The major currency pairs were mixed in Tuesday trading with the return of several major markets from holiday. The biggest advancer in the session was the Canadian dollar, pushing to a fresh 30-year high against the greenback on the heels of a hawkish policy statement from the BoC.
Meanwhile, the Conference Board’s consumer confidence reading for May improved to 108, edging out forecasts for a slight improvement to 105 from 104.
Wednesday, May 30, 2007
Monday, May 28, 2007
FX Trading Thinned by Holidays
Germany Market Closed for Holiday
UK Market Closed for Holiday
Swiss Market Closed for Holiday
US Market Closed in Observance of Memorial Day
The foreign exchange market will be off to a slow start with several markets closed for holiday on Monday, including Swiss, Germany, UK and the US. However, the economic calendar is stacked with key reports this week and culminates with the closely anticipated US labor report on Friday. Currency movements have predominantly been dictated by sentiment over the outlook for global central banks and should continue to prevail in the coming week.
Some key highlights will be the Bank of Canada’s rate decision on Tuesday, Eurozone money supply, Germany’s unemployment report, Canada’s March GDP, US Q1 GDP, Eurozone Q1 GDP, and manufacturing reports from the US, Japan, UK and Eurozone. Although the BoC is not seen raising rates this week from 4.25%, the policy statement will be closely scrutinized given the recent uptick in Canada’s consumer price inflation as traders gauge whether additional tightening is a possibility. Meanwhile, the growth rates from Swiss, Canada, Eurozone, and US will also be analyzed, with GDP in the Eurozone seen outpacing its counterparts, effectively providing the ECB with additional room to tighten.
UK Market Closed for Holiday
Swiss Market Closed for Holiday
US Market Closed in Observance of Memorial Day
The foreign exchange market will be off to a slow start with several markets closed for holiday on Monday, including Swiss, Germany, UK and the US. However, the economic calendar is stacked with key reports this week and culminates with the closely anticipated US labor report on Friday. Currency movements have predominantly been dictated by sentiment over the outlook for global central banks and should continue to prevail in the coming week.
Some key highlights will be the Bank of Canada’s rate decision on Tuesday, Eurozone money supply, Germany’s unemployment report, Canada’s March GDP, US Q1 GDP, Eurozone Q1 GDP, and manufacturing reports from the US, Japan, UK and Eurozone. Although the BoC is not seen raising rates this week from 4.25%, the policy statement will be closely scrutinized given the recent uptick in Canada’s consumer price inflation as traders gauge whether additional tightening is a possibility. Meanwhile, the growth rates from Swiss, Canada, Eurozone, and US will also be analyzed, with GDP in the Eurozone seen outpacing its counterparts, effectively providing the ECB with additional room to tighten.
Saturday, May 26, 2007
Dollar Slipped On Existing Home Sales
The dollar slipped after a report indicated an unexpected decline in US existing home sales, re-igniting concern over the downturn of housing sector and the Fed interest rate cut possibility.
US existing homes sales declined 2.6% to an annual rate of 5.99 million units in April, below the estimate of 6.14 million. The tame housing data surprised the market, which had anticipated a number as robust as the new home sales released yesterday. The euro rose from around 1.3445 to as high as 1.3471, and the sterling gained 30 pips to 1.9868 versus the dollar.
With recent upbeat economic US data, the dollar rebounded versus the euro and sterling. The dollar has gained against the euro for four weeks, which constitutes the longest rally in 5 quarters. However, the dollar failed to break the 1.3415 level versus the euro following the surprisingly good new home sales. The 1.3410-15 area therefore became a base of the pair¡¯s consolidation range.
US existing homes sales declined 2.6% to an annual rate of 5.99 million units in April, below the estimate of 6.14 million. The tame housing data surprised the market, which had anticipated a number as robust as the new home sales released yesterday. The euro rose from around 1.3445 to as high as 1.3471, and the sterling gained 30 pips to 1.9868 versus the dollar.
With recent upbeat economic US data, the dollar rebounded versus the euro and sterling. The dollar has gained against the euro for four weeks, which constitutes the longest rally in 5 quarters. However, the dollar failed to break the 1.3415 level versus the euro following the surprisingly good new home sales. The 1.3410-15 area therefore became a base of the pair¡¯s consolidation range.
USD Buoyed Against Eur, JPY
At 4:30 AM UK Q1 GDP y/y (exp 2.8%, prev 2.8%)
UK Q1 GDP q/q (exp 0.7%, prev 0.7%)
At 10:00 AM US April Existing Home Sales (exp 6.14 mln units, prev 6.12 mln units)
The dollar remains buoyed against the euro and yen following yesterday’s upbeat US housing data, with new home sales posting its steepest gain in 14-years. Sentiment over central bank interest rate decisions continues to be the primary driver in the foreign exchange market, as expectations for a Fed rate cut this year are slowly diminishing, ultimately supporting the greenback.
The OECD released its semi-annual Economic Outlook this week and called for global central banks, with the exception of Japan, to “err on the side of tightness” given lingering inflationary pressure. Further, it urged the Fed to refrain from shifting to an easing stance until early 2008, citing “more persistent than expected” inflation in the US. The OECD anticipates two more rate hikes from the ECB to 4.25% and sees further possible tightening from the BoE throughout the remainder of this year as well. Also, to highlight the growing disparity between the economies of the US and the rest of the world, the OECD cut the growth forecast for the US while simultaneously upwardly revising the growth rates for the Eurozone, UK, Japan and Australia.
UK Q1 GDP q/q (exp 0.7%, prev 0.7%)
At 10:00 AM US April Existing Home Sales (exp 6.14 mln units, prev 6.12 mln units)
The dollar remains buoyed against the euro and yen following yesterday’s upbeat US housing data, with new home sales posting its steepest gain in 14-years. Sentiment over central bank interest rate decisions continues to be the primary driver in the foreign exchange market, as expectations for a Fed rate cut this year are slowly diminishing, ultimately supporting the greenback.
The OECD released its semi-annual Economic Outlook this week and called for global central banks, with the exception of Japan, to “err on the side of tightness” given lingering inflationary pressure. Further, it urged the Fed to refrain from shifting to an easing stance until early 2008, citing “more persistent than expected” inflation in the US. The OECD anticipates two more rate hikes from the ECB to 4.25% and sees further possible tightening from the BoE throughout the remainder of this year as well. Also, to highlight the growing disparity between the economies of the US and the rest of the world, the OECD cut the growth forecast for the US while simultaneously upwardly revising the growth rates for the Eurozone, UK, Japan and Australia.
Dollar Advanced on New Home Sales
The dollar advanced after a report showed US new home sales growth rate in April reached the highest in 14 years, dampening the expectations that the Fed may need to cut interest rates this year.
US new home sales rose 16.2% in April to 981k, beating the estimate of 860k. The unexpectedly robust housing data added evidence that the spillover from housing sector to the whole economy is limited. The Fed is widely expected to hold interest rates unchanged in its June monetary policy meeting and is likely to make no move for the rest of the year. The greenback rallied following the housing report. The euro fell from 1.3450 to a day low at 1.3417 versus the dollar, and the sterling dipped around 50 pips against the dollar.
Earlier, the dollar was little changed after the release of two US second-tier data. The weekly jobless claims rose to 311k, compared to a forecast of 305k. The durable good orders rose 0.6% in April, below the expectation of 1.0%. Ex-transport index was up 1.5%, better than an expected 0.6% rise.
US new home sales rose 16.2% in April to 981k, beating the estimate of 860k. The unexpectedly robust housing data added evidence that the spillover from housing sector to the whole economy is limited. The Fed is widely expected to hold interest rates unchanged in its June monetary policy meeting and is likely to make no move for the rest of the year. The greenback rallied following the housing report. The euro fell from 1.3450 to a day low at 1.3417 versus the dollar, and the sterling dipped around 50 pips against the dollar.
Earlier, the dollar was little changed after the release of two US second-tier data. The weekly jobless claims rose to 311k, compared to a forecast of 305k. The durable good orders rose 0.6% in April, below the expectation of 1.0%. Ex-transport index was up 1.5%, better than an expected 0.6% rise.
Thursday, May 24, 2007
USD Mixed Ahead of Data
At 2:00 AM Germany Q1 GDP q/q (exp 0.5%, prev 0.5%)
Germany Q1 GDP y/y (exp 3.6%, prev 3.6%)
At 4:00 AM Germany May Ifo Current Conditions (exp 113.5, prev 113.2)
Germany May Ifo Index (exp 108.8, prev 108.6)
At 8:30 AM US Weekly Jobless Claims (exp 305.0k, prev 293.0k)
US April Durable Goods Orders (exp 1.0%, prev 3.8%)
US April Durable Goods Orders ex-transports (exp 0.6%, prev 1.4%)
At 10:00 AM US April New Home Sales (exp 860k, prev 858k)
The greenback is mixed in early Thursday trading, firmer against the euro and yen while continuing to trade on its heels versus the sterling and Loonie. Currency movements have been largely dictated by sentiment on the outlook for global interest rate differentials, with the currencies of the central banks most likely to further tighten policy benefiting from market expectations. Inflation remains buoyed in countries such as the UK and Canada resulting in heightened expectations for rate hikes from their respective central banks.
US economic data for the coming session will see weekly jobless claims, April durable goods orders and new home sales. Weekly jobless claims are forecasted to edge up to 305.0k, from 293.0k the previous week. Durable goods orders for April are seen retreating to 1.0%, versus a robust 3.8% reading previously. Durable goods orders excluding transports is also lower to 0.6% from 1.4% in March. Meanwhile, April new home sales are seen edging higher to 860k versus 858k a month earlier.
Germany Q1 GDP y/y (exp 3.6%, prev 3.6%)
At 4:00 AM Germany May Ifo Current Conditions (exp 113.5, prev 113.2)
Germany May Ifo Index (exp 108.8, prev 108.6)
At 8:30 AM US Weekly Jobless Claims (exp 305.0k, prev 293.0k)
US April Durable Goods Orders (exp 1.0%, prev 3.8%)
US April Durable Goods Orders ex-transports (exp 0.6%, prev 1.4%)
At 10:00 AM US April New Home Sales (exp 860k, prev 858k)
The greenback is mixed in early Thursday trading, firmer against the euro and yen while continuing to trade on its heels versus the sterling and Loonie. Currency movements have been largely dictated by sentiment on the outlook for global interest rate differentials, with the currencies of the central banks most likely to further tighten policy benefiting from market expectations. Inflation remains buoyed in countries such as the UK and Canada resulting in heightened expectations for rate hikes from their respective central banks.
US economic data for the coming session will see weekly jobless claims, April durable goods orders and new home sales. Weekly jobless claims are forecasted to edge up to 305.0k, from 293.0k the previous week. Durable goods orders for April are seen retreating to 1.0%, versus a robust 3.8% reading previously. Durable goods orders excluding transports is also lower to 0.6% from 1.4% in March. Meanwhile, April new home sales are seen edging higher to 860k versus 858k a month earlier.
Sterling Advanced on BOE Minutes
The sterling advanced on Wednesday after the Bank of England May monetary policy meeting minutes showed all nine committee members voted to lift UK interest rates a quarter percentage to 5.50%.
This marked the first time this year that the committee members unanimously voted to increase rates. Besides, the minutes revealed that some members even suggested an unprecedented 50 basis point increase in the meeting. The MPC minutes surprised the market that had expected an 8-1 vote. The sterling rose sharply from 1.9750 to 1.9880 versus the dollar.
China Vice Premier Wu Yi and US Treasury Secretary Paulson ended two-day meeting in Washington today. They both stressed the need for closer cooperation and Paulson called for more foreign exchange reform from China.
This marked the first time this year that the committee members unanimously voted to increase rates. Besides, the minutes revealed that some members even suggested an unprecedented 50 basis point increase in the meeting. The MPC minutes surprised the market that had expected an 8-1 vote. The sterling rose sharply from 1.9750 to 1.9880 versus the dollar.
China Vice Premier Wu Yi and US Treasury Secretary Paulson ended two-day meeting in Washington today. They both stressed the need for closer cooperation and Paulson called for more foreign exchange reform from China.
Wednesday, May 23, 2007
USD Buoyed, Eyes MPC Minutes
At 4:30 AM May MPC Vote (exp 8-1, prev 2-7)
At 5:00 AM Eurozone March Industrial Orders m/m (exp 1.1%, prev –0.7%)
Eurozone March Industrial Orders y/y (exp 6.9%, prev 4.7%)
At 8:30 AM Canada April Leading (exp 0.4%, prev 0.4%)
The major currency pairs are little changed with the greenback holding onto its gains against the majors, buoyed near 121.60 versus the yen and 1.3450 against the euro. The meeting between US Treasury Secretary Paulson and Chinese officials was essentially a non-event in the foreign exchange market. Paulson urged China to hasten its currency reform, only to be rebuffed from China’s Vice Premier Yi, who said that pressure from the US would be counterproductive and merely complicate matters.
The FX market continues to consolidate amid a dearth of key news or data at the start of the week. The calendar picks up in the coming session with the release of the Bank of England’s MPC meeting minutes from May, in which the Bank hiked rates by 25-bp. Traders will scrutinize the minutes for clues on whether additional tightening can be expected from the BoE, particularly following its previous statement in which it downplayed further risks to inflation. The Bank had previously stated that it expects CPI to trend back toward its 2% target over the course of this year, tempering market expectations for aggressive tightening in the coming months. Meanwhile, a 25-basis point ECB rate hike in June is already fully priced-in and we anticipate another 25-basis point hike in Q4, lifting the ECB’s benchmark lending rate to 4.25% by year-end.
At 5:00 AM Eurozone March Industrial Orders m/m (exp 1.1%, prev –0.7%)
Eurozone March Industrial Orders y/y (exp 6.9%, prev 4.7%)
At 8:30 AM Canada April Leading (exp 0.4%, prev 0.4%)
The major currency pairs are little changed with the greenback holding onto its gains against the majors, buoyed near 121.60 versus the yen and 1.3450 against the euro. The meeting between US Treasury Secretary Paulson and Chinese officials was essentially a non-event in the foreign exchange market. Paulson urged China to hasten its currency reform, only to be rebuffed from China’s Vice Premier Yi, who said that pressure from the US would be counterproductive and merely complicate matters.
The FX market continues to consolidate amid a dearth of key news or data at the start of the week. The calendar picks up in the coming session with the release of the Bank of England’s MPC meeting minutes from May, in which the Bank hiked rates by 25-bp. Traders will scrutinize the minutes for clues on whether additional tightening can be expected from the BoE, particularly following its previous statement in which it downplayed further risks to inflation. The Bank had previously stated that it expects CPI to trend back toward its 2% target over the course of this year, tempering market expectations for aggressive tightening in the coming months. Meanwhile, a 25-basis point ECB rate hike in June is already fully priced-in and we anticipate another 25-basis point hike in Q4, lifting the ECB’s benchmark lending rate to 4.25% by year-end.
Dollar Holds Firm During China Talk
The dollar holds firm against its major rivals as expectations for a Fed rate cut is diminishing following last week’s upbeat economic data.
The comments from the Fed official Lacker today also helped to support the greenback. He said the Fed need to get back to contain core inflation between 1 and 2%. He added inflation is a predominant concern at present time for the Fed. US growth Return to trend by the end of the year. Nevertheless, he mentioned that the housing will be a drag on US economy for a couple of more quarters.
China Vice Premier Wu Yi and US Treasury Secretary Henry Paulson started their two-day meeting in Washington today. China is on the way of allowing the yuan more flexibility.
The euro failed to rise versus the dollar though Germany ZEW investors survey came in better than expectations. The ZEW headline came in at 24 as expected, up from 16.5 in April. The ZEW current situation rose from 76.9 to 88 in May, above the estimate of 79.
The comments from the Fed official Lacker today also helped to support the greenback. He said the Fed need to get back to contain core inflation between 1 and 2%. He added inflation is a predominant concern at present time for the Fed. US growth Return to trend by the end of the year. Nevertheless, he mentioned that the housing will be a drag on US economy for a couple of more quarters.
China Vice Premier Wu Yi and US Treasury Secretary Henry Paulson started their two-day meeting in Washington today. China is on the way of allowing the yuan more flexibility.
The euro failed to rise versus the dollar though Germany ZEW investors survey came in better than expectations. The ZEW headline came in at 24 as expected, up from 16.5 in April. The ZEW current situation rose from 76.9 to 88 in May, above the estimate of 79.
USD Firms Ahead of Data
At 1:00 AM Bank of Japan Meeting Minutes
At 5:00 AM E-13 March Trade Balance (exp 3.0-bln euros, prev –1.7 bln euros)
Germany May ZEW Current Situation (exp 79.0, prev 76.9)
Germany May ZEW Index (exp 24.0, prev 16.5)
At 10:00 AM US May Richmond Fed Manufacturing Index (exp n/f, prev –11)
The dollar remains buoyed against the euro, yen and sterling, but is mired near multi-decade lows versus its Canadian counterpart around 1.0850. The key highlight for the coming session will be Treasury Secretary Paulson’s meeting with Chinese officials in Washington. We anticipate further discussion on the flexibility of China’s currency regime and heightened calls for it to accelerate its move toward a free-floating currency. Global trade imbalances will also be another topic of interest that will likely be discussed in greater detail.
The greenback garnered support in spite of reports from Kuwait announcing an end to its dollar peg, and shifting to a basket of currencies instead. We continue to anticipate further demand for dollars in light of recent US equity market strength attracting additional foreign capital inflows. The S&P 500 index climbed into record territory on Monday, closing at 1,525.10, while the Dow Jones Industrial Average remains buoyed near all-time highs.
