After yesterday’s moves in the Yen, the market is on high alert today for more intervention by the Japanese authorities after a massive amount of Yen selling knocked it from a 15 year high against the dollar.

Comments overnight from Prime minister Kan suggested that further intervention could follow, repeating his pledge that the government will take decisive steps to counter the Yen rise when needed, and that rapid Yen moves would not be allowed. Despite this, in the CFDs markets, the Yen continued to creep up against the dollar and euro.

The Fed and US treasury declined to comment on Japan’s currency intervention, however, Eurogroup Chairman Juncker said that unilateral currency intervention was not the appropriate way to deal with global imbalances.

The US has a good deal of data due later today with PPI, Unemployment Claims, Philly Fed Manufacturing data and lastly a speech from Treasury Secretary Geithner to wrap it all up.

Sterling has weakened against the Dollar and Euro as investors ran for cover following shocking retails sales figures released for August.

Results showed a -0.5% MoM move against a forecast of +0.3% with the YoY figure showing just a 0.4% gain against a 2.0% expected increase.

Meanwhile the UK claimant count rose last month by 2,300 which was the first increase since Jan of this year. However, the annual rate of growth in average earnings rose slightly in July, these increases are unlikely to be of any concern to the BOE as they are still considered relatively low and are unlikely to add to the UK’s current inflationary pressures.

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The day after Naoto Kan’s victory in a leadership challenge sent the Yen to a fresh fifteen year high against the US Dollar, the Japanese authorities finally stepped out of the shadows, stopped merely puffing out their chest and wagging a finger in disapproval at the continued Yen strength and directly intervened in the FX market.

The BOJ initially sold around 200-300 Billion Yen, immediately sending the pair back above 83, and it now trades as high as 85 Yen per $ after more intervention this morning.

The Nikkei reacted very positively, climbing almost 2% having been down over 1 per cent before the announcement. Unilateral intervention in the online CFDs FX markets does not have a successful record over the long-term in curbing market forces, so this story will run for a while as we see retests of the 82 level and the possibility of the kitchen sink strategy by the Japanese.

Sterling started yesterday on the back foot after disappointing RICS house price data showed their headline index fall from -4 in July to -32 in August, the sharpest one month fall since 2004.

The Governor of the Bank of England speaks at the TUC conference at 11.30am today, so be on guard for the Pound sell off that has accompanied his last few speeches.

He will almost certainly have to write another letter to the Chancellor to explain why inflation remains above the banks target level of 2% plus or minus 1%, after yesterday CPI figures showed a rise of more than forecast in the month on month data of 0.5%.

Add to this the recent poor harvests across the globe, flooding in Pakistan affecting cotton supply & high street retailers warning of price rises and you have the Governors head between and rock and a hard place.

Elsewhere in CFD trading Euro recovered against the USD overnight as the focus moves away from Euro zone sovereign risk for the time being. German ZEW economic data index fell more than expected in September. The index, which measures German investor morale, came in much lower than expected at -4.3, its lowest reading since 2009.

ZEW economists noted the increased uncertainties given the slowdown in the US economy and expect capacity to fall by year-end. Today we have Euro zone CPI & employment data to watch out for but expect all action to remain in the USD & JPY pairs today.

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The US dollar has come under some selling pressure as global risk aversion continues to ease.

Positive industrial production data out of China along with less severe banking reform rules announced in Europe, have put some appetite for risk back in to the markets. The dollar is trading downwards against the Euro as market participants look to unwind some of their safe haven trades.

Elsewhere in the CFDs markets, Sterling has come under selling pressure versus the US dollar overnight on the back of upbeat Chinese data and banking reform rules boosted risk sentiment, but is weaker against the Euro which is seen by many as more likely to gain from a strong Chinese economy.

There was mixed data out of the UK overnight, consumer confidence picked up after 3 months of decline; however the RICS housing survey showed its worst result since May 2009.

