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US markets closed for Presidents Day holiday |
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Sunday, 18 February 2007 |
- US markets closed for Presidents Day holiday
- Traders await Wednesday’s data with keen interest
A US bank holiday
today for Presidents Day will likely mean a quiet start to the week and
a chance to wade through the stack of paper and list of “things-to-do”
most of us have on our desks. There are no data releases today and the
quiet start to the week continues until Wednesday when traders can get
their teeth stuck into the minutes from both the Bank of England’s MPC
and the US FOMC. The MPC minutes may go some way to settle the variance
in views surrounding the next interest rate move. The vast majority of
the market is expecting a rate hike by the MPC in April but softer UK
data last week has increased the probability rates would be left on
hold. The minutes are pivotal in giving us a view on how members may
vote next time around with the market expecting a 7-2 split with 2
voting for a hike and 7 for rates on hold. If the number
voting for a rate hike is higher than 2 then expect the pound to
strengthen and vice-versa for less than 2 voting for a hike. The
extension of the congestion charge begins today which no doubt will
irritate many of our readers. I am sure millions of London drivers will
be over
the moon with the extension so long as car less Ken Livingstone can
afford to make more ‘fact finding’ trips to South America and the
coffers of Toyota (sellers of the exempt low-emission Prius) are filled!
The Kiwi dollar has
broken above $0.70 against the US dollar this morning as 84% of traders
expect the Reserve Bank of New Zealand to hike rates to 7.50% next
month. This would be the first rate hike for 15 months and should add
further pressure to the GBPNZD cross rate which has broken below $2.80
to the lowest level in 6 weeks. Japanese data continues to disappoint
the market and, with few expecting the Bank of Japan (BOJ) to hike
interest rates on Wednesday, the carry-trade (where one borrows a low
yielding currency such as the Japanese Yen to invest in a high-yielding currency
such as the Kiwi dollar) will continue to boost demand for Kiwi
dollars. Kiwi dollar buyers should pray for a surprise rate hike on
Wednesday morning by the BOJ as this should stop GBPNZD testing NZ$2.75
again. I wrote a GBPNZD research paper late last week so if you want
our latest views in more detail please reply to this email requesting a
copy or click the link on the right.
Weak UK data and
stronger Euro economic releases have added to the fall in GBPEUR which
was overdue but not expected to fall a full 5 cents to where the whole
move began back in January after the surprise Bank of England interest
rate hike. I have written a new GBPEUR research paper this morning
which goes into much greater detail so if you want our view on where
GBPEUR is heading please reply to this email requesting a copy or click
the link on the right.
My
choice early in life was either to be a piano-player in a whorehouse or
a politician. And to tell the truth, there's hardly any difference.
Harry S Truman
FX Research and Analysis undertaken by:
David Johnson - Halo Financial
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