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Mar-15-2010Global stocks slip as caution reins, dollar gains(topic overview)
CONTENTS:
- On Friday, the dollar fell against major currencies but rose versus the yen following conflicting reports on retail sales and consumer confidence. (More...)
- KAN: Japan FinMin Kan reported saying, - BOJ has been and will be working with Govt. to beat inflation - BOJ understands Govt's expectations through discussions in parliament - Concerns about double dip recession have receded - Yen relatively stable now - Concerns remain that euro's woes could affect yen. (More...)
- Following a disappointing U.S. Consumer Sentiment result on Friday, the most significant trends in the market seem to be the bearish crude oil and the drop of the Dollar against the Euro. (More...)
- "There's a lot of back and forth on Greece. (More...)
- Several economic publications from the Japanese economy have contributed to the Yen's weakness during last week's trading session. (More...)
- Budget deficit worries will continue to keep a lid on the currency. (More...)
- The OMB'''s 2011 budget showed that the U.S. debt-to-GDP ratio will continue to rise over next 10 years until 2020, where the projection ends and when U.S. debt will equal 77.2 percent of GDP. Inflation is one strategy that could be used in an attempt to lessen that debt burden. (More...)
- With fiscal integrity on the chopping block as a result of the forthcoming election, the perceived risks to the loss of such status was a convenient excuse for traders to lop a cent off the value of sterling versus the dollar. (More...)
- ECB TUMPEL-GUGERELL: Must remain vigilant, attentive to financial stability. (More...)
- Concern within the Euro-zone has eased slightly, although there is still a high degree of caution, especially with strikes within Greece maintaining underlying fears over the budget outlook. (More...)
- The euro was changing hands at US$1.3740 in Tokyo afternoon trade, down from US$1.3761 in New York late Friday, and fell to 124.47 yen from 124.76 yen. (More...)
- As long as US-China tensions continue, markets are beginning to worry about a wild card and DBS noted that CNY inaction may lead China to be named a currency manipulator in next month's U.S. Treasury Currency Report. (More...)
- Any rallies in the kiwi are likely to be short-lived after last weeks decision by the Reserve Bank of New Zealand to keep rates steady at 2.5 per cent. (More...)
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On Friday, the dollar fell against major currencies but rose versus the yen following conflicting reports on retail sales and consumer confidence. What's moving the market: Lingering concerns about Greece's debt crisis boosted the dollar versus the euro ahead of a meeting of European finance ministers on Monday, as investors lost confidence that a solution would be reached to help the nation reduce its growing debt. News that Moody's Investor Services said the United States is closer to losing its AAA credit rating also worried investors, said Gareth Sylvester, a senior currency strategist at HIFX. [1] Following the successful sale of new Greek debt, sentiment has been improving towards the Euro. The Greek Finance Minister has been traveling to various global finance centers to meet with investors to calm them about Greece'''s prospects. As such, the EURUSD rallied last week and was able to bounce off of its 1.3540 lows to trade back above 1.3700. This week, the German ZEW Economic Survey will be released on Tuesday. [2]
If the BOC moves prior to the FOMC, the Canadian dollar would likely move through parity; a level we haven'''t seen since July of 2008. The other commodity currencies of Australia and New Zealand pared their recent gains as risk returned to trader'''s screens. The Moody'''s report, and continued worry over the Greek debts, has moved investors away from riskier assets, causing a pullback by both the Aussie dollar ( AUD ) and kiwi ( NZD ). These currencies will benefit whenever there is positive news regarding global growth, and get sold off on any news calling the global recovery into question. These currencies are momentum trades, and will continue to rise and fall with global economic predictions. [3]
NEW YORK (CNNMoney.com) -- The dollar gained against the euro and the pound, but fell versus the yen on Monday as equities declined and investors continued to worry about finding a concrete solution for Greece's mounting debt. [1] Versus the Japanese Yen, the Euro traded at 124.50 Yen, as compared to Friday's New York trade of 124.57 Yen. A senior Forex manager in Tokyo suggested that investors may be anxious to reap the profits of Friday's gain in the Euro, believing that the single currency will likely trend lower this week unless detailed information about a Greek rescue package is offered; it was further suggested that the Euro could drop to $1.3680 and 124.00 Yen in today's trading session. [4] In early trading the euro declined to $1.3711. Japanese yen ''' The yen awaits the outcome of this week'''s two-day meeting at the Bank of Japan with dealers anticipating a further degree of easing, however the Bank might manage it. The top bet is for an extension of the ''10 trillion fund via which the central bank has so far granted liquidity to the banks in an effort to encourage them to lend. The yen maintained its weaker bias on Monday as traders continued to favor the dollar, which has built on the momentum it gathered Friday. [5] The one currency to rally versus the U.S. dollar over the past trading day was the Canadian dollar ( CAD ), which was up slightly. Investors moved toward the Canadian dollar as they bet the Canadian central bank would move to raise rates earlier than their U.S. counterparts. Recent data released over the past month show that the Canadian economy is recovering a bit more quickly than here in the U.S. Interest rate markets are pricing in a 22% chance of a quarter-point raise by the BOC at their June meeting, and a 100% chance of an increase at the July meeting. [3] The E.U. Finance Ministers meet later today for a regularly scheduled monthly meeting. In the United States, the Federal Open Market Committee will meet on