The loonie had a third week of losses as a fall in U.S. stocks and crude oil decreased the attractiveness for the high-yielding profile of the Canadian currency.
Canada is one of the world’s most important commodity producers, and being the U.S. its main exporting destination, a fall in their main stock indexes affected directly the outlook for the Canadian currency. Since signs of economic recovery started to appear two months ago, the price of crude oil and equities market around the world witnessed a sharp increase in their levels, and being the loonie a commodity-linked currency more attractive as risk appetite grows due to its high-yielding profile, it posted the highest gains in 59 years during the month of May following the rally in the crude oil price. As the price of stocks failed to continue its gains, Canada’s dollar entered its third week of losses, since risk aversion rebounded slightly, and commodities prices did not provide the necessary support for the loonie to maintain its high levels.
Economists refer the weak performance for the Canadian dollar also with a more solid outlook for the U.S. dollar, as investors realize that an economic chaos will not be installed in the U.S. and that the Federal Reserve stills in the control of the nation’s finances, the greenback rose, also forcing the Canadian currency further down.
Blog Archive
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2009
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June
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- Canadian Dollar Falls as Stocks Decline
- Yen Rises as Crisis in Iran Deepens
- Pound Falls on U.K. Home Prices Drop
- GBP/USD Technical Analysis
- Gasoline market sell-off drags crude oil price lower
- Moves away from safe havens hit dollar
- GBP/USD Technical Analysis
- US Economic Indicators: Latest 6 Months Data
- US Consumer Price Index-STATS-Historical
- US Economic Indicators: DJ Survey Of Forecasters
- USD/JPY's decline continues to post 95.53, fresh 2...
- Euro Gains Versus Dollar, Yen as Credit Suisse Pos...
- Greenshoots watch: Think tank says recession is over
- Recent rally in oil prices explains recovery story...
- British Pound Could Succumb to Bearish CPI, Employ...
- Japanese Yen May See Big Break as Risk Trends Stil...
- Euro Technical Forecast Calls for Losses, Fundamen...
- US Dollar Will Falter if Risk Appetite is Revived ...
- US gold up on weak dollar, interest rate in focus
- Great Britain Pound Rebounds on Improved Real Esta...
- Yen Continues Fall as Demand For Yield Rises
- U.S. Economy Recovery, Crude Oil Push Canadian Dol...
- U.S. Jobs Report Pushes Dollar Up Against Euro, Pound
- Dollar Climbs on Interest Rates Raise Speculations
- Pound Slides against Euro, Dollar as Pressure on P...
- Yen seen losing ground as risk appetite returns
- European Spending, Exports Decline Most in 14 Years
- FOREX-Asian comments provide a big boost to the do...
- Pound Slides as Traders Consider Current Rally Exc...
- Continuing Dollar Weakness
- Dollar General profit soars as shoppers seek value
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June
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Monday, June 22, 2009
Canadian Dollar Falls as Stocks Decline
Yen Rises as Crisis in Iran Deepens
The yen, considered as a refuge investment for moments of instability, rose as the political crisis in Iran deepens, creating tension in the international financial scenario.
The Japanese currency started this week’s session stronger than all of the main traded currencies due to rising concerns about the political crisis around the eventually irregular elections in Iran, which resulted so far in 17 casualties in popular protests since the riots started to take place in the nation’s capital, Tehran, 2 weeks ago. A World Bank report stated that the global recession will be deeper than it predicted before, and that a flux of capital out of developing nations will increase the world unemployment figures. High-yielding currencies like the Australian dollar and the South African rand lost the most against the yen, in an expected chart movement that follows rising tensions of economic and political aspects.
The economic analysis towards the yen is always favorable when moments of uncertainty about the world economic health appear through reports or official statements, the situation in Iran added to the unexpected World Bank report made the Japanese currency to climb for the first time supported by actual events since the swine flu concerns, around 2 months ago. The yen may continue its climb if negativity on markets increase risk aversion among traders.
Pound Falls on U.K. Home Prices Drop
The British pound fell against the U.S. dollar as a report indicated the first fall in U.K. home prices in five months, increasing risk aversion towards the pound sterling outlook.
The pound had another day of losses as stocks declined snapping the previous days gains, adding pessimism to the already nebulous equities markets scenario. Rightmove Plc, one of the most relevant British real estate websites, indicated a fall of 0.4 in home prices within Great Britain, being that the first fall in five months, which until now have been witnessing a recovery in the average real estate prices. A part from the negative news in the domestic scenario, the pound also lost ground as currencies like the yen and the U.S. dollar became more attractive to investors as risk appetite decreased this Monday among traders.
The pound outlook, according to currency specialist, is being negatively affected by days of confusion about the global recession, which led to several sessions of losses in stock markets, decreasing attractiveness for the British currency. Domestic reports in the U.K. have not been as positive as expected previously, and the return of demand for refuge currencies like the yen created perfect conditions for a pound downtrend, which may continue further, if equities markets remain bearish.
Friday, June 19, 2009
GBP/USD Technical Analysis
The Pair fell sharply yesterday following an unexpected fall in UK retail sales, but recovered most losses in the U.S. session. Seasonally adjusted retail sales fell 0.6% in May, below market expectations for sales to increase by 0.5%. On a separate report, the Confederation of British Industry (CBI) said manufacturing conditions remained tough in June as exports orders continue to weaken. The CBI industrial survey came in at -51%, compared to -56% in May. The outlook for economic recovery is mixed, however most analysts point to growth by the end of the year or early 2010.
Looking at the 4hour chart, GBP/USD continues to show both strong supply and demand levels. near its 38.2% Fib retracement level at 1.6450 (supply) and 1.6200 area as support. Wall Street performance should be key for the pair's next move as it could benefit from risk appetite; however, yesterday's session proved little as far as price action. The next level of resistance lies at 1.6454, followed by 1.6510 and 1.6600.
Gasoline market sell-off drags crude oil price lower
Oil prices fell 2.5% to below $70 a barrel yesterday, pulled lower by a sell-off in the gasoline market as dealers bet there would ample fuel supply in the United States to meet demand from summer vacationers.
US crude fell $1.82 to settle at $69.55 a barrel. Gasoline futures fell 10.51 cents, or 5.18%, to $1.9244 a gallon. Brent crude fell $1.87 to settle at $69.19 a barrel.
"Gasoline is under siege here, with the supply build after production rose last week," said Andy Lebow, broker at MF Global in New York.
US gasoline supplies rose unexpectedly last week as refiners boosted output to prepare for an expected seasonal uptick in demand, according to government data issued on Wednesday.
Experts have been mixed on how strong consumption for the motor fuel will be this summer as the effects of the recession counter-balance relatively low prices at the pumps.
The US Transportation Department said yesterday, Americans drove more miles in April than they did a year earlier, marking the first monthly rise in US highway travel in more than a year.
Oil prices had been in positive territory earlier in the day as rebel attacks in Nigeria hit output from the Opec-member country and economic optimism propelled equities markets higher.
Nigeria's main militant group Mend said it had attacked a pipeline operated by Italy's Agip, close on the heels of previous attacks on facilities operated by Royal Dutch Shell and Chevron. Together, the attacks have cut at least 133,000 barrels of daily output.
Rebels in Nigeria, the world's seventh-largest oil exporter, have been carrying out attacks on the oil industry for years in what they claim is a struggle aimed at spreading the region's energy wealth to the poor local communities.
Oil prices also got some support from political turmoil in Iran, the world's fifth- largest exporter, in the wake of its presidential election.
"We will see support continue to come from Iran and Nigeria. There is no immediate supply threat from Iran, but in Nigeria, (there) is an actual physical disruption," oil analyst Olivier Jakob of Petromatrix said.
Oil prices have nearly doubled since February on signs of a potential economic recovery but the pace of the rally has sparked concerns prices are not well supported by fundamentals.
