May 1, 2012
There is a very old saying in the stock market that goes “Sell in May, and Go Away.” This pertains to the notion that investors should cash in on their investments this month and take the summer off because June, July, August and September have traditionally been some of the worst months in the equity market.
Over the past decade, this adage has held true. If you were to sell the S&P 500 at the end of May, you would have avoided an loss over the past 10 years. For the EUR/USD however you would have lost out on a gain but selling USD/JPY in May would have been a great idea because the currency pair fell steeply between June and September.
Looking beneath the hood however, the decision to sell in May and go away for the summer is not so easy for currency traders because if you did so in 2009 and 2010, you would have missed out on big gains in the EUR/USD. Between June and September of 2009, the EUR/USD appreciated more than 3 percent and in 2010 it rose nearly 11 percent.
This year, there is a reasonable chance that stocks could continue to fall, leading to more risk aversion in currencies because US data has been mixed and central banks are returning to easier monetary policies. However following seasonality without following stories blindly would be a big mistake.
Posted in eur/usd, euro, forex blog, forex seasonality
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April 30, 2012
The Reserve Bank of Australia is gearing up to cut interest rates this evening. The market is currently pricing in 32bp of tightening which means that investors expect the central bank to reduce rates by a minimum of 25bp. 50bp is a possibility but given some signs of improvement in Australia’s economy (jobs and construction/services), I expect a more moderate move. Here’s a table comparing how economic data has fared since the last monetary policy meeting on April 3rd.
Posted in Australian Dollar, Reserve Bank of Australia, aud/usd, australian dollar forecast
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April 25, 2012
Here’s my marked up version of the FOMC Statement with notable changes.
Compare with:
March FOMC Statement
Release Date: March 13, 2012
For immediate release
Read the rest of this entry »
Posted in FOMC, Federal Reserve
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April 25, 2012
Aside from the Federal Reserve, the Reserve Bank of New Zealand also has a monetary policy announcement this afternoon. The RBNZ is expected to keep rates unchanged - hard to validate a rate hike when the RBA is planning to ease. Also, the last time the RBNZ met, Governor Bollard said “sustained strength in NZD would reduce the need for further increases in the cash rate.” - So it doesn’t look like rate hikes are in the pipeline until there is more evidence of a recovery. Nonetheless, here’s a table of how the economy changed since the last meeting:
Posted in New Zealand dollar, reserve bank of new zealand
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April 25, 2012
Here’s a table comparing how the US economy has changed since the last FOMC meeting in March. More weakness than strength 4 sure…
Posted in FOMC, Fed Rate Cut, Federal Reserve
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