At 5:00 AM E-13 March Trade Balance (exp 3.0-bln euros, prev –1.7 bln euros)
Germany May ZEW Current Situation (exp 79.0, prev 76.9)
Germany May ZEW Index (exp 24.0, prev 16.5)
At 10:00 AM US May Richmond Fed Manufacturing Index (exp n/f, prev –11)
The dollar remains buoyed against the euro, yen and sterling, but is mired near multi-decade lows versus its Canadian counterpart around 1.0850. The key highlight for the coming session will be Treasury Secretary Paulson’s meeting with Chinese officials in Washington. We anticipate further discussion on the flexibility of China’s currency regime and heightened calls for it to accelerate its move toward a free-floating currency. Global trade imbalances will also be another topic of interest that will likely be discussed in greater detail.
The greenback garnered support in spite of reports from Kuwait announcing an end to its dollar peg, and shifting to a basket of currencies instead. We continue to anticipate further demand for dollars in light of recent US equity market strength attracting additional foreign capital inflows. The S&P 500 index climbed into record territory on Monday, closing at 1,525.10, while the Dow Jones Industrial Average remains buoyed near all-time highs.
Greenback Extends Gains, China Talk in Focus
The dollar extends gains across the board after last week’s unexpectedly strong data from housing, manufacturing, and labor markets, which diminished expectations that the Fed may need to cut interest rates this year.
This week’s economic calendar is quite light, with only US durable goods and housing data due on Thursday and Friday. The market then will focus on the talk between China Vice Premier Wu Yi and US Treasury Secretary Henry Paulson this Tuesday and Wednesday in Washington. US has always been calling for a more flexible Chinese yuan and faster appreciation.
EURUSD will face interim resistance at 1.35, followed by 1.3530 and 1.3550. Additional ceilings will emerge at 1.3580, backed by 1.36. Support starts at 1.3450, backed by 1.3420, 1.34 and 1.3380. Subsequent floors are eyed at 1.3350.
This week’s economic calendar is quite light, with only US durable goods and housing data due on Thursday and Friday. The market then will focus on the talk between China Vice Premier Wu Yi and US Treasury Secretary Henry Paulson this Tuesday and Wednesday in Washington. US has always been calling for a more flexible Chinese yuan and faster appreciation.
EURUSD will face interim resistance at 1.35, followed by 1.3530 and 1.3550. Additional ceilings will emerge at 1.3580, backed by 1.36. Support starts at 1.3450, backed by 1.3420, 1.34 and 1.3380. Subsequent floors are eyed at 1.3350.
FX Sideways Amid Dearth of News
At 4:30 AM UK April PS net borrowing (exp 1.5 bln stg, prev 8.5 bln stg)
UK April PSNCR (exp -1.5 bln stg, prev 17.2 bln stg)
The dollar holds steady against the majors heading into the week, buoyed above the 121-level versus the yen and steady near 1.9740 against the sterling. Trading is off to a slow start given the dearth of economic events early in the week. The G8 Finance Ministers meeting over the weekend also provided traders with little new material to digest, refraining from mentioning foreign exchange levels in its communiqué.
The US economic calendar is light this week, with the releases of the May Richmond Fed manufacturing index, April durable goods orders, April new home sales, and existing home sales. Also worth noting this week, will be US Treasury Secretary Paulson’s meeting with Chinese officials in Washington on Tuesday.
UK April PSNCR (exp -1.5 bln stg, prev 17.2 bln stg)
The dollar holds steady against the majors heading into the week, buoyed above the 121-level versus the yen and steady near 1.9740 against the sterling. Trading is off to a slow start given the dearth of economic events early in the week. The G8 Finance Ministers meeting over the weekend also provided traders with little new material to digest, refraining from mentioning foreign exchange levels in its communiqué.
The US economic calendar is light this week, with the releases of the May Richmond Fed manufacturing index, April durable goods orders, April new home sales, and existing home sales. Also worth noting this week, will be US Treasury Secretary Paulson’s meeting with Chinese officials in Washington on Tuesday.
Yen Rallied as China Raised Rates
The yen, a proxy for the yuan, rallied against the majors after China said it will widen the yuan-dollar trading band effective May 21 and raise interest rates. The dollar dipped to as low as 120.70 versus the yen, and climbed back to above the 121 handle as the market digested China move.
The People’s Bank of China said on its website that the yuan will be allowed to move as much as 0.5% either side of a daily fixing rate against the dollar, up from 0.3%. The central bank will also increase its one-year lending rate by 0.18% to 6.57% and lift one-year deposit rate by 0.27% to 3.06%. This is a move intended to smooth the relationship with US and European countries before China Vice Premier Wu Yi meets US Treasury Secretary Henry Paulson next week and the G8 meeting in Germany over the weekend.
USDJPY encounters interim resistance at 121.40, backed by 121.70 and 122. Subsequent ceilings will emerge at 122.10, followed by 122.30 and 122.50. On the downside, support begins at 121 and 120.70, followed by 120.50. Additional floors are eyed at 120.30, backed by 120 and 119.80.
The People’s Bank of China said on its website that the yuan will be allowed to move as much as 0.5% either side of a daily fixing rate against the dollar, up from 0.3%. The central bank will also increase its one-year lending rate by 0.18% to 6.57% and lift one-year deposit rate by 0.27% to 3.06%. This is a move intended to smooth the relationship with US and European countries before China Vice Premier Wu Yi meets US Treasury Secretary Henry Paulson next week and the G8 meeting in Germany over the weekend.
USDJPY encounters interim resistance at 121.40, backed by 121.70 and 122. Subsequent ceilings will emerge at 122.10, followed by 122.30 and 122.50. On the downside, support begins at 121 and 120.70, followed by 120.50. Additional floors are eyed at 120.30, backed by 120 and 119.80.
Dollar Gained on Jobless Claims Decline
The greenback extended its rally after a weekly jobless claims report showed the US labor market is still robust, adding evidence to the view that the Fed need not cut rate anytime soon. The weekly dropped 5000 to 293k, beating the estimate of 310k. The euro fell off the 1.35 handle against the dollar and reached as low as 1.3478. The sterling slid from 1.9790 to 1.9734 versus the dollar following the upbeat US job data.
Later in the day, the market was little changed after two other US reports. Leading indicators unexpectedly declined 0.5% in April, compared with a 0.1% rise in the previous month. Philadelphia Fed index rose from 0.2 to 4.2 in May, beating the estimate of 3.0.
Technically, the euro is supported at 1.3460 versus the dollar. Should the pair broke this level, the next target will be 1.3350.
The market will focus on the University of Michigan consumer sentiment (exp 86.5, prev 87.1) due 10:00 AM EST Friday.
Later in the day, the market was little changed after two other US reports. Leading indicators unexpectedly declined 0.5% in April, compared with a 0.1% rise in the previous month. Philadelphia Fed index rose from 0.2 to 4.2 in May, beating the estimate of 3.0.
Technically, the euro is supported at 1.3460 versus the dollar. Should the pair broke this level, the next target will be 1.3350.
The market will focus on the University of Michigan consumer sentiment (exp 86.5, prev 87.1) due 10:00 AM EST Friday.
USD Buoyed, JPY Drifts on GDP
At 2:00 AM Bank of Japan May Report
At 7:00 AM Canada April CPI m/m (exp 0.3%, prev 0.8%)
Canada April CPI y/y (exp 2.1%, prev 2.3%)
Canada April core CPI m/m (exp 0.1%, prev 0.3%)
Canada April core CPI y/y (exp 2.4%, prev 2.3%)
At 8:30 AM US Weekly Jobless Claims (exp 310k, prev 297k)
At 10:00 AM US April Leading Indicators (exp -0.1%, prev 0.1%)
May Philadelphia Fed Survey (exp 3.0, prev 0.2)
The greenback remains firmer across the board heading into the Thursday session, with traders turning to US economic reports. The data include weekly jobless claims, April leading indicators and the May Philadelphia Fed survey. Jobless claims are seen edging higher to 310k from 297k a week earlier, while the April leading indicators are expected to give back last month’s 0.1% increase, falling by 0.1%. Lastly, the Philadelphia Fed survey is forecasted to improve to a 3.0 reading, up considerably from 0.2 previously.
This morning will also see the release of consumer price inflation data from Canada, scheduled for 7:00 AM. April CPI is forecasted to slip to 0.3%, from 0.8% a month earlier and fall to 2.1% versus 2.3% versus the previous year. The core readings for CPI are seen mixed, with the monthly number down to 0.1% from 0.3% while the annualized figure is expected to edge up slightly to 2.4% from 2.3%.
At 7:00 AM Canada April CPI m/m (exp 0.3%, prev 0.8%)
Canada April CPI y/y (exp 2.1%, prev 2.3%)
Canada April core CPI m/m (exp 0.1%, prev 0.3%)
Canada April core CPI y/y (exp 2.4%, prev 2.3%)
At 8:30 AM US Weekly Jobless Claims (exp 310k, prev 297k)
At 10:00 AM US April Leading Indicators (exp -0.1%, prev 0.1%)
May Philadelphia Fed Survey (exp 3.0, prev 0.2)
The greenback remains firmer across the board heading into the Thursday session, with traders turning to US economic reports. The data include weekly jobless claims, April leading indicators and the May Philadelphia Fed survey. Jobless claims are seen edging higher to 310k from 297k a week earlier, while the April leading indicators are expected to give back last month’s 0.1% increase, falling by 0.1%. Lastly, the Philadelphia Fed survey is forecasted to improve to a 3.0 reading, up considerably from 0.2 previously.
This morning will also see the release of consumer price inflation data from Canada, scheduled for 7:00 AM. April CPI is forecasted to slip to 0.3%, from 0.8% a month earlier and fall to 2.1% versus 2.3% versus the previous year. The core readings for CPI are seen mixed, with the monthly number down to 0.1% from 0.3% while the annualized figure is expected to edge up slightly to 2.4% from 2.3%.
Dollar Rebounded vs Euro
The greenback rebounded versus the euro after mixed US housing data and upbeat manufacturing reports eased worries over the nation's economy. The euro dipped to 1.3508 after breaking a key support 1.3560 against the dollar.
US housing starts rose at an annual rate of 1.528 million units in April, above the forecast of 1.49 million and the March reading of 1.518 million. Building permits decreased from 1.564 million units on a yearly basis to 1.429 million. Mixed data indicated the housing sector is cooling down at a moderate pace as expected. US industrial production rose 0.7% in April, reversing a 0.2% decline in the previous month and beating the estimate of 0.3%. US capacity utilization for April came out at 81.6% as expected.
The market will pay attention to US weekly job claims, leading indicators and Philadelphia Fed survey due tomorrow.
US housing starts rose at an annual rate of 1.528 million units in April, above the forecast of 1.49 million and the March reading of 1.518 million. Building permits decreased from 1.564 million units on a yearly basis to 1.429 million. Mixed data indicated the housing sector is cooling down at a moderate pace as expected. US industrial production rose 0.7% in April, reversing a 0.2% decline in the previous month and beating the estimate of 0.3%. US capacity utilization for April came out at 81.6% as expected.
The market will pay attention to US weekly job claims, leading indicators and Philadelphia Fed survey due tomorrow.
Tuesday, May 15, 2007
Dollar Slid on Lower-Than-Expected
The dollar slid against the euro and sterling after a key inflation indicator came in worse than expected, raising concern on a near term Fed rate cut.
US CPI rose 0.4% in April, less than the estimate of a 0.5% rise and down from a 0.6% reading a month earlier. Excluding food and energy, core CPI rose 0.2% as expected. After breaking the resistance at 1.3565 versus the dollar, the euro accelerated its rally to reach as high as 1.3608. The sterling climbed more than 100 basis points to a day high at 1.9871.
Besides, NY Fed manufacturing index rose from 3.8 to 8.03 in May as forecasted. US net long-term TIC flows increased from 58.1 billion to 67.7 billion in March, below the consensus forecast of 75 billion.
US CPI rose 0.4% in April, less than the estimate of a 0.5% rise and down from a 0.6% reading a month earlier. Excluding food and energy, core CPI rose 0.2% as expected. After breaking the resistance at 1.3565 versus the dollar, the euro accelerated its rally to reach as high as 1.3608. The sterling climbed more than 100 basis points to a day high at 1.9871.
Besides, NY Fed manufacturing index rose from 3.8 to 8.03 in May as forecasted. US net long-term TIC flows increased from 58.1 billion to 67.7 billion in March, below the consensus forecast of 75 billion.
FX Awaits Data
At 2:00 AM Germany Q1 Flash GDP q/q (exp 0.3%, prev 0.9%)
Germany Q1 Flash GDP y/y (exp 3.1%, prev 3.5%)
At 3:15 AM Swiss March Retail Sales (exp 4.0%, prev 4.5%)
At 4:30 AM UK April RPI-x m/m (exp 0.5%, prev 0.6%)
UK April RPI-x y/y (exp 3.7%, prev 3.9%)
UK April RPI m/m (exp 0.5%, prev 0.6%)
UK April RPI y/y (exp 4.5%, prev 4.8%)
UK April CPI m/m (exp 0.3%, prev 0.5%)
UK April CPI y/y (exp 2.8%, prev 3.1%)
At 5:00 AM Eurozone Q1 flash GDP q/q (exp 0.5%, prev 0.9%)
Eurozone Q1 flash GDP y/y (exp 2.9%, prev 3.3%)
At 8:30 AM Canada March Manufacturing Shipments (exp 1.0%, prev -0.2%)
US April Real Earnings (exp -0.3%, prev -0.1%)
May NY Fed Manufacturing Survey (exp 8.0, prev 3.8)
US April CPI-x m/m (exp 0.2%, prev 0.1%)
US April CPI-x y/y (exp 2.4%, prev 2.5%)
US April CPI m/m (exp 0.5%, prev 0.6%)
US April CPI y/y (exp 2.7%, prev 2.8%)
At 9:00 AM US March Net Long-Term TIC flows (exp $75.0 bln, prev $58.1 bln)
At 1:00 PM US May NAHB Survey (exp 33.0, prev 33.0)
The major fx pairs remain largely unchanged ahead of a barrage of economic data in the session ahead. The greenback trades higher against the euro at 1.3546 and sterling at 1.9790. Inflation and growth data will be the primary focus, and will likely guide direction in the currency market.
US economic reports slated for release include April CPI, May New York Fed manufacturing survey, April real earnings, March TICS data, and the May NAHB survey. Consumer price inflation is seen easing slightly in April, with the headline number down to 0.5% from 0.6% in the previous month and 2.7%, down from 2.8% in the previous year. The core readings for CPI are seen mixed with the monthly figure up marginally to 0.2%, while the annualized figure is seen down to 2.4%. The NY Fed manufacturing survey is forecasted to post a sharp gain for May, rising to 8.0 from 3.8 previously. Also forecasted to improve will be the March net long-term TIC flows, seen climbing to $75.0-bln from $58.1-bln. Meanwhile, the NAHB housing survey is estimated to remain unchanged at 33.0.
Germany Q1 Flash GDP y/y (exp 3.1%, prev 3.5%)
At 3:15 AM Swiss March Retail Sales (exp 4.0%, prev 4.5%)
At 4:30 AM UK April RPI-x m/m (exp 0.5%, prev 0.6%)
UK April RPI-x y/y (exp 3.7%, prev 3.9%)
UK April RPI m/m (exp 0.5%, prev 0.6%)
UK April RPI y/y (exp 4.5%, prev 4.8%)
UK April CPI m/m (exp 0.3%, prev 0.5%)
UK April CPI y/y (exp 2.8%, prev 3.1%)
At 5:00 AM Eurozone Q1 flash GDP q/q (exp 0.5%, prev 0.9%)
Eurozone Q1 flash GDP y/y (exp 2.9%, prev 3.3%)
At 8:30 AM Canada March Manufacturing Shipments (exp 1.0%, prev -0.2%)
US April Real Earnings (exp -0.3%, prev -0.1%)
May NY Fed Manufacturing Survey (exp 8.0, prev 3.8)
US April CPI-x m/m (exp 0.2%, prev 0.1%)
US April CPI-x y/y (exp 2.4%, prev 2.5%)
US April CPI m/m (exp 0.5%, prev 0.6%)
US April CPI y/y (exp 2.7%, prev 2.8%)
At 9:00 AM US March Net Long-Term TIC flows (exp $75.0 bln, prev $58.1 bln)
At 1:00 PM US May NAHB Survey (exp 33.0, prev 33.0)
The major fx pairs remain largely unchanged ahead of a barrage of economic data in the session ahead. The greenback trades higher against the euro at 1.3546 and sterling at 1.9790. Inflation and growth data will be the primary focus, and will likely guide direction in the currency market.
US economic reports slated for release include April CPI, May New York Fed manufacturing survey, April real earnings, March TICS data, and the May NAHB survey. Consumer price inflation is seen easing slightly in April, with the headline number down to 0.5% from 0.6% in the previous month and 2.7%, down from 2.8% in the previous year. The core readings for CPI are seen mixed with the monthly figure up marginally to 0.2%, while the annualized figure is seen down to 2.4%. The NY Fed manufacturing survey is forecasted to post a sharp gain for May, rising to 8.0 from 3.8 previously. Also forecasted to improve will be the March net long-term TIC flows, seen climbing to $75.0-bln from $58.1-bln. Meanwhile, the NAHB housing survey is estimated to remain unchanged at 33.0.
Dollar In Consolidation, Eyes on CPI
The dollar drifted lower slightly against the euro on concerns that a key inflation report due tomorrow may raise bets on a Fed rate cut in 2007. The foreign exchange market was quiet on Monday as there were few economic data. The euro hovers above the 1.35 handle against the dollar and faces a key short-term resistance at 1.3560. The sterling traded around 1.98 versus the dollar with no clear indication for a next move.
Recall that the latest FOMC meeting minutes eased worries on an early rate cut. However, the weak-than-expected retail sales report released last Friday sparked speculations on a Fed rate cut within this year. The market will focus on the US Consumer Price Index report due Tuesday for more insights on the inflation outlook and the monetary policy in future.
