| //10-03-2010 |
Previous session overview
The euro ticked up against the yen in Asia Wednesday, as Japanese importers buying the single currency on a regular settlement day set the tone of the market amid a lack of other trading cues.
But further gains are far from certain, dealers said, with the euro's near-term direction resting on developments in the euro-zone's fiscal problem and upcoming economic data.
As of 0450 GMT, the euro stood at JPY122.44, slightly up from JPY122.36 in New York late Tuesday.
The Euro slumped in Europe through the USD1.3600 level on heavy EURJPY selling but the downside pressure did not last and the single currency finished at the USD1.3600 level. EURGBP continued to grind higher as the Pound suffered the most of the majors.
The British pound fell as Fitch Ratings also said that the UK needs to improve its fiscal policy and Moody's said that the financial-strength ratings of UK banks haven't improved. The RICS house price balance report from yesterday also continued to weigh on the Pound. The report showed that the number of real-estate agents and surveyors saying house prices rose exceeded those reporting declines by 17%, much lower than forecasts at 30%.
Higher metals prices pushed up the Australian dollar Wednesday as dealers wait all important employment numbers Thursday. Aside from gains against the U.S. dollar, the Australian unit set a fresh record against the euro and is at its highest against the pound since it was floated.
Market expectation
The euro is higher against the pound, as concern about the U.K.'s fiscal problems reverberates. However, concerns about similar problems in Portugal keep the lid on the euro's gains.
While temporary swings in risk appetite will continue to benefit the euro, the common currency is vulnerable because of concerns about the sovereign debt of several euro-zone countries.
EURUSD breaks below support at USD1.3560 to extend lows to USD1.3550 with rate retaining a heavy feel, traders suggest. Support seen at Tuesday's lows at USD1.3537, with demand said to extend toward USD1.3530.
Pound grinds its way down to USD1.4910, with tone remaining heavy as recovery efforts seen shallow. A break below USD1.4900 may expose USD1.4880. Level expected to draw demand as it corresponds to a 76.4% retrace of the recovery from recent lows at USD1.4781 to USD1.5197. Traders confirm that stops are placed on a break below.
European stocks are expected to open little changed following Wall Street's modest rebound in the previous session, while the major currencies are trading within tight ranges.
Most players are bearish toward the euro, better than expected economic data could help restore investor confidence, possibly buoying the risk-sensitive euro toward USD1.3700 and JPY123.50, some dealers said. Investors will monitor U.S. retail sales for February and Reuters/University Of Michigan Consumer Sentiment Survey for March, both due Friday, for any hints on the health of the global economy.
|
| //10-03-2010 |
EUR/USD
Trading range: 1.3615 - 1.3515
Trend: Downward
Sell at 1.3605 SL 1.3637 TP 1.3528
USD/JPY
Trading range: 90.25 - 89.35
Trend: Downward
Sell at 90.15 91 90.47 TP 89.43
GBP/USD
Trading range: 1.4995 - 1.4880
Trend: Downward
Sell at 1.4981 SL 1.5013 TP 1.4893
USD/CHF
Trading range: 1.0735 - 1.0845
Trend: Upward
Buy at 1.0747 SL 1.0715 TP 1.0831
|
| //10-03-2010 |
The British Pound was little changed in Asian trade, treading water near familiar levels ahead of a report that is expected to show industrial production shrank at the slowest annual pace in nearly two years.
The Euro and the British Pound were little changed against the US Dollar with prices treading water in familiar territory throughout Asian trade. We remain short EURUSD at 1.4881 and GBPUSD at 1.5765.
Australian Home Loans unexpectedly fell 7.9 percent in January, marking the largest decline in nearly a decade, after the central bank raised interest rates while the government reduced cash handouts to first-time homebuyers. Excluding refinancing of existing mortgages, loans fell by an even more pronounced 8.2 percent. The Value of Loans fell 5 percent, the most since April 2008. Reserve Bank of Australia Governor Glenn Stevens has previously acknowledged that “lenders have generally raised rates a little more than the [central bank’s benchmark borrowing costs] over recent months.” Grants for Australians purchasing their first home were reduced to their original amount of A$7,000 in January after being tripled to A$21,000 as part of the 2008 stimulus package.
Separately, an index of Australian Consumer Confidence compiled by the Westpac Banking Corp rose 0.2 percent in March. The details of the report pained a mixed picture, with expectations of household finances in a year from now rising 5.5 percent while those of the overall economy declined for the second consecutive month, down 1.9 percent. Westpac chief economist Bill Evans referred to the outcome as “a solid result” but cautioned that RBA rate hikes may start to weigh on sentiment in the months ahead, saying “rates have not reached the point where increases have a major impact on confidence.”
Germany’s Trade Balance surplus is expected to expand to 14.5 billion euro in January as export volumes rise to the highest in 14 months, adding 0.5 percent from the previous month on the lingering effects of over $2 trillion in global stimulus efforts and buoyant Asian demand, particularly from China. Overseas sales may begin to flounder in the months ahead however; indeed, China’s Customs General Administration reported today that imports from Germany fell to the lowest in nine months in February. Separately, the final revision of February’s Consumer Price Index figures is set to confirm the annual pace of inflation slumped to 0.4 percent in February.
UK Industrial Production is set to fall 0.8 percent in the year to January, the smallest decline in nearly two years. However, yesterday’s unexpected 4.4 percent drop in exports – the largest in over three years – bodes ill for manufacturing going forward, hinting that lackluster demand will keep output subdued even as the government makes a push to make overseas sales the center-piece of its strategy to build a firm recovery in Europe’s third-largest economy. That said, number of leading output indicators remain well-supported, with a gauge of production expectations from the Engineering Employers Federation turning positive for the first time since 2008 last month while Manufacturing PMI held at the highest in at least three years over the same period. Rumors suggest that heavy snowfall created logjams at ports in January, which may resolve the disconnect between trade and these leading figures, so traders will likely need to wait for further evidence before making any firm conclusions about the trajectory of the UK industrial sector.
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| //09-03-2010 |
The British Pound declined against the spectrum of major currencies in overnight trade after a disappointing set of house price and retail sales figures as well as rumors that Moody’s may downgrade the bonds of several UK banks.
The Euro was little changed in overnight trade, continuing to consolidate in a narrow 40-pip range below 1.3640 to the US Dollar that emerged in the second half of the US session. The British Pound declined 0.5 percent against the greenback after a disappointing set of house price and retail sales figures (see below). A Wall Street Journal article claiming that Moody’s may downgrade the bonds of some UK banks after the government winds down its financial-sector bailout programs also encouraged GBP selling. We remain short EURUSD at 1.4881 and GBPUSD at 1.5765.
UK House Prices stumbled in February according to a survey of real estate agents from the Royal Institution of Chartered Surveyors (RICS), with only 17 percent of respondents reporting rising property prices – the smallest in six months. Economists predicted a 30 percent outcome ahead of the release. RICS spokesman Jeremy Leaf said, “The magnitude of the gains going forward is likely to continue to ease, reflecting the fact that new supply coming onto the market is starting to outstrip fresh demand.” Separately, UK Retail Sales rose 2.2 percent in the year to February according to a report from the British Retail Consortium (BRC). BRC Director General Stephen Robertson said, “Despite appearances, these results are not that strong [because] the growth is compared with very weak figures a year ago.” Stephenson added that although “consumer confidence is certainly up…unemployment is rising again [and] its clear customers are still cautious.”
A gauge of Australian Business Confidence matched a seven-year high in February according to a report from the National Australia Bank. The details of the report looked broadly encouraging, with gains in the headline figure driven by strong improvements in forward orders and export sales. However, trade balance figures released last week suggest that much of the resilience in sentiment likely owes to buoyant Asian (specifically, Chinese) demand for minerals such as iron ore. China’s recent attempts to clamp down on lending growth amid fears that the south Asian giant will overheat may bode ill for the mining sector, hinting that the current resilience in business confidence may prove fleeting.
Switzerland’s Consumer Price Index is expected to show the annual pace of inflation held at 1 percent in February, matching a 14-month high recorded in the previous month. The outcome will also mark the third consecutive month of positive price growth and comes a day ahead of the monetary policy announcement from the Swiss National Bank. While a rate hike is surely out of the question, SNB chief Philipp Hildebrand and company may now have room to drop their now-familiar refrain about lingering deflation risk and possibly even address the time frame for withdrawing their policy of intervention in currency markets to “prevent any excessive appreciation of the Swiss Franc against the Euro.
|
| //09-03-2010 |
Previous session overview
The euro fell against the dollar and the yen in Asia Tuesday as speculators took profits before a key U.S.-Greece meeting later in the global day, while weak U.K. housing data sent sterling broadly lower.
Profit-taking by Asian investors and U.S. hedge funds pushed the euro down by three-quarters of a yen from New York late Monday to JPY122.33 during Tokyo hours, traders said.
The sellers took profit on the euro's gain overnight as caution set in before planned meetings between Greek Prime Minister George Papandreou and U.S. President Barack Obama and Treasury Secretary Timothy Geithner, dealers said.
The dollar fell to JPY89.87 from JPY90.26 in New York on selling by Japanese exporters, traders said.
The Euro tested USD1.3700 in Asia after weekend reports from French President Sarkozy that Greece would be given financial support if it needed it. The pair was weak for the rest of the day as profit taking set in and support at USD1.3620 was tested.
The Pound fell to an intraday low of USD1.4995 compared with USD1.5063 in New York, while it also slid versus the euro and the yen. The pound suffered from data released in Asian time by the Royal Institution of Chartered Surveyors showing that in February, the proportion of surveyors reporting a rise in U.K. house prices exceeded the proportion reporting a fall by 17 percentage points. That was the lowest level since the plus 9.4 reading in August 2009, and sharply missed the plus 32 forecast by economists.
The Australian dollar was lower in Asia Tuesday on weakness in gold and the euro in the offshore session, but the local unit found some strength on a surge in business confidence and a private employment index which underscored the health of the country's job market.
Market expectation
EURUSD edges back to USD1.3620, after earlier Europe squeezed rate under USD1.3600 to challenge tech support at USD1.3597 (61.8% USD1.3530/1.3705). Offers at USD1.3620/25 currently under pressure, a break to open a move back toward the Asian highs at USD1.3636 (USD1.3638 38.2% USD1.3705/1.3597). Bids now seen placed at USD1.3590, stops on a break of USD1.3580.
