Month: September 2012

By TraderVox.com

Tradervox.com (Dublin) – The Federal Reserve Chairman Ben Bernanke defended his monetary easing program in Jackson Hole Wyoming, where he indicated that he would be deploying such action to curb the rising unemployment in the country. In his speech, Bernanke described his actions as beneficial to the country’s economy and ensured that critics of such moves understood that he is aware of the disadvantages of such moves which he said were manageable. The remarks by the Fed Chairman led to an increase in stocks and treasuries as the dollar dropped to almost three-month low.

According to Mark Spindel of Potomac River Capital in Washington, the major point in Bernanke’s speech was that tools available will work and the status of the economy at the moment warrants serious consideration of these tools. After the speech, the Standard and Poor’s 500 Index appreciated by 0.5 percent as the ten-year Treasury note dropped by 0.07 percent. In addition the Dollar Index, used by the International Exchange Inc dropped by 0.55 percent to its lowest level since may 14. Bernanke also highlighted the disadvantages of high unemployment levels in the country, saying that they may cause irreversible damage to the US economy in the long term.

With these remarks, Former Fed Vice Chairman Alan Blinder interpreted Bernanke’s as a signal of stimulus as soon as September. Blinder said in Jackson Hole on Friday that given the fact that Bernanke used a similar forum to signal the second round of quantitative easing, his comments in Jackson Hole indicated that the Fed is likely to make the third round of purchases which might happen as soon as this month. According to Roberto Perli, a managing director responsible for policy research at International Strategy and Investment, indicated that the Fed is very close to making monetary easing and the only question remaining is whether it would happen this month or the fed would wait for a stronger case to be made. The Federal Open Market Committee meets on Sept 12-13 where they are expected to provide a way forward.

Disclaimer
Tradervox.com is not giving advice nor is qualified or licensed to provide financial advice. You must seek guidance from your personal advisors before acting on this information. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. Opinions expressed at Tradervox.com are those of the individual authors and do not necessarily represent the opinion of Tradervox.com or its management. 

Article provided by TraderVox.com
Tradervox.com is a Forex News Portal that provides real-time news and analysis relating to the Currency Markets.
News and analysis are produced throughout the day by our in-house staff.
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By TraderVox.com

Tradervox.com (Dublin) – Japanese companies’ capital spending gained by 6.6 percent according to a Finance Ministry report released on Monday in Tokyo. The increase fell short of market expectation which expected an increase of 7.8 percent. This is a big gain as a year earlier the figure fell by 8.2 percent. The report has sparked speculation that the Bank of Japan may embark on a bond purchases program to boost economy. Further, economists are expecting the government to revise its forecast that the economy grew by 1.4 percent in second quarter.  Japan’s economic woes are compounded by the declining consumer prices and the low industrial output registered in July. Economists have suggested that Japanese economy will shrivel due to the growing crisis in Europe and the strong yen in the forex market, which has reduced the countries exports.

Yoshimasa Maruyama, a Chief Economist in Tokyo at Itochu Corp, noted that the report showed capital spending figures that were lower than business spending figure in preliminary gross domestic product report. He concluded that this is an indication that companies in Japan have lowered their business spending and predicted that this trend might continue in the coming months. According to a RBS Security Japan Ltd report, the Bank of Japan may decide to expand its asset purchases program when the officials meet on September 18-19.

The Capital Spending report showed that company sales declined by 2.5 percent in April-through-June from the previous three months. The report also showed a decline in company spending by 0.5 percent in the same period. Junko Nishioka, a Chief Economist in Tokyo at RBS Securities Japan Ltd, noted that the major disappointing in the report was the decline in sales which was the first one in four quarters. The decline is an indication of declining production and exports in the country. Nishioka said that while Japan may not go into recession, the global slowdown has weakened the economy and the figures might force the government to revise its GDP forecasts downwards.

Disclaimer
Tradervox.com is not giving advice nor is qualified or licensed to provide financial advice. You must seek guidance from your personal advisors before acting on this information. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. Opinions expressed at Tradervox.com are those of the individual authors and do not necessarily represent the opinion of Tradervox.com or its management. 