Moves away from safe havens hit dollar
The dollar drifted lower Friday as investors showed more confidence in world economic prospects, moving away from the safe-haven US currency.
The euro rose to 1.3934 at 2100 GMT from 1.3901 dollars late Thursday in New York.
The dollar edged down to 96.31 yen against 96.55.
With little in the way of market-moving data, currency traders took a cue from equities, which suggesting a further rise in confidence about prospects for recovery from the prolonged recession.
This encouraged traders to follow the trend into riskier assets, hurting the greenback.
"All in all, the market still does not seem to be in an intense and sustained 'sell dollar' mode as it had been until the beginning of the month, a bit of a relief as consolidation brings an increasing sense of the returning stability to forex markets," said Sacha Tihanyi at Scotia Capital.
"An eventual resumption in dollar weakness is in our forecast throughout the next quarter."
"The euro should continue to climb against the dollar as investor confidence is restored," said analysts at BNP Paribas bank.
They pointed to recent encouraging reports from the United States suggesting that a recovery may be starting to take hold in the world's largest economy.
On Thursday, the Conference Board's index of leading economic indicators, a measure of economic conditions in the coming months, rose 1.2 percent in May from the prior month. Most analysts had expected a rise of 1.0 percent.
As chances for a rebound in the United States strengthen, investors are emboldened to take positions in currencies seen as riskier than the dollar, notably the euro.
The euro also drew strength from recent stability on world financial markets, which further encourages investors to venture into currencies apart from the dollar.
"As the level of panic in financial markets is falling, traders are changing gears on buying currencies that attest to strength in the global economy," said Sumitomo Trust and Bank foreign exchange strategist Jitsuo Tachibana.
At the same time, other analysts cautioned that concerns over the health of US public finances, notably the country's massive budget deficit, were likely to cast a shadow over the recent encouraging data.
Washington will issue a record 104 billion dollars in new bonds next week and traders "will be nervously watching for how this jump in supply is absorbed with implications for the dollar and bond yields," NAB Capital strategists wrote in a note to clients.
Investors will also be waiting for the Federal Reserve monetary policy meeting beginning Tuesday for clues on the outlook for interest rates, another
factor that could affect currencies. Some see a possible rate hike by the end of the year.
"A rate hike in our view is relatively far off into the future, but there are numerous other means by which the Fed with possible assistance of the Treasury could pull back on various stimulus plans," said Gregory Drahuschak at Janney Montgomery Scott.
In late New York trade, the dollar stood at 1.0810 Swiss francs from 1.0861 Thursday
GBP/USD Technical Analysis
The Pair fell sharply yesterday following an unexpected fall in UK retail sales, but recovered most losses in the U.S. session. Seasonally adjusted retail sales fell 0.6% in May, below market expectations for sales to increase by 0.5%. On a separate report, the Confederation of British Industry (CBI) said manufacturing conditions remained tough in June as exports orders continue to weaken. The CBI industrial survey came in at -51%, compared to -56% in May. The outlook for economic recovery is mixed, however most analysts point to growth by the end of the year or early 2010.
Looking at the 4hour chart, GBP/USD continues to show both strong supply and demand levels. near its 38.2% Fib retracement level at 1.6450 (supply) and 1.6200 area as support. Wall Street performance should be key for the pair's next move as it could benefit from risk appetite; however, yesterday's session proved little as far as price action. The next level of resistance lies at 1.6454, followed by 1.6510 and 1.6600.
Wednesday, June 17, 2009
US Economic Indicators: Latest 6 Months Data
US Economic Indicators: Latest 6 Months Data-Jun 17
Forecasts based on the projections from 10 economists as of Friday,
Jun 12. NA = not available. E = estimate. R = revised. **** = tentative.
--Forecast--
Date Indicators :Median : May Apr Mar Feb Jan Dec
06/16 Hsg Starts : 0.480: 0.532 0.454 0.521R 0.574 0.488 0.556
06/16 % change : : 17.2 -12.9 -9.2R 17.6 -12.2 -15.1
06/16 Permits : 0.510: 0.518 0.498 0.511 0.550 0.531 0.564
06/16 % change : : 4.0 -2.5 -7.1 3.6 -5.9 -10.5
06/16 PPI : : 170.8 169.9 168.9 170.1 170.4R 168.8
06/16 % change : 0.6: 0.2 0.3 -1.2 0.1 0.8 -1.8
06/16 % 12-mo chg: : -5.0 -3.7 -3.5 -1.3 -1.0 -0.9
06/16 PPI Core : : 171.1 171.3 171.4 171.6 171.3 170.8
06/16 % change : 0.1: -0.1 0.1 0.0 0.2 0.2 0.3
06/16 Industl Prod : : 95.8 96.9 97.6R 99.4R 100.2R 102.4
06/16 % change : -1.1: -1.1 -0.7 -1.8R -0.8R -2.1 -2.3R
06/16 Capacty Util: 68.3: 68.3 69.0 69.4R 70.7R 71.2R 72.7R
06/17 Current Acct : :[Q1 09 -$101.5 [Q4 08 R -$154.9][Q3 08 -$184.2]
06/17 CPI : : 213.9 213.2 212.7R 212.2 211.1 210.2
06/17 % change : 0.3: 0.1 0.0 -0.1R 0.4 0.3 -0.8
06/17 % 12-mo chg: : -1.3 -0.7 -0.4 0.2 0.0 0.1
06/17 CPI Core : : 219.1 219.1 218.6 217.7 216.7 216.1
06/17 % change : 0.1: 0.1 0.3 0.2 0.2 0.2 0.0
06/17 Real Earnings: : -0.3 0.4 -0.2R -0.3 -0.2 1.0
06/18 Unemply Clms : 610: [6/6 601 [5/30 625R ] [5/23 625]
06/18 LEI : : 99.0 98.1 98.4R 98.9 98.8
06/18 % change : 1.0: 1.0 -0.2 -0.5R 0.1 -0.1
06/23 Exist Hm Sls : NA : 4.68 4.55 4.71 4.49 4.74
06/23 % change : : 2.9% -3.4% 4.9% -5.3% 4.4%
06/23 Pre Stl Imp : : -19.3 -3.1 -33.7 17.9 -11.4
06/24 Durable Gds : 615.0: 161.5 158.4 161.8R 159.2 172.7
06/24 % change : NA : 1.9 -2.1 1.6R -7.8 -4.6
06/24 NonDef Captl: : 49.5 50.4 50.9R 48.6 54.0R
06/24 % change : : -2.0 -0.9 4.7R -9.9 -10.3R
06/24 S/F Home Sls : NA : 352 351 362R 329R 374R
06/24 % change : : 0.3% -3.0% 10.0%R -12.0%R -4.1%R
06/25 GDP Annual % : NA :[Q1 09 -5.7R [Q4 08 -6.3 ][Q3 08 -0.5]
06/25 Final Sales%: NA :[Q1 09 -6.3R [Q4 08 -9.9 ][Q3 08 2.2]
06/25 PCE Defltr % NA :[Q1 09 1.5R [Q4 08 -4.3 ][Q3 08 -3.8 ]
06/25 Prc Defltr %: NA :[Q1 09 2.8R [Q4 08 0.6 ][Q3 08 3.9]
06/25 Chnd Wt Prc%: :[Q1 09 2.8R [Q4 08 0.5 ][Q3 08 3.9]