US CPI is expected to rise 0.5% in April, lower than the 0.6% rise a month earlier. Excluding food and energy, core CPI is estimated to rise on a monthly rate of 0.2%. NY Fed manufacturing index is seen rise from 3.8 to 8 in May. Besides, US net long-term TIC flows due 9:00 EST tomorrow morning may increase from 58.1 billion to 75 billion in March.
The Canadian dollar got rid of the impact from last week’s soft data and strengthened today versus the dollar. Should US CPI come in weaker-than-expected tomorrow, the pair is likely to head to the 29 ½ year low at 1.0931.
Recall that the latest FOMC meeting minutes eased worries on an early rate cut. However, the weak-than-expected retail sales report released last Friday sparked speculations on a Fed rate cut within this year. The market will focus on the US Consumer Price Index report due Tuesday for more insights on the inflation outlook and the monetary policy in future.
US CPI is expected to rise 0.5% in April, lower than the 0.6% rise a month earlier. Excluding food and energy, core CPI is estimated to rise on a monthly rate of 0.2%. NY Fed manufacturing index is seen rise from 3.8 to 8 in May. Besides, US net long-term TIC flows due 9:00 EST tomorrow morning may increase from 58.1 billion to 75 billion in March.
The Canadian dollar got rid of the impact from last week’s soft data and strengthened today versus the dollar. Should US CPI come in weaker-than-expected tomorrow, the pair is likely to head to the 29 ½ year low at 1.0931.
Sunday, May 13, 2007
Dollar Slid on Retail Sales Decline
The dollar slid against the euro after a report showed an unexpected decline in US retail sales, raising concern on the nation¡¯s economic outlook. The euro rose back to above 1.35 area versus the dollar with a resistance at 1.3560. The sterling climbed from 1.9780 to as high as 1.9841.
US retail sales fell 0.2% in April, compared to a consensus forecast for a 0.4% rise and 0.8% a month earlier. Excluding autos, core retail sales was unchanged, also below the estimate. PPI, an inflation gauge, rose 0.7% in April, beating the estimate of 0.6% but below previous month¡¯s1.0%. Core PPI was unchanged for a second month.
The worse than expected Retail Sales number has the market reposition itself for the possibility of a Fed ease in the coming months.
EURUSD will face interim resistance at 1.3540, followed by 1.3560 and 1.3580. Additional ceilings will emerge at 1.36, backed by 1.3620. Support starts at 1.35, backed by 1.3470, 1.3450 and 1.34. Subsequent floors are eyed at 1.3360.
US retail sales fell 0.2% in April, compared to a consensus forecast for a 0.4% rise and 0.8% a month earlier. Excluding autos, core retail sales was unchanged, also below the estimate. PPI, an inflation gauge, rose 0.7% in April, beating the estimate of 0.6% but below previous month¡¯s1.0%. Core PPI was unchanged for a second month.
The worse than expected Retail Sales number has the market reposition itself for the possibility of a Fed ease in the coming months.
EURUSD will face interim resistance at 1.3540, followed by 1.3560 and 1.3580. Additional ceilings will emerge at 1.36, backed by 1.3620. Support starts at 1.35, backed by 1.3470, 1.3450 and 1.34. Subsequent floors are eyed at 1.3360.
Friday, May 11, 2007
FX Stabilizes Ahead of US Data
At 7:00 AM Canada April Unemployment Rate (exp 6.1%, prev 6.1%)
Canada April Jobs-Change (exp 18.0k, prev 54.9k)
At 8:30 AM US April Retail Sales m/m (exp 0.4%, prev 0.7%)
US April Retail Sales ex-autos m/m (exp 0.4%, prev 0.8%)
US April PPI m/m (exp 0.6%, prev 1.0%)
US April PPI-x m/m (exp 0.2%, prev 0.0%)
At 10:00 AM US March Business Inventories (exp 0.3%, prev 0.3%)
Central bank policy decisions were largely anticipated, with the ECB remaining on hold while signaling a June hike and the BoE raising its benchmark-lending rate by 25-basis points. Price action in the currency market benefited the dollar, advancing 1.9773 versus the sterling at 1.3465 against the euro. Traders continue to reassess global interest rate differentials following commentary from the FOMC, ECB and BoE over the past 48 hours and are factoring in less aggressive policy tightening from the latter two central banks over the coming months.
Economic reports slated for release in the coming session include Canada’s labor report and US retail sales, PPI and business inventories. Canada’s April unemployment rate is seen unchanged at 6.1% while the jobs-change in the same month are seen at 18.0k, down from 54.9k in the previous month.
Canada April Jobs-Change (exp 18.0k, prev 54.9k)
At 8:30 AM US April Retail Sales m/m (exp 0.4%, prev 0.7%)
US April Retail Sales ex-autos m/m (exp 0.4%, prev 0.8%)
US April PPI m/m (exp 0.6%, prev 1.0%)
US April PPI-x m/m (exp 0.2%, prev 0.0%)
At 10:00 AM US March Business Inventories (exp 0.3%, prev 0.3%)
Central bank policy decisions were largely anticipated, with the ECB remaining on hold while signaling a June hike and the BoE raising its benchmark-lending rate by 25-basis points. Price action in the currency market benefited the dollar, advancing 1.9773 versus the sterling at 1.3465 against the euro. Traders continue to reassess global interest rate differentials following commentary from the FOMC, ECB and BoE over the past 48 hours and are factoring in less aggressive policy tightening from the latter two central banks over the coming months.
Economic reports slated for release in the coming session include Canada’s labor report and US retail sales, PPI and business inventories. Canada’s April unemployment rate is seen unchanged at 6.1% while the jobs-change in the same month are seen at 18.0k, down from 54.9k in the previous month.
Euro and Sterling Slumps as Traders Trim Rate Bets
The euro and sterling slump against the dollar as traders trim bets on further rate hikes after monetary policy meetings. The greenback extended its strength gained from yesterday¡¯s FOMC statement, which indicated inflation remained the predominant concern of the Fed. The euro fell off the 1.35 handle and reached a one-month low at 1.3563 against the dollar. The sterling slid from above 1.99 to as low as 1.9773.
The Bank of England raised interest rates from 5.25% to 5.50% as expected. The sterling lost its ground as the accompanying statement somewhat disappointed the market. The central bank did not indicate further monetary policy actions, however, another rate increase by the year-end has already been priced in.
Meanwhile, the European Central Bank left the benchmark rates unchanged at 3.75% as forecasted. ECB Chairman Trichet said the bank will be strongly vigilant on the inflation, reinforcing the expectations for a rate hike in June. However, the euro failed to gain from Trichet¡¯s hawkish talk as it was as the market anticipated.
The Bank of England raised interest rates from 5.25% to 5.50% as expected. The sterling lost its ground as the accompanying statement somewhat disappointed the market. The central bank did not indicate further monetary policy actions, however, another rate increase by the year-end has already been priced in.
Meanwhile, the European Central Bank left the benchmark rates unchanged at 3.75% as forecasted. ECB Chairman Trichet said the bank will be strongly vigilant on the inflation, reinforcing the expectations for a rate hike in June. However, the euro failed to gain from Trichet¡¯s hawkish talk as it was as the market anticipated.
FX Awaits Central Bank Decisions
At 1:00 AM Japan April Economy Watchers Diffusion Index (exp n/f, prev 50.8)
At 2:00 AM Germany April WPI m/m (exp 0.7%, prev 0.5%)
Germany April WPI y/y (exp 2.8%, prev 3.1%)
At 4:30 AM UK March Trade Balance (exp –6.68 bln stg, prev –6.791 bln stg)
UK March Manufacturing Production m/m (exp 0.5%, prev –0.6%)
UK March Manufacturing Production y/y (exp 0.9%, prev 1.2%)
UK March Industrial Production m/m (exp 0.4%, prev –0.2%)
UK March Industrial Production y/y (exp 0.0%, prev 0.3%)
At 7:00 AM Bank of England Policy Decision (exp 5.50%, prev 5.25%)
At 7:45 AM European Central Bank Policy Decision (exp 3.75%, prev 3.75%)
At 8:30 AM ECB President Trichet Press Conference
US Weekly Jobless Claims (exp 315k, prev 305k)
US March Trade Deficit (exp $60.0 bln, prev $58.44 bln)
Canada March Trade Balance (exp C$5.5 bln, prev C$4.83 bln)
At 10:00 AM US April Federal Budget (exp $136.7 bln, prev $118.84 bln)
The dollar holds steady following the FOMC’s unchanged stance, which was largely anticipated by markets, and hovers near its multi-week highs versus the euro around 1.3530 and buoyed above 120 against the yen. The Fed provided little new information to trade on, as the statement was nearly identical to its March release. The FOMC reiterated the Board’s view that risks to inflation remain a priority over concerns of slowing growth -- suggesting a neutral stance over the coming few months unless the pace of deterioration in economic growth exceeds expectations.
In addition to central bank policy decisions from the BoE and ECB, traders will also digest US economic reports, consisting of weekly jobless claims, March trade deficit and the April Federal Budget. Weekly jobless claims are forecasted to edge up to 315k from 305k, while the trade deficit is seen expanding in March to $60.0 billion versus a $58.44 bilion deficit previously. Later in the afternoon will be the release of the April Federal Budget, seen rising to $136.billion, up from $118.84 billion in the month prior. The primary focus for US data releases will be on Friday, with retail sales and the producer price index both slated to be softer than previous releases.
At 2:00 AM Germany April WPI m/m (exp 0.7%, prev 0.5%)
Germany April WPI y/y (exp 2.8%, prev 3.1%)
At 4:30 AM UK March Trade Balance (exp –6.68 bln stg, prev –6.791 bln stg)
UK March Manufacturing Production m/m (exp 0.5%, prev –0.6%)
UK March Manufacturing Production y/y (exp 0.9%, prev 1.2%)
UK March Industrial Production m/m (exp 0.4%, prev –0.2%)
UK March Industrial Production y/y (exp 0.0%, prev 0.3%)
At 7:00 AM Bank of England Policy Decision (exp 5.50%, prev 5.25%)
At 7:45 AM European Central Bank Policy Decision (exp 3.75%, prev 3.75%)
At 8:30 AM ECB President Trichet Press Conference
US Weekly Jobless Claims (exp 315k, prev 305k)
US March Trade Deficit (exp $60.0 bln, prev $58.44 bln)
Canada March Trade Balance (exp C$5.5 bln, prev C$4.83 bln)
At 10:00 AM US April Federal Budget (exp $136.7 bln, prev $118.84 bln)
The dollar holds steady following the FOMC’s unchanged stance, which was largely anticipated by markets, and hovers near its multi-week highs versus the euro around 1.3530 and buoyed above 120 against the yen. The Fed provided little new information to trade on, as the statement was nearly identical to its March release. The FOMC reiterated the Board’s view that risks to inflation remain a priority over concerns of slowing growth -- suggesting a neutral stance over the coming few months unless the pace of deterioration in economic growth exceeds expectations.
In addition to central bank policy decisions from the BoE and ECB, traders will also digest US economic reports, consisting of weekly jobless claims, March trade deficit and the April Federal Budget. Weekly jobless claims are forecasted to edge up to 315k from 305k, while the trade deficit is seen expanding in March to $60.0 billion versus a $58.44 bilion deficit previously. Later in the afternoon will be the release of the April Federal Budget, seen rising to $136.billion, up from $118.84 billion in the month prior. The primary focus for US data releases will be on Friday, with retail sales and the producer price index both slated to be softer than previous releases.
Thursday, May 10, 2007
Dollar Climbed after FOMC
The dollar climbed modestly across the board after the FOMC monetary policy announcement. The euro dipped 20 pips to new day low at 1.3523 versus the dollar and the sterling fell from 1.9965 to 1.9930.
Ten Fed policy board members unanimously voted to leave interest rates unchanged at 5.25% as expected. However, the dollar was boosted slightly as the Fed said their predominant concern is still inflation.
The post-meeting statement showed no significant change from last meeting. The Fed said core inflation remains somewhat elevated and the economy is likely to expand at moderate pace over coming quarters. It said future policy adjustment will depend on economy and inflation outlook. The Fed did not indicate it is going to cut rates anytime soon, which relieved the market a little bit.
Ten Fed policy board members unanimously voted to leave interest rates unchanged at 5.25% as expected. However, the dollar was boosted slightly as the Fed said their predominant concern is still inflation.
The post-meeting statement showed no significant change from last meeting. The Fed said core inflation remains somewhat elevated and the economy is likely to expand at moderate pace over coming quarters. It said future policy adjustment will depend on economy and inflation outlook. The Fed did not indicate it is going to cut rates anytime soon, which relieved the market a little bit.
Dollar Steadies Ahead of FOMC
At 1:00 AM Japan March Leading Indicator (exp n/f, prev 27.3)
Japan March Coincident Indicator (exp n/f, prev 30.0)
At 2:00 AM Germany March Trade Balance (exp 14.5 bln euros, prev 13.8 bln euros)
At 2:15 PM FOMC Monetary Policy Announcement (exp 5.25%, prev 5.25%)
The major currencies remain mixed early in the week ahead of central banks policy announcements beginning later today. The dollar is firmer against the euro and sterling, holding steady around 1.3540 and 1.9890, respectively. We remain biased toward further weakness in the greenback over the rest of this week, much in part due to divergent central banks outlooks on interest rates.
The FOMC will announce the results of its policy-setting meeting at 2:15 PM New York time. The overwhelming consensus view, including our own, is for the Fed to stand pat at 5.25% and issue a statement largely in line with the March policy statement. The recent slate of economic data since the previous meeting has been mixed, as GDP, manufacturing, housing and jobs have slowed while inflation continues to hover near its highs – warranting the Fed to maintain its neutral stance with caution towards risks to inflation.
Japan March Coincident Indicator (exp n/f, prev 30.0)
At 2:00 AM Germany March Trade Balance (exp 14.5 bln euros, prev 13.8 bln euros)
At 2:15 PM FOMC Monetary Policy Announcement (exp 5.25%, prev 5.25%)
The major currencies remain mixed early in the week ahead of central banks policy announcements beginning later today. The dollar is firmer against the euro and sterling, holding steady around 1.3540 and 1.9890, respectively. We remain biased toward further weakness in the greenback over the rest of this week, much in part due to divergent central banks outlooks on interest rates.
The FOMC will announce the results of its policy-setting meeting at 2:15 PM New York time. The overwhelming consensus view, including our own, is for the Fed to stand pat at 5.25% and issue a statement largely in line with the March policy statement. The recent slate of economic data since the previous meeting has been mixed, as GDP, manufacturing, housing and jobs have slowed while inflation continues to hover near its highs – warranting the Fed to maintain its neutral stance with caution towards risks to inflation.
Dollar Rebounded on Risk Reduction
The greenback rebounded against the euro and sterling as investors trimmed risk before three central banks hold monetary policy meetings this week. The euro fell off the 1.36 handle and dived down to 1.3516 versus the dollar. The sterling dipped from around 1.9950 to 1.9881.
The Fed is scheduled to announce its interest rate decision tomorrow afternoon 2:15 EST. It is seen holding rates unchanged at 5.25%. If the monetary policy meeting statement sounds dovish on the US economy and inflation, the dollar may weaken against its major rivals.
Meanwhile, the Bank of England and the European Central Bank will meet on Thursday. BOE is expected to lift interest rates from 5.25% to 5.5%, which will put the British rates above those in the United States for the first time since January 2006. ECB is likely to leave the benchmark rates unchanged at 3.75% this time. However, ECB chairman Trichet is widely expected to give a hawkish talk to set stage for a rate increase in June.
The Fed is scheduled to announce its interest rate decision tomorrow afternoon 2:15 EST. It is seen holding rates unchanged at 5.25%. If the monetary policy meeting statement sounds dovish on the US economy and inflation, the dollar may weaken against its major rivals.
Meanwhile, the Bank of England and the European Central Bank will meet on Thursday. BOE is expected to lift interest rates from 5.25% to 5.5%, which will put the British rates above those in the United States for the first time since January 2006. ECB is likely to leave the benchmark rates unchanged at 3.75% this time. However, ECB chairman Trichet is widely expected to give a hawkish talk to set stage for a rate increase in June.
FX Sideways, USD Softer
At 6:00 AM Germany March Industrial Production (exp 0.0%, prev 0.9%)
At 8:15 AM Canada April Housing Starts (exp 215k units, prev 210.9k units)
At 10:00 AM US March Wholesale Inventories (exp 0.4%, prev 0.5%)
The major currency pairs continue to consolidate amid a dearth of fresh news and traders taking to the sidelines ahead of several key central banks monetary policy decisions this week. We expect the dollar to remain pressured, particularly versus the euro and sterling given this week's likely divergence in policy outlooks.
The FOMC is largely expected to stand pat while the ECB is forecasted to signal a rate hike in June and the BoE is seen tightening policy by 50-bp to 5.75%. The primary focus continues to be the state of the US economy, with recent data revealing further deterioration in fundamentals.
Economic reports from North America in the coming session will see Canada April housing starts and US March wholesale inventories. Canada’s housing starts
At 8:15 AM Canada April Housing Starts (exp 215k units, prev 210.9k units)
At 10:00 AM US March Wholesale Inventories (exp 0.4%, prev 0.5%)
The major currency pairs continue to consolidate amid a dearth of fresh news and traders taking to the sidelines ahead of several key central banks monetary policy decisions this week. We expect the dollar to remain pressured, particularly versus the euro and sterling given this week's likely divergence in policy outlooks.
The FOMC is largely expected to stand pat while the ECB is forecasted to signal a rate hike in June and the BoE is seen tightening policy by 50-bp to 5.75%. The primary focus continues to be the state of the US economy, with recent data revealing further deterioration in fundamentals.
