Life Won't be Easy for Carry Traders (page 2 of 2)

However the region's economy has proved to be resilient despite the triple threat of a strong currency, a slowdown in the US economy and tight monetary policy. In the week ahead, there are only a few pieces of potentially market moving European economic data, namely Eurozone retail PMI, German unemployment, German retail sales and manufacturing PMI. The lack of big event risk suggests that the movements of the Euro will be largely driven by US economic data. Meanwhile Switzerland will be releasing their UBS consumption index, the KoF, and manufacturing PMI. A sharp drop in retail sales suggest that consumption may slow as well but for the time being, the Swiss franc is acting just like the Japanese Yen, meaning that Franc is moving with equities.

Beer Maker Deal Gives the British Pound More Reason to Rally

In yesterday's Daily Fundamentals, we indicated that our technical and sentiment based indicators pointed to further gains in the British pound. The sterling did rally today which is quite a testament to the strength of the currency because nearly all of the other major currency pairs weakened against the dollar. The move was largely due to Carlsberg and Heineken's purchase of Scottish & Newcastle PLC for GBP7.8 billion. In the week ahead, the UK will be releasing a number of housing market related data in addition to manufacturing PMI. In general, we do not expect any of these numbers to be pound bullish.

Australian, New Zealand and Canadian Dollars: Any More Room for Recovery?

After Monday's massive sell-off, the Australian, New Zealand and Canadian dollars have recovered nearly all of their losses this week. With commodity prices rebounding and the Federal Reserve expected to cut interest rates again on January 30th, there is a decent chance that these currencies will extend their gains in the coming week. However that would be more of a dollar story because economic data from the Commodity Bloc was mixed. Canadian consumer prices were weaker than expected last month, giving the Bank of Canada all the more reason to continue lowering interest rates. Australia's conference board index of leading indicators dropped from 1.1 percent to 0.8 percent and RBNZ central bank Governor Bollard warned that the New Zealand is still overvalued. In the week ahead, the economic data due for release from these 3 countries are important, but likely to be overshadowed by the big US event risks.