Tuesday, and market analysts suggest that if interest rates continue to remain unchanged at their current low levels over an extended period of time, the U.S. Dollar may soften versus the Yen. [4] The Federal Funds Rate is in fact the U.S. interest rates announcement for the next month. Current expectations are that the Fed will leave rates at their current low levels of less than 0.25%. If the Fed will surprise and hike rates, this has the potential to erase the Dollar's losses from last week. The Euro managed to erase some of its losses against the major currencies during last week's trading. [6] During last week's trading, the Dollar saw a bearish correction against the Euro, following several weeks of a consistent bullish trend. This week's most interesting question is whether the Dollar will resume the bullish trend, or might the Euro's recovery proceed? This could be answered on Tuesday when the U.S. Interest Rate decision will be announced. [6]
If the following data from the U.S. economy will continue to disappoint, it seems that crude oil might drop below $80 a barrel. Looking ahead to this week, traders are advised to follow the main publications from the U.S and the Euro-Zone. Special attention should be given to the U.S. Interest Rate announcement on Tuesday and the Crude Oil Inventories report on Wednesday, as these seem to be the news events that will impact crude oil the most this week. [6] Currently it seems that until a series of positive data will be published from the Japanese economy, the Yen might continue tumbling. As for this week, the most interesting publication from the Japanese economy looks to be the Overnight Call Rate, which is in fact the Japanese interest rates announcement for the next month. Japan currently holds the lowest rates within the industrial world, and analysts have forecasted that the Bank of Japan (BoJ) is likely to leave rates at their current low levels. If the BoJ will surprise and hike rates, this is likely to boost the Yen. [6]
DBS expects the interest rates in U.S. to increase in about six months or 3-4 FOMC meetings from the day the "extended period" phrase is removed from the central bank's statement. The U.S. Federal Open Market Committee is scheduled to announce its decision on interest rates on March 16. Even though the market is not expecting the Fed to alter its statement relaying its intention to 'keep rates at exceptionally low levels for an extended period' at the meeting, it is believed that the Fed is preparing for an eventual interest rate hike, the first following the current downturn. [7]
'''At the current elevated levels of debt, rising interest rates could quickly compound an already complicated debt equation, with more abrupt rating consequences a possibility,''' said Pierre Cailleteau, Managing Director of Moody'''s Sovereign Risk Group. The U.S. will spend more on debt service as a percentage of revenue this year than any other top rated country except the UK. According to the report, the U.S. and UK are maintaining their AAA rating because of their ability to raise taxes and force spending cuts on discretionary programs. [3]
"The British Pound has failed to break back above the key resistance levels at 1.10 versus the Euro and 1.50 against the U.S. Dollar, indicating that a move lower is increasingly likely. The UK currency declined heavily on Tuesday, after Fitch Ratings said that Britain is taking too long to cut its budget deficit and may be susceptible to a downgrade in its credit rating from top level status," says Solomon. Concern over the UK elections have also weighed heavily on Sterling, amid speculation that Britain may have its first minority government since 1974. [8] Futures traders have over 8 times more wagers on the pound weakening versus the U.S. dollar than when Soros forced the pound from the European Exchange Rate Mechanism. The Swiss franc ( CHF ) rose to its strongest level in nearly one-and-half years against the euro this morning. [3]
"Following on from last week, the British Pound declined against the Dollar for three straight days last week, while the UK currency lost ground against 15 out of the 16 most actively traded currencies, adding to declines from the previous week. Sterling is approaching its weakest level against the U.S. Dollar in 10 months, after a report showed UK manufacturing unexpectedly contracted in January," reports Adam Solomon from business foreign exchange brokers TORfx. [8]
In Forex trading in Asia today, the Japanese Yen and the U.S. Dollar both made gains against the single currency Euro as weak regional shares in the Nikkei, Shanghai and other Asian markets prompted short term market players and Asian hedge funds to sell off their risk sensitive currencies. [4] The euro fell against the yen and U.S. dollar in Asia yesterday as weaker regional shares prompted investors to sell the risk-sensitive currency to take profits on its recent rise, analysts said. [9]
The ICE Futures' dollar index, meanwhile, reversed Friday's losses to trade firmer after weakness in U.S., Asian, and European stocks prompted investors to shy away from riskier assets. Comments by Chinese Premier Wen Jiabao on Sunday, who rejected calls by the international community to revalue the yuan, saying its currency is not undervalued, also unsettled the market, analysts said. That spurred investors to seek shelter in the U.S. dollar. On Monday, Moody's said the credit ratings of the United States, UK, France, Germany and Spain were safe but risks to their top-notch status had grown. [10] Riskier assets fell during the European trading session after Moody's Investor Service warned the U.S., U.K., Germany, and France of a potential downgrade to their AAA credit ratings. This drove traders out of equities and into safe haven assets such as the dollar and the yen. [11]
