There is no better analogy to QE than anabolic steroids. Right now we are in the 'kissing our biceps in the mirror' stage of QE. The peanut-sized love spuds come 'later'. We've seen newly created money pump up asset prices to make markets look prettier, with some modest 'real economy' gains to boot. Perhaps 20% of the real economy gains will remain once QE is wound down (in a very long time from now). The other 80% tends to shrivel away as we saw with the last two rounds of QE. Additionally,…

ING Bank - "For EUR/USD we retain a negative view, targeting a non-consensus 1.20 by year-end. Political/event risks are an important, negative theme into mid-year, with a market unfriendly election result in Italy prominent. US debt ceiling discussions into a mid-May deadline are also a potential source of higher risk aversion. However, we also look for debate surrounding ECB and Federal Reserve policy to gain traction over coming months. For the ECB, the possibility of an interest rate cut…

Deutsche Bank - "The stronger than expected employment report was not strong enough to defer the December FOMC decision to meld QE3 into QE4, dropping the selling of short-term securities that is part of Twist. No doubt there will be some reaction to anything that does not see net Treasury ($45bn) and MBS ($40b) purchases of close to $85b a month, or a Fed balance sheet expansion running at a pace close to $1 trillion annualized. This will contrast sharply with the ECB, where OMT related…

ING  Bank - "The US labour report for November shows employment rising 146,000 on the month, better than the 85,000 consensus, but there were a net 49,000 downward revisions to previous data. There was also good news in that the unemployment rate fell to 7.7% from 7.9% where-as the consensus was looking for that to remain unchanged. However, the reasons behind the fall in the unemployment rate are not as encouraging. This household survey showed employment falling 122,000 with the only…

In spite of a sharp drop in demand for the Canadian dollar following recent comments by Bank of Canada Governor Mark Carney, gains opposite the US dollar are projected today. Fundamental data from the world’s largest economy are perceived to give a boost to risk confidence, and direct some of the bullish demand to the Loonie.



In just about a day after strengthening the case for tightening monetary policy, BOC chief Mark Carney said that the need for higher interest rates has become…

HSBC - "We remain bullish on gold, and we expect prices to reach USD1,900/oz by year-end. The Federal Reserve’s third round of asset purchases via quantitative easing (QE3) - and other central banks’ policy easing measures are measurably boosting gold investment demand. For investors who expect QE3 will fail to jump-start economic growth, gold offers an attractive quality asset. For investors concerned about the inflationary impact of QE3, gold appeals as an inflation hedge.

Concerns…

Bank of Tokyo-Mitsubishi - "The performance of EUR/USD since setting its most recent intra-day low of 1.2043 on 24th July is certainly indicative of investor scepticism over recent policy steps taken to arrest the euro-zone crisis. The move higher incorporated two key policy steps – the announcement of OMT by the ECB and QE3 by the Federal Reserve. On QE3 alone if the move from that July low to the September high of 1.3172 is complete, it would mark the smallest dollar sell-off of the three…

HSBC - "FX markets are no longer trading on clear mechanisms. They are trading on uncertain perceptions, be they of the impact of QE3, the implications of US data, or the questionable currency effects of non- conventional monetary policy easing. The certainty that the USD will retain its safe-haven status will also need to be challenged, and the market will likely split. We are moving from a one-way street on the USD’s relationship with RORO to one characterised by two-way…

BNZ - "Looking ahead, there is little on the data calendar tonight. We doubt the weekend’s G20 meeting will produce anything particularly meaningful. So markets look set to end the week a little more downbeat than how they began. With the risks to global growth again tipping to the downside, risk appetite may struggle to retain its post-QE3 buoyancy in the short-term. This should limit the AUD/USD and…

Capital Economics - "The upshot is that even though QE3 appears to have had a modest positive impact on financial markets, we suspect the impact on wider economic growth will still be mostly insignificant. QE3 probably won’t be much more successful at firing-up the economy than either QE1 or QE2."