This week sees other important economic data releases out of the UK; markets will be focusing on the release of inflation data on Tuesday, followed by employment figures on Wednesday and retail sales on Thursday. UK data has been disappointing lately and there is a certain sense in the markets that the UK may be heading towards a double dip recession.

In European CFD share trading the markets were in positive territory yesterday and the euro posted its biggest one day gain against the US dollar in two months overnight.

The euro also strengthened against sterling as analysts believe there is more potential for the euro zone to benefit from strong German exports and a stronger Chinese economy.

Also, there were no nasty surprises from new Basel III rules which were more accommodative than initially anticipated. The single currency is trading well and is now looking more attractive than it has been in recent months as the European Commission released its latest outlook for the euro zone economy commenting that it sees the euro zone recovery continuing.

However, analysts are quick to point out the debt woes in the euro zone have not gone away.

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Global banking stocks are on the rise today as regulators announced details of the Basel III accord, raising the minimum core Tier 1 capital level from 2 to 4.5 per cent with a subsequent 2.5 per cent require as a buffer against future shocks, which is to act in a counter cyclical manner in the sense that Banks will set aside the money when the going is good.

Large British banks already meet the capital benchmarks comfortably, RBS, Lloyds Barclays and HSBC all have core Tier one ratios of around 9-10%, but the announcement will spark a fresh round of capital raising in the worldwide banking sector.

Today Deutsche Bank announced it will tap shareholders for cash to pay for it’s acquisition of retail bank Deutsche Postbank and to bolster its own capital position, expect this to be the first of many over the next few months.

In the CFDs markets, the announcement has signalled risk-on (at least for today) and Sterling is gaining against the safe haven currencies of the Dollar and Yen.

The gain in the Pound today look likely to be short lived, with the Chancellors controversial budget cuts sparking union discontent and threats of co-ordinated strike action across the country.

George Osborne detailed further reductions in the welfare budget, amounting to £4 Billion, but he gave no details on where the axe may fall (this is on top of the £11 Billion of cuts announced in the emergency budget in June).

The strikes would see disruption to the economy on a scale not seen for many decades and will be heavily Sterling negative – this will be on top of the effect on the Pound of a reduction in growth levels when spending cuts begin to take effect.

Better than expected jobless claims figures aided a rise in the Dollar on Friday, but as mentioned above, the Basel announcement has lifted risk sentiment and the Greenback has given back most the gains.

The Yen Dollar pair continues to trade close to a 15 year high as Japanese authorities keep up the intervention rhetoric without actually doing anything of substance.

Today is light on releases but tomorrow sees GBP CPI figures & German economic sentiment.

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Sterling has performed well particularly against the Euro in the last couple of sessions.

The trend was bolstered by July’s UK Manufacturing report showing gains for the third month coming in 0.3% and posting the biggest annual gain since 1994, signalling the economic recovery is persisting. The report suggests that strength in the domestic economy and the weak pound is maintaining a pickup in the manufacturing sector.

Another positive for the pound saw Halifax release positive house price data. This showed that house prices increased more than expected at 0.2% in August, following on from a 0.7% rise in July.

German exports unexpectedly dropped in July for the first time since April at -1.5% month on month and imports fell at -.2.2%. The Trade balance showed a surplus of €12.7bn. German Industrial output also disappointed at 0.1% after expanding at the fastest pace in two decades during Q2 2010.

This data adds to evidence that the German economy is showing signs of cooling and may struggle to gather strength as the global recovery weakens and European governments cut spending to push down budget deficits

U.S. markets tried to stage a recovery but failed, the morning rally was put to a halt after President Obama’s speech acknowledging that the recovery has been “painfully slow” and urging the U.S. Congress to approve more business tax breaks and infrastructure spending to boost the economy.

The Fed’s Beige Book report did not help to improve the mood much either. Although the report showed moderate growth across most of the 12 districts, it also pointed to a “widespread signs of deceleration”.