Article provided by TraderVox.com
Tradervox.com is a Forex News Portal that provides real-time news and analysis relating to the Currency Markets.
News and analysis are produced throughout the day by our in-house staff.
Follow us on twitter: www.twitter.com/tradervox

Article by AlgosysFx Forex Trading Solutions

The Euro continued its incline versus the Great British pound in the previous European trading exchanges as markets remain hopeful that the European Central Bank would take the necessary action to tackle the debt crisis at its policy meeting this coming September 6. As traders still hold on to hopes of an ECB intervention in the bond markets, the single currency is expected to rise versus the Pound in today’s European exchanges.

As the central bank policy makers near their key meeting this week to announce measures to defend the shared currency, so are the European officials in the persons of the four most powerful leaders in the Euro Zone. German Chancellor Angela Merkel, French President Francois Hollande, Italian Prime Minister Mario Monti and Spanish Prime Minister Mariano Rajoy are having their own meetings, and all have seemingly shown support for a more active participation of the central bank in the fight against the debt crisis; although talks have not gone smoothly as others anticipated because of the leaders’ contrasting opinions. But others remain positive that the European officials are brewing an agreement to effectively deal with the debt crisis.

Even though the European Union’s outlook was cut by Moody’s Investors Service, the shared currency is expected to find support from expectations that the ECB would resume its bond buying. According to Jean-Paul Gauzes, member of the European Parliament, ECB President Mario Draghi said that he would be comfortable buying debt with maturities of up to about three years, as reported in Bloomberg News. On speculations that Draghi’s plan would work in order that confidence would be supplied to the beleaguered Euro area, the EURGBP is likely to go higher. Thus, a long position is recommended in today’s European trading session.

For more news, analysis, technical charts and candlestick analysis, visit AlgosysFx

By TraderVox.com

Tradervox.com (Dublin) – Economist are projecting that the US payrolls may have grown at a slower pace in August and unemployment is likely to remain above eight percent according to a report to be released by the Labor Department on September 7. Most analysts have indicated that the slowing labor market may have prompted the Federal Reserve Chairman Ben S. Bernanke to highlight this sector as of grave concern to US policy makers when he spoke in Jackson Hole last Friday. The market is expecting 125,000 jobs to have been created in August against a job growth of 163k in July. Joblessness is expected to remain at 8.3 percent. The US economy is seen to be faltering as a separate report is set to indicate that US manufacturing was swinging between expanding and shrinking.

According to Joshua Shapiro, the Chief Economist in New York at Maria Fiorini Ramirez Inc, the slowing payrolls are only going to make it hard to bring unemployment down. He indicated that the labor demand is soggy and the US is experiencing some weaknesses in exports. In addition, the growing fiscal uncertainty will add to slow growth in Labor market. In his speech last week, the Fed Chairman Ben Bernanke indicated that the stagnation in labor market has led the policy makers to keep the monetary stimulus option on the table. He pointed out that the lower-than-expected gains in employment and consumer spending has been compounded by the global economic slowdown and growing concerns over the “US Fiscal cliff.” These factors are making it difficult for the economy to rebound and even more daunting for the labor market.

The task of boosting the job market has been exacerbated by the recent announcements from major US companies which have indicated that they would be cutting jobs to reduce their operational cost. Google Inc, on August 13, said that it would cut 4,000 employees while Lexmark International Inc, a Kentucky-based printer maker indicated that it would reduce its workforce by 1,700 globally as it projected to close one of its companies  in Philippines. These scenarios have pushed the FOMC to consider monetary stimulus as a major boost to this sector.

Disclaimer
Tradervox.com is not giving advice nor is qualified or licensed to provide financial advice. You must seek guidance from your personal advisors before acting on this information. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. Opinions expressed at Tradervox.com are those of the individual authors and do not necessarily represent the opinion of Tradervox.com or its management. 

Article provided by TraderVox.com
Tradervox.com is a Forex News Portal that provides real-time news and analysis relating to the Currency Markets.
News and analysis are produced throughout the day by our in-house staff.
Follow us on twitter: www.twitter.com/tradervox

Source: ForexYard

The euro was able to largely maintain its recent gains yesterday, as a lack of significant news resulted in a low liquidity environment in the marketplace. That being said, the Australian dollar fell to new six-week lows against both the USD and JPY following the release of disappointing Chinese and Australian economic indicators. Today, traders will want to pay attention to the US ISM Manufacturing PMI, set to be released at 14:00 GMT. While the US Non-Farm Employment Change, set to be released on Friday, is forecasted to be the highlight of the trading week, a better than expected manufacturing figure today could help the dollar recoup some of its recent losses.

