Mike Paterson’s daily Forex brief
Yesterday’s eagerly awaited testimony to Congress by Fed Chairman Ben Bernanke set the markets reeling as he failed to give clear signals that he was about to open the up the easing sluice gates.
I said in my piece yesterday that we shouldn’t be surprised by Mr B and that we could see some rapid reversals if he disappointed on expectations and so it proved.
EURUSD fell sharply from 1.2300 to 1.2188, and GBPUSD from 1.5620 to 1.5554 as traders scrambled to buy their US Dollars back. EURGBP fell to 0.7834 (GBPEUR up to 1.2764) as the Euro took the brunt of the move.
But then later in his testimony he suggested that QE3 was still on the table and he was ready to act if economic data justified it. And, lo and behold, it was another mad scramble back the other way with EURUSD peaking above 1.2300 again and GBPUSD capping out at 1.5669. Crazy days indeed and stocks and gold joined in the rollercoaster ride.
He’s back for Part 2 today but it’s usually repetition of the same stance to a different set of questions. Given what we saw yesterday though traders will be ruling nothing out.
BOE MPC Minutes just out show they voted 7-2 to raise QE by Â£50 billion and 9-0 in keeping interest rates on hold. They expressed concerns over the impact on UK growth from the Eurozone bailout schemes.
The UK Claimant Count for June has just come in at 6100, in line with expectations, with the Unemployment Rate at 4.9% also as forecast. The Pound has had a little wobble on the combined news but nothing too dramatic.
After yesterday’s mad ride traders will understandably be reticent to get involved today. Many having been burnt by the ferocity of the moves, and they’ll re-assess after Mr B finally sits down, given nothing too untoward from elsewhere in the meantime.
In the world of sport, Bradley Wiggins still remains on course to be the first British rider to win the Tour de France, England and South Africa prepare to start battle tomorrow in the First Test at The Oval, and final practice rounds are the order of the day ahead of golf’s prized Claret Jug in The Open also starting tomorrow. A busy time sports fans!
Interbank Rates 08:47 BST
Today’s Data: BST
09.30-UK – BOE MPC Minutes / Claimant Count Change / Unemployment Rate / Average Earnings Index
13.30-US – Building Permits / Housing Starts
15.00-US – Fed Chairman Bernanke testifies again to Congress
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Mike ‘Oscar’ Paterson has been in the Forex trenches for nearly three decades working as a senior Spot trader in London at UBS, Chief Dealer FX at the State Bank of Victoria and in charge of Spot CHF at Credit Suisse with a daily turnover in excess of $1.5 billion. Mike now works as an independent consultant providing a fully bespoke service to the corporate and private sectors in physical FX delivery as well as guiding those who wish to improve their currency trading. Mike also presents seminars and workshops and writes for a number of publications.
To contact Mike please call +0044 (0) 1732 700383 or email firstname.lastname@example.org
The views expressed above are those of the author and should not be taken as investment advice. MSP Foreign Exchange Services will have no liability for, or to, any persons executing trades based on the content above.