Pound recovery extends to USD1.5000, but rate seen running into resistance around this level. A break may open a move toward USD1.5030. Support remains at USD1.4975/70, stronger at USD1.4960 with one trader highlighting the USD1.4950 level as key support.
USDJPY some interesting flow going through in dollar-yen this morning, talk of a large Japanese bank selling over 200 million dollars for exporters without much impact whilst traders report some model buying. There is also talk of some decent size expiries in dollar-yen today at JPY90.00, the market is currently JPY90.03.
European stocks are expected to open flat, with lackluster trading on Wall Street and in Asia offering little direction, while the euro has continued to fall ahead of a key meeting between the U.S. and Greece, due to take place Tuesday.
|
| //09-03-2010 |
EUR/USD
Trading range: 1.3645 - 1.3545
Trend: Downward
Sell at 1.3633 SL 1.3665 TP 1.3556
USD/JPY
Trading range: 90.20 - 89.30
Trend: Downward
Sell at 90.09 91 90.41 TP 89.37
GBP/USD
Trading range: 1.5040 - 1.4925
Trend: Downward
Sell at 1.5026 SL 1.5058 TP 1.4938
USD/CHF
Trading range: 1.0715 - 1.0825
Trend: Upward
Buy at 1.0728 SL 1.0696 TP 1.0812
|
| //08-03-2010 |
Previous session overview
The dollar rose to a two-week-high against the yen Monday in Asia, as higher regional shares bolstered investors' appetite for riskier, higher-yielding assets, and they dumped the safe-haven Japanese unit for the U.S. currency.
The greenback rose as high as JPY90.69, its highest since Feb. 23 as Asian investors took cues from Japan's benchmark Nikkei 225 Stock Average and China's Shanghai Composite Index.
The U.S. government said Friday that non-farm payrolls decreased by 36,000 in February from the month before. This was much better than the 75,000 decline economists had expected.
As of 0450 GMT, the dollar was at JPY90.41 from JPY90.33 Friday in New York.
The EURUSD traded with a soft undertone in Asia and Europe morning as German Economy Minister Rainer Bruederle said the German government had no intention of offering Greece a single cent in financial aid and price fell to an intra-day low of USD1.3530 shortly after U.S. released its jobs data.
The British pound lost its recent gains against the dollar following data US job losses was smaller than expected. The Office for National Statistics reported annual producer output price inflation accelerated to 4.1% in February, the highest rate since December 2008.
After surging over the weekend, the Australian dollar continued its upward move in Asian trade Monday as Friday's strong jobs report in the U.S. and further easing of Greek debt worries continued to drive investors into the local currency.
Market expectation
Higher Asian share prices often push the yen lower, as Japanese investors become more aggressive about investing in overseas assets with higher yields.
The yen's decline, however, isn't likely to continue for long because Japanese exporters still have a vigorous appetite for yen, analysts said. Exporters need a hefty volume of yen ahead of the March 31 fiscal year-end when they close their books.
There is also a risk that demand for yen will increase again if upcoming U.S. economic data, such as Friday's retail sales, turn out weaker than expected, analysts said.
EURUSD traders note that offers are seen stacked from above USD1.3700 (earlier high USD1.3704) through to USD1.3725, adding that stops are reported on a break above the Mar 3 high at USD1.3736. Rate currently trades back around USD1.3675.
Pound having extended recovery highs to USD1.5195 in early European dealing (USD1.5191 Asia high) it squeezes lower, currently easing in to challenge support at USD1.5155.50. Below here and rate can slip toward USD1.5130.
European stocks are expected to open higher, Monday, following stronger performances in the U.S. and Asian equity markets, while the euro has continued to attract buyers on improved sentiment about Greece and the U.S. economy.
|
| //08-03-2010 |
EUR/USD
Trading range: 1.3715 - 1.3615
Trend: Downward
Sell at 1.3703 SL 1.3735 TP 1.3626
USD/JPY
Trading range: 90.60 - 89.70
Trend: Downward
Sell at 90.48 91 90.80 TP 89.76
GBP/USD
Trading range: 1.5205 - 1.5095
Trend: Downward
Sell at 1.5194 SL 1.5226 TP 1.5106
USD/CHF
Trading range: 1.0665 - 1.0770
Trend: Upward
Buy at 1.0676 SL 1.0644 TP 1.0760
|
| //08-03-2010 |
The Euro may extend overnight gains into European trade amid receding concerns about Greek credit woes the country conducted a successful bond auction and received strong endorsements for its austerity measures from France and Germany.
The Euro and the British Pound advanced against the US Dollar as Asian stock exchanges added 1.6 percent on average in overnight trade with investors responding to Friday’s better-than-expect US jobs report. We remain short EURUSD at 1.4881 and GBPUSD at 1.5765.
Japan’s Current Account Balance recorded a surplus of 899.8 billion yen in January, a reading significantly greater than the 783.9 billion economists expected, as exports surged 40.6 percent from the previous year. The effects of global fiscal stimulus efforts continued to drive overseas demand, with shipments to China rising at the fastest pace since 1985 while those to the US jumped 24 percent, the first annual increase in over two years. However, looking past percent-change readings, actual export volumes have recovered less than half of the decline from their peak in March 2008, hinting that the actual level of foreign demand remains decidedly lackluster compared to where it has been in recent years. Most worryingly, the increase in cross-border sales does not seem offer a recipe for sustainable growth considering the flow of stimulus cash will invariably dry up, an outcome that is likely to materialize sooner rather than later considering the widespread worries about public deficits that have taken root over recent months. Imports increased 7 percent, driven primarily by oil purchases. Separately, the Eco Watchers survey of merchant sentiment topped expectations, with the forward-looking Outlook index rising to the highest in seven months, likely reflecting the cautious improvement in employment seen in January’s labor-market figures.
Germany’s Industrial Production is set to rise 0.9 percent in the year to January – the first positive reading in 17 months – as output remains supported by the lingering effects of last years’ global stimulus measures on foreign demand for the country’s manufactured goods. While the outcome may not be particularly market-moving in its own right given the themes behind it have been priced in for some time, it certainly won’t hurt an environment that seems already supportive of a near-term rebound in the Euro amid tempered concerns about the Greek budget crisis. Indeed, Greek credit default swaps dropped 79.7 basis points last week to reach the lowest level since mid-January while an auction of 5 billion euro in 10-year Greek government bonds drew three times more bidders than necessary to absorb the number of securities on offer. Investors were reassured after Athens announced another 4.8 billion euros in austerity measures and as Germany (the natural leader of any bailout effort) threw their support behind the troubled nation’s efforts while “leaking” plans for a contingency plan to funnel 25-30 billion euros through western European state-owned banks should PM George Papandreou and company fail to get their own house in order.
Switzerland’s Unemployment Rate is expected to decline to 4.4 percent in February, marking the first decline in eight months. Meanwhile, Retail Sales are set to add 2.3 percent in the year to January, marking the second consecutive month in positive territory. While certainly encouraging, these outcomes are unlikely to prove necessarily supportive for the mountain nation’s currency. Indeed, as we noted in our weekly Swiss Franc outlook, traders’ attention is fixated on larger themes such as the receding threat of a default in Greece and a broad re-balancing of carry trade portfolios, exposing CHF to competing forces that is likely to yield a mixed performance against the majors.
|
| //05-03-2010 |
Previous session overview
The yen fell against the dollar in Asia on Friday as reports that the Bank of Japan may take additional steps to ease monetary policy led investors to speculate Japanese interest rates might fall, reducing the attractiveness of yen-denominated assets.
Non-Japanese investors jumped on the reports and pushed the yen lower. But the reaction by Tokyo dealers was limited. They said even if the BOJ reinforces the lending facility, the yen-weakening effects will be limited.
As of 0450 GMT, the greenback was at JPY89.25 from JPY89.09 Thursday in New York. The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 80.510 from 80.571.
Euro has traded with a soft undertone in Asia but staged a pullback to 1.3694 in European morning. Price fell sharply from there and picked up more downward momentum after the ECB kept rate remained unchanged at 1% as expected. After the rate decision, ECB's Trichet said euro zone economy is expected to grow at moderate pace in 2010 and inflation will be around 1% in near term.
The British pound strengthened vs. the dollar overnight, but soon erased those gains after data from the US. There was little reaction from financial markets after the Bank of England kept interest rates and quantitative easing on hold.
The Australian dollar and interest rate futures have nudged lower in a lackluster Asia session Friday as dealers await all important U.S. employment figures due later.
Market expectation
The dollar's topside will be capped at around JPY90.00 for the time being, despite the reports, dealers said, as any BOJ easing is unlikely to do much to improve investor sentiment.
EURUSD trades around USD1.3578. Offers seen placed at USD1.3605/10, with Asian traders earlier noting European name offer sitting behind at USD1.3620. Further offers now reported at USD1.3630/35. Bids remain in place at USD1.3550 (USD1.3549 61.8% USD1.3433/1.3736), more at USD1.3520 with stops below.
Pound gets a lift above USD1.5030 on reports of sterling-yen demand. Offers seen placed at USD1.5050/55. Support remains ahead of USD1.5000; with further demand noted close behind at USD1.4990.
European stocks are expected to open marginally higher Friday, taking their cue from a late rally on Wall Street.
Looking ahead, investors will pay attention to U.S. non-farm payrolls data due at 1330 GMT. The dollar may spike against the yen briefly if the jobs data beat economists' forecast.
|
| //05-03-2010 |
EUR/USD
Trading range: 1.3720 - 1.3620
Trend: Downward
Sell at 1.3710 SL 1.3742 TP 1.3633
USD/JPY
Trading range: 88.65 - 87.70
Trend: Downward
Sell at 88.51 91 88.83 TP 87.79
GBP/USD
Trading range: 1.5110 - 1.5000
Trend: Downward
Sell at 1.5098 SL 1.5130 TP 1.5010
USD/CHF
Trading range: 1.0660 - 1.0765
Trend: Upward
Buy at 1.0671 SL 1.0639 TP 1.0755
|
| //05-03-2010 |
Currency markets kept to narrow ranges in overnight trade, marking time ahead of the upcoming release of the closely-watched US employment report. UK Producer Price Index figures headline the docket in European hours.
