Forex Market Updates & Commentary

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• Report of a negative report on the EURO
• FXStreet webinar today at 11:00 AM ET. Register here
• NY Morning Forex Commentary for May 11th is available for viewing
• Canada Trade Balance Rises
• US Trade Balance comes out at -48.28B. Worse than expectations
• ECB Stark tries to keep the EURO supported so inflation can remain tame
• US & Canada Trade Balance Data Due at 8:30AM
• ECB’s Stark says the Euro will guarantee stability and prosperity in Europe.
• BOE’s King
• Cable completes hourly retracement following inflation report
• BOE Inflation Report
• EUR/$ hourly consolidation b/w 1.44177 and 1.43777
• U.K March trade balance came in at -7.7B
• German Deputy Finance Minister Asmussem says inflation rate could exceed official 2011 forecast of 2.25%.
• Euro support @ 1.43837

Report of a negative report on the EURO Posted: 11 May 2011 06:25 AM PDT There is talk of a negative report on the EURO from a private consulting firm which is having an effect on the EURUSD.

FXStreet webinar today at 11:00 AM ET. Register here Posted: 11 May 2011 06:08 AM PDT

NY Morning Forex Commentary for May 11th is available for viewing Posted: 11 May 2011 05:50 AM PDT

Canada Trade Balance Rises Posted: 11 May 2011 05:31 AM PDT Canada Trade Balance: Survey: 0.4B   Actual: 0.6B   Prior: 0.0B   Revised: 0.4B Mar vs Feb Exports: $37.372 vs $36.116 Agricultural: $3.045 vs $3.229 Energy: $9.430 vs $8.980 Forestry $1.999 vs $1.805 Industrial: $9.614 vs $9.270 Machinery: $6.540 vs $6.241 Automotive: $4.567 vs $4.554

US Trade Balance comes out at -48.28B. Worse than expectations Posted: 11 May 2011 05:30 AM PDT However exports was largest since 1994. They totaled 172.7 Billion which is a record. Imports came in at 220.8 billion on oil (higher prices means higher imports), computers and autos. If oil was excluded the trade balance would be -16.89 billion vx -19.956 billion last month. The inflation adjusted trade balance (used for GDP) widened to -50.063 from -49.259 B. This suggests lower GDP. There is little reaction to the data.

ECB Stark tries to keep the EURO supported so inflation can remain tame Posted: 11 May 2011 04:38 AM PDT ECB Stark is on the newswires saying that the ECB has to withdraw monetary stimulation to control inflation. He also says inflation to average above 2.5% in 2011 and that the ECB sets monetary policy  for EURO as a whole. He thinks that the markets did not fully understand the ECB last week (i.e., when Trichet was perceived to be more dovish).  He referred to the code words and commented on how they have served the ECB well but warned that the market should not put too much emphais on a single word (i.e. “vigilence”).  He further warns that the use of code words does not mean ECB is committed.  The EURO strength has kept inflation down as it lessens import inflation.  His comments suggest the ECB is not all that excited about the sharp fall in the EURO. Their mandate is to keep inflation low - below 2% and it is above that level now. A lower EURO does increase the price of imports and in the absense of the strength, the ECB likely feels that inflation would be higher and borrowing costs would likewise be higher in the weak and strong economies of the EU. The EURUSD has moved a bit higher on his comments. Greece remains a concern today. Nevertheless the EURUSD is in a very narrow range today (70 pips), suggesting a non trending market. The range is likely to be extended.  Will it be higher or lower.  Look for a break.  If the EURUSD is to recover today a move above the 1.4378 level will be eyed for clues by the market. This level was a ceiling for an extended period yesterday (see chart above).  The price move briefly above the level on the last move higher but has moved back lower (see chart below).  ON the downside, the 1.4351 level is trendline support on the 5 minute chart. A move below this level should solicit stop selling.  Until then it may be a dip buying opportunity.  That is what Stark seems to want at least.

US & Canada Trade Balance Data Due at 8:30AM Posted: 11 May 2011 04:30 AM PDT

ECB’s Stark says the Euro will guarantee stability and prosperity in Europe. Posted: 11 May 2011 03:51 AM PDT

BOE’s King Posted: 11 May 2011 02:50 AM PDT MPC expects recent softness in activity to prove temporary. Risk that high inflation will push up CPI expectations. MPC needs to focus on the medium term. Bank rate has been so low partly because of the gap between the Bank rate and commercial banks funding costs. Hops that the fall in bank funding spreads will allow BOE rates to rise. Low money supply growth is dampening consumer spending and inflation. Stable exchange rate is a good thing. We are not helpless at all but cannot do much to offset short term inflation movements.

Cable completes hourly retracement following inflation report Posted: 11 May 2011 02:42 AM PDT Cable was trading around the 1.6420 area just before the release. Seen here the pair has climbed 50 points following the Bank of England’s inflation report completing a move from May 6th highs to Monday’s low. Further higher we see the 200 hour moving average coming in an at 1.6490; a level that showed the pair support early last week.

BOE Inflation Report Posted: 11 May 2011 02:34 AM PDT Sees annual GDP growth close to 3% in 1Q 2013. Near-term CPI outlook markedly higher than in Feb. Roughly equal chance CPI above or below goal in medium term. Growth outlook weaker, near term CPI outlook higher. Fiscal squeeze is likely to weigh on growth. Prospects for inflation are “highly uncertain”. Risks to growth skewed to the downside. “Significant” downside risk to consumer spending. “Good chance” inflation will reach 5% this year. Surveys suggest underlying growth is stronger than GDP data. Pace of growth likely to pick up from “soft patch”.

EUR/$ hourly consolidation b/w 1.44177 and 1.43777 Posted: 11 May 2011 02:04 AM PDT BOE inflation report is due out in less than a half hour. Maybe that will stur the market a bit.

U.K March trade balance came in at -7.7B Posted: 11 May 2011 01:31 AM PDT Surprisingly the market had a limited reaction to the release.

German Deputy Finance Minister Asmussem says inflation rate could exceed official 2011 forecast of 2.25%. Posted: 11 May 2011 12:50 AM PDT Germany will comoply with 3% deficit limit in 2011. there will be debate on Greece next week, no decision will be taken. Sees Eurogroup adopting Portugal package next week. Need to move toward exchange rate regime taht allows adjustment in line with economic fundamentals.

Euro support @ 1.43837 Posted: 10 May 2011 11:05 PM PDT Not much action tonight so far. On a 15 minute chart we find some EUR/$ support at 1.43837; the 38.2% fibo line on the move from yesterdays low to today’s high.

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