06/25 Corp Profit%: :[Q1 09 1.1 [Q4 08 -10.7][Q3 08 -0.5R ]
06/26 Personal Inc : : 12,092 12,034 12,060R 12,089R 12,084
06/26 % change : NA : 0.5 -0.2 -0.2R 0.0R -0.2
06/26 PCE : : 9,927 9,932 9,965R 9,926R 9,831
06/26 % change : NA : -0.1 -0.3 0.4R 1.0R -1.1
06/30 Cnsmr Confid : NA : 54.9 40.8 26.9 25.3 37.4 38.6
07/01 Constrcn Spd : : 968.7 961.3 957.1R 977.2 1012.0
07/01 % change : NA : 0.8 0.4 -2.1R -3.4 -3.1
07/01 ISM : NA : 42.8 40.1 36.3 35.8 35.6 32.9
07/01 Employment : : 34.3 34.4 28.1 26.1 29.9 29.9
07/01 Prices : : 43.5 32.0 31.0 29.0 29.0 18.0
07/02 Jobless Rate : NA : 9.4 8.9 8.5 8.1 7.6 7.2
07/02 Jobs (chg) : : -345 -504 -652 -681 -741 -681
07/02 Pvt (chg) : : -338 -596 -648 -688 -749 -670
07/02 Manuf(chg): : -156 -154 -172 -172 -262 -180
07/02 Factory hrs : : 2.7 2.7 2.6 2.7 2.9 2.9
07/02 Avg Hr % chg: NA : 0.1 0.1 0.2 0.2 0.2 0.3
07/02 Factory Ords : : 344.4 341.9 348.5 346.1 358.8
07/02 % change : NA : 0.7 -1.9 0.7 -3.5 -4.9
07/02 Unfill Order: : 748.7 757.7 770.9 784.0 800.4
07/02 % change : : -1.2 -1.7 -1.7 -2.0 -1.5
07/08 Consumr Crdt : : 2551.1 2562.2R 2570.3R 2563.3
07/08 change : NA : -11.1 -8.1R 7.0R -6.8
07/09 Wholesale Inv: : 405.4 411.1 418.5 425.9 427.3
07/09 % change : NA : -1.4 -1.8 -1.7 -0.3 -1.5
07/09 Invty-Sales: : 1.31 1.32 1.31 1.34 1.27
07/10 Trade Balnce : NA : -29.16 -28.53 -26.1R -36.6R -41.9R
07/10 Goods Balnce: NA : -40.1 -39.2 -37.2R -47.6R -53.2R
07/10 Imports : : 150.3 152.5 152.5R 161.5R 174.8R
07/10 Exports : : 121.1 123.9 126.4R 125.0R 132.9R
07/13 Trsy Budget : NA :-189.7 -20.9 -191.6 193.9R -63.5R -51.8R
07/14 Retail Sales : : 340.0 338.4 339.2 343.4 342.0 336.4
07/14 % change : NA : 0.5 -0.2 -1.2 0.4 1.7 -3.2
07/14 Ex-Auto : : 284.7 283.4 284.0 287.0 284.0 279.9
07/14 % change : NA : 0.5 -0.2 -1.1 1.1 1.4 -3.5
07/14 Busin Invty : : 1,385 1,400 1,418 1,438 1,456
07/14 % change : NA : -1.1 -1.3 -1.4 -1.2 -1.5
07/14 % mfg chg : : -1.0 -1.2 -1.3 -1.1 -1.9R
07/31 ECI : NA :[Q1 09 0.3 [Q4 08 0.6][Q3 08 0.6]
07/31 ECI Annual : NA :[Q1 09 2.1 [Q4 08 2.6][Q3 08 2.9]
08/11 Prod & Costs%: NA :[Q1 08 1.8R [Q4 08 -0.5][Q3 08 2.3]
08/11 Unit Labor%: NA :[Q1 08 2.7R [Q4 08 5.4][Q3 08 3.3]
-By Rodney Christian; Dow Jones Newswires; 202-646-1880;
csstat@dowjones.com
Related fixed stories:
84697 US Economic Indicators: Latest 6 months data
80055-57 US Economic Calendar
US Consumer Price Index-STATS-Historical
US Consumer Price Index-STATS-Historical -2-
Mar 00 171.2 0.6 3.8 : 180.5 0.3 2.4 : 4.6 : 0.2
Feb 00 169.8 0.4 3.2 : 179.5 0.1 2.2 : 3.3 : 0.4
Jan 00 168.8 0.3 2.7 : 178.8 0.3 2.0 : 1.1 : 0.1
1999 Ann 166.6 NA 2.2 : 177.0 NA 2.1 : NA : NA
Dec 99 168.3 0.2 2.7 : 178.2 0.2 1.9 : 2.1 : 0.1
Nov 99 168.3 0.2 2.6 : 178.4 0.2 2.1 : -0.4 : 0.2
Oct 99 168.2 0.2 2.6 : 178.3 0.2 2.1 : 0.2 : 0.2
Sep 99 167.9 0.4 2.6 : 177.7 0.3 2.0 : 2.1 : 0.2
Aug 99 167.1 0.2 2.3 : 177.1 0.1 1.9 : 2.6 : 0.2
Jul 99 166.7 0.4 2.1 : 176.9 0.3 2.1 : 2.1 : 0.1
Jun 99 166.2 0.0 2.0 : 176.6 0.1 2.1 : -0.4 : -0.1
May 99 166.2 0.1 2.1 : 176.6 0.1 2.0 : -0.6 : 0.2
Apr 99 166.2 0.7 2.3 : 176.8 0.3 2.2 : 5.1 : 0.1
Mar 99 165.0 0.1 1.7 : 176.2 0.1 2.1 : 1.2 : 0.0
Feb 99 164.5 0.0 1.6 : 175.7 0.0 2.1 : -0.5 : 0.2
Jan 99 164.3 NA 1.7 : 175.3 NA 2.4 : NA : NA
US Economic Indicators: DJ Survey Of Forecasters
Forecasts based on the projections from 10 economists as of Friday,
Jun 12. NA = not available. E = estimate. R = revised. **** = tentative.
Time --Forecast--
Date EDT Indicators Median Low High Prev Actual
06/16 :0830: May Housing Starts : 0.480 0.460 0.520: 0.454R: 0.532
06/16 :0830: % change : : -12.9R: 17.2
06/16 :0830: Housing Permits : 0.510 0.490 0.510: 0.498 : 0.518
06/16 :0830: % change : : -2.5 : 4.0
06/16 :0830: May PPI (% chg) : 0.6 0.5 1.0: 0.3 : 0.2
06/16 :0830: PPI Core (% chg) : 0.1 0.0 0.1: 0.1 : -0.1
06/16 :0915: May Industl Prod (% chg) : -1.1 -1.5 -0.7: -0.7R: -1.1
06/16 :0915: Capacty Util : 68.3 68.3 68.6: 69.0R 68.3
06/17 :0830: May CPI (% chg) : 0.3 0.2 0.6: 0.0R: 0.1
06/17 :0830: CPI Core (% chg) : 0.1 0.1 0.1: 0.3 : 0.1
06/18 :0830: Unemploy Clms p/e Jun 13 : 610 600 615: 601 :
06/18 :1000: May LEI (% chg) : 1.0 0.8 1.4: 1.0 :
06/23 :1000: Apr Existing Home Sales : NA NA NA : 4.68 :
06/23 1000: % change 2.9%
06/23 :1000: May Preliminary Steel Impo: : -19.3 :
06/24 :0830: May Durable Goods (% chg) : NA NA NA : 1.9 :
06/24 :1000: May S/F Home Sales : NA NA NA : 352 :
06/25 :0830: Q1 Fin GDP : NA NA NA : -5.7 :
06/25 :0830: Final Sales Dom Prchsr : NA NA NA : -6.3 :
06/25 :0830: PCE Defltr : NA NA NA : 1.5 :
06/25 :0830: Price Defltr : NA NA NA : 2.8 :
06/25 :0830: Q1 Fin Corp Profits : : 1.1 :
06/26 :0830: May Personal Inc (% chg) : NA NA NA : 0.5 :
06/26 :0830: PCE (% chg) : NA NA NA : -0.1 :
06/30 :1000: Jun Consumer Confidence : NA NA NA : 54.9 :
07/01 :1000: May Constrcn Spdg(% chg) : NA NA NA : 0.8 :
07/01 :1000: Jun ISM : NA NA NA : 42.8 :
07/01 :1000: Employment : : 34.3 :
07/01 :1000: Prices : : 43.5 :
07/02 :0830: Jun Jobless Rate : NA NA NA : 9.4 :
07/02 :0830: Jobs (chg) : : -345 :
07/02 :0830: Private (chg) : : -338 :
07/02 :0830: Manufac (chg) : : -156 :
07/02 :0830: Avg Hourly (% chg) : NA NA NA : 0.1 :
07/02 :1000: May Factory Ord (% chg) : NA NA NA : 0.7 :
07/08 :1500: May Consumr Crdt (bln$) : NA NA NA : -11.1 :
07/10 :0830: May Trade Balance : NA NA NA : -29.2 :
07/10 :0830: Goods Total : NA NA NA : -40.1 :
07/13 :1400: Jun Treasury Budget Stmt : NA NA NA : -189.7 :
07/14 :0830: Jun Retail Sales (% chg) : NA NA NA : 0.5 :
07/14 :0830: Ex-Auto (% chg) : NA NA NA : 0.5 :
07/14 :1000: May Busin Invty (% chg) : NA NA NA : -1.1 :
07/31 :0830: Q2 09 ECI : NA NA NA : 0.3 :
07/31 :0830: ECI Annual : NA NA NA : 2.1 :
08/11 :0830: Q2 Pre Productivity : NA NA NA : 1.8 :
08/11 :0830: Unit Labor Costs : NA NA NA : 2.7 :
-By Rodney Christian; Dow Jones Newswires; 202-646-1880;
csstat@dowjones.com
Related fixed stories:
84698 US Economic Indicators: Latest 6 months data
80055-57 US Economic Calendar
USD/JPY's decline continues to post 95.53, fresh 2-week low
FXstreet.com (Barcelona) - USD/JPY has declined further in the American session after the U.S. CPI posted the largest decline in the last 60 years and the pair has fallen below 96.00 level and has posted 95.53 as fresh 2-week low. Currently the pair is trading around 96.65/75, 0.30% below today's opening price action.
