ECB Rate Decision
The European Central Bank left rates unchanged at 4.0 percent at their September meeting.
Trichet noted a few reasons supporting the rate decision:
- Inflation risks are on the upside
- Commodity prices are weighing on growth
- Eurozone slowdown will be followed by “gradual recovery”
- Downside risk to growth remain
- ECB has no rate policy bias
- Price stability situation has improved
- The rate decision was unanimous
The ECB seems happy with the developments of the exchange rate of the Euro. It has lowered steadily over the past few months and tensions are easing. While the ECB looks like they are standing pat on rates to keep things stable and to guard against a potential inflation problem, it seems that there is no rush to change anything with the Euro coming more in line with fundamentals and moving away from speculative levels.
Bank of England Rate Decision
The pound showed some firming against the majors after suffering significant falls over the past few days. The only notable exception being against the US Dollar which seems to be running over everything in it’s path this week.
The Bank of England did not issue a statement with their decision.
The RBA Cuts Rates!
The RBA cited that inflation remained a threat but that they expect that there is “wiggle room” in their overall financial forecast for some rate cuts to relieve pressure on the economic side side.
The Australian Dollar continues to sink on speculation of further rate cuts down the line.
The Best Times to Trade
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Forex Economic Calendar
Important economic releases for forex traders for the week of Sept 1 – Sept 5, 2008.
Tuesday
4:30 Australian Interest Rate Annoucement
9:00 European PPI
Wednesday
1:30 Australian GDP (Q2)
9:00 European Retail Sales
12:15 US ADP Employment Survey
13:00 Canadian Interest Rate Announcement
Thursday
11:00 Bank of England Interest Rate Annoucement
11:45 European Interest Rate Annoucement
Friday
11:00 Canadian Employment Report
12:30 US Non-Farm Payrolls
*All Times GMT
Fed Minutes
The minutes of the August Federal Reserve meeting were released and show that the Fed is referencing a rate hike sometime in the future. The Fed references slow growth and “less than potential” GDP expectations though the middle of 2009. They also noted that inflation was expected to moderate, but not until next year.
The important part of these details is the lack of any indecision on what the next step is. Rumors have been flying that the Fed is going to cut rates even more than they did earlier this year. These meeting minutes indicate that while the timing is a big question, the Fed knows that their next move is a hike. Interest rates will not be going any lower.
The lone dissenter from the Fed rate decision this month was Richard Fisher who voted for an immediate rate hike. Mr. Fisher is worried about inflation and inflation expectations and supports more aggressive action to get inflation contained sooner rather than later.
The US dollar showed slight weakness after the Fed minutes, but remains in recent ranges with the likley hood of breaking out and continuing it’s rebound during the past two months.
Economic Calendar
Economic Calendar for the week of August 25 – 29, 2008
Monday
14:00 US Existing Home Sales
Tuesday
12:30 US Durable Goods Orders
14:00 US New Home Sales
18:00 US Federal Reserve Minutes
Thursday
12:30 US GDP Q2
23:30 Japan CPI
23:30 Japan Unemployment
23:50 Japan Retail Sales
Friday
12:30 Canada GDP Q2
*All times GMT
US Producer Price Index
The US Dollar wavered under the pressure of the producer inflation data. It continues to be rangebound with it’s eyes to the sky.
Red Hot New Zealand PPI
Normally, this would be the material that rate hike speculation is made of. These days however, it is more likely an argument for less of a rate cut. The RBNZ was expected to cut rates by 50bps during their september meeting to help ease the economic slowdown that is now seeming to be a global slowdown. The markets are now reducing that expectation to a 25bps cut because of pricing pressures that businesses are facing.
The New Zealand dollar reacted mildly by bouncing around in range. Risk aversion has been weighing heavily on the high yielding single currency. It continues to firm as the market progresses on its recovery from risk liquidation.
RBA Minutes Indicate Dovish Bias
The minutes indicate that a rate cut is probably in the works for September, but the mention of extended inflation keeps speculation of further cuts well nailed down.
The Australian Dollar remains stable after suffering a 1000 pip falls against several other currencies over the past month. It appears that the market has already priced in the expectation of a rate cut, the downside from here should be limited for the time being.