Economic reports from North America in the coming session will see Canada April housing starts and US March wholesale inventories. Canada’s housing starts
Dollar Drifted Lower Ahead of Three Central Banks Decisions
The dollar drifted lower against the euro and sterling on diverging interest rate outlook among three central banks. The euro extended its gains against the dollar from Friday’s weaker-than-expected US payrolls report. The single currency hovers above the 1.36 handle against the dollar on Monday. Today’s currency market is quiet as trading volume is light during UK public holiday.
The Fed meets on Wednesday and is seen keeping rates steady at 5.25%. The Bank of England is expected to lift interest rates from 5.25% to 5.5% on Thursday, which will be the first time for the British rates move above those in United States since January 2006. Meanwhile, the European Central Bank is likely to leave the benchmark rates unchanged at 3.75% on Thursday. However, the market focus will be on the post-conference talk by the ECB chairman Trichet and look for any signal of a June rate increase.
The Canadian dollar is the biggest mover today. The market is attracted to test the 1.1000 key resistance. Canada building permits rose 27.4% in March, compared to a 22.4% decline.
The Fed meets on Wednesday and is seen keeping rates steady at 5.25%. The Bank of England is expected to lift interest rates from 5.25% to 5.5% on Thursday, which will be the first time for the British rates move above those in United States since January 2006. Meanwhile, the European Central Bank is likely to leave the benchmark rates unchanged at 3.75% on Thursday. However, the market focus will be on the post-conference talk by the ECB chairman Trichet and look for any signal of a June rate increase.
The Canadian dollar is the biggest mover today. The market is attracted to test the 1.1000 key resistance. Canada building permits rose 27.4% in March, compared to a 22.4% decline.
USD Soft Heading into Week
UK Markets Closed for Early May Bank Holiday
At 1:00 AM March BoJ Meeting Minutes
At 1:45 AM Swiss April Unemployment Rate (exp 2.8%, prev 2.9%)
At 6:00 AM Germany March Industrial Orders m/m (exp –0.5%, prev 3.9%)
At 8:30 AM Canada March Building Permits (exp 6.7%, prev –22.4%)
At 3:00 PM US March Consumer Credit (exp $4.5bln, prev $2.97bln)
The dollar continues to trade on weaker footing against the majors, still reeling from Friday’s disappointing labor report. The April non-farm payrolls figure grew at its slowest pace in over two years, expanding by 88k and falling short of estimates for 100k jobs growth. The US economy continues to reveal signs of slowing, with housing and manufacturing slumping and jobs growth seemingly at the onset of further deterioration. As mentioned previously, any dollar rebound is deemed to be temporary position squaring and an opportunity to sell the currency.
Central Bank monetary policy decisions will be the key highlight in the coming week, with the FOMC, BoE and ECB deliberating policy. Among the central banks, only the Bank of England is forecasted to change rates – with consensus estimates calling for a 25-bp rate hike to 5.5%. There is also scope for the BoE to preempt additional inflationary pressure in the UK with a surprise 50-bp rate hike to 5.75%. Such a move will see the sterling quickly race toward 2.100 against the dollar. Meanwhile, the FOMC announces its decision on Tuesday and is largely expected to remain unchanged from its previous meeting in both decision and statement. The ECB is also expected to leave policy unchanged at 3.75%, but Bank President Trichet is likely to signal a hike in June in his subsequent press conference. Trichet will likely use the word vigilance in describing the Bank’s stance against inflation.
At 1:00 AM March BoJ Meeting Minutes
At 1:45 AM Swiss April Unemployment Rate (exp 2.8%, prev 2.9%)
At 6:00 AM Germany March Industrial Orders m/m (exp –0.5%, prev 3.9%)
At 8:30 AM Canada March Building Permits (exp 6.7%, prev –22.4%)
At 3:00 PM US March Consumer Credit (exp $4.5bln, prev $2.97bln)
The dollar continues to trade on weaker footing against the majors, still reeling from Friday’s disappointing labor report. The April non-farm payrolls figure grew at its slowest pace in over two years, expanding by 88k and falling short of estimates for 100k jobs growth. The US economy continues to reveal signs of slowing, with housing and manufacturing slumping and jobs growth seemingly at the onset of further deterioration. As mentioned previously, any dollar rebound is deemed to be temporary position squaring and an opportunity to sell the currency.
Central Bank monetary policy decisions will be the key highlight in the coming week, with the FOMC, BoE and ECB deliberating policy. Among the central banks, only the Bank of England is forecasted to change rates – with consensus estimates calling for a 25-bp rate hike to 5.5%. There is also scope for the BoE to preempt additional inflationary pressure in the UK with a surprise 50-bp rate hike to 5.75%. Such a move will see the sterling quickly race toward 2.100 against the dollar. Meanwhile, the FOMC announces its decision on Tuesday and is largely expected to remain unchanged from its previous meeting in both decision and statement. The ECB is also expected to leave policy unchanged at 3.75%, but Bank President Trichet is likely to signal a hike in June in his subsequent press conference. Trichet will likely use the word vigilance in describing the Bank’s stance against inflation.
Dollar Slid on Weaker-than-Expected Payrolls
The dollar pared some of its gains after US Labor Department reported the economy added fewer jobs than expected in April. The greenback weakened to 1.3610 versus the dollar and tested 120 level against the yen.
US non-farm payrolls came out at 88k, below the consensus of 100k. March payrolls were revised slightly downward from 180k to 177k. The unemployment rate rose as expected from 4.4% to 4.5%. Average earnings rose 0.2% in April, below the forecast and previous month’s reading of 0.3%. Following the weaker than expected report, the dollar failed to retain its gains from robust manufacturing data released earlier this week. The Fed is widely expected to cut interest rates later in the year, while the ECB and BOE are likely to raise rates further. The dollar moves back and forth this week against the euro and sterling around the lows, however the overall sentiment over the dollar is still tilted to negative.
Meanwhile, the Canadian dollar edged up against the dollar after a report showed Canada Ivey PMI fell from 67.7 to 60.9 in April.
US non-farm payrolls came out at 88k, below the consensus of 100k. March payrolls were revised slightly downward from 180k to 177k. The unemployment rate rose as expected from 4.4% to 4.5%. Average earnings rose 0.2% in April, below the forecast and previous month’s reading of 0.3%. Following the weaker than expected report, the dollar failed to retain its gains from robust manufacturing data released earlier this week. The Fed is widely expected to cut interest rates later in the year, while the ECB and BOE are likely to raise rates further. The dollar moves back and forth this week against the euro and sterling around the lows, however the overall sentiment over the dollar is still tilted to negative.
Meanwhile, the Canadian dollar edged up against the dollar after a report showed Canada Ivey PMI fell from 67.7 to 60.9 in April.
US Jobs Takes Center Stage
At 8:30 AMUS April Average Work Week (exp 33.9, prev 33.9)
US April Average Earnings (exp 0.3%, prev 0.3%)
US April Unemployment Rate (exp 4.5%, prev 4.4%)
US April non-farm payrolls (exp 100k, prev 180k)
At 10:00 AM Canada April Ivey PMI (exp n/f, prev 67.7)
The greenback’s recovery extended into a quiet early Friday session with the Japanese market closed for holiday and traders sidelined ahead of the closely watched US jobs data later today. The dollar firmed higher versus the euro, rising to 1.3537 and edging up to 120.44 against the yen, its highest level in 2-months. This past week’s US reports have been mixed, but given the oversold levels against the majors, traders have used upbeat data to square positions thereby prompting broad based dollar recovery.
Whether this optimism can continue hinges on the April non-farm payrolls, due out at 8:30 AM New York time. Consensus estimates are calling for payrolls to grow by 100k, down considerably from the prior month. Released earlier this week, the ADP payrolls, often viewed as a proxy to the NFP, undershot analyst estimates and grew at its slowest pace in nearly 4 years – up by 64k. Further softening in the jobs outlook would also pave the way for a Fed rate cut over the coming months, especially in light of last week’s disappointing GDP report.
US April Average Earnings (exp 0.3%, prev 0.3%)
US April Unemployment Rate (exp 4.5%, prev 4.4%)
US April non-farm payrolls (exp 100k, prev 180k)
At 10:00 AM Canada April Ivey PMI (exp n/f, prev 67.7)
The greenback’s recovery extended into a quiet early Friday session with the Japanese market closed for holiday and traders sidelined ahead of the closely watched US jobs data later today. The dollar firmed higher versus the euro, rising to 1.3537 and edging up to 120.44 against the yen, its highest level in 2-months. This past week’s US reports have been mixed, but given the oversold levels against the majors, traders have used upbeat data to square positions thereby prompting broad based dollar recovery.
Whether this optimism can continue hinges on the April non-farm payrolls, due out at 8:30 AM New York time. Consensus estimates are calling for payrolls to grow by 100k, down considerably from the prior month. Released earlier this week, the ADP payrolls, often viewed as a proxy to the NFP, undershot analyst estimates and grew at its slowest pace in nearly 4 years – up by 64k. Further softening in the jobs outlook would also pave the way for a Fed rate cut over the coming months, especially in light of last week’s disappointing GDP report.
Tuesday, May 8, 2007
FX Sideways, USD Softer
At 6:00 AM Germany March Industrial Production (exp 0.0%, prev 0.9%)
At 8:15 AM Canada April Housing Starts (exp 215k units, prev 210.9k units)
At 10:00 AM US March Wholesale Inventories (exp 0.4%, prev 0.5%)
The major currency pairs continue to consolidate amid a dearth of fresh news and traders taking to the sidelines ahead of several key central banks monetary policy decisions this week. We expect the dollar to remain pressured, particularly versus the euro and sterling given this week's likely divergence in policy outlooks.
The FOMC is largely expected to stand pat while the ECB is forecasted to signal a rate hike in June and the BoE is seen tightening policy by 50-bp to 5.75%. The primary focus continues to be the state of the US economy, with recent data revealing further deterioration in fundamentals.
Economic reports from North America in the coming session will see Canada April housing starts and US March wholesale inventories. Canada’s housing starts
At 8:15 AM Canada April Housing Starts (exp 215k units, prev 210.9k units)
At 10:00 AM US March Wholesale Inventories (exp 0.4%, prev 0.5%)
The major currency pairs continue to consolidate amid a dearth of fresh news and traders taking to the sidelines ahead of several key central banks monetary policy decisions this week. We expect the dollar to remain pressured, particularly versus the euro and sterling given this week's likely divergence in policy outlooks.
The FOMC is largely expected to stand pat while the ECB is forecasted to signal a rate hike in June and the BoE is seen tightening policy by 50-bp to 5.75%. The primary focus continues to be the state of the US economy, with recent data revealing further deterioration in fundamentals.
Economic reports from North America in the coming session will see Canada April housing starts and US March wholesale inventories. Canada’s housing starts
Dollar Drifted Lower Ahead of Three Central Banks Decisions
The dollar drifted lower against the euro and sterling on diverging interest rate outlook among three central banks. The euro extended its gains against the dollar from Friday’s weaker-than-expected US payrolls report. The single currency hovers above the 1.36 handle against the dollar on Monday. Today’s currency market is quiet as trading volume is light during UK public holiday.
The Fed meets on Wednesday and is seen keeping rates steady at 5.25%. The Bank of England is expected to lift interest rates from 5.25% to 5.5% on Thursday, which will be the first time for the British rates move above those in United States since January 2006. Meanwhile, the European Central Bank is likely to leave the benchmark rates unchanged at 3.75% on Thursday. However, the market focus will be on the post-conference talk by the ECB chairman Trichet and look for any signal of a June rate increase.
The Canadian dollar is the biggest mover today. The market is attracted to test the 1.1000 key resistance. Canada building permits rose 27.4% in March, compared to a 22.4% decline.
The Fed meets on Wednesday and is seen keeping rates steady at 5.25%. The Bank of England is expected to lift interest rates from 5.25% to 5.5% on Thursday, which will be the first time for the British rates move above those in United States since January 2006. Meanwhile, the European Central Bank is likely to leave the benchmark rates unchanged at 3.75% on Thursday. However, the market focus will be on the post-conference talk by the ECB chairman Trichet and look for any signal of a June rate increase.
The Canadian dollar is the biggest mover today. The market is attracted to test the 1.1000 key resistance. Canada building permits rose 27.4% in March, compared to a 22.4% decline.
Monday, May 7, 2007
Dollar Rose on Strong ISM
The dollar climbed against its major rivals after a stronger-than-expected manufacturing report, temporarily easing worries about US economy slow-down and the Fed interest rate outlook. The manufacturing ISM rose from 50.9 to a 11-month high at 54.7 in April. The greenback bounced from near-record low at 1.3672 to test the 1.36 handle against the euro. The sterling went off a high at 2.0073 to the 2 level versus the dollar.
The dollar rebound today was partly a result of the thin trading during the Labor Day and the lack of fresh data. This single manufacturing report was not enough to change the overall negative sentiment over the greenback. The market will focus on the employment report from the US Labor Department this Friday for more clues on the economic conditions and outlook. Besides, tomorrow¡¯s ADP job report will give some insights on the job market of private sectors.
EURUSD will face interim resistance at 1.3650, followed by 1.3670 and 1.37. Additional ceilings will emerge at 1.3730, backed by 1.3750. Support starts at 1.36, backed by 1.3580, 1.3550 and 1.3530. Subsequent floors are eyed at 1.35.
The dollar rebound today was partly a result of the thin trading during the Labor Day and the lack of fresh data. This single manufacturing report was not enough to change the overall negative sentiment over the greenback. The market will focus on the employment report from the US Labor Department this Friday for more clues on the economic conditions and outlook. Besides, tomorrow¡¯s ADP job report will give some insights on the job market of private sectors.
EURUSD will face interim resistance at 1.3650, followed by 1.3670 and 1.37. Additional ceilings will emerge at 1.3730, backed by 1.3750. Support starts at 1.36, backed by 1.3580, 1.3550 and 1.3530. Subsequent floors are eyed at 1.35.
USD Extends Gains
At 3:55 AM Germany April Manufacturing PMI (exp 57.3, prev 56.9)
At 4:00 AM Eurozone April Manufacturing PMI (exp 55.7, prev 55.4)
Germany April Unemployment Rate (exp 9.1%, prev 9.2%)
Germany April Unemployment (exp 3.94 mln, prev 4.108 mln)
Germany April Unemployment Change (exp -40.0k, prev -65.0k)
At 4:30 AM UK March Consumer Credit (exp 900 mln stg, prev 919 mln stg)
At 5:00 AM Eurozone March Unemployment Rate (exp 7.2%, prev 7.3%)
At 8:15 AM US April ADP Payrolls (exp 100.0k, prev 106.0k)
At 10:00 AM US March Durable Goods Orders (exp 3.3%, prev 3.4%)
US March Factory Orders (exp 2.1%, prev 1.0%)
Markets continued to reward the dollar for yesterday’s higher than expected manufacturing report, with the greenback piercing through the 120-level versus the yen for the first time in 2-months. Trading remained choppy in the overnight session, as position squaring in the euro and sterling pushed both lower toward 1.3562 and 1.9915 respectively against USD. We anticipate these conditions will linger heading into Friday’s all-important US non-farm jobs report.
On the calendar for today, we’ll see the April ADP payrolls report and March durable goods orders. Traders will look at the ADP payrolls data as a proxy for Friday’s non-farm payrolls reading. The April figure is seen slipping to 100k, down from 106.0k previously. Meanwhile, the March durable goods orders are largely unchanged, down marginally to 3.3% versus 3.4%. Factory orders are seen edging up to 2.1% from 1.0%.
At 4:00 AM Eurozone April Manufacturing PMI (exp 55.7, prev 55.4)
Germany April Unemployment Rate (exp 9.1%, prev 9.2%)
Germany April Unemployment (exp 3.94 mln, prev 4.108 mln)
Germany April Unemployment Change (exp -40.0k, prev -65.0k)
At 4:30 AM UK March Consumer Credit (exp 900 mln stg, prev 919 mln stg)
At 5:00 AM Eurozone March Unemployment Rate (exp 7.2%, prev 7.3%)
At 8:15 AM US April ADP Payrolls (exp 100.0k, prev 106.0k)
At 10:00 AM US March Durable Goods Orders (exp 3.3%, prev 3.4%)
US March Factory Orders (exp 2.1%, prev 1.0%)
Markets continued to reward the dollar for yesterday’s higher than expected manufacturing report, with the greenback piercing through the 120-level versus the yen for the first time in 2-months. Trading remained choppy in the overnight session, as position squaring in the euro and sterling pushed both lower toward 1.3562 and 1.9915 respectively against USD. We anticipate these conditions will linger heading into Friday’s all-important US non-farm jobs report.
On the calendar for today, we’ll see the April ADP payrolls report and March durable goods orders. Traders will look at the ADP payrolls data as a proxy for Friday’s non-farm payrolls reading. The April figure is seen slipping to 100k, down from 106.0k previously. Meanwhile, the March durable goods orders are largely unchanged, down marginally to 3.3% versus 3.4%. Factory orders are seen edging up to 2.1% from 1.0%.
Dollar Strengthened, Eyes on US Payrolls
The greenback continued its corrective rally on Wednesday with mixed US economic data. The euro weakened to as low as 1.3562 versus the dollar, and the sterling fell from 2 to 1.9873.
Durable goods orders rose 3.7% in March, beating the estimate of 3.3%. Factory orders increased 3.1% in March, above the forecast of 2.1% and a 1.0% rise in the previous month. Combined with the stronger-than-expected manufacturing ISM index, those two manufacturing numbers helped the dollar extend the correction in thinned holiday trading conditions.
The dollar rebound was resulted from adjustments in short dollar positions rather than a change in overall negative sentiment over the dollar. The dollar is likely to maintain tight range correction before the Labor Department employment report due Friday. US ADP job report today showed that private sectors added 64k jobs in April, far below the forecast of 100k. Though ADP report has no correlation with the Labor Department report, the market will keep cautious ahead of Friday payrolls.