The Euro and the British Pound were little changed in Asian trade, adding a modest 0.1 and 0.02 percent against the US Dollar as currency markets marked time ahead of tomorrow’s US Nonfarm Payrolls report. We remain short EURUSD at 1.4881 and GBPUSD at 1.5765.
The pace of expansion in Australia’s construction sector slowed in February according to a report from the Australia Industry Group, as an index tracking the industry fell to 52.8 from 57.7 in the previous month – the largest decline in nearly two years. The details of the report revealed slowing momentum across all sub-sectors, with apartment and commercial construction leading the way lower. New orders and employment declined for the first time in three months while prices saw the first decline since October.
The economic calendar is decidedly tame in European hours, with February’s UK Producer Price Index figures being the only item of interest on the docket. Expectations call for the annual pace of wholesale inflation to advance to 4.0 percent, the highest in 14 months. February’s quarterly inflation from the Bank of England forecast a spike in year-on-year price growth figures through the first quarter as higher oil prices and sterling depreciation feed through, and that seems to be precisely what is likely to drive this result. Indeed, the Core PPI reading that strips out volatile items like food and energy is set to print significantly lower at 2.8 percent. On balance, the outcome fits well within the underlying themes priced into exchange rates over recent weeks and so seems unlikely to stir much volatility given its limited implications for monetary policy at least until the release of the minutes from yesterday’s BOE policy meeting offers a bit more perspective next week. On balance, all eyes are likely to be transfixed on the US Nonfarm Payrolls release set to cross the wires late into the session.
|
| //04-03-2010 |
Previous session overview
The euro edged lower against the dollar in Asia on Thursday as U.S. and European banks took profits after the euro hit a two-week high overnight.
Non-Japanese banks and speculators sold the risk-sensitive euro as falls in Japanese shares left them reluctant to take risks, traders said.
The U.S. unit was at JPY88.45, almost unchanged from its New York level of JPY88.43. The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 80.064 from 79.971 in New York.
The EURUSD briefly dipped to USD1.3593 in European morning but rebounded sharply from there after Greece announced plans for a further USD6.5 billion in pay cuts and tax hikes to reduce its deficit, easing worries about the country's debt crisis. The euro rallied to USD1.3736 in NY afternoon.
The British pound strengthened after a survey showed an unexpected jump in UK services sector activity. Data from the purchasing managers' survey showed Britain's services sector rose to 58.4. Though the positive economic news pushed the pound higher, gains were limited as investors' wariness over Greece's debt problems made them shy away from risk.
The Australian dollar slid Thursday, struggling against some technical levels after key economic data boosted the currency earlier in the week. In a relatively quiet session, the Australian dollar drifted to the downside against most major currencies. The only domestic economic report was a reading on international trade that showed only a slight improvement.
Market expectation
The dollar-yen is recovering after posting a low at JPY88.14 it is currently trading at JPY88.33 after touching JPY88.37. Traders note they expect to see a sell the rally theme to the market today with offers initially at JPY88.50 and then JPY88.80.
Still, the euro may widen losses if any negative news about euro-zone fiscal problem emerges, adding to worries over the economic outlook, dealers said.
The near-term direction of the euro and the dollar will largely depend on Friday's U.S. non-farm payrolls report for February.
Some dealers said worse-than-expected figures may push the dollar toward JPY88.00 and the euro to JPY120.30 on mounting expectations the Federal Reserve won't likely hike its policy rate for the time being.
EURUSD traders reported stops through USD1.3640/35 targeted and triggered, taking rate down to USD1.3633. Rate currently trades back around USD1.3645 as profit take demand quickly emerges to soak up stop supply. Next support seen placed at USD1.3620.
European stocks are expected to open lower Thursday, taking their cue from a late selloff on Wall Street and a downbeat Asian session, as investors adopt a cautious stance ahead of key meetings at the Bank of England and European Central Bank.
|
| //04-03-2010 |
EUR/USD
Trading range: 1.3720 - 1.3620
Trend: Downward
Sell at 1.3710 SL 1.3742 TP 1.3633
USD/JPY
Trading range: 88.65 - 87.70
Trend: Downward
Sell at 88.51 91 88.83 TP 87.79
GBP/USD
Trading range: 1.5110 - 1.5000
Trend: Downward
Sell at 1.5098 SL 1.5130 TP 1.5010
USD/CHF
Trading range: 1.0660 - 1.0765
Trend: Upward
Buy at 1.0671 SL 1.0639 TP 1.0755
|
| //04-03-2010 |
Euro traders are bracing to hear the European Central Bank’s take on the developing debt crisis in Greece while the Pound may see selling pressure as the Bank of England reinforces a dovish posture with twin interest rate announcements ahead.
The Euro and the British Pound slid 0.4 percent apiece against the US Dollar in overnight trade as Asian stocks declined, stoking safety-related demand for the greenback. We remain short EURUSD at 1.4881 and GBPUSD at 1.5765.
The US Dollar and Japanese Yen traded broadly higher on safety-related demand as stocks sold off in Asian trade, leading the MSCI Asia Pacific regional equity benchmark index down 0.6 percent after China’s Industrial Bank Co said loan growth will nearly halve this year as the government clamps down on credit on fears that the ultra-loose monetary policy encouraged amid the credit crunch will see the economy overheat if it is not reigned in, producing asset bubbles and runaway inflation.
Australia’s Trade Balance deficit narrowed to -A$1.2 billion in January – the smallest in seven months – from a revised -A$2.2 billion in the previous month as imports fell 3 percent (A$719 million), led by a 25 percent drop in overseas fuel purchases. Exports gained 1 percent (A$278 million), driven by a 7 percent jump in cross-border sales of metal ores and minerals. Japan’s Capital Spending fell 17.3 percent in the three months to December 2009, showing firms cut investments for the eleventh consecutive quarter, hinting at lingering doubt about the sustainability of the export-led recovery of recent months after the effects of global stimulus efforts are exhausted.
Interest rate decisions from the Bank of England and the European Central Bank headline the economic calendar. The outcome out of the UK will be at best a re-statement of the dovish posture that was on display in February’s quarterly inflation report, where the BOE said that “the pace of recovery is somewhat less strong than [previously expected, while] inflation is likely to fall back to below the target” over the medium term despite a likely uptick above 3% in the first quarter as higher oil prices and sterling depreciation feed through. As for quantitative easing (QE), central bank chief Mervyn King said that although the BOE had paused asset purchases, “it is far too soon to conclude that no more purchases will be needed.” However, last week’s disappointing fourth-quarter GDP report (which revealed a sharp 3.1% drop in private investment along with an unexpected 1.2% surge in government spending) painted a picture of an economy that is still far from self-sufficient, meaning the risks are to the downside should the BOE conclude that pausing QE was premature.
Meanwhile, the ECB announcement will likely see the market focused on central bank President Jean-Claude Trichet’s comments regarding Greece and the rest of southern Europe rather than actual monetary policy, which is almost certain to remain on hold. Indeed, looking beyond recent complications from sovereign default risk, inflation is well below the 2% target while economic recovery apparently began to falter in the fourth quarter, all of which point to an ECB that remains firmly on hold. Greek Prime Minister George Papandreou announced expanded steps to deal with his country’s gaping budget deficit yesterday; the measures entail such dramatic steps as a freeze on pensions, a cut in civil service salaries, and a broad batch of new taxes – none of which will sit well with the unions and is likely to bring continued civil unrest. Papandreou is heading to Germany and France starting Friday to seek strong endorsements for Greece’s austerity program, warning that if they don’t win enough support to calm the markets and bring down the costs of borrowing country, he will be forced to turn to the International Monetary Fund for assistance. This would be a significant slap in the face for the leadership of the European Union, whom the Greek Deputy PM Theodoros Pangalos described as being of “very poor quality” last week, illustrating that they are unable to put their own house in order without outside involvement.
Traders will be eager to hear the ECB’s perspective on the issue, particularly after Euro Zone finance minister group head and Luxembourg PM Jean-Claude Juncker told German news daily Handelsblatt that the markets could only “blackmail” the currency bloc for so long, warning that policymakers have “instruments of torture” that could be put to use if necessary. This amounts to a direct challenge to traders that have been raising bets against the Euro amid the developing sovereign debt crisis. Such an approach has famously backfired during the Asian Financial Crisis as well as when the UK was forced to drop out of the EU’s Exchange Rate Mechanism (a precursor to adopting the Euro), an episode known as the time when George Soros “broke” the Bank of England. Needless to say, the markets will be keen to test EU officials’ resolve, an outcome that is likely to see the Euro come under intense selling pressure as the situation develops.
|
| //03-03-2010 |
Previous session overview
The dollar touched a two and a half month low against the yen in Asia on Wednesday due to selling by Japanese exporters, falling long-term U.S. interest rates, and expectations for weak U.S. jobs data.
Elsewhere, easing concerns over Greece's debt problems helped the euro rise further versus the greenback, while doubts over the ability of Prudential PLC to buy part of a major U.S. insurance company lifted the British pound against the U.S. currency, dealers said.
During Asian trading hours, the dollar fell to JPY88.47, the lowest since JPY88.32 on Dec. 14. That compares with JPY88.75 in New York late Tuesday.
The euro dropped to a 9 1/2-month low against the dollar after Greece's biggest public sector union called for a 24-hour strike on March 16 to protest Athens expected plans to cut its ballooning debts. However, the euro was able to recoup some of those losses after Greek Prime Minister George Papandreou announced a cabinet meeting on Wednesday to "take decisions about the economy."
Sterling briefly hit USD1.5075 compared with USD1.4960 in New York overnight. A report in the Financial Times questioning Prudential's ability to buy the Asian operations of American Insurance Group as planned led speculators to buy the pound on the view the failure of the deal would make it unnecessary for the firm to sell a lot of sterling for dollars, three traders said.
The Australian dollar rose against the U.S. dollar Wednesday, boosted by robust local growth data, though technical factors and profit taking pushed the Australian dollar lower against the Japanese yen.
Market expectation
For EURUSD support remains in place at USD1.3615, with interest seen extending toward USD1.3600. Offers remain above USD1.3655, with further sell interest noted at USD1.3665/70. Above here and rate expected to meet further offers beginning from around USD1.3685 through to USD1.3700, with talk around of large stops placed on a break of USD1.3700.
Pound drags itself back above USD1.5000, after early Europe had squeezed longs as it took rate back to USD1.4975, extending the corrective pullback off overnight highs of USD1.5077. Offers now seen placed at USD1.5020/25 ahead of USD1.5050. A break here to open a move back toward the overnight highs, with offers noted between USD1.5075/80.