While sorting through the longer-term charts for the major pairs and reflecting on the 10-14 September FX trading week, the euro's five-day rise of 2.5 percent against the US dollar -- its largest weekly advance against the greenback in 33 weeks -- certainly caught my attention. As I scanned the daily charts for the yen crosses, it quickly became apparent to me that the eye-popping move of the week was the Japanese currency's two percent drop against Europe's single currency on Friday 14…

ANZ -

- With the US FOMC delivering QE3, we expect more upside for Asian currencies.

- KRW is our preferred exposure in the Asian currency space given its high beta to risk and recent credit rating upgrade.

- We recommend buying a 3m USD put KRW call spread (strikes 1120 and 1080), at a cost of 1% with a potential payoff of 1:3.6.

- We also take profit on our long 2m USD/IDR NDF trade (initiated on August 13).

- Although we remain concerned about Indonesia’s current…

With the markets still off a high from the Federal Reserve’s decision to launch a third round of quantitative easing to breathe life to a sputtering US economic recovery, the US dollar is deemed to sustain its losses opposite the Australian dollar. The Fed launched an aggressive program yesterday, saying it will embark on open-ended purchases of mortgage debt and at the same time extended its pledge for near-zero interest rates. Likewise, a report today that American consumers continued to…

The financial markets are bracing for the Federal Reserve’s announcement today, where positive news would provide a strong boost on risk sentiment and bring gains for the Canadian dollar over its US counterpart. Despite a technical retracement by the USDCAD currency pair yesterday, trades are projected to reverse and bring the momentum back to the bears today.



Surveys of economists and analysts alike are for the Fed to announce a third round of bond purchases today. Almost…

While across the Atlantic the German Constitutional Court’s decision on the legality of the Euro Zone’s permanent bailout fund occupies the markets, North America braces itself for the Federal Reserve and Apple. Trading today between the two North American dollars sees a sustained bearish pull by the Canadian dollar against its US counterpart.



The German top court ruled in favor of the European Stability Mechanism today. Germany's Constitutional Court said that the country can…

The US dollar is believed to weaken opposite the Australian dollar as fresh signs of a weakening US economy are presumed to strengthen the case for further monetary stimulus from the Federal Reserve. Discouraging trade and consumer figures are likely to underscore the fragility of the world’s largest economy amid slowing conditions at home and abroad.



The dire global economic conditions are foreseen to be reflected by today’s July Trade Balance report from the US. With the slowing…

Deutsche Bank - "(...) we feel that the Fed should and probably will limit its actions next week to verbal easing. It would be better in our view, to hold further QE in reserve in case it is needed to deal with a major negative shock in the quarters ahead, for example, on either the euro or US fiscal front."

Capital Economics - "It now seems highly likely that the Fed will launch a third round of large-scale asset purchases (QE3) at this week's two-day FOMC meeting, which concludes on…

Bank of Tokyo-Mitsubhisi - (...) Next  week  the  key  event  for  the dollar generally is the FOMC monetary policy  decision.  Today’s  weaker  than  expected non-farm payrolls report reinforces the Fed’s thinking expressed in the minutes of its last meeting, released  on 22nd August. Hence, QE3 is a high possibility next week but we maintain  that the program will much more conditional on incoming data than QE1  and  QE2.  Hence,  a commitment to purchase meeting to meeting is more likely,…

The US economy expanded more than the previous record in Q1, which reflected gains in consumer spending and exports amid threats by costlier gasoline and a global slowdown. Gross domestic product climbed at a 1.7 percent pace in Q2, up from 1.5 percent in Q1. The weakest gain in business investment in new equipment in almost three years restrained the pace of growth, which was the slowest since Q3. The US could be stuck in a slow-growth mode, but it is certainly not on its heels as the…

Discouraging data for investors are perceived to propel the US dollar to close this week’s exchanges in gains over its Canadian counterpart. The Loonie dollar has been on six consecutive weeks of appreciation prior to this week. However, diminishing hopes of Fed stimulus are seen to direct traders to the safety of the Greenback today.



USD/CAD trades reached a 0.9945 high on Wednesday; a 0.9946 high yesterday; and also reached 0.9945 earlier today. It seems that the bulls are being…