Durable goods orders rose 3.7% in March, beating the estimate of 3.3%. Factory orders increased 3.1% in March, above the forecast of 2.1% and a 1.0% rise in the previous month. Combined with the stronger-than-expected manufacturing ISM index, those two manufacturing numbers helped the dollar extend the correction in thinned holiday trading conditions.
The dollar rebound was resulted from adjustments in short dollar positions rather than a change in overall negative sentiment over the dollar. The dollar is likely to maintain tight range correction before the Labor Department employment report due Friday. US ADP job report today showed that private sectors added 64k jobs in April, far below the forecast of 100k. Though ADP report has no correlation with the Labor Department report, the market will keep cautious ahead of Friday payrolls.
FX Consolidates Ahead of Data
At 8:30 AM US Q1 Productivity (exp 1.0%, prev 1.6%)
US Q1 Labor Costs (exp 4.0%, prev 6.6%)
US Weekly Jobless Claims (exp 325k, prev 321k)
At 10:00 AM US April non-manufacturing ISM (exp 53.0, prev 52.4)
Currencies remained confined within recent ranges with a lack of fresh impetus and traders sidelined ahead of Friday’s US jobs data. The greenback was mixed overnight, holding firm above the 120-level against the yen while relinquishing the 1.36-mark versus the euro.
Economic data will be the focus today, with productivity, labor costs, jobless claims and services ISM due out. The Q1 productivity number is forecasted to drop to 1.0%, from 1.6% while labor costs are seen slipping to 4.0%. Weekly jobless are largely unchanged at 325k, up slightly from the prior week at 321k. Lastly, we have non-manufacturing ISM for April, estimated to improve to 53.0 from a 52.4 reading from March.
US Q1 Labor Costs (exp 4.0%, prev 6.6%)
US Weekly Jobless Claims (exp 325k, prev 321k)
At 10:00 AM US April non-manufacturing ISM (exp 53.0, prev 52.4)
Currencies remained confined within recent ranges with a lack of fresh impetus and traders sidelined ahead of Friday’s US jobs data. The greenback was mixed overnight, holding firm above the 120-level against the yen while relinquishing the 1.36-mark versus the euro.
Economic data will be the focus today, with productivity, labor costs, jobless claims and services ISM due out. The Q1 productivity number is forecasted to drop to 1.0%, from 1.6% while labor costs are seen slipping to 4.0%. Weekly jobless are largely unchanged at 325k, up slightly from the prior week at 321k. Lastly, we have non-manufacturing ISM for April, estimated to improve to 53.0 from a 52.4 reading from March.
Solid Data Boosted Greenback
The dollar extended its gains broadly after a run of strong US economic data this morning. The euro dropped to as low as 1.3550 and the sterling fell to 1.9858 versus the dollar.
The weekly jobless claims fell unexpectedly by 21k to 305k, the lowest since January. Productivity grew 1.7% in the first quarter, beating the estimate of 1.0%. The fourth quarter reading was revised from 1.6% to 2.1%. The labor cost rose only 0.6% in the first quarter, far below the 4.0% estimated growth rate. Besides, US non-manufacturing ISM rose from 52.4 to 55 in April, beating the forecast of 53. These numbers indicated solid growth and contained inflation, which are ideal for the economy.
All eyes will focus on the April employment report from the US Labor Department tomorrow morning. Non-farm payrolls are expected to drop from 180k to 100k, and the unemployment rate is seen up from 4.4% to 4.5%. The market is likely to keep cautious ahead of this key report.
The weekly jobless claims fell unexpectedly by 21k to 305k, the lowest since January. Productivity grew 1.7% in the first quarter, beating the estimate of 1.0%. The fourth quarter reading was revised from 1.6% to 2.1%. The labor cost rose only 0.6% in the first quarter, far below the 4.0% estimated growth rate. Besides, US non-manufacturing ISM rose from 52.4 to 55 in April, beating the forecast of 53. These numbers indicated solid growth and contained inflation, which are ideal for the economy.
All eyes will focus on the April employment report from the US Labor Department tomorrow morning. Non-farm payrolls are expected to drop from 180k to 100k, and the unemployment rate is seen up from 4.4% to 4.5%. The market is likely to keep cautious ahead of this key report.
USD Soft Heading into Week
UK Markets Closed for Early May Bank Holiday
At 1:00 AM March BoJ Meeting Minutes
At 1:45 AM Swiss April Unemployment Rate (exp 2.8%, prev 2.9%)
At 6:00 AM Germany March Industrial Orders m/m (exp –0.5%, prev 3.9%)
At 8:30 AM Canada March Building Permits (exp 6.7%, prev –22.4%)
At 3:00 PM US March Consumer Credit (exp $4.5bln, prev $2.97bln)
The dollar continues to trade on weaker footing against the majors, still reeling from Friday’s disappointing labor report. The April non-farm payrolls figure grew at its slowest pace in over two years, expanding by 88k and falling short of estimates for 100k jobs growth. The US economy continues to reveal signs of slowing, with housing and manufacturing slumping and jobs growth seemingly at the onset of further deterioration. As mentioned previously, any dollar rebound is deemed to be temporary position squaring and an opportunity to sell the currency.
Central Bank monetary policy decisions will be the key highlight in the coming week, with the FOMC, BoE and ECB deliberating policy. Among the central banks, only the Bank of England is forecasted to change rates – with consensus estimates calling for a 25-bp rate hike to 5.5%. There is also scope for the BoE to preempt additional inflationary pressure in the UK with a surprise 50-bp rate hike to 5.75%. Such a move will see the sterling quickly race toward 2.100 against the dollar. Meanwhile, the FOMC announces its decision on Tuesday and is largely expected to remain unchanged from its previous meeting in both decision and statement. The ECB is also expected to leave policy unchanged at 3.75%, but Bank President Trichet is likely to signal a hike in June in his subsequent press conference. Trichet will likely use the word vigilance in describing the Bank’s stance against inflation.
At 1:00 AM March BoJ Meeting Minutes
At 1:45 AM Swiss April Unemployment Rate (exp 2.8%, prev 2.9%)
At 6:00 AM Germany March Industrial Orders m/m (exp –0.5%, prev 3.9%)
At 8:30 AM Canada March Building Permits (exp 6.7%, prev –22.4%)
At 3:00 PM US March Consumer Credit (exp $4.5bln, prev $2.97bln)
The dollar continues to trade on weaker footing against the majors, still reeling from Friday’s disappointing labor report. The April non-farm payrolls figure grew at its slowest pace in over two years, expanding by 88k and falling short of estimates for 100k jobs growth. The US economy continues to reveal signs of slowing, with housing and manufacturing slumping and jobs growth seemingly at the onset of further deterioration. As mentioned previously, any dollar rebound is deemed to be temporary position squaring and an opportunity to sell the currency.
Central Bank monetary policy decisions will be the key highlight in the coming week, with the FOMC, BoE and ECB deliberating policy. Among the central banks, only the Bank of England is forecasted to change rates – with consensus estimates calling for a 25-bp rate hike to 5.5%. There is also scope for the BoE to preempt additional inflationary pressure in the UK with a surprise 50-bp rate hike to 5.75%. Such a move will see the sterling quickly race toward 2.100 against the dollar. Meanwhile, the FOMC announces its decision on Tuesday and is largely expected to remain unchanged from its previous meeting in both decision and statement. The ECB is also expected to leave policy unchanged at 3.75%, but Bank President Trichet is likely to signal a hike in June in his subsequent press conference. Trichet will likely use the word vigilance in describing the Bank’s stance against inflation.
U.S. Forex Market Commentary
EURO
The euro moved higher vis-? -vis the U.S. dollartoday asthe single currency tested offers around the US$ 1.3625 level and was supportedaround the $1.3590 level. Technically,today??™s intraday low was right around the 38.2% retracement of the move from$1.3680 to $1.3535. A few factorscontributed to the pair??™s gains today. First, French presidential candidateSarkozy won the run-off election in France this weekend and even thoughhe was critical of the European Central Bank during his campaign, he was lesscritical than leftist candidate Royal. Much of the criticism that is periodically levied against the ECB originates in France and Sarkozy??™s conservativegovernment may change that dynamic. Second, Ecofin finance ministers reaffirmed the ECB??™s independencesaying it is ???an independent organ.??? Third, ECB President Trichet remained hawkish in comments saying ???Let's continue to befully aware about the risks. Pricestability is necessary for a global growth.??? The ECB convenes on Thursday andis not expected to tighten monetary policy until next month. Fourth, German March manufacturing ordersrose 2.4% m/m and 9.9% y/y. In U.S. news, most traders expect theFederal Open Market Committee will keep interest rates unchanged onWednesday. Friday??™s weaker-than-expectedU.S.April non-farm payrolls tally may play into the Fed??™s policy statement anddealers await any signal from the Fed that it is moving closer to a neutralpolicy bias. Euro bids are cited aroundthe US$ 1.3580 level.
JPN/CNY
The yen appreciatedvis-? -vis the U.S. dollar today asthe greenback tested bids around the ??119.75 level and was capped around the??120.20 level. Technically, today??™sintraday low was right around the 23.6% retracement of the move from ??117.60 to??120.45. Liquidity returned to normalfollowing last week??™s Golden Week holidays in Japanand China. Minutes from Bank of Japan??™s March PolicyBoard meeting were released overnight and some members indicated the centralbank must better communicate its intention to raise interest ratesgradually. Bank of Japan Governor Fukuiis scheduled to speak on Thursday and any indication from him that rates couldmove higher despite recent deflationary pressures may lead to further yenappreciation. The Nikkei 225 stock index gained 1.58% to close at??17,669.83. Dollar bids are cited aroundthe ??119.35 level. The euro gained marginal ground vis-? -vis the yen as the singlecurrency tested offers around the ??163.35 level and was supported around the??162.95 level. The British pound and Swiss franc moved marginally lower vis-? -visthe yen as the crosses tested bids around the ??239.15 and ??99.00 levels,respectively. In Chinese news, data released in China today saw May Day holidayretail sales climb 15.5% y/y.
STERLING
The British pound appreciated vis-? -vis the U.S. dollar today as cable tested offersaround the US$ 1.9975 level and was supported around the $1.9930 level. Technically, today??™s intraday low was rightaround the 38.2% retracement of the move from $1.9590 to $2.0130. A survey published by CBI today reported thatmanufacturing business confidence improved across all regions of the United Kingdomfor the first time since February 1995. Mosttraders expect Bank of England??™s Monetary Policy Committee to tighten interestrates by +25bps on Thursday. Cable bidsare cited around the US$ 1.9860 level. The euro gained marginal groundvis-? -vis the British pound as the single currency tested offers around the?‚¤0.6825 level and was supported around the ?‚¤0.6810 level.
SWISS
The Swissfranc appreciated vis-? -vis the U.S. dollar today as the greenback testedbids around the CHF 1.2080 level and was capped around the CHF 1.2110level. Today??™s range was limited onaccount of the bank holiday in the U.K.and pending interest rate decisions in the U.S.,eurozone, and U.K.this week. Traders await the release ofthe Swiss April unemployment rate. Dollar offers are cited around the CHF 1.2130 level. Theeuro and British pound lost marginal ground vis-? -vis the Swiss franc asthe crosses tested bids around the CHF 1.6440 and CHF 2.4110 levels,respectively.
AUD
The Australian dollar moved higher vis-? -vis theU.S. dollar today as the Aussie tested offers around the US$ 0.8260 level and wassupported around the $0.8205 level. Technically,today??™s intraday low was right around the 50% retracement of the move from$0.8030 to $0.8390. Data released in Australiaovernight saw April job advertisements climb 3.5% m/m and 27.1% y/y while theApril NAB business confidence index rose to +13 from +10 in March. Australian dollar bids are cited around theUS$ 0.8165 level.
CAD
The Canadian dollar appreciated vis-? -vis the U.S.dollar todayas the greenback tested bids around the C$ 1.1005 level and was capped aroundthe $1.1075 level. Today??™s intraday lowwas the pair??™s weakest print since 13 June 2006. April housing starts data will be releasedtomorrow. U.S. dollar offers are citedaround the C$ 1.1150 level.
The euro moved higher vis-? -vis the U.S. dollartoday asthe single currency tested offers around the US$ 1.3625 level and was supportedaround the $1.3590 level. Technically,today??™s intraday low was right around the 38.2% retracement of the move from$1.3680 to $1.3535. A few factorscontributed to the pair??™s gains today. First, French presidential candidateSarkozy won the run-off election in France this weekend and even thoughhe was critical of the European Central Bank during his campaign, he was lesscritical than leftist candidate Royal. Much of the criticism that is periodically levied against the ECB originates in France and Sarkozy??™s conservativegovernment may change that dynamic. Second, Ecofin finance ministers reaffirmed the ECB??™s independencesaying it is ???an independent organ.??? Third, ECB President Trichet remained hawkish in comments saying ???Let's continue to befully aware about the risks. Pricestability is necessary for a global growth.??? The ECB convenes on Thursday andis not expected to tighten monetary policy until next month. Fourth, German March manufacturing ordersrose 2.4% m/m and 9.9% y/y. In U.S. news, most traders expect theFederal Open Market Committee will keep interest rates unchanged onWednesday. Friday??™s weaker-than-expectedU.S.April non-farm payrolls tally may play into the Fed??™s policy statement anddealers await any signal from the Fed that it is moving closer to a neutralpolicy bias. Euro bids are cited aroundthe US$ 1.3580 level.
JPN/CNY
The yen appreciatedvis-? -vis the U.S. dollar today asthe greenback tested bids around the ??119.75 level and was capped around the??120.20 level. Technically, today??™sintraday low was right around the 23.6% retracement of the move from ??117.60 to??120.45. Liquidity returned to normalfollowing last week??™s Golden Week holidays in Japanand China. Minutes from Bank of Japan??™s March PolicyBoard meeting were released overnight and some members indicated the centralbank must better communicate its intention to raise interest ratesgradually. Bank of Japan Governor Fukuiis scheduled to speak on Thursday and any indication from him that rates couldmove higher despite recent deflationary pressures may lead to further yenappreciation. The Nikkei 225 stock index gained 1.58% to close at??17,669.83. Dollar bids are cited aroundthe ??119.35 level. The euro gained marginal ground vis-? -vis the yen as the singlecurrency tested offers around the ??163.35 level and was supported around the??162.95 level. The British pound and Swiss franc moved marginally lower vis-? -visthe yen as the crosses tested bids around the ??239.15 and ??99.00 levels,respectively. In Chinese news, data released in China today saw May Day holidayretail sales climb 15.5% y/y.
STERLING
The British pound appreciated vis-? -vis the U.S. dollar today as cable tested offersaround the US$ 1.9975 level and was supported around the $1.9930 level. Technically, today??™s intraday low was rightaround the 38.2% retracement of the move from $1.9590 to $2.0130. A survey published by CBI today reported thatmanufacturing business confidence improved across all regions of the United Kingdomfor the first time since February 1995. Mosttraders expect Bank of England??™s Monetary Policy Committee to tighten interestrates by +25bps on Thursday. Cable bidsare cited around the US$ 1.9860 level. The euro gained marginal groundvis-? -vis the British pound as the single currency tested offers around the?‚¤0.6825 level and was supported around the ?‚¤0.6810 level.
SWISS
The Swissfranc appreciated vis-? -vis the U.S. dollar today as the greenback testedbids around the CHF 1.2080 level and was capped around the CHF 1.2110level. Today??™s range was limited onaccount of the bank holiday in the U.K.and pending interest rate decisions in the U.S.,eurozone, and U.K.this week. Traders await the release ofthe Swiss April unemployment rate. Dollar offers are cited around the CHF 1.2130 level. Theeuro and British pound lost marginal ground vis-? -vis the Swiss franc asthe crosses tested bids around the CHF 1.6440 and CHF 2.4110 levels,respectively.
AUD
The Australian dollar moved higher vis-? -vis theU.S. dollar today as the Aussie tested offers around the US$ 0.8260 level and wassupported around the $0.8205 level. Technically,today??™s intraday low was right around the 50% retracement of the move from$0.8030 to $0.8390. Data released in Australiaovernight saw April job advertisements climb 3.5% m/m and 27.1% y/y while theApril NAB business confidence index rose to +13 from +10 in March. Australian dollar bids are cited around theUS$ 0.8165 level.
CAD
The Canadian dollar appreciated vis-? -vis the U.S.dollar todayas the greenback tested bids around the C$ 1.1005 level and was capped aroundthe $1.1075 level. Today??™s intraday lowwas the pair??™s weakest print since 13 June 2006. April housing starts data will be releasedtomorrow. U.S. dollar offers are citedaround the C$ 1.1150 level.
The dollar rallied against the yen last week
The dollar rallied against the yen last week on cross trading and due to declining concern of international criticism toward the weak Japanese currency. The European currencies traded sideways to lower while the Canadian dollar strengthened on M&A activity and on official neglect toward its strength. There is a good chance the dollar will make a more sustained rally this week despite the week non-farm payrolls report.
Past Week's Data and Events
United States
The dollar managed to recover some early losses and will attempt to make a stronger upmove this week. The yen weakened further on cross trading but the Canadian dollar rallied further as the M&As continued unabated.
The religious/political upheaval in Turkey gave the dollar an early jolt on the last day of April. The situation clearly nixes Turkey??™s chance to joint the European Union and highlights the threat of religious extremism in today??™s world.
Personal income in March 2007 rose 0.7 percent from February's upwardly revised 0.7 percent. March consumer spending rose a smaller-than-expected 0.3 percent from +0.7 percent. Disposable personal income increased 0.7 percent. The March saving rate came in at -0.8 percent from -1.2 percent in February.