European stocks are expected to open lower Wednesday, as investors react with caution, awaiting further developments from Greece and ahead of key employment data out of the U.S.
A U.S. private-sector employment report will be issued later in the day by payroll giant Automatic Data Processing Inc. and consultancy Macroeconomic Advisers. Economists expect the data to show losses of 50,000 private-sector jobs last month, following a 22,000 drop in January.
U.S. non-farm payrolls data due Friday are likely to show a net loss of 75,000 workers in February, worse than the previous month's 20,000 decline, the economists said.
|
| //03-03-2010 |
EUR/USD
Trading range: 1.3665 - 1.3565
Trend: Downward
Sell at 1.3653 SL 1.3685 TP 1.3576
USD/JPY
Trading range: 88.50 - 89.45
Trend: Upward
Buy at 88.63 SL 88.31 TP 89.35
GBP/USD
Trading range: 1.5085 - 1.4975
Trend: Downward
Sell at 1.5073 SL 1.5105 TP 1.4985
USD/CHF
Trading range: 1.0705 - 1.0815
Trend: Upward
Buy at 1.0719 SL 1.0687 TP 1.0803
|
| //03-03-2010 |
The Euro and the British Pound advanced against the US Dollar on firming risk appetite in Asian trade amid rumors that Greece will announce an additional 4.8 billion euros in spending cuts to trim its budget deficit.
The Euro and the British Pound advanced in Asian trade, adding 0.2 and 0.5 percent respectively against the US Dollar as stocks rose on expectations that Greece will announce an additional 4.8 billion euros in spending cuts to trim its budget deficit. We remain short EURUSD at 1.4881 and GBPUSD at 1.5765.
Australia’s Gross Domestic Product expanded 0.9 percent as expected in the fourth quarter, while the outcome for the three months through September 2009 was revised higher to 0.3 percent. Private-sector investment stood out as the most encouraging item in the figures, rising by a hefty 4.9 percent to register the largest increase since the second quarter of 2008 on the back of a sharp increase in purchases of new machinery and equipment. Household consumption held steady, matching the previous quarter’s 0.7 percent increase but falling short of the 0.9 percent gain recorded in the three months to June 2009.
The outcome was not all rosy however. Indeed, the jump in government expenditure was disappointing as public spending added 1.8 percent – the most in three and half years – hinting that the economy remains reliant on stimulus as a significant driver of expansion and will likely slow down as fiscal support is withdrawn. Indeed, Australian Treasurer Wayne Swan acknowledged as much in a press conference following the release while Prime Minister Kevin Rudd said it was the government that “kept the economy growing strongly”. Further, the jump in machinery investment likely owed to continued expansion in the mining sector, and industry that is intimately tied to Chinese demand and now seems acutely vulnerable with Beijing intent on cooling economic growth.
Currency markets were clearly disappointed with the outcome, with the Australian Dollar trading slightly lower following the release. More worrisome still, a Credit Suisse gauge of priced-in expectations shows that traders see a mere 21 percent probability of another further monetary tightening in April after yesterday’s interest rate increase from the Reserve Bank of Australia, down from 100 percent before the GDP report crossed the wires.
Elsewhere on the calendar, UK Consumer Confidence rose to the highest level in two years according to a report from the Nationwide Building Society. The outcome was not as robust as the headline figure would suggest however: the details of the report showed that a gauge of spending intentions declined to the lowest in a year, meaning apparently firming confidence both the current and future economic environment may not translate into any meaningful gains for consumption and thereby for economic growth.
German Retail Sales are expected to decline 0.6 percent from the previous month in January while those in the Euro Zone as a whole give back 0.3 percent after yielding a flat result in December. The more timely Bloomberg Retail PMI report foreshadowed a negative outcome, showing the sector shrank at the fastest pace in 10 months in January and continued to contract in the following month. The readings will add to building evidence that economic recovery in the currency bloc is stalling after German GDP disappointed in the fourth quarter and Euro Zone flash CPI retreated for the first in five months in February.
On balance, the developing situation in Greece is likely to remain the dominant driver of currency market price action after rumors that it will commit to as much as 4.8 billion euros in additional spending cuts to trim its gaping budget deficit – the highest in the Euro Zone. The outcome will be a pivotal moment for near-term risk sentiment, with anything that the market sees as insufficient likely to send stock markets and risk-correlated currencies lower while boosting the US Dollar and Japanese Yen. Alternatively, a meaningful step to trim the fiscal shortfall will likely have the opposite effect, fostering buying interest in the Euro as well as the spectrum of risky assets (stocks, commodities, high-yielding currencies). Asian shares rose in anticipation of the release, with the MSCI Asia Pacific Index adding 0.6 percent.
|
| //02-03-2010 |
Previous session overview
The euro fell against the dollar in Asia Tuesday after Australia's central bank chief voiced concerns over the effect of sovereign debt problems on the global economy, such as those of euro-zone member Greece, prompting short-term players to sell the common currency.
The risk-sensitive common currency may continue to edge down for the rest of the day if share markets in Europe and the U.S. are sluggish, dealers said. Japan's Benchmark 225 Nikkei Stock Average was down 0.02% in the early afternoon session.
The dollar rose slightly against the yen as U.S. hedge funds and other short-term players bargain-shopped the U.S. units after its overnight fall. At 0450 GMT, the greenback traded hands at JPY89.34 compared to JPY89.07 late Monday in New York.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies including the yen and euro, was at 80.960 compared to 80.728.
The euro fell to USD1.3511, from USD1.3562 late Monday, and the British pound skidded 0.8% to USD1.4871, continuing its slide.
The pound plunged on Monday, as worries about the outcome of the U.K. general election and the ability of the government to remedy the high fiscal deficit put the currency under heavy selling pressure.
The Australian dollar got an early lift against its U.S. counterpart in Asian trading Tuesday after the Australian central bank raised interest rates as expected, but the move only briefly stalled the greenback's overall rise. The Reserve Bank of Australia raised its policy rate by a quarter point to 4.0%, as most had expected, marking the central banks' fourth rate increase in five meetings after last month's surprise decision to stand pat.
Market expectation
EURUSD getting flashed that a semi official name has sell interest at USD1.3540. Rate currently trades around USD1.3525. Real money also noted selling in recent trade.
EURGBP resistance seen placed toward stg0.9100 (stg0.9098 61.8% stg0.9150/0.9015), a break may open a move toward stg0.9120 (stg0.9118 76.45) ahead of stronger area between stg0.9150/55. Support remains at stg0.9070 ahead of stg0.9045/40.
Pound recovered to around the USD1.4920 level on the reported Asian sovereign buys, but just as quickly sinks back to USD1.4885. Getting talk that the UK clearer could have more sell interest to be executed today, the name was mentioned earlier when rate was sold off from USD1.4930 to USD1.4855.
European stocks are expected to open largely unchanged Tuesday, as investors await further developments from Greece, which is due to offer more details on its austerity plans this week.
|
| //02-03-2010 |
EUR/USD
Trading range: 1.3555 - 1.3450
Trend: Downward
Sell at 1.3541 SL 1.3573 TP 1.3464
USD/JPY
Trading range: 89.50 - 88.55
Trend: Downward
Sell at 89.36 91 89.68 TP 88.64
GBP/USD
Trading range: 1.4950 - 1.4835
Trend: Downward
Sell at 1.4937 SL 1.4969 TP 1.4849
USD/CHF
Trading range: 1.0795 - 1.0905
Trend: Upward
Buy at 1.0808 SL 1.0776 TP 1.0892
|
| //02-03-2010 |
Currency markets were visibly unimpressed after the Reserve Bank of Australia raised interest rates to 4.0 percent, with knee-jerk Australian Dollar volatility as the announcement crossed the wires culminating in a flat outcome against the majors.
The Euro and the British Pound tracked slightly lower in Asian trade, slipping 0.2 and 0.4 percent respectively against the US Dollar. We remain short EURUSD at 1.4881 and GBPUSD at 1.5765.
Currency markets were visibly unimpressed after the Reserve Bank of Australia raised interest rates to 4.0 percent, with sharp Australian Dollar volatility as the announcement crossed the wires culminating in an essentially flat outcome against the majors. RBA Governor Glenn Stevens struck a markedly hawkish bias, saying that “with growth likely to be close to trend and inflation close to target over the coming year, it is appropriate for interest rates to be closer to average,” which presumably means anywhere between 5-6 percent given where borrowing costs have been over the past two decades. Stevens added that today’s decision was “a further step in [the] process” of returning to this average, explicitly signaling that further hikes are on the way. The market’s apparent lack of excitement may be linked to a belief that the central bank is on a path to overshoot on monetary tightening considering the threat posed to Australia’s mining sector – arguably one of the most important engines of the country’s economic growth – from China’s aggressive moves to slow expansion amid fears the south Asian giant may overheat.
Separately, Australia’s Retail Sales added 1.2 percent in January – topping economists’ forecasts for a more modest 0.5 percent increase – with Department Store and Apparel sales driving receipts higher with impressive gains of 7.4 and 2.9 percent, respectively. Looking past month-to-month volatility at the overall trend however, the outcome seems far less optimistic than the headline figure would suggest. Indeed, sales grew 3 percent from the previous year, rebounding from a 13-month low in the annualized growth recorded in the previous month but falling significantly short from the long-term trend average at 6.6 percent. To that effect, it may be premature to sign off on the return of consumer-led economic growth in Australia for the time being until further evidence emerges.
Japan’s Unemployment Rate fell to 4.9 percent in January from a revised 5.2 percent in the previous month. The number of unemployed workers fell by 160,000 while the labor force grew by a hefty 480,000, suggesting the drop in the jobless rate can’t be chalked up to increasingly discouraged applicants giving up the job search (and thereby no longer counting as “unemployed”) as had been the case in recent months. The Transportation, Retail Trade, and Medical sectors led gains in new employment. Interestingly, the number of people working more than 35 hours per week increased by over half a million workers while part-time employment fell by a similar amount, seemingly reflecting a cautious optimism among employers considering full-time positions imply higher wages and longer contracts. Looking past the upbeat headline figure however, it is important to note that the number of employed workers is still 1.5% lower than a year ago having recovered less than half of the drop from the peak in December 2007, hinting that any recovery that may be underway is young and fragile.
