22 MAY 2013: BERNANKE HOLDS THE KEY TO THE STRENGTH OF THE USD

Global markets traded steadily yesterday building up to the publishing of the Federal Reserve’s minutes from the last BOD meeting in April/May, and Ben Bernanke’s statement to Congress later today.  After a small correction on Tuesday, the USD continues to strengthen and is up close to record high against a basket of currencies, DXY.

As proven over the last few weeks, the overall trend in the USD is pointing up towards all currency pairs in spite of a day or two of declines.  This trend is supported by three main factors;  the forecast for the US is better than for any other economy, Europe is ridden with recession and Japan is concentrating its efforts on increasing the inflation to the 2 % target.

The upswing in the US economy is mainly due to its monetary easing and FED's loose monetary policies. FED representatives have, over the last few days, indicated that the bond buying program will soon come to an end. If Bernanke “sneezes” today and states the same as his local FED representatives have done, it would mean a further strengthening of the USD.

A weaker Euro and Yen over the last few hours seem to indicate that this is what markets expect.  After the Japanese Economy minister talked the Yen up earlier in the week,  he seems to have been reprimanded by superiors, and the Yen continues its free fall. The International Monetary Fund, IMF, in a report today, urged Swiss authorities to weaken the Franc by unwinding its currency reserve funds. The Franc has already depreciated 3,7 % towards the Euro in 2013.

Precious metals continue to fluctuate, wildly searching for direction.  The large increases in gold and silver throughout Asia and early European trade was quickly eaten by new steep falls. Oil prices keep steady. Smaller than expected English inflation strengthened GBP and gave the markets hopes for loser monetary policies, meaning more money printed by the Bank of England.

Follow up with or daily market reviews on http://www.MAYZUS.com/en/market-reviews.html

11 March 2013: US-Dollar keeps the upper hand

The USD keeps the upper hand in the currencies markets and continue to gain both against a currency basket and major currencies as Euro, GBP and JPY. USD/JPY traded at 96,10 – a 3-and-a-half year high following surprisingly strong USD labor data on Friday. US employers added a more-than-expected 236 000 workers to their payrolls in February. The jobless rate fell to a four year low of 7,7%.

There is still a way to go before the unemployment numbers reach the 6,5% target set by the Federal Reserve (FED) and monetary easing is reconsidered. Before this target is obtained the US economy must produce more than 200 000 monthly jobs for the next three consecutive months. The strong February data has, however, created a momentum and new optimism that the US economy finally is turning and lying the financial crisis from the autumn 2008 behind.

Risk appetite was, however, curbed by a mixed bag of economic data from China painting a patchy recovery in the world’s second-largest economy. The data signaled a looming dilemma for policymakers, as inflation stood at a 10 month high in February. Factory output and consumer spending were weaker than forecast. The data caught commodity prices between growing optimism of increased consumption and a stronger dollar. Non-dollar holders are buying dollar-denominated commodities.

In Asia the MSCI-index for Asia-Pacific was up 0,1% while Shanghai fell 0,3%. The Dow Jones industrial average posted its fourth consecutive record high on Friday. European shares also jumped on the strong US labor data. The strength of the dollar is also a reflection of more fundamental money flows out of the yen and euro. These developments nudge the dollar higher. Currency speculators are boosting their bets in favor of USD and raised their short positions in most other currencies as yen, pound sterling GBP and Euro. Oil and precious metal prices keep steady.

Follow up with or daily market reviews on http://www.MAYZUS.com/en/market-reviews.html

04 March 2013: Asia tumbles on China worry

 Asian  shares slipped on  Monday as China tightened its grip on the property sector. Beijing increased Friday  required down payments and loan rates for buyers for second homes in cities where prices have been quickly  increasing  in an effort to contain housing costs. This had immediately a negative effect on the Chinese markets and led to a tumble in Asia. The MSCI-index for ASIA-Pacific shares are 1,3 % down after Shanghai shares slipped 2,3 %.

 Slower growth in  Chinese increasingly important services sector had also an impact. The growth in this sector was slower than in five months, reinforcing the view that the Chinese recovery remains modest. The slower Chinese growth had an immediate effect on Australia where the AXJO index fell 1.2 %. Japan was the only positive spot.  The Nikkei 225rose 0,6 % as the sole gainer in the region. Export companies were boosted by a weaker yen and surprisingly strong US manufacturing and consumer sentiment.

 The new Governor of Bank of Japan (BOJ) stated that BOJ is ready to take whatever measures necessary to get Japan out of the vicious deflation circle. USD/JPY trades at 93,33. In spite of its budget problems USD is trading on a six months high against a basket of currencies. Currency speculators have over the last week increased their bets in favour of the US dollar.

 Evidence of Europe’s problem with Spain at risk needing a state bailout is weighing in on the Euro.  Data presented on Friday showed that Germany and Ireland are the only Euro zone members with factory output growth last month. Joblessness within the Euro zone rose to an all-time high. The Euro steadied at 1.3015 after slipping to a low of 1.2966 on Friday, the lowest level seen in 3 months.

 Concerns about the negative impact from the USA spending cuts also weighed in on US crude which is down to USD 90.59 a barrel. Brent is trading at 110,50. Gold and silver prices are hurt by the strong dollar.

Follow up with or daily market reviews on http://www.MAYZUS.com/en/market-reviews.html