Valeria Bednarik, Fxstreet.com collaborator, comments: "Pair continues clearly bearish in 4 hours charts, although momentum is fiving some signs of exhaustion. Daily ascendant trend line around 95.60 will be key in the next hours: strong rebound around that level (not really seen at this point) could support some upside corrective movements in the pair to the 97.00 zone. Break under that level, or even better, daily candle closing under it, will open doors to the downside, and send the pair to retest the 93.80 zone. Immediate support lie at 95.20 94.80 and 94.40 zone, while resistances from actual price are at 96.10 96.50 and the 96.90 zone."
Sunday, June 14, 2009
Euro Gains Versus Dollar, Yen as Credit Suisse Posts a Profit
The euro rose against the dollar and the yen afterCredit Suisse Group AG, the biggest Swiss bank by market value, said it returned to profit in the first quarter, spurring demand for higher-yielding currencies.
The yen fell against the Australian and New Zealand dollars as Asian stocks advanced after Credit Suisse’s earnings exceeded estimates. The euro also advanced before European reports today that economists say will show manufacturing and service industries improved for a second month, adding to evidence the euro area’s recession is easing.
“Asian stock markets, a gauge for risk aversion, rebounded following Credit Suisse’s earnings news,” Tomohiro Nishida, a foreign-exchange dealer at Chuo Mitsui Trust & Banking Co. in Tokyo. “The bounce back of stocks triggered buying of the euro and other higher-yielding currencies.”
The euro climbed to $1.3037 as of 7:48 a.m. in London from $1.3005 yesterday in New York after falling as low as $1.2980. It advanced to 127.72 yen from 127.48, after earlier weakening to 126.80. Japan’s currency was little changed at 97.967 per dollar from 98.01.
Japan’s Nikkei 225 Stock Average rose 1.4 percent and the MSCI Asia-Pacific Index of regional shares climbed 1.4 percent.
Credit Suisse announced a net income of 2 billion Swiss francs ($1.7 billion), compared with a 2.15 billion-franc loss a year earlier, the Zurich-based bank said in a statement. Earnings were twice the median estimate of analysts surveyed by Bloomberg News.
‘Highly Volatile’
The yen earlier gained versus all of the 16 most-traded currencies on speculation the U.S. government will uncover more losses at the nation’s banks when it releases results of its so- called stress tests on May 4
“Highly volatile price action is expected before the results of the ongoing stress test are announced,” said Yoshifumi Suzuki, a foreign-exchange dealer at Hachijuni Bank Ltd. in Tokyo. “If concerns about the credit crunch eases, then people may favor such currencies as the Aussie.”
Australia’s dollar rose to 69.48 yen from 69.14 yen yesterday, reversing a loss of as much as 0.7 percent. The New Zealand dollar climbed to 54.79 yen from 54.44 yesterday.
Japan’s currency had approached a three-week high against the dollar afterMorgan Stanley, the fifth-biggest U.S. bank by assets, posted a larger-than-expected loss yesterday, and Wells Fargo & Co. Chief Financial OfficerHoward Atkins said “credit may not have turned yet.” Bank of America Corp. also increased its loan-loss reserves this week.
Profit Trends
“While there is some improvement in profit trends at U.S. banks, it is far from clear if this positive flow will be sustained,” said Masashi Hashimoto, senior analyst in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s largest lender.
The euro rose against 13 of the 16 most-active currencies before Markit Economics releases its composite index of Europe’s manufacturing and service industries. The index, which is based on a survey of purchasing managers, rose to 38.9 in April from 38.3 the previous month, according to a Bloomberg News survey.
“Most people are looking for a better PMI number,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “Signs that the euro-zone’s recession isn’t worsening would probably be supportive of the euro.”
Greenshoots watch: Think tank says recession is over
THE recession is over, according to a leading economic think tank. The National Institute of Economic and Social Research (NIESR) estimates that Britain’s gross domestic product returned to growth in April and May. Official GDP figures will be published in July, but the institute thinks that the recession bottomed out in March.
- THE UK’s manufacturing industry also sounded a more optimistic note, with output rising 0.2% in April, a figure that was higher than economists had expected. Revised data for March showed a similar gain, marking the first time there have been consecutive monthly increases since the start of 2008.
- STERLING touched its highest level against the euro since the beginning of this year, boosted by the news on manufacturing output and the NIESR forecasts. The pound closed at €1.18 on Friday.
- JOSEF ACKERMANN, chairman of the Institute of International Finance, suggested that a global economic recovery was under way, but cautioned that there was still some way to go. The institute predicts that global GDP will shrink 3% this year but will rise by 2% in 2010.
Recent rally in oil prices explains recovery story - Investec
Crude oil prices collapsed last July as the largest economy in the world faced its worst recession ever as the housing bubble finally busted towards the end of 2007.
However, this week, as the US economy showed some green-shoots, the price of black gold is again spiking and Goldman Sachs analysts predict it could hit $85 by year end.
However, Investec says it is much more cautious saying a price of $50 - $60 would be fine for the sector.
“Fundamentals do not explain the recent rally in oil prices but a recovery story does. Investors believe that the world is placed for recovery in commodities, in equities and the general economy and therefore oil prices have caught on this positive wave,” Investec Fund Manager Bakang Seretse explained.
Futures investors are again hedging against oil as there are signs of recovery since Barack Obama took office early this year.
Media reports showed that the US light sweet crude rose 40 cents to $69.21, on Friday while London Brent added 30 cents to $69.01.
BBC notes that oil prices have risen sharply from lows of near $30 a barrel, but are still less than half of the peak of $147 reached in July last year.
However, a spike in oil prices is a big gain for futures investors while it is a big blow to consumers and industry as it means spending more at the pumps.
