Please note that as this
coming Friday (Good Friday, 18th April) is a holiday for all
important Forex markets, there will be no OmiCronFX commentary on that day.
For a long time we have been
writing about the tendency of the Forex market to react to any and all
individual periodic reports when they are announced, while policy makers,
particularly in the central banks, are focused exclusively on the trend that
becomes apparent over time. This is true in relation to all markets.
Now, according to Callam
Pickering, writing in the Australian Business Spectator, even the individual
reports on Australian unemployment are not to be relied on at the present time.
See his article on the subject here: “The
truth about unemployment in Australia”. This is primarily because of a
recent change in the sampling methodology for by the labour force survey, but
there are other issues too.
In the meantime the
Australian dollar has been on a tear, which has been fueled to a very large
extent by those same labour force surveys. Are Australian dollar bulls deluded?
Read Pickering’s article and make up your own mind.
Pressure on the ECB to increase inflation
The pressure is well and
truly on the ECB to carry out measures that will raise inflation in the
Eurozone. After a meeting of the IMF in Washington
over the weekend just past, it was reported that Mario Draghi, who was in
attendance, and his colleagues are considering the reduction of the ECB
overnight deposit rate into negative territory. The last time that was mooted
there was a sharp reduction in the value of the Euro against all its global
counterparts.
While deflation is the
bugbear, as it was in Japan
during its “lost decade”, it is also recognised that consistent low inflation
is equally damaging to an economy. Senor Draghi, when reminded of this by
Christine Lagarde of the IMF prior to the last ECB press conference, retorted
with comments thanking Madame Lagarde for her input that were dripping with
irony. It is one thing to have the IMF as a partner in the bailouts of
recalcitrant Euro zone peripheral states, but quite another to find yourself on
the receiving end of a lecture from Washington
DC , where the IMF is based, and
this is particularly so when you are being told something you already know.
Another new development is
the rhetoric from the ECB chief that seems to recognise explicitly that the
value of the Euro is a factor in all of this. Up to recently, the ECB had held
itself above the mundane matter of exchange rates to concentrate on measures
that might, or might not, affect the currency. It is probably realised too that
attempts to talk down a currency, as Central Bankers from Switzerland to Australia , where such activity is
known as “jawboning”, have found to their chagrin, are almost always doomed to
failure.
The bottom line in all of this is that there is
now definite risk on the side of a reduction in the value of the Euro, by one
means or another.
3ZG8S5
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