The OECD now sees the U.K. economy growing at +1.5% compared to its previous estimate of +0.8%. The revision is consistent with recent data, which has been more positive that the market had foreseen. British policymakers jobs have just got that much harder. The revised growth forecast does not make new Governor Mark Carneys job any easier either. Strong data and revised growth makes it difficult for policymakers to keep a lid on market rate expectations.
The rupee has come under come under severe pressure and been the worst performing Asian currency since global investors offloaded their investment in emerging economies to maximise return from rising US bond prices after the Federal Reserve withdrew quantitative easing. The rupee depreciated about 27% since April to its record closing low of 68.80 a dollar on August 28. In comparison, Indonesian rupiah fell about 12% this year while Malaysian Ringgit saw 8% depreciation. Japanese yen fell 11.6% this year.
The rupee has depreciated over 25 percent in value since May. Because of its deficits, it has fared worse than other emerging market currencies since the U.S. Federal Reserve first indicated it is considering reducing its bond-buying stimulus. External factors coupled with slowing domestic growth have dragged the rupee to a series of record lows, forcing the central bank to sell dollars from its reserves to avert a deeper slide of the local currency. The rupee touched a lifetime low of 68.85 to the dollar on August 28, and ended at 67.63/64 on Tuesday. India’s ratio of short-term debt to forex reserves rose to 33.1 percent at the end of March from 28.7 percent last September, the central bank added in its half-yearly foreign exchange reserves management report.
Forex reserves dipped to 7 months import cover at end-March
As you can see these numbers have been anything but consistent, causing problems for traders. With this in mind, lets look at last months event in more detail. Below we can see exactly what occurred with last months price action on a EURUSD 5 minute chart, during the NFP news release. NFP numbers were expected to be released at 185k, meaning analysts expected 185,000 new jobs to be added to the economy. However, at the time of release the NFP number was issued lower than expected at 162k.
Source: <a Rydex ETF List href=’http://finance.yahoo.com/news/forex-news-trading-weeks-nfp-190000561.html’ >http://finance.yahoo.com/news/forex-news-trading-weeks-nfp-190000561.html
Forex – GBP/USD holds steady after downbeat U.K. data
In addition, another 1.1 mbd or so barrels are transported through the 200-mile long Sumed pipeline connecting the Red Sea to the Mediterranean. As such, if there is any threat of disruption here, traders start panicking and this would increase the volatility of the market. High volatility necessitates a rebalancing of contracts and a clear rise of oil prices in the market. A good rule of thumb to apply here is that, for every 1% reduction in world oil production (exclusive of an equivalent reduction in demand), the average crude oil prices rise by up to $10 per barrel. When there is a crisis or any kind of instability in Egypt, hitches in the Suez Canal supply route can be caused by government cuts in communications all over the country.
A separate report showed that the U.K. trade deficit widened to GBP9.85 billion in July, from a dwonwardly revised deficit of GBP8.17 billion the previous month. Analysts had expected the trade deficit to narrow to GBP8.15 billion in July. In addition, the Bank of England said that inflation expectations for the third quarter ticked down to 3.2% from 3.6%. in the three months to June. Data also showed that U.K house prices rose less-than-expected in August, ticking up 0.4% after a 0.9% increase the previous month.