Euro’s recovery lost steam and weakens today after data showed inflation eased in December. European Union statistics office’s CPI flash estimate moderated from 3.0% to 2.8%. The data prompted some speculation that easing inflation would give ECB rooms for rate cut even though the benchmark rate is already back to record low of 1% after two rate cuts last year. Some analysts are forecasting that inflation would drop below ECB’s target of 2% by mid-2012 should oil does not rise again. However, that’s a big “if” considering that WTI crude oil is staying firm above 100 level for the moment and is building up momentum for a test on recent high near to 115. Meanwhile, some argued that ECB could cut again in first half and the benchmark rate could … Read entire article »

The US dollar is expected to outperform other major currencies in the first half of 2012. The key reasons for the greenback’s glitter are the ongoing sovereign debt crisis in the Eurozone and the relatively strong economic improvement in the US. It is, however, rather difficult to forecast the outlook of the US dollar in the second half of the year as uncertainties related to the pace of recovery in European economies, fiscal tightening in the US and the FED’s implementation of QE3 heighten. Moreover, the ability for China to avoid hard landing would be another factor affect USD’s outlook. The US dollar index gained +1.46% in 2011. Among the major currencies under our coverage, USD rose again EUR (+3.23%), GBP … Read entire article »

By: Barbara ZigahIn Asian trading, the Euro held overnight gains following the largest single day rally for the common currency in almost two months, driven by whetted risk appetite and short covering. As reported at 2:39 p.m., the Euro was trading against the U.S. Dollar at 1.3029, retreating from Tuesday’s high of $1.3076, a gain of nearly 0.9%. Analysts say that a break above $1.3075, the 21-day moving average, could see the Euro rise toward $1.3200, the high on December 21. The Australian Dollar also got a boost, bouncing back against the U.S. Dollar toward $1.0400. Also providing some support to risk appetite was an unexpectedly positive manufacturing report from the U.S. and news that the Federal Reserve intends to provide forecasts on interest rate direction beginning this month. The U.S. … Read entire article »

Dollar recovers mildly today as risk rally takes a breath in Asia. Overall sentiment continues to favor more upside in stocks, commodities and commodity currencies. European majors will ride on risk rallies and there is room for extending the rebound against dollar. However, investors would likely remain cautious as concerns on the European debt crisis, now with attention on Italy, persist. Hence even in case of further risk rally, we’d expect Euro and Sterling to underperform Aussie and Loonie. And, that would possibly help dollar index stay above 78 level even though stocks are set to take on last year’s high in near term. The FOMC minutes for the December meeting released over night suggested the Fed will focus on communication strategy at meetings this year. Members agreed … Read entire article »

The FOMC minutes for the December meeting suggested the Fed will focus on communication strategy at meetings this year. Members agreed to include their “projections of appropriate monetary policy” into the Summary of Economic Projections (SEP) beginning in January. The SEP will also unveil “participants’ current projections of the likely timing of the first increase in the target rate” given their projections of future economic conditions. Moreover, there will be “qualitative information regarding participants’ expectations for the Federal Reserve’s balance sheet” and introduction of a more formal inflation-targeting framework. The Fed aims to increase transparency by implementing the above measures. However, some participants worried that the release of information about their individual policy projections might “confuse the public”. For instance, the public could “mistakenly interpret participants’ projections of the target federal … Read entire article »