NEW YORK/LONDON (Reuters) - World equities traded lower on Monday as investors took a cautionary stance ahead of U.S. and Japanese central bank policy-setting meetings this week, while oil and other commodities fell on a stronger dollar. [12] Sterling was the day's biggest mover, falling nearly 1.0 percent against the dollar GBP=D4 to $1.5039 after hitting session lows of $1.5019 on persistent worries about a weak UK economic outlook and on uncertainty ahead of a general election expected in May. Still many investors remained sidelined ahead of monetary policy meetings by the Federal Reserve and Bank of Japan this week. [10] MSCI's all-country world index.MIWD00000PUS was off 0.4 percent, and Wall Street also was down. Investors moved to the sidelines ahead of the Federal Reserve's meeting on Tuesday, which is widely expected to stick to its near zero interest rate policy, and a Bank of Japan meeting on Tuesday and Wednesday. [12] Stocks were lower on Monday as investors looked ahead to the Federal Reserve's decision on interest rates, due Tuesday. [1]
Although policy makers left interest rates at a record low, investors will be watching the tone and language used in the minutes, given recent indications that the BoE is ready to act if the need arises. [13]
There have been a number of diverging comments from policy makers expressing unease about interest rates remaining at record low levels for an extended period. [13]
Monday'''s less enthusiastic mood contrasts to any of the recent reports indicating strong growth among Australia'''s trading partners and ahead of minutes from the recent RBA meeting at which members voted for a quarter point increase in interest rates. [5] Ahead of the trading day in New York the Aussie is slightly lower at 91.31 U.S. cents. Canadian dollar ''' The Canadian dollar has maintained Friday'''s strength spurred by another firming in employment conditions and the tailwinds of strong retail sales growth in its major U.S. market. Since its propulsion to 98.48 U.S. cents in the aftermath of Friday'''s data the Canadian unit has not fallen below 98.07 cents since. [5] As reported at 1:50 p.m. (JST), the U.S. Dollar rose against the Euro from $1.3762 in Friday's New York trading to $1.3739. [4] The U.S. Dollar Index, which measures the greenback's strength versus a basket of six major currencies, traded at 79.927.DXY, off from Friday's trading in New York of 79.818.DXY. [4]
NEW YORK, March 15 (Reuters) - The euro slid against the U.S. dollar on Monday, hampered by a lack of progress on a financial aid package for debt-strapped Greece. [10] "The Euro was up to one-month highs against the U.S. dollar as risk appetite rose following positive U.S. retail sales and news of a possible rescue for Greece," says Caxton FX in a morning research note. [14]
Stocks eased on Wall Street and higher-yielding currencies like the Australian dollar fell broadly. That gave a boost to the safe-haven U.S. dollar. Euro zone finance ministers are expected to agree on Monday to a way of providing Greece with financial aid to tackle its debts. [10] Talking about whether to buy the euro or the U.S. dollar, Goldman Sachs (NYSE:GS) let be known what currency should be acquired, and that is the euro. They're probably right, as the underlying fundamentals of the U.S. dollar haven't changed, and only concerns over the Greek sovereign debt issue gave some temporary strength, based on the fall of the euro rather than something in herent in the dollar. Most of this is based on short term emphasis and possible events, rather than long term investment suggestions. Goldman believes the U.S. dollar will revert to its weakened condition, while in the short term the euro should have some nice upside surprises in store. One of the more unprecedented turnarounds for the U.S dollar came when almost everyone was bullish on it until the Greek crisis and its effect on the euro, now that it has passed and Europe in general is supporting Greece, the dollar has nothing to make it keep its strength, while for now, the euro does. [15]
Every publication of potential rescue plan has strengthened the Euro so far, and a final solution to the Greek debt crisis is likely to be received as a strong signal that the Euro-Zone has healthy economies that can aid Greece. Looking ahead to this week, a batch of data is expected from the Euro-Zone. [6] Finance ministers from the 16 countries using the euro, the Eurogroup, were meeting in Brussels on Monday to discuss the Greek debt crisis and the country's progress in introducing austerity measures necessary to regain the confidence of markets. [12] "The weaker stocks have led naturally to some profit taking," said Mitsuru Sahara, senior manager of the foreign exchange sales department at the Bank of Tokyo-Mitsubishi UFJ. Investors may be keen to lock in profits after the euro's rise Friday amid speculation that Europe is mustering support for ailing eurozone member Greece, he told Dow Jones Newswires. With a monthly meeting of European Union finance ministers later in the day unlikely to yield any specific details of financial aid for Greece, the euro may fall further this week, dealers said. [9] European finance ministers begin a two day meeting in Brussels this afternoon, but the German and French finance ministers damped speculation of a bailout for Greece. German Finance Minister Wolfgang Schaeuble continues to insist that Greece must '''go it alone''' and he was joined by French Finance Minister Christine Lagarde over the weekend. Both feel that 4.8 billion euros in budget cuts will put Greece back on track. The markets don'''t agree, and the euro got hit; dropping almost a full cent from its highs on Friday. [3]
The euro depreciated 0.5 percent to $1.3707 as of 1:46 p.m. in London and was 0.3 percent weaker at 124.32 against the yen. It has lost 4.2 percent against the dollar and 6.5 percent versus the yen since Dec. 31 amid concern that Greece won't be able to cut the European Union's biggest budget deficit. [16] The Euro rose against most of the major currencies towards the end of last week, rising 0.2% against the Dollar, as German bonds dropped to the lowest level in more than two weeks, amid renewed hope that Greece's budget deficit will be reined in. [13]
The currency rode on the coat-tails of a stronger Euro (1.3750) which hit a one-month high against the greenback as Greeces plan to cut the Euro-regions largest budget deficit looks like winning the support of investors and credit-rating agencies. The local unit has pulled back a shade from the recent dizzy heights against both the Euro (0.6670) and?Pound Sterling (0.6042). [17] Aiding the 16-nation single currency were comments by European Central Bank President Jean-Claude Trichet who said that Greece's plan to cut the region's largest budget deficit will win the backing of investors and credit-rating agencies. [17]