Today’s main attraction is the Bank of England policy statement for September. It is widely expected to maintain its current policy of a benchmark interest rate at 0.50% and asset purchase target at GBP 200 billion.

Policy maker Andrew Sentance has been defeated at the last three monthly meetings in a push for higher interest rates to stem a pickup in inflation above the government’s 3% upper limit and we will have to wait for the minutes to see if it remains the same this time. The decision will be announced at noon today.

We also have UK Trade balances which expected to show the trade deficit to widen slightly to GBO 3.7bln in July and The afternoon the usual weekly Initial jobless claims in the US. After climbing to 504,000 in mid-August, initial jobless claims have averaged 475,000 for the past two weeks. The market is looking for 480,000 this week.

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We can all agree that the economic data releases at the moment are confusing.

In the UK, the Nationwide survey last week showed UK house prices declining month on month by 0.9%, today the Halifax Survey reports house price increases of 0.2% from July.

Positive consumer confidence figures were followed by disappointing PMI index figures, with the net result that traders have been left bewildered and slightly uncertain and the markets necessarily choppy.

This mornings releases are no different, industrial production came in lower than forecast and manufacturing production exactly as predicted, but in the CFD trading markets we saw an almost one cent move upwards in Sterling in the run up to the figures, and are in the midst of a retracement back to where we started.

In today’s online CFDs markets it is getting more and more difficult to see the wood from the trees but we may now see calm until tomorrows Bank of England interest rate decision, at which no change to the base rate and asset purchase scheme are expected.

Conflicting data has also been a theme in the US, with the raft of negative data suddenly reversed with positive ISM & employment figures at the end of last week.

What was becoming a clear picture of a slowing US economy and potential re-entry into recession was suddenly muddled slightly with the apparently positive figures.

However, investors remain fearful of the stalling US recovery (and impending QE2) with traditional safe haven currencies like the Swiss Franc and Japanese Yen continuing to perform strongly.

The Yen hit the highest level against the Dollar since 1995 yesterday, as the supposedly psychological key level of 84 was brushed aside easily. If you are forex CFD trading, note that this afternoon sees Narayana Kocherlakota of the Federal Reserve speak, along with the release of their beige book & consumer credit statistics.

Euro worries have remerged (or should that be come back into the spotlight since I’m pretty sure nothing much has changed, except the fickleness of the markets) with the Op-ed in America on the total uselessness of the bank stress tests, and a unexpected drop in the growth of German Exports. Tomorrow sees German CPI released and on Friday a raft of EU wide industrial production.

CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

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Back in July, 91 of Europe’s largest banks were required to disclose how much government liability from European countries they held on their balance sheets. Regulators said the data showed banks’ total holdings of that debt as of March 31st.

At the time, worries about the Banks’ government-debt holdings were fanning fears about the health of Europe’s banking system as a whole. Release of the bank data was considered the main benefit of the stress tests, which were widely criticized as being lenient overall, but taken as showing that the exposures were not as widespread and extreme as had been feared.

According to an article in today’s Wall Street Journal, “An examination of the banks’ disclosures indicates that some banks didn’t provide as comprehensive a picture of their government-debt holdings as regulators claimed. Some banks excluded certain bonds, and many reduced the sums to account for “short” positions they held—facts that neither regulators nor most banks disclosed when the test results were published in late July”.

Asian CFD markets, starved of news or data input following the US/Canadian Bank Holiday, seized upon this article and dumped the Euro – especially versus the Yen – on fears that Eurozone Governments and Financial Institutions would accordingly find it difficult to raise new and renew maturing funding with doubts returning over the health of the region’s finance.

The Yen was the favoured recipient on the lack of mention of the strength of the currency in the statement from the Bank of Japan which followed their decision to leave Japanese rates and QE levels on hold.

The Central Bank now seems more confident of strong domestic growth, and the expectation is that lower unemployment and increasing inflationary pressures will prompt the Bank to resume a hike in official rates later this year.

