Risk Rally Not Sustainable

December 6, 2011 by · 6 Comments
Filed under: my paper 

(As written for My Paper on 6 December 2011. Click here to enlarge)

There were two headlines late last week that caused a rally in the risk currencies.

Firstly, it was the surprise announcement by the major central banks to boost liquidity. In a coordinated action to ease credit lending, six central banks agreed to reduce the cost of temporary dollar loans offered to banks by half a percentage point. The facility, called liquidity swaps, began yesterday and will run through to 1 February 2013.

Will the risk rally be sustainable? Not in my view – and here’s why. Read More »

AUD/USD bias still to the downside

November 29, 2011 by · 8 Comments
Filed under: my paper 

(As written for My Paper on 29 November 2011. Click here to enlarge)

Traders and investors are highly concerned about the on-going debt crisis in Europe.

What is the one crucial clue that is a clear indicator that risk? The clue lies in bond yields.

By definition, a bond yield is the return an investor would earn if a bond was purchased and held to maturity.

It also represents the interest the bond issuer has to pay to borrow the money. Suffice to say, the higher the yield, the more money the issuer has to stump out to repay the bondholders.

What drives yields up or down? Read More »

Downside bias seen for AUD/USD

November 22, 2011 by · 19 Comments
Filed under: my paper 

(As written for My Paper on 22 November 2011. Click here to enlarge)

Last week, the Monetary Authority of Singapore said that the global economy and financial system are at their most fragile state since the 2008 crisis, with the immediate outlook characterised by a high degree of uncertainty.

Not the most encouraging words for traders and investors to hear, but recent data from the various industries seem to agree. Read More »

Welcome Change in Europe

November 15, 2011 by · 6 Comments
Filed under: my paper 

(As written for My Paper on 15 November 2011. Click here to enlarge)

The countries which make up the “PIGS” – Portugal, Italy, Greece and Spain, have new leaders.

Portugal is headed by Prime Minister Pedro Passos Coelho, after Jose Socrates resigned in March.

Greek Prime Minister George Papandreou resigned last week to make way for a coalition led by European Central Bank Vice President Lucas Papademos.

Former European Union competition commissioner Mario Monti, has become Italy’s new Prime Minister following the resignation of Silvio Berlusconi.

Spanish Prime Minister Jose Luis Rodriguez Zapatero has decided not to seek re-election and polls show Mariano Rajoy, leader of the conservative People’s Party, will win an absolute majority in the 20 November vote. Read More »

Expect Increased EUR/USD Volatility

November 8, 2011 by · Leave a Comment
Filed under: my paper 

(As written for My Paper on 8 November 2011. Click here to enlarge)

Last week, 2 major central banks slashed their interest rates by 25 basis points each.

The Reserve Bank of Australia was the first to act, cutting rates from 4.75% to 4.5%. This was followed 2 days later by new ECB chief, Mario Draghi, who surprised everyone by cutting rates from 1.5% to 1.25%.

Rate cuts are normally announced when central banks see that growth prospects are weakening. It was all the more surprising for the ECB, as maintaining price stability is their number one priority. However, inflation is expected to fall in the Eurozone over the next few months.

This caused Draghi to cut rates and focus on staving off a recession instead. Read More »

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