U.S. Dollar-yen rates were trapped in a narrow range as investors wait for meetings of the U.S. and Japanese central banks. [9] Wen also said that far from convincing Beijing of the merits of appreciation, external pressure on China is detrimental to exchange rate reform. JAPAN PRESS: Japan Post Bank bought U.S. Treasuries for the first time since its October 2007 privatization launch by acquiring about Y300 billion worth in the October-December quarter of 2009, the Nikkei reported. With Japanese government bonds composing about 80% of the nearly Y190 trillion in assets it collects through postal savings deposits, the Japan Post Holdings Co. unit seeks to diversify its investments. MOODY'S: The ratings of all Aaa governments are currently well positioned despite their stretched finances, says Moody's Investors Service in the third issue of its quarterly Aaa Sovereign Monitor. [18]
Unemployment is inching down. The ECB, arguably the world's most independent central bank, is already planning its exit from excess liquidity programs, unlike the U.S. (the Fed indicating its current regime to remain in place for an extended time), Japan (perhaps just now initiating its own QE) and the UK. [19]
The Pound staged a modest recovery against the majors on Friday, rising for the first time in three days against the Dollar and the Euro, after the Bank of England said that UK inflation expectations reached the highest level since November 2008. [13] The Pound edged above the pivotal $1.50 level against the Dollar and tested resistance at 1.10 versus the Euro but analysts are pessimistic on the chances of a recovery. [13] What prices are doing: The dollar was up 0.8% versus the euro to $1.3659 and rose 1.09% against the British pound to $1.5040. [1]
The dollar weakened against the franc and the pound, but showed choppy trading versus the yen and the euro. [20] Ahead of the release of the report, the dollar showed mixed trading versus other majors. [20]
Looking ahead to the U.S. trading session, traders will be focusing on the release of the TIC Long-Term Purchases report. [11] Forex traders were unimpressed with the decresease that took place in exports. Looking ahead, this week won'''t have any shortage of news events as U.S. PPI and CPI are released along with the FED'''s FOMC Meeting on Tuesday. Forex traders aren'''t expecting the FED to raise rates at this meeting, however they will be looking for any change in the language of the statement. [2] U.S. Dollar ''' The FOMC begins a two-day meeting on Tuesday with no one looking for any change in official rates. The policy statement will be closely examined to ensure the Fed hasn'''t changed its subtle tone. [5]
The latest Euro-zone industrial production data was also stronger than expected, with an annual increase for the first time since 2008. The ECB President Trichet made comments on Friday that Greece had taken courageous and convincing measures on the budget deficit. His remarks suggest that the ECB has decided to provide strong verbal support to Greece. U.S. Federal Reserve policy comes into focus this week with the latest FOMC rate announcement due to be held on Tuesday, March 16th. [14] A basket of data is being due out tomorrow, including an interest rate decision by the U.S. Federal Reserve which will likely keep markets quiet today. [14] A change in the tone or language of the accompanying statement would tend to support the Dollar, amid speculation of an interest rate increase. [13] Sterling reversed an earlier decline, strengthening against all of the 16 most actively traded currencies, amid speculation of a near-term interest rate rise. [13] In the past, the FED has used the words '''extended period''' to signify how long interest rates will remain low. If this phrase changes, it may indicate that they are gearing the capital markets for a possible rate increase sooner rather then later. [2]
Comments from France Finance Minister Christine Lagarde and China's Premier Wen countered the early risk appetite. Euro-dollar eased off its highs, holding between $1.3767/72 for around 4-hours before stronger sales of euro-yen (as Asian equity markets traded in the red) squeezed the rate to lows of $1.3726. [18] LONDON (SHARECAST) - The dollar skidded to a one-month low against the euro as better than expected U.S. retail sales data spurred risk appetite. [21] The yen weakened against the dollar after the U.S. retail sales data, falling to 90.51 Japanese yen as risk aversion reversed. [21]
KAN: Japan FinMin Kan reported saying, - BOJ has been and will be working with Govt. to beat inflation - BOJ understands Govt's expectations through discussions in parliament - Concerns about double dip recession have receded - Yen relatively stable now - Concerns remain that euro's woes could affect yen. NODA: Reported comments from MOF Noda, - Hopes BOJ will take appropriate policy steps in view of economic situation. - Flexible yuan a plus to both the world and China economy. JAPAN: Japan's govt upgrades its economic assessment for the first time since July 2009, saying the economy has been steadily picking up. It adds that deflation still remains a risk to the economy. [18] While the economic data released Monday was roughly in line with expectations, the economy needs to show significant signs of recovery in order for risk to fully return, said Sylvester. "By now, people are wanting more than just mediocrity," he said. "The market wants to believe in this recovery story and that we're in that next growth phase, but until we get the data to support that, the market will remain nervous." [1]
The data should maintain expectations that the economy is recovering, but doubts over the strength of the recovery are likely to remain. [13]