Economic News

USD – US Manufacturing Data Could Help USD

A lack of US news due to a bank holiday yesterday resulted in the US dollar seeing very little movement against its main currency rivals over the course of the day. After dropping to a three-week low against the Japanese yen on Friday, the dollar was able to see a slight upward correction during the Asian session yesterday. The USD/JPY advanced 18 pips to trade as high as 78.39 before reversing to stabilize at the 78.30 level. The greenback also advanced close to 15 pips against the Swiss franc to reach as high as 0.9558 during European trading.

Today, the dollar is likely to see more volatility when the US ISM Manufacturing PMI is released at 14:00 GMT. Analysts are predicting that today’s news will come in at 50.1, which if true, would not only signal an improvement from last month, but would also be a sign that the US manufacturing sector is expanding. The dollar could see bullish movement during afternoon trading if the PMI comes in at or above expectations. Additionally, traders will also want to remember that the all-important US Non-Farm Payrolls figure is being released on Friday, and is likely to result in significant activity in the marketplace.

EUR – Euro Remains Bullish Ahead of Possible ECB Action

After hitting a two-month high against the US dollar on Friday, the euro was able to largely maintain its recent gains yesterday, despite the absence of significant economic news. The EUR/USD spent much of the day trading around the 1.2570 level, virtually unchanged from when markets opened for the week, and not far below Friday’s high of 1.2636. Against the British pound, the euro took moderate losses over the course of the day, falling around 15 pips before stabilizing at the 0.7915 level.

Turning to today, euro traders will want to pay attention to US manufacturing data, as it could result in volatility for the euro. If the US data comes in below the expected level, speculations that the Fed may initiate a new round of quantitative easing in the near future may increase, which could lead to significant gains for the euro. Later in the week, traders should not forget to pay attention to an ECB press conference, scheduled to take place on Thursday. Some analysts are predicting that the ECB could unveil steps to lower borrowing costs in the euro-zone, which if true, could help the common currency extend its gains.

Gold – Gold Stays Close to 5-Month High

Hopes among investors that the Fed and ECB will both take steps in the near future to boost the economic recoveries in the US and euro-zone, kept the price of gold near a five-month high during European trading yesterday. The precious metal gained more than $4 an ounce during the mid-day session to trade as high as $1692.03.

Turning to today, gold may reverse some of its upward momentum if a US manufacturing indicator comes in above its forecasted level and leads to bullish movement for the USD. In such a case, the precious metal would become more expensive for international buyers which could result in a downward correction.

Crude Oil – Despite Poor Chinese Data, Oil Maintains Gains

After taking moderate losses during Asian trading following the release of disappointing Chinese data, crude oil was able to stage a recovery during the European session. Crude fell around $0.50 to reach as low as $95.99 a barrel soon after markets opened for the week. The commodity was able to gain back virtually all of its losses and was trading at $96.46 by the afternoon session.

Today, oil traders will want to pay attention to monitoring developments in the euro-zone and US. Any signs that either the ECB or Fed are getting ready to take steps to help boost their respective economies, as is widely expected, could lead to risk taking which would lead to additional gains for oil.

Technical News

EUR/USD

The Bollinger Bands on the weekly chart are beginning to narrow, signaling a possible price shift in the coming days. Furthermore, the Williams Percent Range on the same chart is approaching the overbought zone, indicating that the price shift could be downward. Opening short positions may be the wise choice for this pair.

GBP/USD

Most technical indicators on the daily and weekly charts show this pair range trading, making it difficult to make a long-term prediction. Traders may want to take a wait and see approach, as a clearer trend is likely to present itself in the near future.

USD/JPY

The daily chart’s Slow Stochastic appears close to forming a bearish cross, indicating that an upward correction could occur in the near future. Furthermore, the Williams Percent Range on the weekly chart has dropped into oversold territory. Opening long positions may be the right move for this pair.

USD/CHF

Long-term technical indicators are providing mixed signals for this pair. On the one hand, the MACD/OsMA on the weekly chart has formed a bearish cross, meaning that downward movement could occur. On the other hand, the same chart’s Williams Percent Range has fallen into oversold territory. Taking a wait and see approach may be the best choice for this pair.