Seretse told Sunday Standard that although oil cartel, OPEC, has cut output by 4 million - 4.5 million (barrel per day) bpd, the recent high prices cannot be explained as demand remains weak.
“OPEC could turn the taps back on if demand picks up and there was somewhere to store the oil,” explains Seretse.
“So it is hard to justify an oil price above $60. We think $50 was fair value for now, rising to $60 when the global economy finally picks up next year,” he says.
The Fund Manager adds that the oil price rally was negligible for sometime in Botswana because there was strong Pula rally on the back of the rand, adding that though that price of oil has increased, 58 percent in Pula terms, it is not the end of the world.
Although high oil prices normally are related to a rise in inflation, Seretse says as for now that should not be a concern.
“Most commodities are still down and, therefore, we should not worry of an immediate risk in inflation,” he says.
“As far as Monetary Policy is concerned, again, Bank of Botswana will take time to get a better understanding of the situation. We should remember that monetary policy does not act in inflation of now but of many months from now. Therefore, the increase in oil prices should be sustained long enough for Bank of Botswana to act on it.”
Investec says it assumes $55 for 2009 and $65 for 2010 before returning to a long-term ‘normalised’ level of $80, and says it sees limited upside to our $55 assumption for 2009 – maybe it could go to $60.
Botswana motorists have been enjoying cheaper fuel prices since last year.
Bloomberg reported on Friday that the U.S. lost fewer jobs than forecast in May.
Friday, June 12, 2009
British Pound Could Succumb to Bearish CPI, Employment Data
The British pound experienced broad weakness on Friday after spending most of the week as the strongest of the majors, as risk appetite continues to be one of the sole forces behind GBP/USD strength. In this coming week, though, fundamental forces could start to play a bigger role.
On Tuesday, the May reading of UK CPI is projected to fall to an annual rate of 2.0 percent from 2.3 percent . Such a result would mark a 19-month low and would also bring CPI in line with the Bank of England’s (BOE) target. Nevertheless, the central bank has said in the past that they expect inflation to full much lower later in the year, and greater-than-expected declines could spur fears that CPI will eventually fall negative.
On Wednesday, the minutes from the BOE’s June 4 meeting may not be as market-moving as they've been in the past, as there has already been significant detail revealed about the mindset of the Monetary Policy Committee (MPC). Indeed, we already know that the BOE has decided to expand their quantitative easing (QE) program by 50 billion pounds to 125 billion pounds, but there are indications that they may increase the scope of the program even further as they recently published a paper in which they sought comments on the prospect of including purchases of secured commercial paper in their Asset Purchase Facility (APF). That said, the inclusion of secured commercial paper doesn’t necessarily mean that they will allocate more money toward the APF, and this is a detail that will be critical to British pound price action as past QE announcements have weighed on the currency. At the same time as this release, UK jobless claims will hit the wires and they are projected to rise for the fifteenth straight month in May, this time by 60,000, while the claimant count rate may rise to 4.9 percent, the highest since October 1997, from 4.7 percent.
Finally, on Thursday, UK retail sales are expected to rise for the third straight month in May, this time at a rate of 0.3 percent. That said, this is a very volatile release and the BOE has said in the past that they prefer to look at private surveys, indicating that perhaps we should do the same
Japanese Yen May See Big Break as Risk Trends Still Hold Strong
The Japanese yen the past week mostly lower, as FX carry trades made headway. However, the inability of US equities to make a clear break above their recent highs and tight consolidations suggest that the JPY crosses could see some sort of break this coming week.
This weekend the Group of 8 (G8) will meet, and while it may ultimately prove to be a non-event, traders should keep an eye out for the communiqué as indications that exit strategies for the stimulus measures enacted by the member countries are being plotted could provide a boost to risk appetite when trading resumes on Sunday. Though highly unlikely, discussions about currencies would be sure to shake up the markets as well.
On Monday, just before midnight, the Bank of Japan is anticipated to announce that they are leaving rates unchanged at 0.10 percent, but this is not the part of the central bank’s announcement that will garner the most attention. Instead, the FX markets may only respond to the sentiment reflected in their subsequent policy statement. After the BOJ’s last meeting, they raised their outlook on the economy for the first time in nearly 3 years, saying that “economic conditions have been deteriorating, but exports and production are beginning to level out.” There is speculation that the BOJ will upgrade their outlook once again, and if this is the case, the Japanese yen could gain on a very short-term basis. On a longer-term basis, though, risk trends have been driving price action and the impact of positive BOJ commentary may not go very far
Euro Technical Forecast Calls for Losses, Fundamentals Less Clear
A lackluster week of European economic data and similarly uneventful price action in the S&P 500 left the Euro/US dollar exchange rate almost exactly unchanged through the past week’s trade. Early-week EUR/USD losses initially suggested that the pair was likely to continue its recently sharp downside reversal, but markets refused to allow the previously high-flying pair below important lows of 1.3800. The subsequent rally higher fell short at similarly important Fibonacci resistance at the 61.8 percent retracement of the 1.4340-1.3800 move at 1.4130—the “line in the sand” for the nascent downtrend. A lack of major market-moving developments would keep the battle between bulls and bears at its current deadlock, and it is difficult to predict what could actually break the EUR/USD beyond its recent trading range. That being said, we continue to see signs that US Dollar sentiment hit a bearish extreme on the Euro’s run to 1.4340—suggesting that we could see the EUR/USD remain below said level through the weeks ahead.
Volatility expectations have generally trended lower ahead of what seems to be a week of limited Euro Zone economic event risk. Yet we remain keenly aware that market tensions can flare up at a moment’s notice, and currency moves remain especially difficult to anticipate. German ZEW survey results could spark minor Euro price moves, but the past two reactions to the historically market-moving report have been anything but intuitive. We will keep an eye out for especially large surprises out of the survey data, but recent experience suggests markets will pay little attention to the results. Recent doubts over the future of European Central Bank monetary policy suggests upcoming Euro Zone Consumer Price Index inflation data will command greater influence on FX markets.
Recent ECB rhetoric suggests that the central bank is relatively unlikely to pursue aggressive monetary stimulus, and the Euro has largely benefited from a comparatively stable outlook for monetary conditions. The recent ECB Monthly Bulletin emphasized that the bank feels its actions to date have sufficiently anchored inflation expectations, and the bank expressed relatively sanguine outlook for economic growth. Many have questioned whether the ECB has in fact done enough to stave off risks to deflation—calling for further rate cuts in the face of sharp economic contraction and fast-growing unemployment. Upcoming Euro Zone CPI data could shed some light on price trends, and any especially noteworthy surprises could alter outlook for the future of domestic interest rates. A larger-than-expected pullback in prices would likely force corrections in interest rate expectations and, by extension, the Euro itself.
Otherwise, it will be critical to watch general trends in risk sentiment and its effect the ostensibly risk-sensitive Euro/US Dollar pair. The EUR/USD could remain in its uptrend if the S&P 500 and other indices continue higher, but any noteworthy pullbacks in these key barometers could spark similar moves in the US Dollar
US Dollar Will Falter if Risk Appetite is Revived and Deficits Discussed
Fundamental Outlook for US Dollar: Neutral
- Russia and China diversify away from Treasuries; Japan reiterates its ‘unshakable’ confidence
- Fundamental outlook edges higher as retail sales, University of Michigan survey and Beige Book assessment tick higher
- Congestion develops among the majors, what do technicals project for the eventual dollar break?
Scheduled event risk will moderate even further over the coming week – a precarious position considering the dollar and most of its major pairings are on the verge of a breakout. So, what will win out? Will a lack of tangible, fundamental fodder prevent the market from finding direction; or can the market find its catalyst from other sources like risk trends, relative growth forecasts or policy projections? Recent history has shown that it isn’t indicators like NFPs or Fed rate decisions that define revive or reverse trends; but speculation surrounding the financial health of the US economy (compared to its global counterparts) and broad risk sentiment.
