call that we must export more. We must keep up with the Nigerian Industrial Revolution Policy by showing that we export processed goods so that we can add value and create jobs. It is a positive thing for Nigeria and we have the population to back it up,” he added.

Awolowo, however, expressed fears that the Export Expansion Grant might affect the performance of local manufacturers and consequently the export figure.

The Director-General, Lagos Chamber of Commerce and Industry, Mr. Muda Yusuf, also said that with the productivity challenges plaguing the country, it would be difficult for the non-oil sector to make significant impact on the economy despite its growth rate.

He said, “The economy has very serious productivity challenges and as long as we have these problems, especially by enterprises and those that are in the real sector of the economy, it is difficult to make any significant impact in the non-oil sector.

“Currently, the bulk of what we export is primary products and that cannot give us much value as an economy. When you export something on which you have added value but because of productivity challenges, it is difficult to produce anything competitively; therefore, we are not making the kind of mark we should make in the non-oil export sector.

“Even within the oil sector, we are not supposed to be exporting just crude oil; that is a problem for Nigeria as an oil producing country.”

According to Yusuf, as long as the productivity level remains low, the country cannot be competitive. He added that lack of basic infrastructure, high production costs, bureaucracy and high cost of funds remained major problems for the non-oil export.

He said, “How can we produce for export with those conditions, or with a manufacturer using diesel in his factory? We need to address productivity issues in the real sector, and then, the government should be more serious in creating value addition even in the oil sector.

“It is bad that we are still exporting crude and importing refined products when we should be exporting refined and petrochemical products from our plants where we will make more money than crude oil itself.”

The President, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, Alhaji Mohammed Abubakar, also said there was a need for the country to align with global trend to enhance its competitiveness by re-focusing and re-strategising on productivity.

“To achieve this feat of boosting non-oil exports in the country, with a view to making the sector vibrant and competitive in terms of exportable products and revenue generation, the government must be ready to demonstrate the political will by ensuring the provision of the desired enabling environment, including, of course, adequate infrastructure and incentives to encourage the production of quality goods and services in Nigeria,” he said.

Source: Punch Newspaper.

Firm, AMCON disagree on divestment from Mainstreet Bank

The ongoing proceedings at the International Court of Arbitration (ICA), instituted by Intangis Holdings Limited may stall the divestment plans of Asset Management Company of Nigeria (AMCON) in Mainstreet Bank.

  The new twist at the threshold of the sale of the bridged bank was at the instance of Intangis, which alleged a breach of agreement it reached with Afribank Plc in 2009.

  It would be recalled that Mainstreet Bank emerged from the financial bailout programme in the banking industry by the Central Bank of Nigeria (CBN) and AMCON.

  The said agreement, tagged “Confidential and Non-Circumvention Agreement,” had held that Afribank would not enter into discussions or negotiations with any potential investor in relation to acquisition of a portfolio of non-performing loans and that of a minority stake in its share capital.

  But in a draft response to the company claims by AMCON, the bad debt agency explained that Intangis was pursuing a frivolous claim.

  According to AMCON, it was not party to any agreement with Intangis and Mainstreet was not existing at the time the agreement was reached.

  Mainstreet, which came after a special audit in the banking industry that found it, along with nine others in “grave situation,” sacked the bank’s board and management, with a view to cleaning and repositioning it.

  However, according to AMCON, with apparent lack of capacity to recapitalize before the September 2011 deadline given to it by CBN, Affribank’s license was revoked.

  But with the Nigerian Deposit Insurance Corporation (NDIC), pursuant to its enabling Act (section 39), in collaboration with CBN, executed a Purchase and Assumption Agreement, whic allowed Mainstreet Bank to purchase assets and assume certain liabilities of Afribank, while AMCON subscribed to the shares of the emerged bank.

  AMCON pointed out that Intangis’ claim, anchored on its ongoing divestment of interest in Mainstreet, is frivolous because neither it nor Mainstreet was a party to the agreement and neither party assumed Afribank’s obligations on the agreement.

  It also noted that the agreement in question had expired by November 2, 2011, and there was no subsisting or existing contract, which AMCON can be said to be breaching or inducing its breach.

  “Even if the CNCA had not expired, the ongoing transaction relating to divestment of AMCON’s shareholding in Mainstreet Bank does not constitute a prohibited transaction under its expired terms,” the response added.

Source: Guardian Newspaper

Economy Contracts By An Annualised 2.9%

Last week focused on the surprising announcement that the US Federal Reserve is downgrading their overall 2014 economic growth forecasts.Their reason for doing so was due to an admittance that the adverse weather the United States faced over the New Year period, had a far more detrimental impact on their economy than they first envisaged. The US central bank’s economic downgrade created a fear of anxiety regarding the US first quarter GDP confirmation, scheduled to be announced last Wednesday. Unfortunately, it was not positive news. The US economy contracted by an annualised 2.9% during the first quarter of 2014, their worst GDP reading since 2009.