Switzerland’s Gross Domestic Product is set to grow 0.4 percent in the fourth quarter, marking the second consecutive period in positive territory and the largest expansion since the three months through March 2008. On balance, the outcome is unlikely to stir much of a reaction considering its limited implication for monetary policy. Indeed, a Credit Suisse gauge of priced-in expectations shows that traders forecast virtually no probability of a rate hike at next week’s Swiss National Bank policy meeting and see Chairman Philipp Hildebrand and company adding just 18bps to benchmark borrowing costs over the next 12 months. As for the SNB’s policy of intervention into the EURCHF exchange rate, this has been on the backburner for some time as the markets noticed that the central bank quietly shifted its strategy to managing the pace of the Franc’s appreciation against the single currency rather than defending a particular price level.
Meanwhile, a preliminary estimate of February’s Euro Zone Consumer Price Index is expected to see the annual pace of inflation pull back to 0.9 percent from 1.0 percent recorded in the previous month. On balance, this too is likely to go largely unnoticed with the European Central Bank likely content to remain on the sidelines for now. Indeed, with inflation out of negative territory but still below the 2 percent target level, Jean-Claude Trichet and company can afford to retain a wait-and-see posture considering the difficult task of balancing the competing objectives of stronger and weaker Euro Zone economies amid a brewing sovereign credit crisis. Traders seem to agree, seeing no chance of a rate hike at this week’s policy meeting.
|
| //01-03-2010 |
Previous session overview
The euro held on to recent gains in Asian trading Monday, as traders weighed reports of aid to Greece and gauged the likely effect on the European unit.
A plan led by Germany and France to bail out Greece with as much as 30 billion euros (USD41 billion) was in the works, as German and French officials worked out timing and terms, the Wall Street Journal reported Saturday.
A media report Friday said Germany is considering whether to buy Greek bonds through state-owned bank KfW Group. The move would ease fears that Greece will have trouble tapping the market for much-needed financial support, including a planned bond offering next week.
The euro was at USD1.3619, steady against USD1.3618 in late North American trading on Friday.
The dollar bought JPY89.06, up from JPY88.90 late Friday.
The U.K. pound dropped sharply against the dollar on news late Sunday that American International Group Inc. and U.K.-based Prudential PLC were closing in on a USD35.5 billion deal that would see Prudential purchase government-controlled AIG's Asian life-insurance business, its crown jewel.
The dollar index (DXY), which measures the U.S. unit against a trade-weighted basket of six major currencies, stood at 80.481, up from 80.379 late Friday.
On Friday, the dollar fell as much as 0.8% against the euro and declined versus other major currencies as a report about the possible deal to help Greece meet its financial needs supported the European currency.
The Australian dollar rose in Asia trade Monday as a bailout plan for Greece began to take shape.
Market expectation
Many market participants will likely sell the greenback if U.S. data due out this week reinforce the view that the world's biggest economy is still fragile, and the central bank will keep its ultra-low rate policy in place for an extended period.
For the moment, the market is focused on upcoming U.S. economic indicators for February. These include the Institute for Supply Management's manufacturing business index, due later in the day, and the employment report, due Friday.
EURUSD recovery off early Europe lows of USD1.3585 extends to USD1.3628 with traders now placing sell interest at USD1.3625/30, with more positioned at USD1.3655/60.
Pound gets pulled higher by euro-dollar's recovery, while euro-sterling continues to meet supply above stg0.9000. Rate trades around USD1.5145, challenging reported offers placed from USD1.5140, stronger toward USD1.5150. Above here and rate can edge on toward USD1.5162 (61.8% USD1.5203/1.5096) ahead of USD1.5178 (76.4%).
European stocks are expected to open higher Monday, following positive U.S. and Asian sessions, as investors take heart from reports of a rescue package for Greece.
|
| //01-03-2010 |
EUR/USD
Trading range: 1.3575 - 1.3675
Trend: Upward
Buy at 1.3586 SL 1.3554 TP 1.3663
USD/JPY
Trading range: 88.95 - 89.90
Trend: Upward
Buy at 89.05 SL 88.73 TP 89.77
GBP/USD
Trading range: 1.5180 - 1.5070
Trend: Downward
Sell at 1.5170 SL 1.5202 TP 1.5082
USD/CHF
Trading range: 1.0785 - 1.0680
Trend: Downward
Sell at 1.0771 SL 1.0803 TP 1.0687
|
| //01-03-2010 |
The Euro surged against the British Pound in Asian trade, sending the UK unit sharply lower against most major currencies as the markets digested emerging details of a German-led bailout of the debt-ridden Greek economy. More of the same is likely ahead.
The Euro traded slightly lower against the US Dollar, slipping 0.2 percent. British Pound losses were significantly more substantial as the UK unit slid 0.5 percent against the greenback following an early spike in EURGBP (see below). We remain short EURUSD at 1.4881 and GBPUSD at 1.5765.
The Euro surged against the British Pound in early trading, sending the UK unit sharply lower against most major currencies as the markets digested emerging details of a German-led bailout of the debt-ridden Greek economy. The Wall Street Journal features a story saying German and French officials are hashing out a plan to offer as much as 30 billion euros in aid, likely via the sale of Greek government debt to state-owned banks in the Euro Zone’s top-two economies. This reinforces a story that emerged from Bloomberg News late Friday that cited an anonymous source claiming that German state-owned bank KfW Group to buy up to 25 billion euros in Greek bonds to stave off a default should the troubled southern European country fail to set its own house in order. The Financial Times offered a bit more detail, saying a plan whereby the Berlin administration would offer guarantees on purchases of Greek bonds by major German banks started to take shape after a meeting between Deutsche Bank CEO Josef Ackermann and Greek Prime Minister George Papandreou. The news also helped underpin risk appetite, with the MSCI Asia Pacific regional benchmark stock index rising 0.8 percent.
Australia’s Manufacturing sector expanded at the fastest pace in two years, led by stronger production deliveries growth according to a report from AiG. Housing and resource-linked industries led the metric higher. Meanwhile, the Current Account deficit widened to -A$17.4 billion in the fourth quarter as imports gained 2 percent from the three months through September, driven primarily by purchases of foreign-made industrial transport equipment and oil. Both outcomes reflect continued expansion in Australia’s booming mining sector, although lackluster Chinese Manufacturing PMI figures also released today may prove to bode ill for demand going forward. Indeed, the figures revealed the largest decline in the pace of industrial-sector expansion in 15 months as both output and orders growth faltered, sending the Australian Dollar lower after the data crossed the wires amid fears of dwindling demand from the antipodean nation’s largest trading partner. Still, the elevated pace of economic activity apparent in the AiG report bolstered expectations that the Reserve Bank of Australia will raise interest rates this week to check building inflationary pressure, with a Credit Suisse gauge of the priced-in forecast showing investors now see a 61 percent chance of a 25bps increase versus 49 percent on Friday.
Risk sentiment is likely to dominate currency markets in the forthcoming session, with shares pushing higher as European investors have their chance to price in the emerging details of a Greek bailout plan. US equity index futures are trading about 0.5 percent to the upside, bolstering the case for a “risk on” scenario that may bode ill for the safety-linked US Dollar and Japanese Yen against most major currencies.
Turning to the economic calendar, the Euro Zone Unemployment Rate is expected to rise to set a new record high at 10.1 percent in January. Meanwhile, UK Mortgage Approvals are set to decline to 50,000 in January – the lowest in seven months – while Net Consumer Credit drops 0.1 billion pounds over the same period to mark the first decline in two months. On balance, the reports are unlikely to command significant attention considering traders have had ample time to price in the underlying trends behind the figures. Indeed, the Euro Zone jobless rate has been trending steadily higher for two years while the UK figures were telegraphed by analogous reports from the Bank of England as well as the British Bankers’ Association, with economists citing “one-off factors” such as severe weather that kept prospective buyers from arranging loans as reasons for the slowdown.
|
| //26-02-2010 |
Previous session overview
The euro rose against the dollar in Asia on Friday as an absence of new developments related to Greece's fiscal problem encouraged investors to buy back the common currency, but analysts said the matter will likely keep looming for some time.
Asian hedge funds bought back the euro to increase their diminished holdings of euro, a position that has been profitable because of the euro's recent downtrend, traders said. No new selling factors emerged in Asian hours, they added.
The dollar was at JPY89.27 from JPY89.06 Thursday due to buying by Japanese importers, while the ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 80.546 from 80.685.
The euro rose against the dollar in Asia on Friday as an absence of new developments related to Greece's fiscal problem encouraged investors to buy back the common currency. At 0735 GMT, the euro was at USD1.3575 from USD1.3560 from in late New York trade Thursday, and at JPY121.35 from JPY120.76.
The British pound traded lower against majors as risk aversion rose today. The Pound suffers as Britain battles record deficits and investors fearing a repeat of Greece's crisis. Business investment released showed a drop of 5.8 percent in Q4 from the previous decline of 0.6 percent.
Labor market concerns in the U.S. helped the Australian dollar strengthen against the U.S. dollar Friday, although the local currency was slightly weaker against the Japanese yen.
Market expectation
Investors could resume selling the euro anytime, dealers said, as concerns over a possible downgrade in European credit ratings won't abate. This could, in turn, delay policy tightening by the European Central Bank, analysts said.
Dealers will pay attention to a two-day meeting of from the Group of 20 deputy-minister-level finance officials in Incheon, South Korea, from Feb. 27 for any comments about Greece's fiscal problems.
Any comments by euro-zone officials on sidelines the meeting may create further short-term volatility in the euro, said analysts.
Investors are also focused on revised U.K. gross domestic product data for the fourth quarter because the actual results might miss forecasts and push the U.K. pound lower.
European stock markets are expected to open modestly higher Friday, after a late recovery on Wall Street and some encouraging economic data from the Asian region dispelled the most worrisome scenarios for growth which had ruled the markets much of this week.
EURUSD offers seen placed between USD1.3600/10, a break to open a move toward USD1.3625/30. Support USD1.3535/30 (Asia low USD1.3531 and now 50% USD1.3458/1.3604), a break may allow for a deeper move toward USD1.3515/10 ahead of USD1.3495/90. Rate currently trades around USD1.3570.