Nominal personal consumption expenditures (PCE) increased 0.3 percent in March.
The National Association of Purchasing Management-Chicago business barometer fell to 52.9 from 61.7 in March.
The Institute for Supply Management's manufacturing index rose to a higher-than-forecast 54.7 in April, the highest since May 2006, from 50.9 in March.
Factory goods orders rose a more-than-expected 3.1 percent in March from February??™s upwardly revised 1.4 percent gain.
Productivity declined to an annual rate of 1.7 percent in the first quarter from a 2.1 percent increase in the fourth quarter.
The dollar rallied on Thursday on news that the Institute for Supply Management's services index rose to 56.0 in April from a four-year low of 52.4 in March. The new orders component rose to 55.5 from March's 53.8, the prices-paid index edged up to 63.5 in April from 63.3 in March, and the jobs component rose to 51.9 to from 50.8.
Non-farm payrolls came in just below expectations in April, rising 88,000, but the March report was revised downward to 177,000 from 180,000 and the February payrolls to 90,000 from 113,000. The unemployment rate rose to 4.5 percent in April from 4.4 percent in March.
Weekly claims for unemployment benefits unexpectedly fell to a three-month low of 305,000 last week from 326,000 (up from 321,000).
The index of pending home re-sales, fell 4.9 percent to 104.3 in March, the lowest since March 2003, after a revised 1.1 percent gain in February, according to the National Association of Realtors.
The Eurozone
The euro/dollar sank through Thursday and then recovered losses on Friday to close little changed on the week.
German retail sales report contracted 0.7 percent in March while the February report was revised down to +1.0 percent from 1.5 percent.
The number of unemployed in Germany fell 9,000 to 3.845 million in April, keeping the jobless rate at 9.2 percent the lowest level in nearly six years, as companies hired workers to fill orders.
The Eurozone manufacturing PMI was unchanged at 55.4 in April, while the services PMI fell to 57 from 57.6.
The Eurozone retail sales came in at 0.5 percent in March.
Japan
Dollar/yen rallied last week.
Japanese wages fell 0.4 percent in March after dropping 1 percent in February.
The UK
The pound encountered further selling pressure last week.
U.K. manufacturing PMI slipped to 53.9 in April from a revised 54.2 in March, according to the Chartered Institute of Purchasing and Supply.
In the same vein, services PMI fell to 57.2 in April from 57.6 in March.
Canada
Dollar/Canada sank to an eight-month low last week following strong economic data and after BoC??™s Dodge noted that the central bank will not curb the strength of its currency.
The monthly GDP grew by a higher-than-expected 0.4 percent in February due to a high increase in the energy production from +0.1 percent in January.
Canadian producer prices expanded 1.3 percent in March.
Switzerland
Dollar/Swiss edged higher last week.
The Swiss CPI rose 1.1 percent in April consumer prices and 0.5 percent on an yearly basis.
Australia
The Aussie/dollar encountered further selling pressure last week and that pressure accelerated on Friday.
Reserve Bank of Australia left the overnight cash rate target at a six-year-high 6.25 percent for a fifth straight meeting.
The Australian dollar fell sharply on Friday after the RBA forecast the slowest inflation rate in two years.
This Week's Data and Events
United States
The US economic agenda will start on Wednesday, when the FOMC will leave rates unchanged at 5.25 percent.
Thursday will see the release of the Trade Balance report for March.
The PPI and the Retail sales report for April are due on Friday and both reports are possible market movers.
The Eurozone
The Eurozone economic calendar begins on Monday with the release of the German Factory Orders report for March.
Tuesday will see the German Industrial Production report for March.
The German Trade Balance for March is due on Wednesday.
On Thursday there will be the French and the Italian Industrial Production reports for March.
Also on Thursday, the ECB will leave rates unchanged at 3.75 percent.
Japan
Japan??™s economic calendar is light this week after the Golden Week.
Wednesday will host the Coincident and Leading Indices reports for March.
The UK
The UK calendar will start on Wednesday with the release of the Nationwide Consumer Confidence report for April.
Thursday will see the Trade balance report for March.
The Industrial Production report for March is due on Thursday as well.
The Bank of England may hike rates from the current 5.25 percent.
On Friday there will be the Halifax house price report for April.
Canada
Canada??™s agenda will start on Thursday with the release of the New Housing Price report for March.
The Merchandise Trade report for March is due on Friday.
Overview
Euro/dollar
Last week's range: 1.3534 ??“ 1.3679 (Down)
Previous range: 1.3539 ??“ 1.3683 (Up)
Euro/dollar fell through Thursday and then recovered most of its losses. The pair remains overbought after reaching an 11 ??-year high a week earlier. Sell it again only if a bearish reversal is confirmed.
Immediate resistance is at 1.3620. Above 1.3683, resistance comes at 1.3805. Distant resistance is now seen at 1.3915.
There is initial support at 1.3535. Below 1.3470 there is support at 1.3440. Distant support is at 1.3390. Only a close below 1.3325 would signal the end of the uptrend, but this is very unlikely.
NEAR-TERM:Mixed
MEDIUM-TERM:Bullish
LONG-TERM: Bullish
Dollar/yen
Last week's range: 119.08 ??“ 120.47 (Up)
Previous range: 118.23 ??“ 119.76 (Up)
Dollar/yen exploded higher to a nine-week high last week. The rally may continue but at a reduced pace.
Resistance is at 120.75. Distant resistance now comes at 121.05 from a 50-point pivot, which targets 120.55 and 121.55.
Below 119.90, support comes at 119.65 from another 50-point pivot that targets 119.15 and 120.15. Next level is 118.85. Strong support is still seen at 118.25 from a 50-point pivot that targets 117.75 and 118.75.
NEAR-TERM: Mixed
MEDIUM-TERM: Bullish
LONG-TERM: Bullish
Sterling/dollar
Last week's range: 1.9844 ??“ 2.0073 (Mixed)
Previous range: 1.9866 ??“ 2.0062 (Down)
Sterling/dollar reduced losses incurred during most of the last week. It??™s been under pressure since peaking on April 18 at 2.0131 and the recovery on Friday suggests some upmove this week. Again, this is primarily because is reached the bottom of its rising channel.
Initial resistance is at 1.9995. Above 2.0070, resistance remains between 2.0131 and 2.0151. If this area breaks, the pound would likely take attack a Gann level at 2.0200. Further resistance looms in the 2.0300 area, but this is very unlikely.
Immediate support is at 1.9845. A close below this level would signal trouble for the Cable??™s uptrend. It would then challenge the 1.9800 area. Below 1.9780, distant support follows at 1.9700.
NEAR-TERM: Mixed
MEDIUM-TERM:Bullish
LONG-TERM:Bullish
Dollar/Swiss franc
Last week's range: 1.2031 ??“ 1.2189 (Up)
Previous range: 1.1996 ??“ 1.2127 (Mixed)
Dollar/Swiss franc rallied to a three-week high before reducing gains on Friday. The medium-term outlook remains negative, but only a close below this level confirms the move.
Immediate support is at 1.2095. Next level is 1,2065. Below 1.1996 there is a key level at 1.1945.Dollar/Swiss franc then has strong support at 1.1885.
It would take a break above the resistance at 1.2195 to signal a more sustained recovery. Further resistance is at 1.2255 and 1.2290. Distant resistance is at 1.2370.
NEAR-TERM: Mixed
MEDIUM-TERM:Slightly bearish
LONG-TERM: Bearish
Dollar/Canada
Last week's range: 1.1033 ??“ 1.1197 (Down)
Previous range: 1.1130 - 1.1232 (Down)
Dollar/Canada fell for seven straight weeks to reach an eight-month low at 1.1033. Following a weak recovery, the decline should continue
Below 1.1033, the pair has support at 1.1000. Dollar/Canada then has support at 1.0930. Distant support is at 1.0820.
Immediate resistance is at 1.1115 the pair has a cap at 1.1230. Next level is 1.1305. Above 1.1365, the next level is 1.1420. Distant resistance is at 1.1550.
NEAR-TERM: Bearish
MEDIUM-TERM: Bearish
LONG-TERM: Bearish
Euro/yen
Last week's range: 162.44 ??“ 163.58 (Up)
Previous range: 160.23 ??“ 163.21 (Up)
Euro/yen made climbed to a new lifetime high of 163.68 last week. For as long as the 152.40 level holds, the upside remains favored.
Initial resistance is at 164.15. Next level is 165.15. Distant resistance now looms at 166.95.
Immediate support is still seen at 162.25. This is followed by 161.25. A close below this level would signal a significant decline. The next level remains 160.40. Below 159.50, the euro/yen has distant support at 159.00.
NEAR-TERM: Bullish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish
Euro/sterling
Last week's range: 0.6798 ??“ 0.6838 (Mixed)
Previous range: 0.6774 ??“ 0.6843 (Up)
Euro/sterling traded sideways in a tight range and got stuck in an inside range. More information is needed.
Strong resistance remains at 0.6841 from a Fibonacci retracement level. A pivot high lies at 0.6867. Distant resistance is at 0.6960.
Initial support comes at 0.6800. This is followed by 0.6780. Below 0.6774, another strong level is at 0.6740 from a Fibonacci retracement level. Further support remains at 0.6725. Strong support follows at 0.6690.
NEAR-TERM: Mixed
MEDIUM-TERM: Bullish
LONG-TERM: Bearish
Past Week's Data and Events
United States
The dollar managed to recover some early losses and will attempt to make a stronger upmove this week. The yen weakened further on cross trading but the Canadian dollar rallied further as the M&As continued unabated.
The religious/political upheaval in Turkey gave the dollar an early jolt on the last day of April. The situation clearly nixes Turkey??™s chance to joint the European Union and highlights the threat of religious extremism in today??™s world.
Personal income in March 2007 rose 0.7 percent from February's upwardly revised 0.7 percent. March consumer spending rose a smaller-than-expected 0.3 percent from +0.7 percent. Disposable personal income increased 0.7 percent. The March saving rate came in at -0.8 percent from -1.2 percent in February.
Nominal personal consumption expenditures (PCE) increased 0.3 percent in March.
The National Association of Purchasing Management-Chicago business barometer fell to 52.9 from 61.7 in March.
The Institute for Supply Management's manufacturing index rose to a higher-than-forecast 54.7 in April, the highest since May 2006, from 50.9 in March.
Factory goods orders rose a more-than-expected 3.1 percent in March from February??™s upwardly revised 1.4 percent gain.
Productivity declined to an annual rate of 1.7 percent in the first quarter from a 2.1 percent increase in the fourth quarter.
The dollar rallied on Thursday on news that the Institute for Supply Management's services index rose to 56.0 in April from a four-year low of 52.4 in March. The new orders component rose to 55.5 from March's 53.8, the prices-paid index edged up to 63.5 in April from 63.3 in March, and the jobs component rose to 51.9 to from 50.8.
Non-farm payrolls came in just below expectations in April, rising 88,000, but the March report was revised downward to 177,000 from 180,000 and the February payrolls to 90,000 from 113,000. The unemployment rate rose to 4.5 percent in April from 4.4 percent in March.
Weekly claims for unemployment benefits unexpectedly fell to a three-month low of 305,000 last week from 326,000 (up from 321,000).
The index of pending home re-sales, fell 4.9 percent to 104.3 in March, the lowest since March 2003, after a revised 1.1 percent gain in February, according to the National Association of Realtors.
The Eurozone
The euro/dollar sank through Thursday and then recovered losses on Friday to close little changed on the week.
German retail sales report contracted 0.7 percent in March while the February report was revised down to +1.0 percent from 1.5 percent.
The number of unemployed in Germany fell 9,000 to 3.845 million in April, keeping the jobless rate at 9.2 percent the lowest level in nearly six years, as companies hired workers to fill orders.
The Eurozone manufacturing PMI was unchanged at 55.4 in April, while the services PMI fell to 57 from 57.6.
The Eurozone retail sales came in at 0.5 percent in March.
Japan
Dollar/yen rallied last week.
Japanese wages fell 0.4 percent in March after dropping 1 percent in February.
The UK
The pound encountered further selling pressure last week.
U.K. manufacturing PMI slipped to 53.9 in April from a revised 54.2 in March, according to the Chartered Institute of Purchasing and Supply.
In the same vein, services PMI fell to 57.2 in April from 57.6 in March.
Canada
Dollar/Canada sank to an eight-month low last week following strong economic data and after BoC??™s Dodge noted that the central bank will not curb the strength of its currency.
The monthly GDP grew by a higher-than-expected 0.4 percent in February due to a high increase in the energy production from +0.1 percent in January.
Canadian producer prices expanded 1.3 percent in March.
Switzerland
Dollar/Swiss edged higher last week.
The Swiss CPI rose 1.1 percent in April consumer prices and 0.5 percent on an yearly basis.
Australia
The Aussie/dollar encountered further selling pressure last week and that pressure accelerated on Friday.
Reserve Bank of Australia left the overnight cash rate target at a six-year-high 6.25 percent for a fifth straight meeting.
The Australian dollar fell sharply on Friday after the RBA forecast the slowest inflation rate in two years.
This Week's Data and Events
United States
The US economic agenda will start on Wednesday, when the FOMC will leave rates unchanged at 5.25 percent.
Thursday will see the release of the Trade Balance report for March.
The PPI and the Retail sales report for April are due on Friday and both reports are possible market movers.
The Eurozone
The Eurozone economic calendar begins on Monday with the release of the German Factory Orders report for March.
Tuesday will see the German Industrial Production report for March.
The German Trade Balance for March is due on Wednesday.
On Thursday there will be the French and the Italian Industrial Production reports for March.
Also on Thursday, the ECB will leave rates unchanged at 3.75 percent.
Japan
Japan??™s economic calendar is light this week after the Golden Week.
Wednesday will host the Coincident and Leading Indices reports for March.
The UK
The UK calendar will start on Wednesday with the release of the Nationwide Consumer Confidence report for April.
Thursday will see the Trade balance report for March.
The Industrial Production report for March is due on Thursday as well.
The Bank of England may hike rates from the current 5.25 percent.
On Friday there will be the Halifax house price report for April.
Canada
Canada??™s agenda will start on Thursday with the release of the New Housing Price report for March.
The Merchandise Trade report for March is due on Friday.
Overview
Euro/dollar
Last week's range: 1.3534 ??“ 1.3679 (Down)
Previous range: 1.3539 ??“ 1.3683 (Up)
Euro/dollar fell through Thursday and then recovered most of its losses. The pair remains overbought after reaching an 11 ??-year high a week earlier. Sell it again only if a bearish reversal is confirmed.
Immediate resistance is at 1.3620. Above 1.3683, resistance comes at 1.3805. Distant resistance is now seen at 1.3915.
There is initial support at 1.3535. Below 1.3470 there is support at 1.3440. Distant support is at 1.3390. Only a close below 1.3325 would signal the end of the uptrend, but this is very unlikely.
NEAR-TERM:Mixed
MEDIUM-TERM:Bullish
LONG-TERM: Bullish
Dollar/yen
Last week's range: 119.08 ??“ 120.47 (Up)
Previous range: 118.23 ??“ 119.76 (Up)
Dollar/yen exploded higher to a nine-week high last week. The rally may continue but at a reduced pace.
Resistance is at 120.75. Distant resistance now comes at 121.05 from a 50-point pivot, which targets 120.55 and 121.55.
Below 119.90, support comes at 119.65 from another 50-point pivot that targets 119.15 and 120.15. Next level is 118.85. Strong support is still seen at 118.25 from a 50-point pivot that targets 117.75 and 118.75.
NEAR-TERM: Mixed
MEDIUM-TERM: Bullish
LONG-TERM: Bullish
Sterling/dollar
Last week's range: 1.9844 ??“ 2.0073 (Mixed)
Previous range: 1.9866 ??“ 2.0062 (Down)
Sterling/dollar reduced losses incurred during most of the last week. It??™s been under pressure since peaking on April 18 at 2.0131 and the recovery on Friday suggests some upmove this week. Again, this is primarily because is reached the bottom of its rising channel.
Initial resistance is at 1.9995. Above 2.0070, resistance remains between 2.0131 and 2.0151. If this area breaks, the pound would likely take attack a Gann level at 2.0200. Further resistance looms in the 2.0300 area, but this is very unlikely.
Immediate support is at 1.9845. A close below this level would signal trouble for the Cable??™s uptrend. It would then challenge the 1.9800 area. Below 1.9780, distant support follows at 1.9700.
NEAR-TERM: Mixed
MEDIUM-TERM:Bullish
LONG-TERM:Bullish
Dollar/Swiss franc
Last week's range: 1.2031 ??“ 1.2189 (Up)
Previous range: 1.1996 ??“ 1.2127 (Mixed)
Dollar/Swiss franc rallied to a three-week high before reducing gains on Friday. The medium-term outlook remains negative, but only a close below this level confirms the move.
Immediate support is at 1.2095. Next level is 1,2065. Below 1.1996 there is a key level at 1.1945.Dollar/Swiss franc then has strong support at 1.1885.
It would take a break above the resistance at 1.2195 to signal a more sustained recovery. Further resistance is at 1.2255 and 1.2290. Distant resistance is at 1.2370.
NEAR-TERM: Mixed
MEDIUM-TERM:Slightly bearish
LONG-TERM: Bearish
Dollar/Canada
Last week's range: 1.1033 ??“ 1.1197 (Down)
Previous range: 1.1130 - 1.1232 (Down)
Dollar/Canada fell for seven straight weeks to reach an eight-month low at 1.1033. Following a weak recovery, the decline should continue
Below 1.1033, the pair has support at 1.1000. Dollar/Canada then has support at 1.0930. Distant support is at 1.0820.
Immediate resistance is at 1.1115 the pair has a cap at 1.1230. Next level is 1.1305. Above 1.1365, the next level is 1.1420. Distant resistance is at 1.1550.
