Forex Fundamental analysis
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  1. #1

    Forex Fundamental analysis

    Pitfalls in the ECB plans. Fundamental analysis for 26.08.2014

    Mario Draghi’s Friday’s speech in Kansas City marked a significant shift in emphasis in the policy of the ECB. However, over the years of the monetary union the Europeans have taken on so many restrictive measures that the practical realization of all that Draghi said would be extremely difficult. In fact, he shifted the responsibility for low inflation in the national government, calling the last to think about the growth of government spending.

    The fact is that as soon as there was a question about the need to tighten the belt, the European capitals went about it in the simplest way - they mercilessly closed long-term investment projects, which could have served as a basis for future growth. The logic here is more than clear as for the ordinary voter a set of social benefits is far more important. And now Draghi strongly suggests that governments begin to invest in infrastructure.


  2. #2

    The States are returning to pre-crisis levels. Fundamental analysis for 27.08.2014

    The statistics even more clearly reflect the problems with the economic recovery, the beginning of which all European capitals were speaking about a few months ago. And today it became known that the German consumer confidence index has reduced from 9 to 8.6. It seems to be a slight drawdown, but this is the first negative monthly release level since December 2012. In addition, import prices fell by 0.4%.

    Disappointing reports came from other countries as well. In France, the producer confidence index fell, but the most dramatic data is out in Italy, the third largest economy in the euro zone. Earlier there were reports that the country has once again landed in a recession, and now data came out on a sharp drop in the consumer confidence index - with last month’s drop from 104.0 to 101.9 in August. Consequently, a rapid recovery from recession may not happen.


  3. #3

    Thorny Path to European QE. Fundamental analysis for 02.09.2014

    The impending meeting of the ECB raises increasingly heated debates on the effectiveness of the possible onset of the European version of quantitative easing. Opponents of the incentive program argue that the ECB was “stalling” for too long and the exhaust from the mass purchase of assets will not be as significant as it was in the States, where the unemployment rate seems to be stabilized, and the economy has returned to growth.

    Supporters of the start of QE insist that the risks of deflation and the meagre GDP dynamics just do not leave the European regulator any other way to influence the situation. Inflation is with each month getting closer to approaching the zero line, which certainly increases the pressure on the ECB. However, the main consequence of QE is to increase aggregate demand, namely stagnant demand remains one of the key problems in the euro zone.


  4. #4

    Fateful decision of the ECB. Fundamental analysis for 04.09.2014

    One can argue which is more important for the further fate of the Eurodollar this week - the results of the ECB meeting or Friday's report on American employment, but both of these events could have a strong impact on the market. Regarding the States, if unemployment will continue to fall and new jobs will show strong momentum again - it will be another argument in favour of an earlier rate hike by the Fed.

    Speaking of the results of the ECB meeting, it is unlikely that we will see another rate cut - it simply is not able to resist the extremely low inflation, which has slipped to around 0.3% by the end of August. The deposit rate is also likely to be at the level of -0.1%, and all eyes will be on Mario Draghi’s press conference, during which he will reveal hi position in relation to the current statistics.


  5. #5

    The ECB is keeping QE for winter. Fundamental analysis for 05.09.2014

    The outcome of yesterday's meeting of the ECB has been one of the most surprising in the history of the monetary union. Lowering the key rate to 0.05% was not expected by anybody. It is likely that the slowdown in inflation to 0.3% in August after all was the critical level for the ECB, the achievement of which was the starting point for more action from the regulator to stabilize the continuously declining inflation.

    Much more interesting was the announcement of the beginning of ABS buying. But do not confuse this program with full-fledged quantitative easing. As part of the ABS, the launch of which will take place in October, the regulator will only buy the assets of the private sector. Accordingly, the size of the program will be limited to a few hundred billion euro, which is clearly not a full QE, given the scale of the euro zone.


  6. #6

    There are talks about reforms in the euro zone. Fundamental analysis for 08.09.2014

    Friday's data on the labour market came out quite weak. Only 142k new jobs were created in August, which is well below the monthly average index over the past six months at 226k. The situation was smoothed over with the fall in unemployment to 6.1%, the best data for the last six years. Consequently, the intrigue surrounding a possible rate hike will only increase.

    Support will come from a more detailed report on the labour market - namely, the wage growth of 2.5%, decrease in the number of "long-term unemployed", as well as Americans who do not work full time. There is another nuance, in most cases the August data is usually subsequently revised in a positive way. On average, the adjustment is 31k, which can lead figure into the area of 180k.


  7. #7

    ECB follows in the footsteps of the Fed. Fundamental analysis for 17.09.2014

    Positivity came from where it was not expected. Data on the August inflation in the euro area has been revised from 0.3% to 0.4%, which slightly eased the pressure on the ECB, which keeps getting blamed for its failure of interventions. Earlier, the ECB has revised its own inflation forecast for this year from 0.7% to 0.6%, and has adopted a number of stimulus measures and cut its key interest rate.

    Significant is also the fact that the market almost did not react to this slight improvement in statistics on inflation, since the overall picture of the economy is still clearly not conducive to the growth of the latter. The current situation is simply forcing the ECB to keep rates low, and various mechanisms to pump up the economy with liquidity. However, as in the case of the American QE, there is a risk of becoming dependent on cheap money.


  8. #8

    The Fed is in a trend. Fundamental analysis for 18.09.2014

    The outcome of yesterday's FOMC meeting, as expected, helped the euro bears to update the minimum. The Fed once again reduced volume of QE3 by another $10 billion, and confirmed the possibility of the full completion of the program in the next month, if of coarse the economy does not present any unpleasant surprises. Moreover, the Fed lowered its own forecasts for GDP growth and unemployment for the year.

    The most anticipated were the comments from Janet Yellen on the prospects of increasing the rates. In general, there is some roll back to earlier positions. Yellen reiterates that the prospects of an earlier or later start of the cycle of growth of rates will depend on the economic situation. Saying that, if statistics are better than our expectations, the rate may be increased earlier.


  9. #9

    Italy risks the same fate as Greece. Fundamental analysis for 22.09.2014

    The return of Italy, the third-largest euro zone economy, into a recession carries a much higher risk than it might seem at first glance. The thing is that the country is the largest carrier of government debt in Europe, which has already passed the mark of 2.3 trillion euro, which is almost 133% of the national GDP. Therefore, if GDP ceases to grow, and all debts are increasing, the percentage will only increase.

    If in the case of Greece, they somehow managed to pour in money to extinguish the fire, the amount there were far more modest. Since 2007, the level of public debt as a percentage increased from 103 to 133%, according to Eurostat. According to OECD, at the end of this year it will reach a figure of 137.5%, and if the stagnation will continue in the future, then by 2016 the debt load will exceed the level of 150%, which is unlikely to please investors.


  10. #10

    A "remake" by Mario Draghi. Fundamental analysis for 24.09.2014

    This becomes a good tradition - macroeconomic statistics in the euro area regularly come out worse than the market expectations, which help the euro bears to move the market lower and lower. Data on German business climate is not an exception, which reached 104.7 (worst performance since April 2013). This fact cannot be called an accident - the decline is for the fifth consecutive month.

    Earlier, at the end of II quarter, German GDP showed a contraction, and that probably played a key role in the decision of the ECB about the beginning of asset purchases, although it is still far from a full-fledged quantitative easing in the way, in which we have seen in the United States and Britain. It could sound strange, but the ECB is surely delighted with such statistics - degree of protest in Berlin against the deployment of control measures can now go into decline.


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