The Wild Card

NZD/JPY

The daily chart’s Relative Strength Index has dropped into oversold territory, signaling that an upward correction could occur in the near future. Furthermore, the Slow Stochastic on the same chart has formed a bullish cross. Forex traders may want to open long positions ahead of an upward breach.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

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Source: ForexYard

The euro was able to come within reach of a two-month high against the US dollar during overnight trading, as hopes that the ECB will unveil plans to lower borrowing costs in the euro-zone led to risk taking in the marketplace. The EUR/USD advanced more than 45 pips to reach as high as 1.2626 before staging a slight downward correction. The pair is currently trading at the 1.2615 level. Commodities and precious metals saw little movement last night. The price of crude oil remained around its current level of $97.15, a one-week high. Gold spent most of the night trading at the $1695 level, a five-month high.

Main News for Today

US ISM Manufacturing PMI- 14:00 GMT
• The PMI is forecasted to come in at 50.0, which if true, would indicate expansion in the US manufacturing sector
• If today’s news comes in at or above the forecasted level, the USD could recoup some of its recent losses against the EUR and JPY

Read more forex news on our forex blog

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By Central Bank News

By Central Bank News
    The central bank of Australia kept its benchmark cash rate unchanged at 3.50 percent, as widely expected, as inflation was on track to remain within the bank’s target range and economic growth remained close to its trend rate.
    But the international outlook had become more subdued in recent months, the Reserve Bank of Australia (RBA) added in a statement from Governor Glenn Stevens.
    “Having picked up in the early months of 2012, growth in the world economy has since softened. Current assessments are that global GDP will grow at no more than average pace in 2012, with risks to the outlook still on the downside,” Stevens said.
    While economic activity in Europe is contracting, growth in the U.S. is only modest, he said, adding that growth in China has remained reasonably robust but recent indicators have been weaker and this has given rise to uncertainly about near-term growth and dampened growth around Asia.

     Australia’s economy expanded by 1.3 percent in the first quarter from the fourth for an annual growth rate of 4.3 percent, helped by large increases in capital spending in the resources sector.
    The RBA recently raised its 2012 growth forecast to 3.5 percent from a previous forecast of 3 percent on the back of the boom in the mining sector.
    Australia’s inflation rate was 1.2 percent in the second quarter, down from 1.6 percent in the first. The RBA targets inflation of 1-3 percent.
    “The Bank’s assessment is that inflation will be consistent with the target over the next one to two years,” Stevens said, adding that maintaining low inflation will require growth in domestic costs to remain contained as the effects of the rise in the Australian dollar wane.
    The RBA cut its cash rate in June, bringing this year’s reduction to 75 basis points,  and Stevens said interest rates for borrowers were a little below their medium-term averages and the impact of the rate cuts were still working their way through the economy.
    “At today’s meeting, the Board judged that, with inflation expected to be consistent with the target and growth close to trend, but with a more subdued international outlook than was the case a few months ago, the stance of monetary policy remained appropriate,” Stevens said.
    Economists had widely expected the RBA to keep rates unchanged at the meeting but are starting to look ahead to a rate cut later this year as the slowdown in Asia, along with Europe’s slump, hits the country’s growth.
    
    www.CentralBankNews.info

By MoneyMorning.com.au

The Chinese haven’t figured out the answer to the chicken and the egg problem yet. But they sure have answered the economics version of the same question: What comes first, production or consumption?

You can’t consume without producing, but why produce if you’re not consuming?

The Chinese have decided that production is more important. They run the entire Chinese economy on the premise of keeping people employed, not buying stuff. The Americans are the opposite. They think the desire and ability to consume comes first.

Their answer to the chicken and egg problem is to eat both. That’s why, when the financial crisis hit, the Americans stimulated ‘demand’. While China’s economy built stuff, putting things into production.

The demand for Australian resources that resulted from China’s production is what kept us out of trouble during the financial crisis. Finding out who is right about production and consumption, China or America, could determine the source of the world’s future economic growth. And the demand for our resources.

Unfortunately, both sides are wrong. It’s all about producing and consuming at the same time. It’s pretty difficult to produce if you’re not consuming anything. And it’s pretty difficult to consume if you’re not producing anything. Unless you’re a lawyer.

The key is the proportion of the two. And to make sure you produce the right stuff.

Coconut Picking and Ladder Building

Here’s the catch. To enhance your production and consumption, you have to consume less at first. That’s because enhanced production first requires you to work on how efficiently you produce. You need to take the time to build a new tool, or machine. In other words, you need to invest. You can’t consume what you spend on investment. So you have to save it first.