For EURGBP resistance remains between stg0.8900/05, a break may open a move on toward stg0.8920/25. Support stg0.8875/70 ahead of stg0.8845/40.
|
| //26-02-2010 |
EUR/USD
Trading range: 1.3615 - 1.3510
Trend: Downward
Sell at 1.3601 SL 1.3633 TP 1.3524
USD/JPY
Trading range: 89.50 - 88.55
Trend: Downward
Sell at 89.37 91 89.69 TP 88.65
GBP/USD
Trading range: 1.5305 - 1.5195
Trend: Downward
Sell at 1.5293 SL 1.5325 TP 1.5205
USD/CHF
Trading range: 1.0745 - 1.0855
Trend: Upward
Buy at 1.0759 SL 1.0727 TP 1.0843
|
| //26-02-2010 |
The British Pound traded lower against most major currencies as traders prepared for the fourth-quarter Gross Domestic Product report to cross the wires. Sterling only managed to advance against the Yen, which broadly declined on firming risk appetite.
The Euro scored marginal gains on the US Dollar in overnight trading, adding 0.2 percent. The British Pound diverged from the single currency, slipping 0.1 percent against the greenback. We remain short EURUSD at 1.4881 and GBPUSD at 1.5765.
New Zealand’s Trade Balance deficit narrowed to -NZ$178 million in the year to January – the smallest in over seven years – as imports fell 11.9 percent to mark the tenth consecutive month of losses, outpacing a 0.6 percent drop in exports. Inbound shipments have dropped to the lowest level in five years as the unemployment rate rose to a decade high of 7.3 percent, trimming disposable incomes and weighing on spending. The outcome is all the more ominous considering the New Zealand Dollar added an impressive 26.4 percent in the year to January, which would be expected to have supported imports by boosted domestic purchasing power. This does not speak well of the outlook for private consumption – the largest component of overall economic growth – and hints that it may be some time before the Reserve Bank of New Zealand considers increasing interest rates.
In Japan, a hefty dollop of economic data failed to excite the markets as all of the scheduled releases printed in line with established themes that traders have long since priced into exchange rates. The Consumer Price Index dropped 1.3 percent in the year to January, extending deflation (albeit at a slightly slower pace than expected) for yet another month and assuring that Bank of Japan monetary policy remains “extremely accommodative”. Meanwhile, Industrial Production outperformed to add 2.5 percent in January amid expectations for more modest 1 percent increase following analogous outcomes in recent machine orders and exports figures. As with those outcomes, the result is firmly grounded in stimulus-driven overseas demand and so says fairly little about the sustainability of recovery in the world’s second-largest economy. Even a spike in the Retail Trade figure was broadly ignored despite an impressive 2.6 percent increase in the year to January that dwarfed expectations for a 0.2 percent decline. In fact, Japanese retail activity typically spikes around this period to reflect the beginning of Shōgatsu, the New Year holiday period (which can last between one to seven days).Food and beverage sales drove the metric higher, bolstering the case for a one-off seasonal explanation for the uptick. On balance, the Japanese Yen ignored the data docket, trading lower as higher stock prices boosted carry trades at the expense of the perennial funding currency.
Australian Private Sector Credit expanded at a slightly faster pace than economists expected, adding 1.3 percent in the year to January. That said, the outcome is broadly in line with recent figures and follows the slowest quarter of private credit growth in over 16 years, underscoring the trends cited by the Reserve Bank of Australia when it opted to keep interest rates on hold in February saying “lenders have generally raised [more than benchmark borrowing costs over recent months.” Minutes from that policy meeting revealed that the central bank take time to wait and see “more information on how the economy was responding to the monetary tightening that had already occurred,” with tepid credit growth over recent months hinting it may remain on hold once again next week. Traders currently see a 50 percent chance of a 25bps increase at the forthcoming announcement according to a Credit Suisse gauge of priced-in expectations.
Preliminary UK Gross Domestic Product figures are set to show the economy added 0.2 percent in the fourth quarter, topping the 0.1 percent increase recorded in the three months through September. However, traders are likely to look past the headline figure for the source of expansion amid growing concerns that last year’s global rebound may lose momentum amid the fading effects of stimulus measures. A narrow improvement in Private Consumption coupled with an equally small decline in Government Spending seem to be encouraging, but a dramatic slowdown in Gross Fixed Capital Formation (a measure of private investment) and its implications of stubbornly high unemployment may prove hard to swallow.
Turning to the Continent, the final revision of the Euro Zone Consumer Price Index is expected to confirm that prices added 1 percent in the year to January, the largest increase in 11 months. However, the outcome is unlikely to prove particularly market-moving considering its limited implications for future monetary policy. Indeed, inflation is out of negative territory but still well below the European Central Bank’s target of 2 percent, meaning Jean-Claude Trichet and company can afford to remain on the sidelines at a time when they have every incentive to do so considering the difficult task of balancing the competing objectives of stronger and weaker Euro Zone economies amid a brewing sovereign credit crisis. Traders seem to agree, seeing no chance of a rate hike at the next ECB policy meeting and forecast only 50 basis points in tightening over the next 12 months according to a gauge of priced-in expectation from Credit Suisse, amounting to the most lukewarm rates outlook in over six months.
|
| //25-02-2010 |
Previous session overview
The euro hit a one-year low against the yen in Asia Thursday due to a slew of unfavorable news about fiscally embattled Greece and the possible spread to Spain, prompting players to sell the riskier unit for the safe-haven yen.
The euro dropped to JPY120.44, its lowest level since Feb. 24, 2009, down from JPY121.95 in New York Wednesday. Because euro-selling for the Japanese currency involves selling dollar for yen in the process, the U.S. unit also slipped to JPY89.47, its weakest since Feb. 10, compared with JPY90.17.
The euro-selling by hedge funds and institutional players triggered stop-loss selling orders, while Japanese exporters sold the unit, dealers said.
The Euro was quite restrained as support at USD1.3500 held but the negative sentiment remained. The Bernanke's fueled rebound found resistance above USD1.3600 and the pair eased back to middle of the range. December Industrial Orders soared 0.8% vs. -1% forecast.
The British pound rose in tandem with euro and hit an intra-day high of USD1.5476 in European morning. Cable then retreated sharply in U.S. morning on active cross selling in sterling especially versus euro.
The Australian dollar fell in Asia trade Thursday as U.S. Federal Reserve Chairman Ben Bernanke's concern about the labor market fueled a push into perceived safer currencies like the U.S. dollar and Japanese yen.
Market expectation
Looking ahead, the euro may extend its losses if U.S. durable goods data, due 1330 GMT, come in weaker than expected, pushing share markets down, dealers said.
In such an event, the euro could fall to JPY120.00 and the dollar to JPY88.80, dealers said.
EURUSD traders confirm demand placed between USD1.3450/40, with stops placed on a break of USD1.3430. Recent talk had placed option barriers at USD1.3425 and USD1.3400. Rate trades around USD1.3473.
Cross yen continues to be seen as leading; with traders highlighting sterling-yen as looking set to extend recent losses. Stops noted below USD1.5310, which if triggered to open a deeper move toward USD1.5295/90. Through here and rate can sink toward USD1.5270/60. Resistance seen placed at USD1.5350, more toward USD1.5370/80.
European stock markets are expected to open lower Thursday as investors weigh up Federal Reserve Chairman Ben Bernanke's semi-annual testimony to Congress, while the escalating of Greece's debt crisis rattles confidence.
|
| //25-02-2010 |
EUR/USD
Trading range: 1.3515 - 1.3415
Trend: Downward
Sell at 1.3502 SL 1.3534 TP 1.3425
USD/JPY
Trading range: 89.95 - 89.05
Trend: Downward
Sell at 89.83 91 90.15 TP 89.11
GBP/USD
Trading range: 1.5390 - 1.5275
Trend: Downward
Sell at 1.5376 SL 1.5408 TP 1.5288
USD/CHF
Trading range: 1.0825 - 1.0935
Trend: Upward
Buy at 1.0838 SL 1.0806 TP 1.0922
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| //25-02-2010 |
The US Dollar and Japanese Yen advanced against major currencies after Standard & Poor’s said it may lower Greece’s credit rating again by the end of March, sparking flight from risky assets that is likely to carry into European trade.
The Euro and the British Pound dropped 0.6 and 0.5 percent respectively against the US Dollar as renewed risk aversion boosted demand for the safety-linked greenback. We remain short EURUSD at 1.4881 and GBPUSD at 1.5765.
Australian Private Capital Expenditure, a measure of business investment, surged 5.5 percent in the fourth quarter to register the biggest increase in a year. Economists were forecasting a more modest 2 percent increase ahead of the release. Plant and equipment spending led the metric higher, yielding an impressive quarterly increase of 12.4 percent. The apparent decision to expand production capacity suggests Australian firms are turning more optimistic about future demand, which has potential to translate into greater hiring, wages and consumption – the largest component of overall economic growth. The outcome boosted expectations that the Reserve Bank of Australia will raise benchmark interest rates at next week’s monetary policy meeting, with a Credit Suisse gauge tracking the markets’ priced-in outlook rising to show traders now see a 53 percent chance of a 25bps increase versus just 30 percent yesterday.
Meanwhile, a gauge of New Zealand Business Confidence surged to 50.1 – the highest reading in nearly eleven years – according to a survey from the National Bank of New Zealand (NBNZ). A net 41.9 percent of the firms polled for the report said they expect sales to improve while only 10.3 percent foresee the unemployment rate will be higher 12 months from now. The implications of this seemingly robust outcome for monetary policy looked muted however, as the survey revealed that companies’ inflation and interest rate expectations printed below those recorded as recently as November and have remained relatively flat over the past.
The positive tone of the economic calendar faded into the background however as Asian markets reacted to news that ratings giant Standard & Poor’s may lower Greece’s sovereign credit rating again by the end of March, setting off a fresh bout of risk aversion that sent stock exchanges lower and boosted the safety-linked US Dollar and Japanese Yen. The comments follow yesterday’s news that Moody’s – another ratings powerhouse – downgraded the long-term debt of Greece’s four largest banks on concerns about deteriorating asset quality and over-reliance on funding from the European Central Bank. Meanwhile on the political front, the UK Telegraph reported that Greece has substantially hurt its chances of a bailout after the country’s Deputy Prime Minister Theodoros Pangalos told the BBC that Germany had no right to criticize Greece for anything after it devastated the country under the Nazi occupation. Pangalos complained that Germany “took away the gold that was in the Bank of Greece, and they never gave it back,” before turning his scorn to the current set of EU leaders, saying there were of "very poor quality" and not up to the task of managing Europe’s fortunes.
