Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Good Data + Broker Squeeze = FX Risk Recovery

By Kathy LienForexJan 29, 2021 05:07
ph.investing.com/analysis/good-data--broker-squeeze--fx-risk-recovery-50589
Good Data + Broker Squeeze = FX Risk Recovery
By Kathy Lien   |  Jan 29, 2021 05:07
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
EUR/USD
-0.21%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
GBP/USD
+0.22%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
USD/JPY
-0.05%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
AUD/USD
+0.41%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
NZD/USD
+0.58%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
CAD/USD
-0.41%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
All of the major currencies traded higher on Wednesday on the back of good data and equity market gains. The U.S. economy expanded by 4% in the fourth quarter, but this increase was not enough to prevent the economy from shrinking at its fastest pace in 70 years. On a year-over-year basis, U.S. GDP fell 3.5% in 2020, the first decline since 2009 and the sharpest since 1946. On the bright side, the U.S. economy closed the year in good shape. Despite holiday restrictions, the economy still grew in the last three months of the year, and the increases in exports, inventories and investments are a sign that businesses are planning for a recovery. Q4 also marked the second straight quarter of positive growth. Jobless claims and the trade balance were better than expected and, collectively, these reports drove USD/JPY to its strongest level in six weeks.  
 
Yet, the U.S. dollar’s gains were limited to the Japanese Yen because the rebound in stocks had a bigger influence on forex flows. The euro, sterling, the Australian and New Zealand dollars stabilized after yesterday’s decline. Equity investors were encouraged by the steps that brokers took to regain control of the speculative short-squeeze frenzy. Robinhood and interactive brokers restricted trading in stocks and options to sell only and increased the margin requirements for long and short positions. Arresting control from speculators lowers volatility and helps restore normal market activity.
 
Data from the Eurozone was also better than expected, with inflation in Germany doubling expectations and Eurozone economic and industrial sentiment improving. Inflation is still too low for the central bank to worry, especially with such a strong currency. In fact, the longer EUR/USD holds above 1.21, the more jaw-boning we are likely to hear from European Central Bank officials. Germany is next to release Q4 GDP and, unlike the U.S., growth is expected to turn negative at the end of the year. Germany went into partial shutdown in early November, so tomorrow’s report should reflect the impact of increased restrictions. This will be the first of two negative quarters that plunges Germany back into recession. No data was released from the UK, but sterling was taken higher by the risk rally.
 
The commodity currencies were mixed. The New Zealand dollar was the best performer despite weaker trade data. The Australian dollar steadied thanks to stronger export prices. Producer prices are due for release tomorrow and is expected to be firmer. The Canadian dollar did not participate in the recovery despite stronger earnings. Part of that may have to do with tomorrow’s GDP report. Investors are concerned that growth was weaker in November, but with retail sales and trade ticking up, the risk is to the upside for the report. 
Good Data + Broker Squeeze = FX Risk Recovery
 

Related Articles

ING Economic and Financial Analysis
FX Daily: Necessary Evil And Necessary Fixes By ING Economic and Financial Analysis - Oct 17, 2022

As markets price the Fed's peak rate almost at 5.0%, US housing data will be watched this week. A housing downturn is likely considered a "necessary evil" now, but the pace of the...

Kenny Fisher
EUR/USD Near Parity, Powell Speech Next By Kenny Fisher - Aug 26, 2022

The euro has posted gains today and briefly punched above the symbolic parity line. In the North American session, EUR/USD is trading at 0.9978, up 0.11%.German Business Confidence...

Good Data + Broker Squeeze = FX Risk Recovery

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email