Following a disappointing U.S. Consumer Sentiment result on Friday, the most significant trends in the market seem to be the bearish crude oil and the drop of the Dollar against the Euro. Today, several publications are expected from the U.S. economy, and have the potential to extend the trends or to reverse them. [22] A result above the expected 50.3B will show the foreign investors have confidence in the U.S. economy, and the Dollar might rise as a result. Production is highly correlated with consumer conditions such as employment levels and earnings, and thus tends to have a large impact on the Dollar. [22]
The Nasdaq Composite Index.IXIC was down 6.83 points, or 0.29 percent, at 2,360.88. Two reports showing U.S. industrial production braked sharply in February as severe winter storms slammed parts of the United States while manufacturing activity in New York state stalled this month sparked little market reaction. "This number is too small to suggest that the industrial sector is really picking up steam, so it won't be a market mover," said Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto. China, in the meantime, is causing some investors concern because of both its rising inflation and its insistence that the yuan currency is not undervalued, a bone of contention with the United States. [12] A domestic report released in the U.S. showed that the U.S. manufacturing sector in the New York region expanded at a faster than estimated rate. [20]
"There's a lot of back and forth on Greece. France and German finance ministers practically said there is no financial aid announcements this week. That's one of the factors weighing on the euro." said Vassili Serebriakov, senior currency strategist, at Wells Fargo in New York. [10] The main reason for the Euro's uptrend seems to be the speculations regarding the Greece rescue plan by the Euro-Zone. It is expected that the Euro-Zone finance ministers will agree on Monday on a mechanism for helping Greece financially. Such a plan, if will indeed be announced this week, has potential to boost the Euro further. [6]
UK PRESS: Finance ministers from eurozone states will today attempt to paper over cracks and try to reach agreement on a E20bn-E25bn aid package to help ease the financial crisis in Greece, the Telegraph reports. [18] UK PRESS: Germany's trade surpluses built on holding down labour costs may be unsustainable for the other countries in the eurozone, France's finance minister said in an unusually blunt warning to Berlin, the FT reports. Christine Lagarde said Berlin should consider boosting domestic demand to help deficit countries regain competitiveness and sort out their public finances, the paper added. Her comments break a long-standing taboo between the French and German governments about macroeconomic imbalances in the eurozone, the paper noted. [18]
One thing that could shift the focus of the currency markets is a story that appeared in today'''s WSJ. Moody'''s released their quarterly AAASovereign Monitor report this morning, confirming the triple-A ratings of the U.S., UK, and Spain. The report said these countries have moved '''substantially''' closer to losing their AAA ratings as the cost of servicing their debt continues to rise. [3] The UK is headed for a hung Parliament but current officials are putting the budget and the UK'''s credit ratings to the forefront of importance. Regarding the latter, Prime Minister Gordon Brown spoke about potential budget cuts that will help ease the country'''s debt load. Overall, even with a surprisingly poor Manufacturing Production release (the manufacturing sector has been one of the UK'''s better performers), the pound managed to hold steady and held way above its 2010 lows. [2] A YouGov Plc poll published in yesterday'''s Sunday Times showed Labour at 33%, the opposition Conservatives at 37%, and the Liberal Democrats with 17%. UK Prime Minister Gordon Brown stepped up his attacks on the Conservatives, saying that they would '''wreck the recovery''' with their planned budget cuts. [3]
A hung parliament would make it more difficult to tackle the budget problems in the UK, adding to the problems pushing the pound sterling lower. Another report showed there are currently more wagers on the pound weakening against the dollar than when George Soros made his fortune betting against the pound in 1992. [3] British pound ''' The pound is safe for now according to a weekend report from Moody'''s Investor Services, but traders wasted no time rehashing the story using it as reason enough to bash the pound the unit one more time. It was a notable laggard against the dollar and quickly slumped by more than a cent to as low as $1.5020 after a Friday close at $1.5184. [5] The euro may gain to $1.42 and 130 yen in the "short term," the analysts wrote. They recommended investors buy the euro and the Swiss franc versus the dollar. [16]
The Euro gained about 100 pips against the Dollar and the Pound, and rose close to 200 pips against the Yen, having the EUR/JPY reach above the 125.00 level. [6] The Yen saw a relatively peaceful session against the Dollar, yet it underwent a bearish trend vs. the Euro and the Pound. [6]
At present, the dollar is worth 1.5040 against the pound, 1.0595 against the franc, 1.3713 against the euro and 90.78 against the yen. [23]
The U.S. dollar advanced against the pound and the euro, but declined against the franc. [24] The U.S. dollar took a hit against the pound on Friday, as strong U.S. data benefitted perceived riskier currencies like the pound. [8] The strong numbers have further confirmed analyst's belief that the world's largest economy was continuing to recover and the global economy would follow suit. This led to the U.S. dollar being sold for European currencies on Friday as riskier assets were bought up. [8] Against regional currencies the U.S. dollar rose to 1,134.50 South Korean won from 1,128.20 on Friday, to 1.3971 Singapore dollars from 1.3961, to 9,165 Indonesian rupiah from 9,159 and to NT$31.79 from NT$31.75. [9]