Risk aversion seems likely to retain its grip on currency markets in European trade, boosting the safety-linked US Dollar and Japanese Yen at the expense of most of the majors as concerns about the deteriorating fiscal situation in Greece return to the forefront. The MSCI Asia Pacific regional stock benchmark index reversed early gains to drop 0.9 percent while US equity index futures slipped to trade down 0.7 percent late into the overnight session, hinting at a decidedly negative tone ahead of the opening bell in Europe.
German Unemployment figures headline the economic calendar, with expectations suggesting the economy will lose 16,000 jobs in February – the largest drop in seven months – although the jobless rate is seen printing unchanged at 8.2 percent after increasing for the first time since June 2009 in the previous period. The outcome may compound selling pressure on the Euro after the single currency fell to the lowest level in a year against the Japanese Yen and tested a nine-month low against the US Dollar in Asian trade, with the mix of lackluster economic fundamentals (particularly after yesterday’s disappointing GDP result) and EU-led risk aversion likely to be a potent catalyst. Swiss Employment and Euro Zone Economic Confidence figures round out scheduled event risk.
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| //24-02-2010 |
Previous session overview
The U.S. dollar retreated Wednesday in Asia after touching an eight-month high in North American trading, as the market mulled the outcome of Federal Reserve Chairman Ben Bernanke's testimony to Congress.
Against this backdrop, the dollar index (DXY), which measures the U.S. unit against a trade-weighted basket of six major currencies, fell to 80.784 in Asia's Wednesday afternoon trading from 80.874 in late North American trading Tuesday.
The euro rose against the yen and dollar in Asia Wednesday as speculators picked up bargains after steep falls in the single currency overnight, and dealers said further direction depends on Federal Reserve Chairman Ben Bernanke's testimony later in the day.
As of 0450 GMT, the euro stood at USD1.3535 compared with USD1.3496 in New York late Tuesday, when it dropped almost 2 cents from a one-week high of USD1.3693 after the release of worse-than-expected German business sentiment and U.S. consumer confidence data.
Against the yen, the euro stood at JPY122.10 as of 0450 GMT, compared with JPY121.93 Tuesday.
The Australian dollar fell against most major currencies Wednesday as a disappointing reading of consumer sentiment in the U.S. and a bank ratings downgrade in Greece sent traders out of commodities-sensitive currencies.
Market expectation
For EURUSD offers said to remain in place from USD1.3550, with interest extending to USD1.3565 with stops above. Stronger offers then noted toward USD1.3580. Support remains in place toward USD1.3500, the interest extending to USD1.3495. A break here may expose next support at USD1.3485/80. Through here and the recent low at USD1.3443 moves back into view with talk of larger stops placed below.
Pound traders note a lot of Asian sovereign activity this morning into dips, buying euro-dollar off lows with cable also seeing demand from a sovereign name from around the USD1.5430 level, traders report. Rate currently trades around USD1.5445.
European stock markets are expected to start largely unchanged Wednesday, with investors wary of taking positions ahead of the latest guidance from Federal Reserve chairman Ben Bernanke as to the extent of the U.S. economic recovery and the need for loose monetary policies.
Looking ahead, players are focused on what Fed Chairman Bernanke will say about the possibility of rate hikes in his testimony before the U.S. House Financial Services Committee at 1000 GMT.
But dealers said the possibility of Bernanke indicating further monetary tightening is slim, as Fed officials have already made a series of remarks to curb speculation that the discount rate hike last week was a precursor to a similar move in the key policy rate.
Other trading cues include U.S. new home sales data for January due at 1500 GMT. Any better-than-expected numbers may prompt players to take greater risks, lifting the euro and dollar against the yen, dealers said.
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| //24-02-2010 |
EUR/USD
Trading range: 1.3560 - 1.3460
Trend: Downward
Sell at 1.3549 SL 1.3581 TP 1.3472
USD/JPY
Trading range: 90.45 - 89.55
Trend: Downward
Sell at 90.35 91 90.67 TP 89.63
GBP/USD
Trading range: 1.5475 - 1.5365
Trend: Downward
Sell at 1.5465 SL 1.5497 TP 1.5377
USD/CHF
Trading range: 1.0795 - 1.0900
Trend: Upward
Buy at 1.0805 SL 1.0773 TP 1.0889
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| //24-02-2010 |
The US Dollar traded lower against the spectrum of major currencies ahead of tomorrow’s congressional testimony by Fed Chairman Ben Bernanke, where the US central bank chief will likely downplay the prospects for interest rate hikes in the near term.
The Euro and the British Pound advanced, adding about 0.2 percent apiece against the US Dollar as the greenback traded lower against the spectrum of its major counterparts ahead of tomorrow’s congressional testimony by Federal Reserve Chairman Bernanke, with the US central bank chief expected to play down last week’s discount rate increase as “normalization” that is not intended to signal the US central bank is speeding up the march to tighten monetary policy. We remain short EURUSD at 1.4881 and GBPUSD at 1.5765.
Japan’s Merchandise Trade Balance showed a surplus of 85.2 billion yen in January as exports grew at an annual pace of 40.9 percent, the fastest in at least 24 years, on the back of close to $2 trillion in global fiscal stimulus that has boosted demand for Japanese cars and electronics. Shipments to Asia led the increase, rising 68.1 percent. Also of note, cross-border sales to the US added 24.2 percent, marking the first increase in the annual growth rate in over two years. Exports have been the primary engine of growth for the world’s second-largest economy as a crippled labor market continues to bear down on private consumption. Most worryingly, this does not seem to be the recipe for sustainable growth considering the flow of stimulus cash will invariably dry up, an outcome that is likely to materialize sooner rather than later considering the widespread worries about public deficits that have taken root over recent months.
The final revision of fourth-quarter German Gross Domestic Product figures headline the economic calendar in European hours, with expectations calling for the outcome to confirm that growth in the Euro Zone’s largest economy stalled in the three months through December 2009. Traders will be looking past the headline figure however, scouring the details of the report to gauge for signs of sustainable recovery amid increasingly fading effects of global stimulus measures. The outlook does not look encouraging: domestic demand is expected to have declined -0.6 percent, with capital investment dropping -1.3 percent after rising in three months to September while consumption declines -0.8 percent, marking the second consecutive quarter of losses. Exports have been the standout source of strength over recent months, but this too is expected to print softer with a gain of 1.9 percent in the fourth quarter after adding 3.4 percent – the most in three years – in the preceding period.
On balance, the German GDP outcome may put a spotlight on economists’ expectations calling economic growth the Euro Zone will underperform most major economies through 2011 (according to a survey conducted by Bloomberg), hinting that the European Central Bank will keep interest rates at record lows for comparatively longer than its major counterparts and weighing on the Euro. Indeed, US GDP growth is expected to outpace that of Europe by an average of 1.65 percentage points over the next two years, an outcome second only to Australia in the G10, which may help contain EURUSD upside after Ben Bernanke’s testimony that set to begin late into the session.
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| //23-02-2010 |
Previous session overview
The U.S. dollar was higher versus most major rivals Tuesday, gaining ground as a drop in German business confidence and consumer sentiment in the U.S. increased concerns about the durability of the global economic recovery.
The dollar index, which measures the U.S. unit against a trade weighted basket of six major currencies, rose to 80.743, up from 80.513 in late North American trading Monday.
The euro bought USD1.3545, down from around USD1.3609 in North American trade late Monday.
The dollar stayed up and U.S. stocks dropped after the Conference Board's consumer confidence index sank 11 points to 46.0 in February from an upwardly revised 56.5 in January. Economists surveyed drop to 55.5 points from the previously reported January level of 55.9.
The U.K. pound also slipped as Bank of England Governor Meryn King said weaker euro zone growth could dent a nascent U.K. recovery. Giving evidence to U.K. lawmakers Tuesday, King said recovery in the euro zone "appears to have stalled."
The British pound fell 0.4% to USD1.5414 versus the dollar. The euro erased an early grain to trade little changed versus the pound at 87.88 pence.
The dollar dropped versus the Japanese currency, meanwhile, as the yen has typically been deemed even safer than the U.S. dollar when investors want to step away from riskier assets.
Market expectation
The euro remains under pressure over unresolved issues of Greek sovereign debt, which threaten to spill into other areas of the euro zone, and the downgrade of the banks only puts more pressure on the common currency, analysts said.
EURUSD rebound stalled around USD1.3570 area as German bank buys ran their course and EURUSD wasted little time in retreating to USD1.3535 area before regaining some poise, presumably a few European accounts inclined to take money off the table before heading home. Area of USD1.3530 seen by traders as key, a break below may open up USD1.3500. Talk of bids to USD1.3520 before stops kick in, similar orders at USD1.3500 where bids are seen ahead of "nasty" stops.
Pound continues to slip, moves below USD1.5409 (76.4% USD1.5396/1.5450) as traders report supply seen from real money accounts. Rate currently trades back at USD1.5412 after touching USD1.5405. Bids now seen placed toward earlier lows at USD1.5396, with stops positioned on a break of USD1.5395/90. A break here exposes recent lows at USD1.5350. Larger stops noted on a break of USD1.5345.
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| //23-02-2010 |
EUR/USD
Trading range: 1.3605 - 1.3705
Trend: Upward
Buy at 1.3617 SL 1.3585 TP 1.3694
USD/JPY
Trading range: 91.25 - 90.30
Trend: Downward
Sell at 91.12 87 91.44 TP 90.40
GBP/USD
Trading range: 1.5500 - 1.5615
Trend: Upward
Buy at 1.5513 SL 1.5481 82 1.5601
USD/CHF
Trading range: 1.0785 - 1.0680
Trend: Downward
Sell at 1.0773 SL 1.0805 TP 1.0689
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| //22-02-2010 |
Previous session overview
The euro hit a two-week high against the yen in Asia on Monday, as upturns in Asian shares encouraged U.S. hedge funds to buy the risk-sensitive unit, dealers said, adding that the euro has more room to rise this week.
In early Asian trading, the euro rose to JPY125.24, its highest since Feb. 4, as Asian stock rises prompted U.S. hedge funds to accumulate euro holdings, triggering stop-loss orders around JPY124.90 and pushing the dollar-yen higher, dealers said. The dollar climbed to a high of JPY91.90.