NEAR-TERM: Bearish
MEDIUM-TERM: Bearish
LONG-TERM: Bearish
Euro/yen
Last week's range: 162.44 ??“ 163.58 (Up)
Previous range: 160.23 ??“ 163.21 (Up)
Euro/yen made climbed to a new lifetime high of 163.68 last week. For as long as the 152.40 level holds, the upside remains favored.
Initial resistance is at 164.15. Next level is 165.15. Distant resistance now looms at 166.95.
Immediate support is still seen at 162.25. This is followed by 161.25. A close below this level would signal a significant decline. The next level remains 160.40. Below 159.50, the euro/yen has distant support at 159.00.
NEAR-TERM: Bullish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish
Euro/sterling
Last week's range: 0.6798 ??“ 0.6838 (Mixed)
Previous range: 0.6774 ??“ 0.6843 (Up)
Euro/sterling traded sideways in a tight range and got stuck in an inside range. More information is needed.
Strong resistance remains at 0.6841 from a Fibonacci retracement level. A pivot high lies at 0.6867. Distant resistance is at 0.6960.
Initial support comes at 0.6800. This is followed by 0.6780. Below 0.6774, another strong level is at 0.6740 from a Fibonacci retracement level. Further support remains at 0.6725. Strong support follows at 0.6690.
NEAR-TERM: Mixed
MEDIUM-TERM: Bullish
LONG-TERM: Bearish
Sunday, May 6, 2007
Greenback lifts from record lows
The dollar pulled away from a record low against the euro this week as robust US economic data gave investors little fresh impetus to sell the currency.
The dollar rallied after the ISM surveys of both the US manufacturing and services sectors came in ahead of forecasts.
Analysts said the data challenged the market’s pessimistic view of the world’s largest economy after disappointing first-quarter US growth figures released the previous week sent the dollar tumbling to an all-time low of $1.3680 against the euro.
This left the foreign exchange market to focus on Friday’s US employment report for further direction. However, the figures sparked little reaction as they came in slightly below expectations. They showed that the US economy added 88,000 jobs outside the agricultural sector in April, just shy of consensus forecasts for a rise of 100,000.
Ian Gunner at Mellon Financial said the jobs report told investors nothing new about the US labour market.
“The major news of this week remains the more upbeat readings on the two ISM surveys, which, if sustained, should mean better times ahead for the labour market anyway,” he said. “The week’s news remains dollar-positive overall and, given the current positional backdrop, further dollar strength is likely in the short-term as such positioning is pared back.”
Over the week, the dollar rose 0.4 per cent to $1.3590 against the euro, 0.5 per cent to Y120.10 against the yen and 0.3 per cent to $1.9920 against the pound.
Meanwhile, the yen came under pressure, falling to a fresh all-time low of Y163.60 against the euro on Thursday as benign market conditions continued to fuel investor demand for carry trades, in which the purchase of riskier high-yielding assets is funded by selling low-yielding currencies such as the Japanese unit. The yen eased 0.1 per cent to Y163.20 against the euro over the week.
The Swiss franc, investors’ second favourite funding currency, also hit a record low against the euro, dropping to a trough of SFr1.6535 on Tuesday.
However, the Swiss franc recouped some of its losses later in the week after stronger-than-expected consumer price inflation data fuelled expectations for more aggressive monetary tightening from the Swiss National Bank.
Over the week, the Swiss franc fell 0.2 per cent to SFr1.6460 against the euro and lost 0.6 per cent to SFr1.2110 against the dollar.
Meanwhile, the Australian dollar fell 1.1 per cent to a one-month low of $0.8210 against its US counterpart.
A cut in the Reserve Bank of Australia’s 2007 inflation forecast sparked the drop. The central bank said that the Australian dollar’s strength could add to downward pressure on inflation.
However, David Woo at Barclays Capital said unless Australian interest rates cuts began to be priced into the market, the Australian dollar would continue to be supported on dips by demand from carry trade investors. “The market is not pricing in any cuts,” he said.
Elsewhere, the Canadian dollar rose 1.1 per cent over the week to a seven-month high of C$1.1040 against the dollar after strong growth data increased speculation that the Bank of Canada could raise interest rates.
The dollar rallied after the ISM surveys of both the US manufacturing and services sectors came in ahead of forecasts.
Analysts said the data challenged the market’s pessimistic view of the world’s largest economy after disappointing first-quarter US growth figures released the previous week sent the dollar tumbling to an all-time low of $1.3680 against the euro.
This left the foreign exchange market to focus on Friday’s US employment report for further direction. However, the figures sparked little reaction as they came in slightly below expectations. They showed that the US economy added 88,000 jobs outside the agricultural sector in April, just shy of consensus forecasts for a rise of 100,000.
Ian Gunner at Mellon Financial said the jobs report told investors nothing new about the US labour market.
“The major news of this week remains the more upbeat readings on the two ISM surveys, which, if sustained, should mean better times ahead for the labour market anyway,” he said. “The week’s news remains dollar-positive overall and, given the current positional backdrop, further dollar strength is likely in the short-term as such positioning is pared back.”
Over the week, the dollar rose 0.4 per cent to $1.3590 against the euro, 0.5 per cent to Y120.10 against the yen and 0.3 per cent to $1.9920 against the pound.
Meanwhile, the yen came under pressure, falling to a fresh all-time low of Y163.60 against the euro on Thursday as benign market conditions continued to fuel investor demand for carry trades, in which the purchase of riskier high-yielding assets is funded by selling low-yielding currencies such as the Japanese unit. The yen eased 0.1 per cent to Y163.20 against the euro over the week.
The Swiss franc, investors’ second favourite funding currency, also hit a record low against the euro, dropping to a trough of SFr1.6535 on Tuesday.
However, the Swiss franc recouped some of its losses later in the week after stronger-than-expected consumer price inflation data fuelled expectations for more aggressive monetary tightening from the Swiss National Bank.
Over the week, the Swiss franc fell 0.2 per cent to SFr1.6460 against the euro and lost 0.6 per cent to SFr1.2110 against the dollar.
Meanwhile, the Australian dollar fell 1.1 per cent to a one-month low of $0.8210 against its US counterpart.
A cut in the Reserve Bank of Australia’s 2007 inflation forecast sparked the drop. The central bank said that the Australian dollar’s strength could add to downward pressure on inflation.
However, David Woo at Barclays Capital said unless Australian interest rates cuts began to be priced into the market, the Australian dollar would continue to be supported on dips by demand from carry trade investors. “The market is not pricing in any cuts,” he said.
Elsewhere, the Canadian dollar rose 1.1 per cent over the week to a seven-month high of C$1.1040 against the dollar after strong growth data increased speculation that the Bank of Canada could raise interest rates.
Dollar drops after jobs report
NEW YORK (MarketWatch) -- The dollar edged lower against other currencies Friday after a government report showed the U.S. economy created fewer-than-expected jobs in April.
The Labor Department said nonfarm payrolls expanded by 88,000 in April, lower than the 100,000 expected by economists surveyed by MarketWatch. The unemployment rate ticked higher to 4.5% from 4.4%, in line with expectations. Average hourly earnings increased 4 cents, or 0.2%, to $17.25, vs. expectations of a 0.3% gain
"The employment report prompted a modest bout of dollar weakness as players remained cautious over the extent of the dollar's recent consolidation," said Michael Woolfolk, senior currency strategist at The Bank of New York.
"The real surprise in this morning's price action was not the relatively modest reaction to non-farm payrolls, but rather the dollar's negative tone," he said. "While the dollar may still see further gains to its technical consolidation, it is obvious that the momentum has largely been lost."
Late in New York, the euro stood at $1.3595 compared with $1.3551 late Thursday. The dollar was quoted at 120.05 yen, compared with 120.37 yen.
On the week, the dollar gained 0.4% versus the euro and 0.5% against the yen.
The British pound traded at $1.9935 vs. $1.9878. The dollar also changed hands at 1.2109 Swiss francs, compared with 1.2161 francs.
The euro fetched 163.32 yen, compared with 163.16 yen.
Brian Dolan, director of research at Forex.com, a division of Gain Capital, said while the dollar managed to end the week higher for the first time in three weeks, "the overall trend of a lower dollar still seems to be intact as the fundamental picture has not changed significantly."
"Next week should see the dollar resume weakening in light of mostly bullish events for the euro and pound and likely bearish events for the dollar," he said.
Fed outlook
April's employment report is the last key economic release before the Federal Open Market Committee's interest-rate meeting next Wednesday.
The Fed is expected to hold rates steady at 5.25%, where rates have been since last summer, given uncertainties about whether the economy will slow enough to gradually bring down inflation.
Expectations of an interest rate cut through the first half of the year declined slightly, but increased through the end of the year, the federal funds futures market showed Friday.
Traders were pricing in a 4% chance that the Federal Reserve will lower its target for overnight rates to 5% from 5.25% by late June, down from 6% late Thursday. The futures market suggested a cut in overnight rates to 5% through the end of the year is a near certainty.
Ashraf Laidi, chief foreign-exchange analyst at CMC Markets in New York, said that with recent data showing softening inflation, weakness in employment and further slowdown in the housing and manufacturing sectors, "the Federal Reserve will have no choice but to maintain its downgraded growth outlook, while softening its inflation preoccupation."
"This should be a fresh recipe for further dollar declines as it opens the door for a 0.25 percentage point rate cut as early as August," he said.
Australian dollar loses
In other trading, the Australian dollar dropped sharply after the Reserve Bank of Australian lowered its near-term inflation forecasts in its quarterly statement on monetary policy.
"In recent months the decline [in inflation] appears to have been a little faster than originally expected, and it now seems likely that underlying inflation will be about 2.5 per cent, or possibly a little lower, during 2007. Inflation as measured on a year-ended basis by the [consumer price index] will fall below 2 per cent over the next couple of quarters," the bank said in a statement.
The Labor Department said nonfarm payrolls expanded by 88,000 in April, lower than the 100,000 expected by economists surveyed by MarketWatch. The unemployment rate ticked higher to 4.5% from 4.4%, in line with expectations. Average hourly earnings increased 4 cents, or 0.2%, to $17.25, vs. expectations of a 0.3% gain
"The employment report prompted a modest bout of dollar weakness as players remained cautious over the extent of the dollar's recent consolidation," said Michael Woolfolk, senior currency strategist at The Bank of New York.
"The real surprise in this morning's price action was not the relatively modest reaction to non-farm payrolls, but rather the dollar's negative tone," he said. "While the dollar may still see further gains to its technical consolidation, it is obvious that the momentum has largely been lost."
Late in New York, the euro stood at $1.3595 compared with $1.3551 late Thursday. The dollar was quoted at 120.05 yen, compared with 120.37 yen.
On the week, the dollar gained 0.4% versus the euro and 0.5% against the yen.
The British pound traded at $1.9935 vs. $1.9878. The dollar also changed hands at 1.2109 Swiss francs, compared with 1.2161 francs.
The euro fetched 163.32 yen, compared with 163.16 yen.
Brian Dolan, director of research at Forex.com, a division of Gain Capital, said while the dollar managed to end the week higher for the first time in three weeks, "the overall trend of a lower dollar still seems to be intact as the fundamental picture has not changed significantly."
"Next week should see the dollar resume weakening in light of mostly bullish events for the euro and pound and likely bearish events for the dollar," he said.
Fed outlook
April's employment report is the last key economic release before the Federal Open Market Committee's interest-rate meeting next Wednesday.
The Fed is expected to hold rates steady at 5.25%, where rates have been since last summer, given uncertainties about whether the economy will slow enough to gradually bring down inflation.
Expectations of an interest rate cut through the first half of the year declined slightly, but increased through the end of the year, the federal funds futures market showed Friday.
Traders were pricing in a 4% chance that the Federal Reserve will lower its target for overnight rates to 5% from 5.25% by late June, down from 6% late Thursday. The futures market suggested a cut in overnight rates to 5% through the end of the year is a near certainty.
Ashraf Laidi, chief foreign-exchange analyst at CMC Markets in New York, said that with recent data showing softening inflation, weakness in employment and further slowdown in the housing and manufacturing sectors, "the Federal Reserve will have no choice but to maintain its downgraded growth outlook, while softening its inflation preoccupation."
"This should be a fresh recipe for further dollar declines as it opens the door for a 0.25 percentage point rate cut as early as August," he said.
Australian dollar loses
In other trading, the Australian dollar dropped sharply after the Reserve Bank of Australian lowered its near-term inflation forecasts in its quarterly statement on monetary policy.
"In recent months the decline [in inflation] appears to have been a little faster than originally expected, and it now seems likely that underlying inflation will be about 2.5 per cent, or possibly a little lower, during 2007. Inflation as measured on a year-ended basis by the [consumer price index] will fall below 2 per cent over the next couple of quarters," the bank said in a statement.
Hedge Funds Reverse Bets, Expect Canadian Dollar to Advance
May 4 (Bloomberg) -- Hedge funds and other short-term speculative investors reversed their bets, indicating that they now believe that the Canadian dollar will gain against the U.S. dollar as confidence in the economy increased.
The Canadian dollar reached an eight-month high and posted seven straight weekly gains against its U.S. counterpart as signs of growth pushed traders to renew bets on a rise in the Bank of Canada's benchmark lending costs. A government report this week showed economic growth quickened in February for a fifth month.
The difference in the number of wagers on an advance in the Canadian dollar compared with those on a drop -- so-called net longs -- was 8,851 on May 1, compared with net shorts of 1,631 a week earlier, figures from the Washington-based Commodity Futures Trading Commission show. It was the first time the market had a net long for the currency since October.
The Canadian dollar advanced 0.8 percent to 90.31 U.S. cents at 4 p.m. in Toronto from 89.57 cents on April 27, the seventh straight weekly gain. It touched 90.64 cents earlier today, the highest since Sept. 1. One U.S. dollar buys C$1.1073.
The currency has rebounded from 84.20 cents on Feb. 8, the lowest since November 2005, pushing futures traders to unload net shorts on the Canadian currency from a record high of 84,906 on Jan. 12.
Futures are agreements to buy or sell assets at a set price and date. The figures reflect holdings in currency-futures contracts at the Chicago Mercantile Exchange as of Tuesday.
Each Friday the CFTC publishes aggregate numbers for long and short positions of speculators such as hedge funds and institutional investors that buy or sell futures to protect against price moves. Analysts and investors follow changes in the positions because such transactions can reflect an expectation of price changes.
The Canadian dollar reached an eight-month high and posted seven straight weekly gains against its U.S. counterpart as signs of growth pushed traders to renew bets on a rise in the Bank of Canada's benchmark lending costs. A government report this week showed economic growth quickened in February for a fifth month.
The difference in the number of wagers on an advance in the Canadian dollar compared with those on a drop -- so-called net longs -- was 8,851 on May 1, compared with net shorts of 1,631 a week earlier, figures from the Washington-based Commodity Futures Trading Commission show. It was the first time the market had a net long for the currency since October.
The Canadian dollar advanced 0.8 percent to 90.31 U.S. cents at 4 p.m. in Toronto from 89.57 cents on April 27, the seventh straight weekly gain. It touched 90.64 cents earlier today, the highest since Sept. 1. One U.S. dollar buys C$1.1073.
The currency has rebounded from 84.20 cents on Feb. 8, the lowest since November 2005, pushing futures traders to unload net shorts on the Canadian currency from a record high of 84,906 on Jan. 12.
Futures are agreements to buy or sell assets at a set price and date. The figures reflect holdings in currency-futures contracts at the Chicago Mercantile Exchange as of Tuesday.
Each Friday the CFTC publishes aggregate numbers for long and short positions of speculators such as hedge funds and institutional investors that buy or sell futures to protect against price moves. Analysts and investors follow changes in the positions because such transactions can reflect an expectation of price changes.
Dollar Rises From Record Low Versus Euro on Signs of Growth
May 5 (Bloomberg) -- The dollar rose from a record low against the euro as private reports showing resilience in U.S. manufacturing and services industries reduced concern over a slowdown in the world's largest economy.
The U.S. currency also touched a two-month high versus the yen this week as April data showed manufacturing was the strongest in almost a year and services including banking and retailing grew the fastest in three months. The gain may fizzle on bets the European Central Bank will signal further increases in borrowing costs while the Federal Reserve holds its benchmark rate steady at policy meetings next week.
``The dollar was on a winning note'' as the data ``removed some of the pessimism over the near-term U.S. outlook,'' said Brian Dolan, research director at Forex.com, a unit of online currency trader Gain Capital in Bedminster, New Jersey. ``Next week should see the dollar resume weakening as the interest rate outlook still favors the euro against the dollar. The long-term trend of a lower dollar remains intact.''
The dollar rose 0.45 percent to $1.3591 per euro this week, rebounding from a record low of $1.3681 on April 27 and snapping a five-week losing streak. The dollar advanced 0.47 percent to 120.18 yen over the same period. It touched 120.47 yen, the strongest since Feb. 27, when stocks tumbled in a global rout.
`Cut Short'
The Australian dollar was the biggest loser against the dollar among 16 major currencies this week, falling 1 percent to 82.15 U.S. cents after the country's central bank cut its inflation forecast, weakening the case for increased borrowing costs. South Africa's rand was the top performer, rising 1.76 percent to 6.9280 versus the U.S. dollar.
The U.S. currency pared its gains this week as slowing growth in the jobs market led investors to raise bets of an interest rate cut by the U.S. central bank.
``The dollar's recovery was cut short by the weaker-than- expected U.S. employment data,'' said Marc Chandler, global head of currency strategy in New York at Brown Brothers Harriman & Co. ``The main force that has weighed on the dollar will likely continue to exert its pull.''