The U.S. Commerce Department said retail sales rose unexpectedly in February by 0.3% on the previous month. Meanwhile euro zone industrial production saw its strongest monthly increase on record in January, up 1.7%, lifting confidence about economic recovery in the area and pushing the euro higher against major currencies. [21] The Greek financial crisis was given a shot in the arm following news of an agreement between euro zone ministers boosted the euro's appeal. This led to a rise in risk appetite, further bolstered by an unexpected rise in European industrial production. [14] Traders are also advised to follow every report regarding the potential Euro-Zone's rescue plan for the Greek economy. If the Euro-Zone will declare a final plan, this is likely to boost the Euro, as an act of confidence in the European economies. [22] Traders also said there were reports in the market of large option-related sell orders on the approach to $1.3800, limiting any upside momentum on the euro. [10]
In midday New York trading, the euro EUR= was down 0.8 percent on the day at $1.3658, retreating from a four-week high just shy of $1.3800 hit on Friday after euro zone industrial orders data beat forecasts. [10] The euro hit a one-month high on Friday against the greenback, closing at $1.3766, up nearly a cent. In this morning's trading, the euro is down 0.3% as risk-averse trading in Asian markets pushed the single currency lower. [14]
Any resolution to the Greek sovereign debt debacle could be a short term positive for the euro during today's trading. [11] With the Greek debt problems continuing to keep the euro volatile, investors may be wise to look at the Swiss franc as an alternative. [3] Today'''s Greek debt crisis is the euro'''s Sword of Damocles, threatening to fall and slice through the common currency. Only time will tell if the Greeks will be successful in their efforts to refinance their debts. For now, the focus of international currency speculators is locked on this story, and until some other event or crisis draws their attention, the euro will continue to be fairly volatile. [3] The Greek debt crisis will continue to hang over the euro like the Sword of Damocles. [3]
The euro slipped, hampered by a lack of progress on a financial aid package for debt-strapped Greece as gold rose on concerns over sovereign debt, which prompted buying of the metal as a haven from risk. Assets seen as higher risk, such as equities, crude oil and industrial commodities, all retreated as risk appetite receded. [12] Strong euro zone economic data gave the euro a lift while fears about Greece's debt crisis ease. [21]
Economic growth seems to be taking hold, and the Swiss National Bank has been quite in the currency markets, letting the franc appreciate. The SNB sold francs last year in order to hold down its appreciation versus the euro, but they seem to be willing to accept a higher franc given the recent economic data. [3] Data on Friday showed currency speculators trimmed bets in favor of the dollar for a second straight week and raised bets against the euro to a record high. [10] Data released on Monday, however, showed euro zone employment fell in the fourth quarter, highlighting the region's fragile economy. [10]
The pound hit a two-week high on Friday night at 1.5216 after a report revealed that UK house prices rose at their fastest pace in seven years, easing recent concerns about the economy. [17] The governor of the Bank of England and a number of economists have said that inflationary pressures will subside later in the year and drop below the 2% target in 2011. Therefore, the prospect of a near-term increase in borrowing costs is unlikely, especially since the UK economy just about limped out of the recession in the fourth quarter. [13] The Bank of England's chief economist Spencer Dale said on Friday that a pause in quantitative easing did not mean that it had come to an end and there is likely to be further speculation that there could be an expansion of the bond-purchasing program within the next few months. Sterling has dipped lower against the majors this morning following a warning from Standard & Poor's that the UK has moved closer towards a credit-rating downgrade. There is a packed schedule of UK economic data released this week, with the focus falling on Wednesday's release of the minutes from the last BoE policy meeting. [13] Looking ahead, MOC Minutes will be released on Wednesday. Because the Bank of England refrained from issuing a descript statement at their previous meeting, the minutes will be highly anticipated ''' they will shed light on the voting results of the BoE members and may offer opinions of the BoE regarding the UK'''s recovery and inflation. [2]
The Bank's quarterly survey, however, shows that UK consumers expect the inflation rate to hit 2.5% in a year's time, compared with 2.4% in November. Stuart Bennett, a senior foreign exchange strategist at Credit Agricole Corporate and Investment Bank, said that "if inflation expectations are creeping up, this may be a catalyst for the market to give sterling a reprieve." [13]
Currency traders will be looking for hints as to how much further the central bank feels rates should go. [5] Much of the yen selling continues to be executed by non Japanese traders. Japanese traders are more skeptical towards a possible BoJ intervention, as the central bank prefers to limit their involvement in the market place. We should get a clearer picture of the situation as the Bank of Japan is scheduled to hold its official press conference. [2] The yen remained weaker last week as Forex traders continue to believe the Bank of Japan will use monetary policies to weaken the yen. Adding to the speculation was comments from Japanese Prime Minister Yukio Hatoyama of his preference for a weaker yen. [2]
Several economic publications from the Japanese economy have contributed to the Yen's weakness during last week's trading session. [6] The kiwi drifted?on Friday for an intraday range of?0.6980 and 0.7010 after disappointing local retail sales numbers. The unit spiked briefly towards 0.7045 during the European session as both the greenback and Japanese Yen weakened and markets moved back into currencies linked to economic growth. [17] :: Australian Dollar: The Australian Dollar opens higher at 0.9180 as the greenback and Yen weakened on Friday night and markets move back into currencies linked to economic growth. [17]
Overall, the dollar was slightly weaker against major currencies (except for the yen). It did rally against gold which dropped unexpectedly $20 last Wednesday afternoon. Equities continued to rally although the momentum of their move higher has slowed down. [2]