Here’s a quick example to prove the point. You’re stuck on a desert island with a bunch of palm trees. To survive, you need to consume 20 coconuts each day. Any more than that and you’re living a life of luxury. You can pick 4 coconuts an hour (production), or you can produce wood (save) to build yourself a ladder (investment), which will take 5 hours.

With a ladder, you can double your production to 8 coconuts an hour. How do you apportion your time between coconut picking and ladder building without starving or dying of exhaustion?

The Chinese answer is to produce more ladders. The American answer is to consume more coconuts. Obviously, you want to do both. But just wanting more of one or the other isn’t going to achieve anything.

The real question you face is how to apportion your time between coconut production and ladder building.

What’s interesting is that every individual would answer the question differently. We have different preferences for how many coconuts we want and how hard we want to work. Not only that, but the amount of coconuts we need and are able to pick differs. So does our ladder building ability.

But when the government makes the decision on whether the economy needs more production or consumption, everyone is along for the ride.

That’s why hundreds of millions of Chinese are suffering in terms of not being able to consume very much. And millions of Americans are suffering in terms of not having a job.

Over in America, they’ve been so busy consuming coconuts, they haven’t even maintained their ladders, let alone increased them.

That’s why ‘American incomes declined more in the three-year expansion that started in June 2009 than during the longest recession since the Great Depression, according to an analysis of U.S. Census Bureau data by Sentier Research LLC.’ Oops.

Over in China, they’ve got multiple ladders up any given coconut palm. That’s another way of saying the Chinese have been building bridges to nowhere. In fact, reality is even more absurd than the metaphors.

German newspaper Der Spiegel has a great article (in English) on what is really going on in China. Here are some highlights, or lowlights if you own shares in Australian mining companies:

‘Duan, the official in the west, is … in a hurry. Duan builds things, and he does so because he can. The sheep walk across Duan’s wonderful, multi-lane, freshly asphalted street, and they’re disruptive.’

The sheep probably don’t appreciate their new highway any more than the occasional drivers do. Der Spiegel visited one of China’s empty cities, built to create jobs:

‘It’s a gloomy day, and the wind is howling through the shells of buildings. According to the plans, there will be 300,000 people living here in 2015, 600,000 by the year 2020 and eventually as many as a million… Everything is already there: airports, railways and highways. Second, there is “unlimited electricity”. And third, the province has rich mineral resources, including coal, oil and nickel. Of course, he adds, it also has plenty of workers.’

Why there are Ghost Cities in China

The beautiful irony of China’s ghost cities is that America is facing a similar problem in its former industrial hubs. Just look at Detroit, the world’s former industrial miracle. You can now play golf from one side of the city to the next. Much of it is abandoned and crumbling.

The problem with overconsumption is obvious. You become unproductive because you didn’t invest in production. The problem with China’s overinvestment is less obvious.

In fact, most economists wouldn’t spot the problem if it was woolly and walked across the highway in front of their car. The term for this is malinvestment. And China is a textbook case. The Age reports on some examples:

‘China’s banks are coming after the country’s steel traders, hauling executives into court to chase down loans that some traders say they didn’t initially need and can’t now repay…

‘”After the financial crisis, when the government released its stimulus, banks begged us to borrow money we didn’t need,” Li Huanhan, the owner of Shanghai Shunze Steel Trading, told a judge at a recent hearing. “We had nothing to do with the money, so we turned to other investments, like real estate.”‘

Debt is one problem even a mainstream economist can spot. It is difficult to repay debt if you don’t earn an income from your investment. And one characteristic of a malinvestment is that it doesn’t earn enough of an income to justify it.

But economists don’t recognise many of the other problems, which are obvious to the rest of us. Producing things that nobody wants, like empty cities, is incredibly wasteful.

Eventually, China will experience an economic crisis. The debts they ran up to malinvest can’t be repaid. When the economy tries to shift towards a more stable balance of consumption, investment and production, it will be extremely disruptive.

Jobs and all the industries catering to construction will take a major hit. You can’t turn an investment and production focused economy into a balanced one overnight.

Unfortunately, all this means a collapse in demand for Australian resources. The mining boom will be over. The iron ore price will plunge. Treasurer Wayne Swan’s budget will be in tatters. As will the speedy half of Australia’s two speed economy.

Worst of all, many of those predictions have already come true. As for what to do about it, you can watch Greg Canavan’s presentation on the matter here.

Nick Hubble
Editor, Money Morning

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