Although it is predominately accepted that the GDP contraction was caused by an atrocious winter weather period, attention will now be focused upon how much of the GDP contraction can be recovered in the following quarter. In reference to other US economic releases last week, performances were mixed. US Manufacturing ISM’s expanded at their fastest rate in four years. This is positive news, considering the US manufacturing sector equates to nearly 17million US jobs, but Durable Goods Orders (-1%) and Personal Spending (0.2%) fell below expectations. Bearing in mind that consumer spending contributes to 70% of the US economy, the personal spending release was looked at unfavorably.

Moving on to the United Kingdom, although economic releases were low in volume last week, the Bank of England (BoE) and more specifically, BoE Governor Mark Carney were still featured in the headlines. Last Tuesday, Carney and three members of the Monetary Policy Committee (MPC) testified in front of the UK Parliament Treasury Committee, and the testimony concluded with the group being accused of sending mixed messages regarding a UK interest rate hike. Just under three weeks ago, Carney announced that the BoE may increase interest rates sooner than the markets expect. However, during the testimony in front of the UK Parliament Treasury Committee, Carney announced that there is no specific time duration to increase interest rates, instead the decision will be encouraged by data driven economic data. Although, Carney did hint that a UK unemployment rate below 6%, alongside a noticeable advancement in UK average wage growth would entice a rate hike sooner. 

In regards to the European economy, economic releases continued to add substance to the speculation that there are signs that the EU economic momentum may be slowing down. This was suggested by the Head of the International Monetary Fund, Christine Lagarde during a recent EU Finance Ministers meeting in Luxembourg, and last week’s economic performances provided some validity to those claims. Last Monday’s Markit PMI showed that EU economic activity slowed to a six-month low. Monday’s PMI’s also showed further PMI contraction in France, while Germany’s IFO estimates on Tuesday failed to meet expectations.

However, the week ended on a positive note when it was announced that Germany’s CPI (inflation) increase month on month to 0.3%. This encouraged some optimism that the recent ECB stimulus measures, may be having a positive effect. 

What to watch this week:

Due to the United States markets being closed this Friday for Independence Day, the US non-farm payroll (the number of jobs the US economy created last month) will be released this Thursday. With the latest European Central Bank (ECB)interest rate decision and Mario Draghi’s live press conference also being scheduled for Thursday, this has the potential to become one of the most volatile trading days of the year.

In regards to the US non-farm payroll release, after last week’s disappointing GDP contraction, the United States would highly benefit from a positive NFP this Thursday. Although Janet Yellen refrained from offering a specific time duration regarding an interest rate rise during the latest FOMC meeting, a figure above 230,000 may entice domestic speculation regarding what timeframe the Federal Reserve may be considering for an interest rate increase.

In reference to the ECB interest rate decision, I feel it is unlikely that the European Central Bank will change monetary policy for two consecutive months. However, there is still the potential for market volatility during Mario Draghi’s press conference, following the interest rate decision. Draghi will likely be answering questions regarding whether he feels the EU economic momentum is slowing down (like IMF head Christine Lagarde has recently suggested) or whether he feels the ECB needs to implement a quantitative easing program in the future. If he is asked these questions, the manner in which he answers them will be pivotal towards which direction the EU currency fluctuates.

Written by Jameel Ahmad, Chief Market Analyst at FXTM.

For more information please visit: ForexTime

Dovish Federal Reserve Weakens the Greenback

Bank of Japan Governor Kuroda 

Last Wednesday evening, a more dovish than expected Federal Reserve weakened confidence in the USD. Although the Federal Reserve continued to taper their Quantitative Easing stimulus by a further $10bn, the US central bank surprisingly downgraded their economic growth projections for 2014. Beforehand, speculation emerged that the Federal Reserve would actually upgrade economic projections during the FOMC minutes (following Yellen’s acknowledgement at a public speaking event in New York during May that US economic growth was set to accelerate throughout the latter half of 2014). In reference towards why the Federal Reserve downgraded their 2014 economic growth projections, the central bank admitted that the adverse winter weather period the United States faced over the New Year, had a larger detrimental effect on the US economy than they first envisaged. Overall, the US central bank are now projecting their economy to expand between 2.1% and 2.3% this year, a considerable decline from the 2.8% to 3% forecasted in March.  

Janet Yellen inspired further USD weakness during her live press conference address, when she refrained from offering any indications regarding what timeframe the Federal Reserve would consider raising interest rates. Previously, Yellen had indicated that this could happen around six months after the Federal Reserve concluded their Quantitative Easing program. Generally, Yellen maintained a dovish tone throughout her press conference. For example, despite the US employment sector making substantial progress over the past few months, (the US economy has now regained all of the 8.7 million jobs lost during the recession and for the first time in nearly 15 years, the US economy has added over 200,000 jobs to their payroll for four consecutive months) Yellen identified that the US employment sector was still underperforming. All in all, the dovish Federal Reserve tone contributed towards the EURUSD reaching a two-week high, the AUDUSD recovering all losses from a dovish RBA minutes release two days prior and the GBPUSD finally advancing to a new 5-year high.