The most immediate threat to stability is G8 meeting that is taking place this weekend. Finance Ministers from the US, UK, France, Germany, Italy, Japan, Canada and Russia have already met on Friday in Lecce, Italy; but the commentary so far has been relatively guarded. Some officials have come out and have pointed to early signs of economic recovery; yet the market is reserving its true consensus on the event for the official communiqué. Already, those familiar with the proceedings say the assessment of growth is little changed from the April gathering and that government exit strategies will indeed be discussed. The latter consideration is the imperative as the recent rebound in optimism (among investors, policy makers and consumers) has led many to wonder if government presence will stifle the recovery or even its prematurely exit would spark another crisis. Officials have said that the unwinding of this temporary support will be discussed; but no time tables will be given. Details will be imperative here; and the more cohesive and pragmatic the plans, the more likely they are to work.
Outside of the summit for the world’s financial leaders, the fuel for risk appetite will largely have to defer to the unknown. Taking the lead of equities and other traditional, speculative instruments; currency traders will have to keep tapped into speculation that the broader economy is recovering and global credit markets are stabilizing. For the dollar, the timing of this turn is critical. If the Treasury and Federal Reserve move too soon to withdrawal their support, another bank implosion could set off another crippling seizure through the credit market. Alternatively, move too slow and expansion across the rest of the globe will devalue US assets that are connected to a massive budget deficit. Not only would this divert capital flows away from the world’s largest economy; but it would also be reason to revive talks for replacing the greenback as the world’s reserve currency. These are long-term concerns; but each speech and event will change the bearings on speculation. Along these lines, not worthy speeches next week include: the Fed’s Duke on the response to the financial crisis; Warsh covering economic policy; Chairman Bernanke on financial literacy; Treasury Secretary Geithner testifying before the House Financial Services Panel after his time at the G8 summit.
For regular event risk, the listing are broad; but their potential impact on long-term growth forecasts is relatively modest. The housing starts and industrial production numbers for May will offer key measurements for their respective sectors. To support speculation of an economic recovery, improvements will be expected. The TIC flows and CPI data will be a little more complicated in its fundamental influence. Capital flows into the US have become a hot topic as the US Treasury continues with record sales and central banks question the country’s financial stability while floating such a tremendous deficit. Price growth has once again become an issue as some suggest loose monetary policy will spark hyperinflation that will stifle the burgeoning recovery
Thursday, June 11, 2009
US gold up on weak dollar, interest rate in focus
U.S. gold futures turned
higher on Thursday as the dollar dropped, but rising Treasury
yields could dampen the investment appeal of
noninterest-bearing gold, traders said.
For the latest detailed report, click on [GOL/].
GOLD
* August GCQ9 up $1.10 at $955.80 an ounce at 10:41 a.m.
EDT (1441 GMT)on the COMEX division of the New York Mercantile
Exchange.
* Ranged from $942.50 to $959.10.
* Gold reversed initial losses as the euro rose above $1.40
against the dollar, boosting the metal's appeal as a hedge
against the falling U.S. currency.
* Gold buying, however, has been under pressure as
benchmark 10-year U.S. Treasury yields had risen to their
highest levels in eight months amid concerns about the
increasing U.S. budget deficit and the government's borrowing
ability in the long term - traders. [ID:nN11335223]
* Rising Treasury yields and high interest rates are
negative for gold and other investments perceived as riskier,
because of the higher opportunity costs of owning them.
* Sellers reappear as higher long-term U.S. rates make gold
future spreads more expensive and prompt traders to look for
other investment opportunities - George Gero, vice president of
RBC Capital Markets Global Futures.
* Weak gold jewelry demand amid poor retail sales hurt
prices, and open interest in gold is expected to drop further -
Gero.
* Gold import from top buyer India dropped 39 percent from
a year ago - Bombay Bullion Association. [ID:nBOM132429]
* Simmering geopolitical tensions in the Middle East and
the Korean peninsular, inflation worries and a first influenza
pandemic in 40 years provided background support to gold as a
safe haven - traders.
* COMEX estimated 10 a.m. volume at 63,656 lots.
* Gold/oil ratio at 13.20, lower than the 13.40 of the
previous session.
* Spot gold
its previous session.
* London gold fix
SILVER
* July SIN9 up 12.5 cents at $15.350 an ounce, tracking
gold's direction.
* Ranged from $14.925 to $15.390.
* COMEX estimated 10 a.m. volume at 21,882 lots.
* Spot silver
from its previous finish.
* London silver fix
PLATINUM
* July PLN9 down $5.10 at $1,268.10 an ounce on light
profit-taking after the previous session's gains.
* Chinese buying of platinum in the past six months has
been the most supportive factor in the market, and demand
growth from the jewelry industry compensated for a slowdown in
purchases from industrial users - UBS Investment Bank.
* The global car industry accounts for 60 percent of total
platinum demand for use in automobile catalytic converters.
* Spot platinum
percent from its previous session.
PALLADIUM
* September PAU9 up 25 cents at $259 an ounce on
investment buying.
* Spot palladium
percent from its previous finish.
Prices at 10:41 a.m. EDT (1441 GMT)
Last Change Pct 2008 YTD
Chg Close % Chg
US gold GCQ9 955.80 1.10 0.1 884.30 8.1
US silver SIN9 15.350 0.125 0.8 11.295 35.9
US platinum PLN9 1268.10 -5.10 -0.4 941.50 34.7
US palladium PAU9 259.00 0.25 0.1 188.70 37.3
Gold
Silver
Platinum
Palladium
Gold Fix
Silver Fix
Platinum Fix
Palladium Fix
-------------------------------------------------------------
Prices in dollars per ounce.
2008 close for U.S. gold second contract month, U.S. silver and
palladium third contract months and U.S. platinum fourth
contract month.
Wednesday, June 10, 2009
Great Britain Pound Rebounds on Improved Real Estate Data
The Royal Institution of Chartered Surveyors said that the United Kingdom real estate market is stabilizing, spurring demand for the pound sterling after sequential days of losses.
The pound gained this Tuesday against the dollar and the euro, after speculations that the worst days of the recession might be already behind. Britain is dealing not only with the economic recession that has been affecting the majority of countries in the world, but also with a political crisis with uncertain consequences, and after several days of negative results against the main currencies, the pound posted gains mostly versus the dollar and the euro, after statements that the British real estate may be recovering fueled U.K. investors with optimism this Tuesday.
Analysts evaluate the complexity of Great Britain’s political and economic scenario with an optimistic tone, affirming that if Prime Minister Gordon Brown somehow keeps his position, the pound may become an interesting investment for traders, as it is very likely that real estate and other economy sectors will continue to provide support for the British currency, as the global slump is definitely having its final days. Today, according to currency specialists, the pound was helped by a risk appetite wave that might continue to influence markets for a while.
Yen Continues Fall as Demand For Yield Rises
The Japanese currency had a day of losses against major currencies and higher-yielding assets as the global slump eases, improving investor’s confidence to take riskier positions.
The yen has been suffering multiple sessions of losses since the global recession gave its first signs of ending in the beginning of April, and being regarded by traders as a safe refuge for times of uncertainty and crisis, the Japanese currency lost most of the gains it posted during the worst moments of the crisis, in the last semester of the past year. The pound climbed significantly against the yen as the political crisis in the United Kingdom seems rather controlled. Australia’s dollar climbed versus the yen as an industry report showed an increase in the consumer confidence.
Currency specialists affirm that refuge currencies like the Japanese and the North American may enter an important downtrend, as risk aversion is declining, favoring emergent market currencies like the South Korean won, and commodity-linked currencies like the Australian. It is very likely that a weaken yen will follow for the next months, according to specialists, even if the Japanese economy shows relevant signs of recovery, it won’t probably be able to sustain the yen at high levels, since the outflow of investors towards higher-yielding positions abroad will tend to be much larger.
