Daily FX commentary – Finotec

The market is nervous, today BoE and ECB interest rate announcement

By Rodian Rahnayev
08 November 2007

Finotec Analysis Team

 

 

Yesterday, we saw a sudden decrease in the U.S dollar, a drop came after official comments suggesting China may diversify away from U.S. assets, fueled a renewed surge in currency volatility that is likely to haunt the market for some time. However, not before the pair EUR/USD reached a record high at 1.4730$.

Apart from the dollar’s fall, the periodic unwinding of risky carry trades, in which low-yielding currencies are used to purchase assets with high returns, and losses in stock markets, are also a reminder that financial markets have yet to fully rid themselves itself of the effects of this summer’s credit squeeze.

“Until we see any clear direction where the U.S economy is pointing, the volatility will stay high” said Rodian Rahnayev, financial dealer from Finotec.com group. “correction expected till the support level of 1.4615$ but the level of 1.50$ seems to be reachable in the short term” he added.

Also, on Wednesday we saw the GBP/USD hit a 26-year high above $2.10. The market is nervous that why the volatility on the pair climbed to its highest level since June 2006 at 8.58 percent. It is not the first time that volatilities have jumped this year. In August, volatility in major currencies rose sharply on fears of a credit crisis in financial markets.

Today the investors will be focusing on two major data’s and two speeches.

First off all, there is the BOE interest rate decision at 12:00 GMT and ECB interest rate announcement at 12:45 GMT.

Secondly, ECB President Trichet will have a speech at 13:30 GMT and Fed chairman Bernanke going to speak at 15:00 GMT. Heavy market volatility is often experienced during those speeches.