Also this morning, Australia’s Labour Prime Minister, Julia Gillard, finally secured the support of two key Independent MPs which enable her to form a working Government with a majority of 2 over the opposition party. All positive news for the currency going forward.

Also in Australia this morning, the Reserve Bank of Australia announced unchanged rates for the Aussie Dollar, but signalled that it is maintaining its tightening bias.

In CFD trading, Sterling has picked up this morning following its ‘across the board’ dip yesterday. Rumour had it that the currency’s fall was on the back of a UK Clearer buying Euro/Sterling as part of the Government’s requirement to fund the European Agricultural Budget.

This caused the rate to rise up through the 100 day moving average thus cementing the move in thin market trading. Today however, the currency bounced back assisted by the fall in the Euro but more on strong retail sales data from the British Retail Consortium which showed a rise in sales volumes compared to the same month last year.

Talk of the demise of the UK Consumer seems greatly exaggerated.

Today there is a raft of economic data globally but little of market importance other than German factory orders. Expectations are for another strong number – not as strong as last month but still indicating year-on-year growth exceeding 20%.

A good question is whether a strong German economy in isolation within Europe, propagating a strong Euro, is actually beneficial for the region…

CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

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Today is Labour Day in the US and in Canada which means very little work will be done anywhere.

Going back to Friday though, the stripped out version of the non-farm payrolls figure produced much stronger numbers than had been anticipated.

The market now feels that removing the seasonally volatile short-term Government hirings gives a much more relevant picture of the employment situation. Accordingly, August private payrolls were reported to have grown by 67,000 (against the consensus figure of 40,000) whilst the July number was revised up from the previously reported -131,000 to -54,000.

Economists quickly concluded that, although the US economy continues to face problems ahead, and that the unemployment rate will likely remain stubbornly high, Friday’s employment report is an important step in the right direction, and should weaken the case for additional quantitative easing on the part of Federal Reserve.

Today’s subdued market is likely to set the tone for certainly the early part of the week with only a light amount of data scheduled and no policy changes anticipated at any of the 3 Central Bank meetings over the coming days.

Following the additional easing measures decided upon at the emergency meeting on 30th August, the market expects the Bank of Japan to maintain its policy settings tomorrow morning. The CFDs‘ market focus will continue to be on the seemingly inexorable appreciation of the Yen and what the government is going to do to try and suppress it.

The Reserve Bank of Australia is also expected to maintain the status quo on rates given the unexpectedly low CPI figure for the 2nd Qtr of the year.

For the BoE policy announcement, there is unlikely to be much to get excited about – the official UK interest rate and the levels of QE purchases will both be unaltered in September.

The minutes of the meeting, to be published on 22 September are a different matter as there is a real possibility of the discussions revealing a three-way split on the Committee.

All the debate will be between the external members of the Committee, with Andrew Sentance sticking to his guns on the need for higher rates, whilst the other three members, (David Miles, Adam Posen and Martin Weale) all possible advocates for the instigation of a 2nd round of easing.

CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

This content should not be construed in any circumstances as a recommendation or solicitation of any offer to buy or recommendation or offer to sell any security or other financial instrument.

Today is the first Friday of the month, so all aboard the good ship Payroll, as US jobless figures are released this afternoon amid the usual scrum of forecasts and media hype.

See the bottom of this blog for the US Non Farm Payroll results…

But it is an important data release, and the Dollar is treading water against the Pound and Euro until we get to see the numbers after lunch.

The consensus is for a third consecutive month of decline with -105K jobs lost, and an unemployment rate of 9.6 percent, still stubbornly high given the impressive pace of job creation in March and April.

The figure was made even more important in light of the surprisingly good ISM figure earlier in the week, and continuing with the naval theme, should give us a clue as to when QE2 may dock over in the US.

The ECB left rates unchanged at 1% yesterday, as expected in light of the better than expected GDP performance in the second quarter of this year and the high levels of confidence indicators during the summer.

