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We provide investors with valuable alternatives in the Forex marketplace. These include innovative educational opportunities, comprehensive research, superior analytical tools and state-of-the-art electronic trading capabilities.Well apparently it’s not the ECB.  However the market is a bit more concerned about the results of the bank stress tests which are due out on Friday.  The Euro is lower this morning as ECB President Trichet is having a “behind closed doors” meeting with the banks in question


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Well apparently it’s not the ECB.  However the market is a bit more concerned about the results of the bank stress tests which are due out on Friday.  The Euro is lower this morning as ECB President Trichet is having a “behind closed doors” meeting with the banks in question today, presumably to get everyone on the same page when the results are released.



This is causing a mild bout of risk-aversion, as there is some concern that perhaps they are working on how to “spin” the results, which may not be as rosy as they have been saying.  Or it could just be much ado about nothing.

Earlier today, the Bank of England released the minutes of its policy rate policy meeting which showed a heightened concern about UK inflation.  This provided the Pound with a bit of a bounce, but it gave back gains as the ECB meeting came more into focus.

Fed Chairman Bernanke is going to speak later today and is expected to maintain a dovish interest rate stance, which could put further pressure on USD/JPY as the Dollar weakens vs. the Yen.

In the forex market:

Aussie (AUD):  The Aussie is mostly lower this morning as mild risk-aversion is causing some selling in all pairs but the Euro and Pound.  CPI data due out will provide more clarity into whether or not the RBA will consider a rate hike next month, assuming the European banks “pass” the stress tests.

Kiwi (NZD):  The Kiwi is actually sporting some strength this morning despite the mild risk aversion as year over year credit card spending increased for the third month in a row.  While I’m not necessarily sure this is a good thing—the Kiwi is higher against USD.

Loonie (CAD):  The Loonie is higher this morning after yesterday’s rate hike despite the dovish comments from the BOC which initially sent the Loonie lower yesterday.  In addition, oil is higher to around 78.50, providing a bid to the Loonie.

Euro (EUR):  The Euro is lower across the board in advance of the stress tests as today’s ECB meeting is causing some traders concern.  Today’s meeting is most likely to just provide a unified response to the stress tests as they don’t want anyone going “rogue”.  So while some might feel this is because the results may be less than desired, I feel it is more of a coordinated action plan which unfortunately is necessary as the slightest misconstrued comment could send the markets reeling.

Pound (GBP):  The Pound is giving back some earlier gains and has gone mostly negative as the market is focused on the ECB meeting taking place.  This is causing some risk-aversion to start the day despite the fact the BOE policy meeting minutes showed that there is a heightened concern for inflation.  At this point, they are not sure how higher taxes and austerity measures are going to affect prices going forward, but a policy adjustment may be in order if CPI data remains above the target range.

Dollar (USD):   The Dollar is mixed today in advance of Bernanke’s speech later today which is all but guaranteed to remain dovish regarding interest rate policy.  The Dollar is catching a bit of a safe-haven bid; though it is lower vs. the Loonie and Kiwi as the birds are showing strength this morning.

Yen (JPY):  The Yen is showing strength across the board going into the Euro bank stress tests as demand for carry trades has weakened.

We were bound to see some Euro weakness going into the stress tests as the market is unsure of what to expect.  While all of the chatter leading up to the meeting has been positive, there is still reason for concern.

Today’s private meeting has led some in the market to believe that they are attempting to  “spin” the news, however I think it’s probably more of forming a plan to provide one clear, concise message.

The Euro has seen good gains over the last 6 weeks as we no longer hear chatter about Euro-Dollar parity.  It is no secret that A LOT of banks have problems, both in the Euro zone and elsewhere, so this really should be a non-event.

Nevertheless, in todays media-centric gotta have every detail every second society, these tests will picked over with a fine-tooth comb and a microscope.

So it will be interesting to see if both the Euro and Pound can turn it around today after the ECB meeting concludes (with no negative news releases).  Stocks markets are higher across the board, and Bernanke will likely contribute to further Dollar weakness today.

Keep an eye on Japan for potential intervention as continued Dollar weakness vs. the Yen is highly undesirable.

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