U.S. Economy Recovery, Crude Oil Push Canadian Dollar Up
The loonie continued its rally after a day of losses as the main trading partner of Canada, the United States, is showing signs of an economic revival.
The Canadian currency has been benefiting from several international factors that are helping it to build the strongest bullish pattern in decades against the main currencies. Canada is one of the main global oil exporters, and since the demand for oil has rebounded in April, the loonie is rocketing against currencies like the greenback and the euro, helped also by the stocks rally, which add attractiveness to the Canadian dollar. After signs of economic recovery in Asia, now speculations about United States interest rate policy, are fueling demand for more risk in equities market, creating a perfect scenario for the loonie to grow stronger.
According to specialists, the current scenario for the loonie might be the most favorable in years, firstly the growing demand for oil, and now, being considered as a satellite for the U.S. economy, it is extremely likely that the loonie will remain stronger if its main trade partner finds a quick way out of recession, and signs that an eventual interest rate raise from the Federal Reserve are already having a positive impact for the Canadian currency.
Monday, June 8, 2009
U.S. Jobs Report Pushes Dollar Up Against Euro, Pound
The greenback had the highest rally since April against the euro, pound after a U.S. employment report indicated that fewer jobs were cut than forecasts predicted, fueling investors with optimism towards the North American economy.
The U.S. dollar gained significantly against most of the main world currencies, as the report bringing better than expected news for the employment sector adds to the already growing evidences that the global recession might be ending, and being the United States a key-country for the world economy, favorable news are regarded by traders as an important opportunity to buy assets in dollar, boosting the American currency and stock markets as well. The data on U.S. employment also brought the yen down, regarded as a refuge currency, it was once again hit by investors looking for higher-yielding opportunities.
Analysts say that positive reports that once were increasing attractiveness to high-yielding assets and making the dollar to lose value, now are favorable to the U.S. currency, as a solid economy keep its currency consistent and sustainable. The dollar has been suffering losses since signs of an economic rebound came from Asia, when investors start purchasing higher-yield assets in the equities market and commodity-linked currencies like the Aussie, but a new uptrend might start for the greenback and its economy starts to revive.
Dollar Climbs on Interest Rates Raise Speculations
The dollar gained versus the main currencies as speculations that the U. S. Government will raise its interest rates by the end of the year, consequently causing a bearish day in equities markets around the world.
High-yield currencies like the South African rand had a negative day against the dollar as the Fed fund futures showed a 40 percent possibility of interest rates raise for the second semester, a high jump from the previous 13 percent chance from a week ago. The yen was the only main currency that did not have a negative day versus the dollar, as domestic favorable news like the falling number of bankruptcies improved confidence among merchants and Japanese investors, making the greenback to end a rally that brought the yen to a one-month low. The U. S. currency also posted sharp gains against the Great Britain pound, as the government crisis in the U.K. deepens, and the future of Prime Minister Gordon Brown is uncertain.
There is a wave of optimism favoring the greenback, according to economists. Several factors indicate for a stronger dollar to come for the following weeks, not only a sequence of positive reports and speculations is raising the traders’ confidence to buy assets in dollars, a consistent sentiment among specialists that the dollar has been excessively sold over the past two months may help the dollar to enter a significant uptrend.
Pound Slides against Euro, Dollar as Pressure on Prime Minister Rises
The pound posted the fourth day of losses in a row against the U.S. dollar as a serious political crisis deepens in Great Britain, where Prime Minister Gordon Brown’s Labour party is losing influence significantly.
Negative factors weighing on the pound are coming from virtually everywhere on the political sphere in the United Kingdom and the European Union, making the pound to reverse an uptrend started by signs of economic recovery. Prime Minister Gordon Brown is suffering sequential calls to resign, as his party had the weakest results in the European Parliament elections, reaching just 15.3 percent of voters, a drop of 7 percent from 2004. David Blanchflower, former Bank of England policy maker, affirmed that the central bank may continue its intentions of buying assets with newly created money, in order to rescue the shrinking British economy, adding pessimism to the pound outlook.
As long as Gordon Brown resists to resign, the pound will continue its bearish trend, according to currency strategists. The United Kingdom is in its worst economic moment since the end of the Second World War, and Gordon Brown is considered unable to rescue Great Britain from the current negative scenario. The pound is likely to continue weak, and as long as Brown remains in power, it’s rather improbable that the pound will recover versus the main currencies.
EUR/GBP rose slightly to 0.8738 from a previous price of 0.8743. GBP/USD traded at 1.5868 from 1.5972
Wednesday, June 3, 2009
Yen seen losing ground as risk appetite returns
The Japanese yen will lose ground against the dollar over the coming year as investors become more bold with their recovery bets, the latest Reuters poll of foreign exchange strategists found on Wednesday.
The poll of around 60 strategists, taken this week, saw the dollar trading in line with current levels at around 96 yen in a month, 100 in six months and 103 in a year. This is weaker than in a May poll which saw the yen at 103 and 105 in six and 12 months ahead respectively.
However, the forecast range was relatively wide, as is usual in this poll. Fifteen economists saw the yen weaken to above 110 per dollar in a year, while 25 saw the Japanese currency at or below 100.
Global economies have been battered over recent quarters but many economists say the worst may have now passed.
Japan was the hardest hit due to its exposure to the collapse in world export markets and what was a very strong currency, but it too has probably turned a corner.
"The ongoing prospect of a recovery in global growth and improving financial market conditions will continue to fuel a reversal of prior safe-haven flows ... , exacerbating yen weakness," said Lee Hardman at BTMU.
Whether the depreciation of the yen is as orderly as the poll suggests remains to be seen, although the survey indicated that volatility levels would fall this month.
The yen's outlook against the euro was far more opaque, with cross rates calculated by Reuters showing 12-month forecasts ranging from 114 to 165 per euro.
In three months the poll predicts the yen will be at 135 per euro, compared with 131 in May's poll and the 137 it was at earlier on Wednesday.
FRANC FRANKLY FLAT
The Swiss franc is not expected to move dramatically from current levels if the consensus forecast, which is generally flat, proves correct.
Median forecasts for each point through the 12-month horizon ranged from 1.08 to 1.12 francs per dollar, stronger than in the May poll. Twelve-month forecasts were wider, ranging from 0.95 to 1.35 per dollar.
"USD-CHF performance will mostly depend on EUR-CHF moves and on high risks of new Swiss National Bank forex intervention," said Roberto Mialich at UniCredit MIB.
The Swiss central bank has repeatedly warned it would fight a rise in the Swiss franc "resolutely" to keep the country out of deflation. The SNB intervened to weaken the franc in March when it announced a set of drastic steps to boost the economy and fend off deflation.
Against the euro the Swiss franc was seen trading at 1.52 in a month, 1.53 in three months and 1.56 in 12 months, compared with the 1.52 it was at earlier on Wednesday
European Spending, Exports Decline Most in 14 Years
European consumer spending and exports contracted the most in at least 14 years in the first quarter and investment slumped as the worst global recession in more than six decades prompted companies to cut output and jobs.
Gross domestic product shrank 2.5 percent from the fourth quarter, matching an initial estimate and the most since the data were first compiled in 1995, the European Union’s statistics office in Luxembourg said. Household consumption contracted 0.5 percent while exports dropped 8.1 percent and imports fell 7.2 percent, all the most since the series began in 1995. Investment fell 4.2 percent after a 4.3 percent drop in previous quarter that also was the sharpest since 1995.
Even with evidence building that the worst of the economic crisis may be over, euro-area unemployment is at a 10-year high as payrolls start to reflect the severity of the recession with companies from ThyssenKrupp AG to Air France-KLM Group firing workers. European Central Bank President Jean-Claude Trichet, who last month pointed to “tentative signs” of stabilization in the economy, tomorrow will unveil the bank’s latest economic forecasts and details on its next policy steps.