Moving on to the United Kingdom, although the GBPUSD finally advanced to a new 5-year high, the advancement occurred in a slightly more unorthodox manner than many were expecting. Since BoE Governor Carney hinted nearly two weeks ago that the BoE might increase interest rates sooner than the markets expect, anticipation was high that either the UK inflation levels had reached the BoE 2% threshold target, or a member of the BoE’s MPC (Monetary Policy Committee) had voted in favor of a UK interest rate increase during the latest BoE meeting. Neither of these hypothetical situations materialized. In fact, UK inflation CPI fell to a new 5-year low, with inflation increasing at an annualized 1.5%, and the BoE minutes release showed that the BoE’s Monetary Policy Committee still voted 9-0 in favor of maintaining interest rates at a record-low 0.5%. In reference to when the GBPUSD advanced towards a new 5-year high, it occurred after the Federal Reserve weakened the USD last Wednesday evening.

Since then, the GBPUSD has depreciated slightly. BoE Governor Carney and three members of the Monetary Policy Committee (MPC) testified in front of the UK Parliament Treasury Committee in London and specified that there is still no confirmed timeframe regarding when the BoE may increase interest rates. In fact, Carney specified that when the UK rate hike occurs, it will be encouraged by data driven economic data, such as the UK unemployment rate extending below 6% and a noticeable advancement in UK average wage growth. Domestically, the BoE are now being criticized for sending contradictory messages regarding when the BoE will raise interest rates. Before Tuesday’s testimony to the UK Parliament Treasury Committee, 80% of economists had predicted an interest rate hike in November. Following Carney’s admission that a UK rate hike will data driven, rather than time specified, economists are delaying their expectations for a UK interest rise until February 2015.   

In reference to the EU economy, with the exception of confirmation that EU inflation increased at an annualized 0.5% last month, economic releases last week were low in quantity. However, the EU economy still remained in the news headlines. During an EU Finance Ministers meeting in Luxembourg, Christine Lagarde (Head of the International Monetary Fund) announced that the EU economic recovery had not been robust, or sufficiently strong. Lagarde also signaled that there were signs that the EU economic momentum was slowing, and the ECB needs to consider introducing asset based purchases (Quantitative Easing), if inflation levels remain low.

Unfortunately, since Lagarde’s comments, there have been further indications that EU economic growth is slowing down. The latest Markit Purchasing Manager’s Index (PMI) showed that EU economic activity in June slowed to its weakest rate in six months. The PMI for private sector activity this month fell to 52.8, from 53.5 in May. Additionally, Monday’s EU Manufacturing and Services PMI release displayed further signs of contraction in France, while Germany’s IFO estimates in June failed to meet expectations.  

Elsewhere, for the second consecutive month, a dovish RBA minutes release encouraged AUDUSD weakness. Last month, the Reserve Bank of Australia weakened confidence in the Australian currency by announcing that the Australian economy was set to enter a period of weaker than expected economic growth. Although this month’s RBA minutes release made some reference towards a similar message, the Australian Central Bank also announced its displeasure with an overvalued AUDUSD. 

Finally, Bank of Japan Governor Kuroda announced during a press conference in Tokyo that the Japanese economy was recovering moderately and he expected Japanese inflation levels to continue to increase throughout 2014. However, Kuroda admitted that a sales tax imposed in April had encouraged some distortion with recent Japanese economic releases. The BoJ is set to continue issuing monetary easing until the Japanese economy is recording a consistent 2% inflation rate. The latter statement refutes an emergence of speculation last month that the BoJ was already internally discussing how to withdraw from its Quantitative Easing program.

What to Watch this Week:

I am expecting the final confirmation of United States first quarter GDP on Wednesday to attract the majority of attention over the upcoming days. Following the Federal Reserve’s surprising announcement during last Wednesday’s FOMC minutes that they were downgrading their economic growth forecasts for 2014 (due to the adverse winter weather period), it is possible that Wednesday’s GDP release will show that the US economy contracted further than originally anticipated during the 1^st quarter of 2014.

Other than Wednesday’s US GDP release, market volatility will likely witness an increase from Thursday evening onwards. On Thursday evening, the latest Japanese CPI (inflation) readings are released. This is followed by UK and France GDP announcements on Friday.

France’s GDP release has the potential to raise a few eyebrows. We are expecting French Gross Domestic Product (Quarter on Quarter) to be confirmed at 0.0%, but their services and manufacturing PMI’s have contracted for several consecutive months and this could consequently correlate towards a worse than expected GDP figure.

Written by Jameel Ahmad, Chief Market Analyst at FXTM.

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