March 15 (Bloomberg) -- The euro is about 4 percent to 5 percent too cheap against both the dollar and the yen given diminishing concerns that any European countries will default, according to JPMorgan Chase & Co. [16] Despite pending reports of a European resolution to bailout the EU member nation Greece, the euro came under pressure from the dollar. [11] The 1400 pip decline in the Euro vs. the Dollar since December appears to me to be emotionally-driven selling, based mainly on the situation in Greece, although additional worries about the rest of the PIIGS may be factored in. [19]
The pound euro exchange rate is higher, while the pound dollar exchange rate has come in lower in morning trade in London. [8] The Dollar dropped about 100 pips against the Euro, and the EUR/USD pair saw a weekly high at the rate of 1.3793. [6]
Budget deficit worries will continue to keep a lid on the currency. The pound is marginally higher against both the Australian Dollar (1.6530) and the New Zealand Dollar (2.1540). [17] The Dollar saw volatile sessions against the Yen and the Pound, and the two pairs didn't see a significant trend. [6] Amid the release of the report, the dollar gained against the yen, but declined against the franc and the pound. [23]
Output was down 0.9% from the previous month, despite initial estimates of 0.2% expansion, and the Pound subsequently fell as much as 0.4% against the Dollar to a low of $1.4875. [13]
Currently it seems that even though the Dollar is generally strengthening, for as long that the economic data from the U.S. won't show a recovery - the Dollar could drop on the short-term. [6] We have a pretty big week of economic data here in the U.S., starting with the volatile Empire Manufacturing number, followed by the net TIC flows, industrial production, and capacity utilization all scheduled to be released today. [3]
The OMB'''s 2011 budget showed that the U.S. debt-to-GDP ratio will continue to rise over next 10 years until 2020, where the projection ends and when U.S. debt will equal 77.2 percent of GDP. Inflation is one strategy that could be used in an attempt to lessen that debt burden. [3] There are riots and strikes, widespread tax evasion, and a deep distrust of the government. Greek officials have initiated their third austerity program, announcing budget cuts, and tax increases totaling $6.5B. Initial market response is positive, with the latest 10 year bond sale of $6.8B oversubscribed by a factor of three. If a rescue is still needed (i.e. if they can't roll over more of the short-term debt), the IMF will likely step in. Most relevant to this discussion, Greece is a tiny part of the whole. [19] While the market focused on the ministers' meeting in Brussels, analysts said anyone hoping for a quick resolution to the Greek debt issue would be disappointed. [10]
Jeremy Stretch, a senior currency strategist at Rabobank International, said that "sterling remains weak amid ongoing concerns over debt ratings and political dynamics." Concerns that Britain, which lagged well behind the U.S and the Euro-region in exiting the recession, will struggle to rein in its debt has made the Pound the worst performer this year among the 16-most actively traded currencies. [13]
The Dollar saw mixed results against the major currencies during last week's trading session. [6] The Dollar failed to rise during last week's trading as several economic indicators delivered worse than expected figures. [6] Trading in the pound last week remained difficult as it has bounced around widely based on the release of new election polls, economic news and statements from government officials. [2]
Risk Warning: Trading in forex and Contracts for Difference (CFDs) is highly speculative and involves a significant risk of loss. Such trading is not suitable for all investors so you must ensure that you fully understand the risks before trading. [2] Online Forex trading involves high risk and is not suitable for all investors. [4]
With fiscal integrity on the chopping block as a result of the forthcoming election, the perceived risks to the loss of such status was a convenient excuse for traders to lop a cent off the value of sterling versus the dollar. [5] Global equity prices are lower to start the week and there is an air of risk aversion about the market tone even before U.S. markets are open. [5] The common European currency's weakness is probably a reflection of "residual skepticism that sovereign risk is contained," analysts including Jan Loeys, global head of market strategy in London, wrote in a research note dated March 12. "This premium is excessive." [16]
ECB TUMPEL-GUGERELL: Must remain vigilant, attentive to financial stability. BUNDESBANK: The gold reserves of Germany's central bank are not available for financing a European Monetary Fund and official plans to the contrary are unknown, the Bundesbank said Sunday in a statement. (Statement, issued in response to a report by German news weekly Focus that such a proposal is under consideration). [18] On-again, off-again reports of European Union help for debt-burdened Greece also put some investors on edge. [12] The Euro-zone officials and the ratings agencies remained unsure if Greece could deliver on its austerity budget pledges and regain its credibility. Greece is expected to report to the European Union tomorrow on its progress. [7]
Concern within the Euro-zone has eased slightly, although there is still a high degree of caution, especially with strikes within Greece maintaining underlying fears over the budget outlook. The French President Sarkozy toned down his rhetoric against a weak Euro and this also provided a degree of support for the single currency. [13] Perhaps it is time to realize that Greece is but a tiny part of the whole, and the euro is much stronger than sentiment would have us think. [19]
