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Savage sell off of ‘riskier’ assets last week. Currency market report Sept 26

By • Sep 26th, 2011 • Category: Currency

The Coracle Online Currency podcast for Sept 26, 2011 in association with Crossbar fx

Significant items this week:

Tues 27th September EU – German Consumer confidence
US – Richmond fed Manufacturing, Consumer confidence

Wed 28th September EU – German Retail sales, CPI
US – Durable Goods orders

Thurs 29th September UK – Consumer credit
EU – German unemployment
US – Q2 GDP, Pending home sales

Fri 30th September UK – Q2 GDP
US – Chicago PMI

Thank you for downloading the foreign exchange market report podcast from Coracle Online and Crossbar fx for September 26th 2011.

Simmering concerns about the global economy exploded on the markets last week, resulting in a savage sell off of riskier assets such as equities and commodities, accompanied by a broad flight to the safety of core government bonds and the USD resulting in the Dollar reaching its highest level for several months, across the board.
The trigger was a combination of gloomy remarks about the US economy, a down beat assessment of the US outlook and the IMF announcing that its global growth forecasts were being lowered as economic data from China and the European zone heightened concerns that the world was slipping back into recession. The Fed announced “Operation Twist” – where they shall sell short dated Treasuries and use the proceeds to buy longer term bonds. They hope that this will keep a lid on longer term interest rates and that that will stimulate the economy.

G20 Finance chiefs issued a statement on Friday pledging to tackle the global economic crisis, but there were no actual policy initiatives announced. If past experience is anything to go by, the increasing of the bailout pot will be akin to kicking the can down the road, rather than actually picking it up and dealing with it.

So market commentators expect the USD to remain strong while announcements come and go without any substantial policy for cutting debt levels. Central banks are interfering to support their own currencies with South Korea and Brazil being the latest two in an effort to support their own currencies and maintain what little export and import growth they have.

In the UK, expectations grew of further monetary easing after the latest Bank of England minutes could be interpreted as leaning towards a second round of asset purchases or QE. This would, should it occur, weaken Sterling… but, if the E.M.U is doing the same we have to wonder if it will amount to a significant change in exchange rates against the Euro? Indeed if the US turns on the printing presses, will anything change there?

These are easy questions to ask, but pretty well impossible to answer as every outcome has a possible chance. Volatility is about the only thing anyone can agree on. What do you think will happen? Why not leave your thoughts on