(As written for My Paper on 15 May 2012. Click here to enlarge)

Amidst the on-going European debt crisis, the Sterling has emerged as one of the unlikely safe haven darlings for currency traders.

The Pound has strengthened 3.4% against the Euro since the start of the year and 7.4% if measured from October 2011.

To many traders, this is surprising, considering two important points. Firstly, the UK is undergoing its second recession in only three years. Secondly, the Bank of England has flooded the financial system with Sterling in its quantitative easing (QE) program – to the tune of 325 billion Pounds.

So what is the main reason for the continued strength of the Sterling despite its weak fundamentals? The answer, is the recent “hawkish” tone displayed by the Bank of England (BOE).

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(As written for My Paper on 8 May 2012. Click here to enlarge)

The proverbial sentence “Sell in May and Go Away” seems to be sweeping the currency market – at least for this week.

In the space of three days, two events have dominated the headlines for traders:

1) USA Jobs Report

On Friday, the US Labour of Statistics revealed that only 115K jobs were created in the month of April. This was much lower than the forecasted figure of 160K. The unemployment rate dropped from 8.2% to 8.1%, its lowest level since January 2009. Read more…

(As written for My Paper on 24 April 2012. Click here to enlarge)

The IMF meetings with its 188 members ended over the weekend.

To some degree, it was seen as a success. For starters, IMF chief Christine Lagarde managed to secure more than USD430 billion in pledges. Japan was the first to lend support, pledging USD60 billion in aid.

The total figure, while impressive, fell short of Lagarde’s original USD600 billion goal. This was because USA, the largest shareholder of the IMF, declined to add to the fund.

There were other cracks that were exposed during the high level meetings. Canada proposed to make it harder for Europe to tap the cash by suggesting a double vote. The first will be conducted by euro-zone members, and the second by the rest.

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(As written for My Paper on 17 April 2012. Click here to enlarge)

What a difference 2 weeks make.

Two weeks ago, China reported stellar numbers in its Purchasing Managers’ Index (PMI), with numbers coming in at a one-year high of 53.1 in March, compared to a reading of 51 in February.

As the world’s largest exporter, the PMI is an important number for traders to gauge the strength of the Chinese economy.

However, on Friday the 13th just four days back, the horror of a slowing economy came crashing back down to earth. China’s GDP figures had come in at 8.1%, a reading worse than economists’ estimates of 8.4%. The previous figure was 8.9%.

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(As written for My Paper on 10 April 2012. Click here to enlarge)

All the excitement in the previous week came to a screeching halt when the US Labour Department released the hotly watched Non Farm Payrolls figures on Friday evening.

The 120,000 jobs added in March were the lowest in five months, underscoring Fed Chairman Ben Bernanke’s concern that recent gains may not be sustained without a pickup in growth.

The figure was all the more soberising considering that the average economist forecast in a Bloomberg survey was 205,000.

The silver lining in the gloomy numbers was the unemployment figures. This came in at 8.2%, down from 8.3% the month prior. The figure was the lowest since January 2009.

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(As written for My Paper on 3 April 2012. Click here to enlarge)

China reported positive figures over the weekend, sending risk currencies higher.

The Purchasing Managers’ Index, compiled by China’s logistics federation and the National Bureau of Statistics, rose to a one-year high of 53.1 in March from 51 in February.

As Australia’s largest trading partner, China’s news caused AUD/USD to spike up a hundred pips from Friday’s closing price.

Other risk assets followed suit.

Oil rose as much as 0.5% to hit $103.58 per barrel yesterday afternoon.

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(As written for My Paper on 27 March 2012. Click here to enlarge)

This week, Eurozone finance ministers will gather in Copenhagen for talks. The main agenda will centre upon strengthening of the region’s financial firewall.

The goal is to establish a massive bailout fund that could combine the European Financial Stability Facility (EFSF) and the system designed to replace it, the European Stability Mechanism (ESM).

The EFSF, which is due to expire next year, has a current total of 440 billion Euros.

It has since disbursed 192 billion Euros in three separate bailouts to Greece, Ireland and Portugal.

Under the current rules, the unused funds would be passed on to the ESM. The ESM itself would have a fresh war-chest of 500 billion Euros available for future use.

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(As written for My Paper on 20 March 2012. Click here to enlarge)

With the Greek story out of the way, all eyes are now focused on the recovery of the US economy.

Over the last couple of months, the US has reported consistent improvements in key economic reports such as non-farm payrolls and retail sales.

For the month of February, US employers added 227,000 jobs while retail sales rose by 1.1%. The jobless rate also remained at a healthy three-year low.

These stellar numbers have damped expectations for more QE from the Federal Reserve – a stimulus that might otherwise debase the greenback.

According to the median forecast of 91 economists in a Bloomberg News survey, US GDP is expected to rise 2.2% this year, while other developed nations are slated to increase by only 1.2%.

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