Paulson in China

Usd continued its choppy trading pattern in Asian session regaining some of it loses to the Eur. Aud, Nzd and Cad performed well in line with stronger commodity prices and weaker Usd. Recently the greenback has been hightly reactive to the price of crude as well as shifting interest rate expectations. Currently the market is split between 25bp & 50bp cut. Whether this will represent the final cut to a dramatic easing cycle is still a moot question. We are currently leaning to a 50bp cut but could easily shift with the release of ISM – non manufacturing data and payrolls figures.

Yesterday Bernanke testified to the Joint Economic Committee. He acknowledged that the economy "will not grow much, if at all, over the first half of 2008 and could even contract slightly" but steered well clear of the "R" word (as to be expected). On the inflation front his comments were slightly less hawkish then the Fed's last accompanying statement.


In China U.S. Treasury Secretary Paulson issued a dire warning that "it is dangerous if you don't have a renminbi that reflects underlying fundamentals." In addition he stated that "appreciation has been good." So far Paulson's two day tour of Beijing has been uneventful but we weren't expecting much.

Today's ISM non manufacturing survey will hold the markets interest for a moment but will be overshadowed by Bernakes testimony and Friday's payroll (especially after yesterday unexpected 8k ADP survey).

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Quiet Open To Week

ForexGen lacked motivation in a quiet Asian session. EurUsd bounced around 1.5761 -1.5817 levels while UsdJpy trended sharply upward from 98.82 to 100.18. Friday ended on a mixed note with stock markets weaker due to some weak US data (Michigan index) and energy and commodities price declined slightly. Over the weekend WSJ reported that Treasury Secretary Paulson would announce today "sweeping structural changes in the way the government monitors financial markets" giving the Fed broader authority to secure "market stability." While we are skeptical of giving the Fed such broad powers with very little oversight we are bracing for a resurgence of risk appetite and will be focused on short Jpy trades this week. On this theme the BoJ Tankan report Tuesday will be of interest. Listening to comments last week it seems that the leadership vacuum has created a lack of unity on how to deal with the combination of growing price risk and slowing economy. While currently the BoJ has not officially adapted an easing bias the market is still pricing in 14bp cut within the next 12 months. JPY remains in favor due to risk aversion and declining carry appetite but these themes could come under pressure this week. Another currency on our watch list this week is Gbp. BoE's King is also scheduled to speak. During the MPC testimony on the Feb inflation report last week the members were more pessimistic regarding the UK economy then previously. In addition, King voiced clear inflation risks, with CPI around 3%, however due to the extent of the economic downturn, he commented MPC is more inclined to cutting rates. We still believe that market hasn't fully pricing in a full easing cycle by the BoE with rates slipping to 4.00% by end 2008 so the Gbp has additional room to depreciate.

ForexGen provides its institutional clients with incomparable professional and individualized trading services. As a professional online trading service, ForexGen provides several facilities for all kinds of traders. Our corporate and managed trading service performance are based on respect and appreciation which is only achieved by offering intelligent high end trading tools for secure investment. ForexGen is the easiest and fastest gateway for the corporate traders to perform successful trading, which provides a unique institutional investor professional facilities and highly qualified individualized services for the international customer. ForexGen provides advanced online trading software with full corporate trading services. A rich choice of managed accounts are also available, please check our Managed Account Section

ForexGen delivers what traders want: instant order execution, lowest spreads, flexible starting capital, fast deposits and withdrawal, a local support in more than 18 countries, and most of all, solid funds security.

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