“The declines in exports and investment are mind- bogglingly large,” said Kenneth Wattret, chief euro-region economist at BNP Paribas in London. “The economy is in dire straits so the pressure is still there on the ECB to do more unconventional things.”
Euro-Area Economy
Today’s report showed that from a year earlier, the euro- area economy shrank 4.8 percent in the first quarter, more than double the 1.7 percent contraction in the previous three months. The statistics office had initially put the annual contraction at 4.6 percent for the first quarter.
The running down of inventories contributed 1 percentage point to the GDP contraction in the quarter, the report showed.
“In a way it’s a good sign because it means that inventory unwinding, at least in part, has run its course,” said Daniele Antonucci, European economist at Capital Economics in London.
Amid global concerns about deflation, euro-area producer prices fell 4.6 percent in April from a year earlier, the most since the data were first compiled in 1981, a separate report showed today.
“The massive contraction in industrial activity across the euro zone in recent months has clearly hit manufacturers’ pricing power very hard,” said Howard Archer, chief European economist at IHS Global Insight in London. “The euro-zone outlook still looks far from bright and we suspect that sustainable recovery is unlikely to develop until 2010.”
Credit Losses
The economy will contract “massively” this year and the central bank’s updated forecasts due tomorrow “won’t be very good,” ECB council member Ewald Nowotny said in Vienna last night, Austrian news agency APA reported. Growth next year will be around zero, he said. The EU last month forecast the economy will contract 4 percent this year and 0.1 percent in 2010.
The financial crisis, which started with the collapse of the U.S. property market in 2007, has triggered more than $1.48 trillion of writedowns and credit losses at financial companies and sent the global economy into its first recession since World War II, according to data compiled by Bloomberg.
The ECB will probably hold its main interest rate at a record low of 1 percent tomorrow, according to economists surveyed by Bloomberg News, as it sets out the mechanisms for buying 60 billion euros ($86 billion) of covered bonds, low-risk securities backed by mortgages and public sector loans. Nowotny said in a letter to Austrian hoteliers last week that the central bank could expand the asset-purchase program beyond that, buying bonds or commercial paper.
Economic Confidence
The global economy will shrink 1.3 percent this year before expanding 1.9 percent in 2010, according to forecasts by the International Monetary Fund. Still, European economic confidence rose for a second month in May and a report today showed the manufacturing and service industries contracted more slowly last month. Investors have also grown more optimistic as the MSCI World Index is trading around seven-month highs.
In the U.K., the euro region’s largest trading partner, consumer confidence rose in May to a six-month high as shoppers became more hopeful that the economy will emerge from the recession, Nationwide Building Society said today.
The euro was lower against the dollar after the GDP report. The European currency traded at $1.4161 at 3 p.m. in London, down 1 percent on the day.
FOREX-Asian comments provide a big boost to the dollar
The dollar recovered from its lowest levels this year against the euro on Wednesday after monetary sources in Asia said they would keep buying U.S. Treasuries even if the U.S. credit rating were to be cut.
The remarks from sources in China, Japan, India and South Korea [ID:nSP412010], compiled by Reuters from separate interviews, helped to stem recent selling that has driven the dollar index .DXY to its lowest this year and down more than 7 percent since the start of May.
Traders viewed the comments as an expression of support for dollar-denominated assets from the nations that control about half of the world's currency reserves. Dollar weakness would erode the value of U.S. investments.
"As the dollar continues to weaken, vocal intervention of this sort will rise," said Jacob Oubina, currency strategist at Forex.com in Bedminster, New Jersey. "This at least sets some kind of ceiling on euro strength and puts a floor under dollar weakness."
The euro pulled away from a five-month high it had hit in early trade and selling accelerated after the Reuters story was published. Sterling retreated from a seven-month high against the U.S. currency.
In early New York trade, the euro traded 0.7 percent lower at $1.4210 on electronic trading platform EBS
The dollar index, which tracks the currency's moves against a basket of six currencies, rose as much as half a percent after the comments, keeping just above its lowest level of the year hit on Tuesday. .DXY
Some of the dollar's slide in past weeks has been attributed to speculation that the U.S. credit rating may be downgraded, a move that may prompt nations to diversify their foreign reserves away from U.S. Treasuries.
The comments by the monetary sources in Asia came after a visit by U.S. Treasury Secretary Timothy Geithner to China, the world's biggest holder of Treasuries, during which he assured Beijing its U.S. investments were safe because Washington is committed to a strong dollar policy.
Analysts said that the dollar-positive comments had prompted traders to lock in profits against the suffering U.S. currency and that it might help to stem its recent selling for the time being but was unlikely to change the trend.
"The market is becoming somewhat stretched on short dollar positions as there has been decent-sized buying in euro and sterling, so traders were looking for a reason to calm things down," said Geoffrey Yu, currency strategist at UBS in London.
Tuesday, June 2, 2009
Pound Slides as Traders Consider Current Rally Excessive
The pound sterling dropped versus the euro and the dollar, after hitting a seven-month high against the dollar in a sharp rally to be considered excessive, as traders agree it does not reflect the United Kingdom’s economic outlook.
The British pound also lost ground against the yen and the country’s main stock exchange index, the FTSE 100, dropped 1 percent after two days of significant gains. The benchmark measure of U.K. equities interrupted its climb to a five-month high after Barclays Plc lost 13 percent, as investors from the United Arab Emirates sold their shares in worth of 4.1 billion pounds. Even if the pound has reached very low levels in the beginning of the year compared to much higher values it had before the global slump, Britain’s economy has still not showed sufficient signs of recovery that could sustain the pound’s rally for much longer.
Analysts consider the current uptrend weighing on the pound to be related directly to the extreme low levels it hit in the previous months, but as it may not be in a sustainable recovery path, it is expected that traders make profits after 2 days of sharp gains versus the dollar, as occurred during the past week. Without further optimistic reports confirming that the U.K. may soon be out of the current recession, the pound is not expected to climb further against currencies like the euro and the dollar.
GBP/USD traded at 1.6407 from yesterday’s top at 1.6495. EUR/GBP rose to 0.8650 from a previous price of 0.8615.
Continuing Dollar Weakness
Price action on USD/CHF, a daily chart of which is shown, has dropped further down to reach support around 1.0600 as of Tuesday (6/2/2009) morning. This occurs after the pair broke down below three different support factors: a well-defined inverted flag, a long-term uptrend support line extending from the March 2008 low, and then the key 1.0700 support resistance region. Currently around the 1.0600 region, bearishness continues to prevail. A strong breakdown below 1.0600 support should target further major support in the 1.0400 price region. Upside resistance in the context of the current steep downtrend resides around the dynamic level of the broken long-term uptrend line.
Read More »»Dollar General profit soars as shoppers seek value
Dollar General Corp DG.UL reported a sharply higher quarterly profit on Tuesday, as cost-conscious consumers flocked to the discount retailer's stores for bargains in the recession.
Dollar General, which sells most of its merchandise for $10 or less, said net income in the first quarter ended May 1 jumped to $83.0 million from $5.9 million a year earlier. Adjusted earnings before interest, income taxes, depreciation and amortization soared 59 percent to $291 million.
As the recession tightens household budgets, more shoppers have flocked to discount chains such as Dollar General, Wal-Mart Stores Inc (WMT.N), Family Dollar Stores Inc (FDO.N) and Dollar Tree Inc (DLTR.O).
Dollar General's quarterly sales rose 15.7 percent to $2.78 billion, while sales at stores open at least a year, or same-store sales, climbed 13.3 percent.
The company, which is owned by private equity group Kohlberg Kravis Roberts & Co KKR.UL, operates more than 8,460 stores in 35 U.S. states