As of 0450 GMT, the euro was at JPY124.95, compared with JPY124.64 in New York Friday, while the dollar was at JPY91.64 from JPY91.65.
The euro reached a ten month low against the US dollar after the Federal Reserve increased the discount rate. Mixed data came from the Euro zone with positive German Manufacturing PMI out higher than estimates, at 57.1 versus the 54.1 projected; while French PMI falling to 54.6 versus the 55.4 projected; and German services PMI barely missing the mark, falling to 52.0 from the previous 52.5.
The British pound remained under pressure, falling over 2 percent this week to a yearly low. Lower-than-expected UK retail sales came out today at -1.2 percent versus the previous 0.3 percent and the forecasted -0.5 percent. Recent negative UK fundamentals along with a generally stronger US dollar dampened investors' confidence in the Sterling, pushing it below the USD1.5400 support level.
The Australian dollar rose in Asian trade Monday as rallying stock markets in the region boosted the currency, while bond prices fell for the fifth-straight session.
Market expectation
EURUSD offers remain in place around USD1.3655, a break above USD1.3660 to open a move toward USD1.3705/15 (USD1.3707 76.4%/USD1.3714 Feb 17 intraday high). Support back at USD1.3605/00, a break to open a move toward USD1.3580/70 ahead of USD1.3550. Euro-dollar recovery off Friday USD1.3443 lows aided by positive reports on Greek debt, though tech traders so far see this as a correction and keep downside favored.
Pound squeezing higher, move back above USD1.5480 as euro-sterling squeezes its way back toward earlier lows at stg0.8801. Cable offers remain in place toward USD1.5500, with stronger interest noted between USD1.5505/15.
Technical traders of EURGBP add that the 200 m/a line comes through today at stg0.8824, adding that the rate did move above this line Feb 11, when it was at stg0.8831, marking recent highs at stg0.8841, but failed to close above. Rate currently trades around stg0.8812, off overnight highs at stg0.8816. Offers now seen placed from that high through to the stg0.8824 200 day m/a level. A break here may again open a move toward that Feb 11 high at stg0.8841.
European stocks are expected to open marginally higher Monday, as concerns ease over the U.S. Federal Reserve's discount rate hike last week, while rising commodity prices help define the early direction for equities.
On the economic data plate, Monday's calendar is relatively thin on the ground, so traders await German IFO and U.S. consumer confidence readings for February, due Tuesday at 0900 GMT and 1500 GMT respectively.
Market participants will now shift their focus onto whether U.S. economic fundamentals are improving, raising expectations that the Federal Reserve will gradually move toward a more normal monetary policy, dealers said.
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| //22-02-2010 |
EUR/USD
Trading range: 1.3665 - 1.3565
Trend: Downward
Sell at 1.3652 SL 1.3684 TP 1.3575
USD/JPY
Trading range: 91.85 - 90.90
Trend: Downward
Sell at 91.71 91 92.03 TP 90.99
GBP/USD
Trading range: 1.5605 - 1.5495
Trend: Downward
Sell at 1.5595 SL 1.5627 TP 1.5507
USD/CHF
Trading range: 1.0730 - 1.0835
Trend: Upward
Buy at 1.0740 SL 1.0708 TP 1.0824
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| //22-02-2010 |
The Euro and the British Pound advanced against the US Dollar as Asian stock exchanges pushed higher, sapping demand for the safety-linked greenback. More of the same is likely in European hours as a bare calendar opens the door for risk-driven trade.
The Euro edged up slightly higher against the US Dollar, adding 0.2%. The British Pound also drifted higher to test the 1.55 level against the greenback. The US unit traded lower against most of the majors (with the usual exception of the Japanese Yen) as Asian stock exchanges pushed higher amid fading US Fed rate hike expectations after Friday’s disappointing CPI result. We remain short EURUSD at 1.4881 and GBPUSD at 1.5765.
Australian New Motor Vehicle Sales fell 3.4 percent from the previous month in January, marking the first decline since July 2009. Sales of “other” vehicles (a category that includes vans, trucks, buses and government-owned vehicles) led the decline, dropping 17.4 percent. The outcome may have been linked to the end of a tax break for businesses making new vehicle purchases, which expired in December 2009. A more hopeful sign was seen in sales of passenger cars, which gained 4 percent to register the largest monthly increase in six months. While it is tempting to conclude that this points consumers’ resilience to the rise in borrowing costs over recent months, this seems premature considering February’s disappointing consumer confidence report. Indeed, those figures saw an index tracking Australians’ willingness to make major purchases (such as cars) decline by the most in at least five months, hinting that the strength in today’s passenger car sales figures may not prove lasting.
The economic calendar is decidedly lackluster in European trading, with risk trends likely to overtake currency markets. Last week began with a broad upward correction in risk appetite as the debt problems in southern Europe faded into the background after the EU gave Athens until mid-March to show serious efforts in tackling its fiscal shortfall. The advance seemed quite orderly and would have likely carrier through the week, but markets were abruptly interrupted by the US Federal Reserve: Ben Bernanke and company revealed a relatively hawkish posture in the minutes from the late-January monetary policy meeting, following up on the very next day with a surprise increase in the discount lending rate. This sent the US Dollar broadly higher against the spectrum of major currencies and put the retracement in risky assets on hold. The surge in the US interest rate outlook did not prove lasting however as Friday brought another about-face after January’s consumer price index figures broadly disappointed, with core inflation (excluding energy and food prices) issuing the first monthly decline in at least 13 years. With the prospects of an imminent Fed rate increase thereby subdued, the rebound in risk appetite is likely to resume. Indeed, US equity index futures are trading firmly higher, arguing for gains across most major currencies at the expense of funding ones (US Dollar, Japanese Yen) as carry trades follow stock exchanges higher.
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| //19-02-2010 |
Previous session overview
The dollar rose to a five-week high against the yen and a fresh nine-month high against the euro early in Asia Friday after the U.S. Federal Reserve raised its discount rate in a fresh sign that the Fed believes financial markets are gradually getting back to normal.
The Fed hiked the rate it charges banks for emergency loans by 25 basis points to 0.75%, fueling expectations for further rises in long-term interest rates, to the benefit of the U.S. unit, dealers said.
But as the Fed insists that the discount rate hike does not represent a tightening of monetary policy or an upgrading of its view on the economy, it is unlikely to prompt sharper dollar gains in coming sessions, dealers said. A sustained dollar rally may only come if jobs and other data improve and lay the groundwork for the Fed to raise its key policy rate, traders said.
Indeed, James Bullard, the president of the St. Louis Federal Reserve Bank, said the central bank won't likely raise its key federal funds rate this year.
As of 0450 GMT, the dollar was at JPY91.76 from New York Thursday's JPY91.80.
The euro and other risk sensitive currencies were trading lower on the Fed move, as the dollar pushed higher. The single currency fell as low as USD1.3443 against the dollar, its lowest level since May 18, 2009.
The Pound was sold in Europe on news that the UK public finances had unexpectedly increased by 4.3bn vs. -2.4bn forecast and in the current environment any bad news about government debt will be greatly scrutinized by the market.
The Australian dollar dropped against the U.S. dollar but remained slightly higher against the Japanese yen Friday as the U.S. Federal Reserve's decision to raise the discount rate it charges banks reverberated in markets around the globe. Bond prices were weighed down by the Fed's decision.
Market expectation
EURUSD traders note 'usual' talk of Asian sovereign demand interest seen in early trade. Rate currently trades around USD1.3483. Resistance remains in place around USD1.3500, support USD1.3450/40, stops below.
For EURGBP offers remain in place to stg0.8750, a break here to open a move toward stg0.8770/75 (stg0.8771 61.8% stg0.8841/0.8657). Support remains at stg0.8705/00.
Pound support remains toward USD1.5380, a break here to open a deeper move toward USD1.5375/70 ahead of stronger level at USD1.5350. Below here the area between USD1.5305/1.5290 moves into view. Resistance seen toward USD1.5420, a break to open a move up to USD1.5450/60 with stops placed on a break above.
European stocks are expected to open lower Friday, after the Federal Reserve surprised markets and raised its discount rate, an action which has also prompted a stark move downward for the euro against the resurgent dollar.
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| //19-02-2010 |
The US Dollar is likely to extend gains against the Euro and the British Pound as European economic data comes in soft, underscoring the likelihood of a relatively hawkish Fed versus the BOE and ECB, while falling stock index futures point to risk aversion.
The Euro consolidated losses in a narrow range through Asian session trade, drifting sideways in a 60-pip band below the 1.35 figure. The British Pound traded lower, slipping as much as 0.9% against the greenback. We remain short EURUSD at 1.4881 and GBPUSD at 1.5765.
New Zealand Credit Card Spending grew 1.5% in January, the largest monthly increase since April 2009. The annual growth rate advanced to 2.6%, the highest in 18 months. Perhaps most interestingly, outstanding credit card balances posted the first month of positive growth since July 2009, adding 0.3% in the year to January. Increasing willingness to take on debt may reflect an improved outlook about future income and employment, which bodes well for private consumption and – by extension – for the ability of New Zealand’s economic recovery to become self-sustaining. That said, it seems premature to read too much into this outcome yet given yesterday’s disappointing consumer confidence survey.
German Producer Prices are expected to 0.3% from the previous month in January, the biggest increase since August 2009. In annualized terms, the pace of wholesale deflation is set to moderate to -4.0%, the lowest negative reading in eight months. Energy prices have led the metric higher over the previous two months and more of the same is likely this time around as oil’s rebound through last year begins to factor into the figures. Indeed, crude prices in terms of the Euro more than doubled through 2009.
Separately, preliminary estimates of Euro Zone Purchasing Manager Index figures are set to show that the composite metric tracking performance in both the manufacturing and services sectors fell for the second consecutive month in February. Looking at individual industries, the pace of manufacturing growth is expected to increase by the smallest margin in 11 months while that of services stalls altogether. German PMI figures are expected to yield a similar result, broadly suggesting that economic recovery in the single currency bloc is losing steam.
Rounding out the calendar, UK Retail Sales are expected to fall -0.5% in January after gaining 0.3% in the previous month. The annual pace of sales growth is set to print at 1.1% – the lowest in seven months – to mark the third consecutive decline. The disappointing outcome is unlikely to prove market-moving, however, considering it has been amply foreshadowed by last week’s release of January figures from the British Retail Consortium.
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