The euro was changing hands at US$1.3740 in Tokyo afternoon trade, down from US$1.3761 in New York late Friday, and fell to 124.47 yen from 124.76 yen. [9] Investors are keen to learn how attempts to ignite growth have fared. "The focus will be on the Fed. They want to keep conventional policy easy," said Mark Pawlak, market strategist at Keefe, Bruyette & Woods in New York. [12] NEW YORK (Reuters) - The former president of privately-held Park Avenue Bank was arrested on allegations of fraud on Monday, including charges of making false statements in the failed bank's application for U.S. government bailout funds. [12] Bringing the dollar down were rumours that U.S. President Barack Obama was planning to appoint Janet Yellen to Fed Vice-Chairman. She is currently the San Francisco Reserve Bank Chief and is widely seen as cautious. [8]
Sales at U.S. retailers rose for a second month in February advancing 0.3 per cent, whilst in Europe, January industrial output rose the most since 1989 pushing the Euro to a one-month high of 1.3795 during Friday's session. [17] DBS noted that the speculative net short euro positions rose to another all-time record high despite the recovery in the euro-dollar pair. [7]
The euro appears to be suffering from another long wait at the end of which there is no news to report, either good or bad. [5] Moody's new report provides an update about the situation of the four largest Aaa governments -- Germany, France, the UK and the U.S. -- as well as other selected Aaa countries: Spain and the less fiscally challenged Denmark, Finland, Norway and Sweden. In its examination of these countries' unchanged creditworthiness, Moody's identifies the key challenges facing them. [18] The EZ current account has made a dramatic improvement YoY (see chart below, courtesy ECB), and the budget deficit is only -7% (compared to the UK at 14% and the U.S. at 10.5%). [19]
Tomorrow will give us a picture of the U.S. housing market, with housing starts and building permits along with the Import Price Index. We will also get the FOMC rate decision, which is pretty much a foregone conclusion with rates remaining at their current 0.25% level. [3] The price move lower began at the resistance level of $83.05 and is approaching the 20-day moving average line of the Bollinger Bands. Forex and commodity traders may want to enter into the market with this downward momentum at their backs. [6]
Traders report a UK clearer behind the move lower which is said to be linked to the Pru-AIA deal. [18] Again Japanese exporters were sellers on the move back through Y125.00 and traders report that a head and shoulders pattern has completed on the hourly euro-yen chart with the neckline broken and closed below at Y123.40. [18]
As long as US-China tensions continue, markets are beginning to worry about a wild card and DBS noted that CNY inaction may lead China to be named a currency manipulator in next month's U.S. Treasury Currency Report. [7] The currency remains near nine-and-a-half year lows against the Australian Dollar at 0.7660. [17] At lunchtime, the EUR/USD was trading lower at 1.3725 from Friday's closing price of 1.3767. The EUR/JPY traded as low as 124.26 after opening trading this week at 124.67. [11] Currently, there are 107,410 shorts to 32,589 longs on the CME. The last two weeks spot price has shown a slight upward trend, which could be a realization that the euro is oversold. [19] Euro ''' Earlier weakness saw the euro ease to $1.3701 as ministers from the EU met in Brussels on Monday to thrash out principles on which a framework to assist Green might be built. [5] Bids were noted toward $1.3700, with talk of east European sovereign demand interest sitting below the figure. CHINA: Chinese Premier Wen Jiabao again offered a robust defence of his government's decision to stabilize the yuan exchange rate, voicing his opposition to attempts to force China to budge and arguing that external pressure isn't helping reform efforts at his annual press conference to close the National People's Congress on the weekend. [18] Stops triggered on the move below took the rate to a low of $1.3708 with recovery efforts so far held below $1.3720. [18]
The main publication looks to be the German ZEW Economic Sentiment. This is a survey of about 350 German institutional investors and analysts that are asked to rate the next 6-month outlook for Germany. [6] The number has been on a steady decline the last few months as business leaders and investors have become increasingly pessimistic about the eurozone'''s economic recovery. [2]
Any rallies in the kiwi are likely to be short-lived after last weeks decision by the Reserve Bank of New Zealand to keep rates steady at 2.5 per cent. [17]
SOURCES
1. Dollar rises on lingering Greece woes - Mar. 15, 2010
2. euro-sentiment-improving-02353.html
3. Greek Debt Crisis Continues to Hang Over the Euro
4. Euro Slips VS USD/JPY on Investor Profit-taking - By DailyForex.com
5. Hawks circle sterling | Forex District - Signature Forex Technical Analysis, Trade Recommendations and Articles
6. Will the Dollar Continue To Slide Against the Euro?
7. Dollar Likely To Find Support When Futures Market Start Discounting US Rate Hike Cycle - DBS
8. Pound exchange rates mixed on Monday morning - The Economy News - Economic news and Insight for the spread betting, CFD trading and investment community
9. Euro falls amid risk aversion - Taiwan News Online
10. FOREX-Euro falls vs U.S. dollar on persistent Greek woes | Reuters
11. Dollar Rises After U.S. Debt Warning
12. Global stocks slip as caution reins, dollar gains | Reuters
13. Foreign Exchange Daily Insight- The Dollar declines as risk appetite improves ahead of the FOMC rate announcement « Foreign Exchange News
14. Euro Dollar exchange rates on Monday - The Economy News - Economic news and Insight for the spread betting, CFD trading and investment community
15. Commodity Surge:: Goldman Sachs (NYSE:GS): Buy Euro!
16. Euro Weakness Is '''Excessive''' as Risks Diminish, JPMorgan Says - BusinessWeek
17. Daily Forex Forecast Mar 15 - International Business Times
18. Ldn FX: Risk Aversion Boosts Dollar And Yen | iMarketNews.com
19. Euro Not as Weak as It Looks -- Seeking Alpha
20. Dollar Slips Against Franc And Pound Ahead Of U.S. Industrial Production Report
21. ShareCast - News you can use
22. U.S. Long-Term Purchases on Tap
23. Dollar Gains Versus Yen Amid Federal Reserve's Empire State Manufacturing Report
24. Dollar Mixed Ahead Of Federal Reserve's Empire State Manufacturing Report
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