Downwardly revised data showed the UK economy stagnated in Q2, leading to a sharp decline in the pound last month. However, we do not expect the Bank to reduce interest rates this year, given that CPI inflation is likely to rise above 5% near term, well above the BoE’s 2%… Read More …
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The single currency – the euro – was introduced on 1 January 1999 and can thus soon celebrate its ten-year anniversary. Up to and after the launch of the euro, the project of the single European currency met with strong opposition. The Americans in particular regarded the single currency as… Read More …
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The credibility of monetary anchoring is vital to central banks. One important indicator of credibility is inflation expectations. Current elevated headline inflation has caused the monitoring of expectations to be even more crucial. This monthly monitor tracks developments in the most recognised measures of inflation expectations in the US, Euroland,… Read More …
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It has now been a year since the international financial crisis really took off. The Fed as well as the European Central Bank have had to render assistance in the form of additional liquidity, and there is still a shortage of liquidity today – a year later. At this point… Read More …
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Q2 2008 did not write itself into the FX annals as a particularly remarkable quarter. The same old song about the trials and tribulations of the dollar and all the blessings of the euro characterised most of the quarter, thus only confirming the trend from the beginning of the year…. Read More …
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Our analysis reasonably concludes that Euroland headline inflation peaked at 4.0% in June and July. Also, as baseline effects begin to kick in around October inflation rates will start to decline. In other words, the period in which inflation has been running at double the ECB target (close to but… Read More …
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The chart shows my long term count for the EUR/USD movement started from 1985 year. It suggests that it is developing as a zigzag correction with wave B of the zigzag developed as an irregular triangle as is shown on the chart. This count suggests that there should be a… Read More …
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There are three sound reasons why EUR/USD could continue to decline in the coming year. First, the euro is decidedly overvalued relative to historical benchmarks. This can continue as long as the economy is expanding, but in a downturn, with several countries on the brink of recession, it can be… Read More …
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We have been cautioning for some time that volatility in the currency markets may increase further, even from the elevated levels of the past year. Nonetheless, violent market action is nerve rattling, even to seasoned investors. An uptick in volatility tends to be associated with an unwinding of leveraged positions…. Read More …
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Recent Japanese Yen and Canadian Dollar losses buck their longer-term seasonal trends, as both currencies tend to appreciate against the US dollar in the month of August. A study from 1999-2007 shows that the US dollar/Japanese Yen pair dropped an average of 208 pips in August while the US Dollar/Canadian… Read More …
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