Based on the recent confirmation by
the ECB that it is considering the purchase of sovereign bonds as an addition
to its other easing measures, the bias in the Euro is currently to the
downside. As far as the EURUSD pair is concerned, however, the revised GDP
figures for the USA, due out later today, could have a bearing on its
continuation.
There is a sense in the Forex market
that these figures will be disappointing. If so, they will provide additional force
to the FOMC instinct to prolong, for some time, the rise in core interest rates
that are under consideration. This could cause the Single currency to reverse
its recent decline, at least temporarily.
Funny
business in Shanghai?
The surprise announcement on Friday,
by the People’s Bank of China, that core interest rates were to be reduced, has
led the Wall Street Journal to flag what it sees as unusual
activity in the equities market in Shanghai. According to the WSJ report, this
seems to indicate that there was insider trading at work.
There was a sudden surge in Chinese
stocks in general but in property developers in particular, hours before the
Chinese central bank made its announcement. And property developers, who are
the largest non-state borrowers in China, are the ones with the most to gain
from interest rate reductions.
From our own point of view in Forex
trading, the pattern of activity seems to have been more conventional. As the
chart above shows, the Aussie dollar, which can be expected to be a beneficiary
of any increased commercial activity in The People’s Republic, spurted upwards
some two minutes after the time of the announcement. This is still a very fast reaction
and we have to wonder at the mechanism that would allow it, but at least it was
after the event. One has to marvel at the kind of trading algorithms that are
in operation at the market movers which allow such a fast response.
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