The U.S. unemployment rate rose to 4.5 percent from the five-year low of 4.4 percent as employers added 88,000 non-farm jobs in April, following a revised 177,000 the previous month, the Labor Department reported yesterday in Washington. The median forecast of 85 economists surveyed by Bloomberg News was for a gain of 100,000.
Benchmark Rates
The Tempe, Arizona-based Institute for Supply Management said this week its April manufacturing index rose last month to 54.7, the highest since May 2006, from 50.9 the previous month, while its index of non-manufacturing businesses rose last month to 56, the highest since January, from 52.4 in March. A level above 50 indicates expansion.
The Fed has kept its target rate for overnight lending between banks at 5.25 percent since lifting it to that level in June. The European Central Bank has raised its rate seven times since November 2005 to 3.75 percent. The Bank of England's rate is 5.25 percent. Policy makers of all three central banks are scheduled to meet to set rates next week.
``Growth and interest rate expectations are conspiring against the dollar,'' said Michael Woolfolk, senior currency strategist in New York at Bank of New York. ``A lower dollar is still the trend.''
The dollar has lost almost 3 percent against the euro and about 1.7 percent versus the pound since the start of the year. The Fed's Trade Weighted Major Currency Dollar Index dropped to 78.91 on April 30, the lowest in its 36-year history.
Yield Advantage
The yield advantage of two-year U.S. Treasury notes over similar-maturity German bunds dropped to 0.465 percentage point on May 2, the narrowest since November 2004. A narrowing yield gap dims the allure of dollar-denominated assets.
Yields on interest rate futures fell following the payroll report, indicating traders raised bets the Fed will lower borrowing costs this year.
The yield on Eurodollar futures for December declined to 5.08 percent yesterday from an almost three-week high of 5.105 percent a day earlier. The contracts' value at settlement is based on the interest rate on three-month bank deposits, which is influenced by the federal funds rate target.
``We have an ECB that remains hawkish,'' said Simon Derrick, chief currency strategist in London at Bank of New York.
Euro Outlook
UBS AG raised its forecast yesterday for the euro to $1.40 by year-end, saying it expects the ECB to increase its key rate to 4.75 percent by mid-2008.
The euro was little changed this week against the yen, trading at 163.32 compared with 163.27 on April 27.
The 13-nation currency rose to an all-time high of 163.60 yen on May 3 on bets the ECB will outpace the Bank of Japan in raising borrowing costs, enhancing the appeal of euro- denominated assets. The BOJ's rate is 0.5 percent, the lowest among major economies. Before this week the euro posted eight straight weekly gains versus the yen.
The U.S. currency also touched a two-month high versus the yen this week as April data showed manufacturing was the strongest in almost a year and services including banking and retailing grew the fastest in three months. The gain may fizzle on bets the European Central Bank will signal further increases in borrowing costs while the Federal Reserve holds its benchmark rate steady at policy meetings next week.
``The dollar was on a winning note'' as the data ``removed some of the pessimism over the near-term U.S. outlook,'' said Brian Dolan, research director at Forex.com, a unit of online currency trader Gain Capital in Bedminster, New Jersey. ``Next week should see the dollar resume weakening as the interest rate outlook still favors the euro against the dollar. The long-term trend of a lower dollar remains intact.''
The dollar rose 0.45 percent to $1.3591 per euro this week, rebounding from a record low of $1.3681 on April 27 and snapping a five-week losing streak. The dollar advanced 0.47 percent to 120.18 yen over the same period. It touched 120.47 yen, the strongest since Feb. 27, when stocks tumbled in a global rout.
`Cut Short'
The Australian dollar was the biggest loser against the dollar among 16 major currencies this week, falling 1 percent to 82.15 U.S. cents after the country's central bank cut its inflation forecast, weakening the case for increased borrowing costs. South Africa's rand was the top performer, rising 1.76 percent to 6.9280 versus the U.S. dollar.
The U.S. currency pared its gains this week as slowing growth in the jobs market led investors to raise bets of an interest rate cut by the U.S. central bank.
``The dollar's recovery was cut short by the weaker-than- expected U.S. employment data,'' said Marc Chandler, global head of currency strategy in New York at Brown Brothers Harriman & Co. ``The main force that has weighed on the dollar will likely continue to exert its pull.''
The U.S. unemployment rate rose to 4.5 percent from the five-year low of 4.4 percent as employers added 88,000 non-farm jobs in April, following a revised 177,000 the previous month, the Labor Department reported yesterday in Washington. The median forecast of 85 economists surveyed by Bloomberg News was for a gain of 100,000.
Benchmark Rates
The Tempe, Arizona-based Institute for Supply Management said this week its April manufacturing index rose last month to 54.7, the highest since May 2006, from 50.9 the previous month, while its index of non-manufacturing businesses rose last month to 56, the highest since January, from 52.4 in March. A level above 50 indicates expansion.
The Fed has kept its target rate for overnight lending between banks at 5.25 percent since lifting it to that level in June. The European Central Bank has raised its rate seven times since November 2005 to 3.75 percent. The Bank of England's rate is 5.25 percent. Policy makers of all three central banks are scheduled to meet to set rates next week.
``Growth and interest rate expectations are conspiring against the dollar,'' said Michael Woolfolk, senior currency strategist in New York at Bank of New York. ``A lower dollar is still the trend.''
The dollar has lost almost 3 percent against the euro and about 1.7 percent versus the pound since the start of the year. The Fed's Trade Weighted Major Currency Dollar Index dropped to 78.91 on April 30, the lowest in its 36-year history.
Yield Advantage
The yield advantage of two-year U.S. Treasury notes over similar-maturity German bunds dropped to 0.465 percentage point on May 2, the narrowest since November 2004. A narrowing yield gap dims the allure of dollar-denominated assets.
Yields on interest rate futures fell following the payroll report, indicating traders raised bets the Fed will lower borrowing costs this year.
The yield on Eurodollar futures for December declined to 5.08 percent yesterday from an almost three-week high of 5.105 percent a day earlier. The contracts' value at settlement is based on the interest rate on three-month bank deposits, which is influenced by the federal funds rate target.
``We have an ECB that remains hawkish,'' said Simon Derrick, chief currency strategist in London at Bank of New York.
Euro Outlook
UBS AG raised its forecast yesterday for the euro to $1.40 by year-end, saying it expects the ECB to increase its key rate to 4.75 percent by mid-2008.
The euro was little changed this week against the yen, trading at 163.32 compared with 163.27 on April 27.
The 13-nation currency rose to an all-time high of 163.60 yen on May 3 on bets the ECB will outpace the Bank of Japan in raising borrowing costs, enhancing the appeal of euro- denominated assets. The BOJ's rate is 0.5 percent, the lowest among major economies. Before this week the euro posted eight straight weekly gains versus the yen.
FOREX-Dollar slips after soft US payrolls data
NEW YORK, May 4 (Reuters) - The dollar fell on Friday after a report showed U.S. payrolls in April grew at their slowest pace in more than two years, suggesting an economic slowdown has finally caught up to the labor market.
The data cast a cloud over near-term U.S. growth and bolstered the case for an interest rate cut by the Federal Reserve later this year, pushing the euro to a session peak at $1.3610, near a record high above $1.3680.
Earlier this week, the dollar enjoyed its biggest rally in two months against the most liquid currencies as reports showing strength in the U.S. manufacturing and services sectors in April snapped a string of weak economic data.
"The dollar's recovery has been cut short by the weaker-than-expected employment data," said Marc Chandler, senior strategist at Brown Brothers Harriman in New York.
According to the Labor Department release, U.S. employers added 88,000 new positions in April, fewer than forecast and less than half of March's total gains.
It also revised down the number of jobs created in March and February, suggesting the labor market was not as resistant to the slowing economy as previously thought.
Midafternoon, the euro was up 0.3 percent at $1.3600, while the dollar was down 0.25 percent to 120.08 yen, just above an intraday low of 119.92 yen.
Against the Swiss franc, the dollar fell 0.4 percent to 1.2103 francs.
CENTRAL BANKS IN SPOTLIGHT
Strategists said the dollar remains vulnerable since the weaker jobs number leaves investors to focus on slower U.S. growth at a time when other major economies, including Britain and the euro zone, continue to show signs of expansion.
Both the Bank of England and European Central Bank have policy meetings next week, with the former expected to raise interest rates to 5.5 percent -- above 5.25 percent in the United States -- and the latter seen preparing markets for a hike in June.
Currencies with higher interest rates offer a higher yield and are thus more attractive to investors.
"Until next week, when we have central bank meetings, we are likely to keep seeing the buck sliding," said Mark Meadows, currency analyst at Tempus Consulting in Washington.
The Fed also holds a one-day policy meeting next week but is widely expected to keep interest rates on hold.
The dollar has weakened considerably in the past year, falling to 26-year lows against sterling and all-time lows against the euro.
The dollar index <.DXY> slipped 0.3 percent to 81.720 after having traded earlier at its highest since April 17.
"I still think there has been a material loss of the dollar's upside momentum," said Alan Ruskin, chief global strategist at RBS Greenwich in Greenwich, Connecticut.
The Australian dollar fell to US$0.8210, near a four-week low after the Australian central bank lowered its forecast for underlying inflation, suggesting rates were on hold for the rest of the year. (Additional reporting by Vivianne Rodrigues and Gertrude Chavez-Dreyfuss)
The data cast a cloud over near-term U.S. growth and bolstered the case for an interest rate cut by the Federal Reserve later this year, pushing the euro to a session peak at $1.3610
Earlier this week, the dollar enjoyed its biggest rally in two months against the most liquid currencies as reports showing strength in the U.S. manufacturing and services sectors in April snapped a string of weak economic data.
"The dollar's recovery has been cut short by the weaker-than-expected employment data," said Marc Chandler, senior strategist at Brown Brothers Harriman in New York.
According to the Labor Department release, U.S. employers added 88,000 new positions in April, fewer than forecast and less than half of March's total gains.
It also revised down the number of jobs created in March and February, suggesting the labor market was not as resistant to the slowing economy as previously thought.
Midafternoon, the euro was up 0.3 percent at $1.3600, while the dollar was down 0.25 percent to 120.08 yen, just above an intraday low of 119.92 yen
Against the Swiss franc, the dollar fell 0.4 percent to 1.2103 francs
CENTRAL BANKS IN SPOTLIGHT
Strategists said the dollar remains vulnerable since the weaker jobs number leaves investors to focus on slower U.S. growth at a time when other major economies, including Britain and the euro zone, continue to show signs of expansion.
Both the Bank of England and European Central Bank have policy meetings next week, with the former expected to raise interest rates to 5.5 percent -- above 5.25 percent in the United States -- and the latter seen preparing markets for a hike in June.
Currencies with higher interest rates offer a higher yield and are thus more attractive to investors.
"Until next week, when we have central bank meetings, we are likely to keep seeing the buck sliding," said Mark Meadows, currency analyst at Tempus Consulting in Washington.
The Fed also holds a one-day policy meeting next week but is widely expected to keep interest rates on hold.
The dollar has weakened considerably in the past year, falling to 26-year lows against sterling and all-time lows against the euro.
The dollar index <.DXY> slipped 0.3 percent to 81.720 after having traded earlier at its highest since April 17.
"I still think there has been a material loss of the dollar's upside momentum," said Alan Ruskin, chief global strategist at RBS Greenwich in Greenwich, Connecticut.
The Australian dollar
EUR/JPY Well Defined Channel Offers Specific Breakout and Reversal Trading Levels
At all time highs, the EUR/JPY may be breaking out to test upper channel resistance near 167.00. However, long term channel analysis places potential resistance near current price and overbought daily RSI warns of a pullback before the bull trend continues. Either way, we have identified specific levels that would confirm whether or not the EUR/JPY is extending or reversing.
The weekly chart shows the well defined long term channel that the EURJPY has held in since late 2000. The pair is just above the confluence of the 61.8% extension of 88.94-140.89 / 130.60 (162.71) / midpoint channel line. The area near the midpoint channel line has acted as resistance in the past so we could see a setback before strong buying re-enters the market.
The daily chart shows the latest move up, which is literally in a straight line from 150.73 to the current price. These are the kind of blow-off moves that lead to reversals. The overbought RSI (daily) along with bearish divergence suggest that we should be on the lookout for a top and reversal. The market may extend higher, as Keynes famously said, “markets can remain irrational far longer than you can remain solvent”…we can not forget that. For this reason, waiting for a daily close below the steep trendline would signal an opportunity to get short against the high. Without a break lower, we have no point of reference from which to get bearish against.
The 240 minute chart gives us a closer view of the rally from 150.73. We have employed the midpoint technique with the channel again, but on a much smaller scale. A rally above the midpoint would give scope to a breakout to higher levels and, ultimately, a test of the upper channel line close to 167.00. The midpoint line has acted as resistance and support during this move so the line bears watching. Again, a break below the trendline (daily close) signals a bearish opportunity. Initial support would be at 159.55.
The weekly chart shows the well defined long term channel that the EURJPY has held in since late 2000. The pair is just above the confluence of the 61.8% extension of 88.94-140.89 / 130.60 (162.71) / midpoint channel line. The area near the midpoint channel line has acted as resistance in the past so we could see a setback before strong buying re-enters the market.
The daily chart shows the latest move up, which is literally in a straight line from 150.73 to the current price. These are the kind of blow-off moves that lead to reversals. The overbought RSI (daily) along with bearish divergence suggest that we should be on the lookout for a top and reversal. The market may extend higher, as Keynes famously said, “markets can remain irrational far longer than you can remain solvent”…we can not forget that. For this reason, waiting for a daily close below the steep trendline would signal an opportunity to get short against the high. Without a break lower, we have no point of reference from which to get bearish against.
The 240 minute chart gives us a closer view of the rally from 150.73. We have employed the midpoint technique with the channel again, but on a much smaller scale. A rally above the midpoint would give scope to a breakout to higher levels and, ultimately, a test of the upper channel line close to 167.00. The midpoint line has acted as resistance and support during this move so the line bears watching. Again, a break below the trendline (daily close) signals a bearish opportunity. Initial support would be at 159.55.
04.05.2007 U.S. nonfarm payrolls rose 88,000
The U.S. economic slowdown finally showed up in the jobs number in April, with a rising unemployment rate, weak job growth and a falling number of hours worked.
Nonfarm payrolls rose just 88,000 in April. That's the weakest job growth in 29 months. Payrolls have grown by an average of 129,000 per month so far this year, down from 189,000 last year.
The unemployment rate rose to 4.5% from 4.4%. Unemployment grew by 77,000 to 6.8 million.
The average workweek declined, and total hours worked in the economy dropped by 0.4%.Average wage growth was tepid, rising just 4 cents to $17.21, a 0.2% gain. Wages are up 3.7% in the past year.
Nonfarm payrolls rose just 88,000 in April. That's the weakest job growth in 29 months. Payrolls have grown by an average of 129,000 per month so far this year, down from 189,000 last year.
The unemployment rate rose to 4.5% from 4.4%. Unemployment grew by 77,000 to 6.8 million.
The average workweek declined, and total hours worked in the economy dropped by 0.4%.Average wage growth was tepid, rising just 4 cents to $17.21, a 0.2% gain. Wages are up 3.7% in the past year.
04.05.2007 In March retail sales in the euro area grew more than expected
Retail sales in the euro area rose in March by 0.5%, Eurostat, the Statistical Office of the European Communities reported today. In the preceding month retail sales grew by 0.3%, while the analysts estimated 0.4% growth.
At the annual rate retail sales in the euro area grew in March by 2.6% , compared with 1.2% in the preceding month.
Retail sales in non-food sector grew in March by 0.2% on month and 2.7% on year.
As a rule, the index increase produces limited positive influence upon euro, mainly in middle- and long term.
At the annual rate retail sales in the euro area grew in March by 2.6% , compared with 1.2% in the preceding month.
Retail sales in non-food sector grew in March by 0.2% on month and 2.7% on year.
As a rule, the index increase produces limited positive influence upon euro, mainly in middle- and long term.
04.05.2007 Correction possibility increases
“Beginning of the week was signified by correction of main currency pairs. The dollar rose slightly following fineness of the market and high U.S. ISM figure” - said Georgiy Fedotov, NorthFinance financial analyst.
The EUR/USD pair is traded in 1.3536-1.3682 range from the beginning of the week. Possibility of correction increased but following growth will indicate continuation of rising trend.
Market sentiment can be marked as neutral. Investors are expecting U.S. nonfarm payrolls figure that will be published today.
The EUR/USD pair is traded in 1.3536-1.3682 range from the beginning of the week. Possibility of correction increased but following growth will indicate continuation of rising trend.
Market sentiment can be marked as neutral. Investors are expecting U.S. nonfarm payrolls figure that will be published today.
04.05.2007 Services sector activity in the euro area slowed down in April
According to the data of RBS and NTC Research Eurozone Services, the growth of activity in the services sector of the euro area slowed down in April.
PMI, reflecting the activity in services sector, fell in April to 57.0 points from 57.4 points in March. The reading above 50 indicates activity growth, below 50 - recession.
The index was below analysts expectations, who estimated the increase to 57.6 points and it may weaken euro position toward other currencies. Besides, the index achieved its minimum since October 2006.
The index of employment fell in April from 54.6 points to 54.1. The index of prices rose from 53.8 to 54.4. However, the index of economic expectations rose from 64.4 points to 67.7, suggesting activity rise in the nearest future.
PMI, reflecting the activity in services sector, fell in April to 57.0 points from 57.4 points in March. The reading above 50 indicates activity growth, below 50 - recession.
The index was below analysts expectations, who estimated the increase to 57.6 points and it may weaken euro position toward other currencies. Besides, the index achieved its minimum since October 2006.
The index of employment fell in April from 54.6 points to 54.1. The index of prices rose from 53.8 to 54.4. However, the index of economic expectations rose from 64.4 points to 67.7, suggesting activity rise in the nearest future.
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