They also revised upwards its growth forecast ranges for 2010 from 0.7%-1.3% to 1.4%-1.8%. Nevertheless, President Trichet remained cautious and said that the ECB expects the pace of economic growth to decelerate over the second half of the year. The ECB also announced that they have extended emergency lending measures for banks into 2011, remaining in crisis mode due to the risk of a renewed U.S. recession putting the euro-area’s rebound in jeopardy.

This morning ECB governing council member, Nowotny, said that any ECB exit (from the current QE stance) would start with liquidity, followed by collateral quality and finally, interest rates. The Euro’s value was mostly unaffected.

The slow decline of Sterling over the past week continued yesterday as a report showed U.K. house prices slid the most in six months in August. Data from the Nationwide Building Society showed that the average home price dropped 0.9 percent from July. Another report also showed that an index of British construction fell last month to the lowest since February.

Non-Farm Payrolls Update

The US job data has been released and has come in much better than expected. Payrolls fell 54,000 much better than the expected drop of 105,000.

In CFDs we have seen a bounce in equities as a result and some unwinding of USD and JPY strength on the back of the data.

CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

This content should not be construed in any circumstances as a recommendation or solicitation of any offer to buy or recommendation or offer to sell any security or other financial instrument.

The US economy grew by just 0.3% over the same three months.

A different two-cent range and a different outcome took sterling lower but only on the second attempt. Last Monday’s two lost cents had been recovered by Thursday morning. It was not until London took the bank holiday Monday off that the longer-lasting damage was done.

In a week otherwise bereft of useful UK statistics Friday’s first revision to second quarter gross domestic product (GDP) took centre stage. Having initially estimated quarterly growth of 1.1% the Office for National Statistics upgraded its guess to 1.2%. Surprisingly, there was a negative reaction to the good news. The sell-off was only brief but it was enough to demonstrate the market’s confusion about sterling. It is almost as if investors saw the strong GDP figure as a sort of economic swansong. They believe the chancellor’s austerity budget will weigh on the economy and that the numbers will get worse; they just don’t know by how much.

If CFD trading investors are in two minds about sterling they are equally confused about the US dollar. We had become used to the idea that bad news for the global economy meant good news for the safe-haven dollar and yen. On Tuesday that link appeared to snap. It was announced that existing (as opposed to new) home sales had slumped by 27% in July, with sales running at annual rate of just under four million. With just over four million homes on estate agents’ books it means a 12-month overhang of unsold second-hand real estate. As one would normally expect, the horrid news sent investors scurrying for safety but they went for the yen, not the dollar. It was the same pattern for the rest of the week. Not until this Monday did the dollar show signs of recovery. Even then it was not clear whether the rebound marked a return to form or was just a fluke.

CFD investors looking for bad US economic news did not have to content themselves with the fall in existing home sales. They found plenty more ammunition among the ecostats. The Richmond Federal Reserve’s manufacturing index fell by five points to 11. Durable goods orders went up by only 0.3% in July; excluding transportation items (trains and boats and planes) orders were down by -3.8% on the month. New home sales fell by more than 12% for the second month running. The week’s toughest call for the dollar should have been Friday’s second quarter GDP figures. The previous estimate of 0.6% quarterly growth was revised down to 0.3%. In the event, the dollar received only mild punishment, perhaps because investors were relieved the figure was not worse.

Sterling and the dollar both face challenges this week from the purchasing managers’ indices, an important barometer of how the manufacturing and services sectors are performing. For the dollar the biggest test of the month comes with Friday’s employment data, specifically the change in non-farm payrolls. Last month’s figure was a disappointment and this latest one will probably not be much better. What will be instructive is how the market reacts to an off-target number. Are we back to normal, buying the dollar on bad global economic news, or are weak US numbers now a reason to sell? Until we find out, the safest risk management strategy is (as is so often the case) a hedge.

CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

This content should not be construed in any circumstances as a recommendation or solicitation of any offer to buy or recommendation or offer to sell any security or other financial instrument.