The dollar fell sharply against the euro and sterling on the disparity between the Fed and the other two central banks in monetary policy outlook.
The Fed yesterday left its interest rate unchanged at 5.25% as expected. The post-meeting statement pointed out that the inflation is still the Fed¡¯s predominant concern, reinforcing the expectations that the Fed would not cut rate within the year. While on the other side of the world, the European Central Bank and the Bank of England are widely anticipated to lift interest rates at least one more time this year. The euro rose above the 1.35 level versus the dollar, the first time in three weeks. Should the pair stand firmly above the 1.3460-80 support area, further rally may extend to 1.3660 with a near target at 1.3550.
After breaking through the key psychological level at 2 yesterday, the sterling extended its gains to as high as 2.0073 against the dollar on Friday. The currency is supported by the speculation that the Bank of England may raise rates as early as July.
Friday, June 29, 2007
FX Awaits US Data
At 8:30 AM US May core PCE y/y (exp 1.9%, prev 2.0%)
US May PCE Deflator y/y (exp 2.4%, prev 2.2%)
US May Personal Spending (exp 0.7%, prev 0.5%)
US May Personal Income (exp 0.6%, prev -0.1%)
Canada April GDP m/m (exp 0.3%, prev 0.3%)
At 9:45 AM US June Chicago PMI (exp 57.5, prev 61.7)
At 10:00 AM US May Construction Spending m/m (exp 0.1%, prev 0.1%)
The dollar is firmer against the yen, but remains mired near two-month lows versus the sterling heading into a data-filled Friday session. Yesterday’s FOMC statement reiterated the Fed’s primary concern of inflationary pressure in the economy and as such, will likely maintain its unchanged stance over the coming months.
Accordingly, traders will look ahead to the Fed’s inflation indicator of choice with the release of the May core personal consumption expenditures – seen slipping slightly to 1.9% from 2.0%. The PCE deflator is expected to edge higher to 2.4% from 2.2%. Meanwhile, personal spending for May is seen rising to 0.7% from 0.5% and personal income is forecasted to reverse the prior month’s 0.1% decline, edging up by 0.6%. Also slated for release today will be the June Chicago PMI, which is expected to drop to 57.1, compared with 61.7 in the previous month
US May PCE Deflator y/y (exp 2.4%, prev 2.2%)
US May Personal Spending (exp 0.7%, prev 0.5%)
US May Personal Income (exp 0.6%, prev -0.1%)
Canada April GDP m/m (exp 0.3%, prev 0.3%)
At 9:45 AM US June Chicago PMI (exp 57.5, prev 61.7)
At 10:00 AM US May Construction Spending m/m (exp 0.1%, prev 0.1%)
The dollar is firmer against the yen, but remains mired near two-month lows versus the sterling heading into a data-filled Friday session. Yesterday’s FOMC statement reiterated the Fed’s primary concern of inflationary pressure in the economy and as such, will likely maintain its unchanged stance over the coming months.
Accordingly, traders will look ahead to the Fed’s inflation indicator of choice with the release of the May core personal consumption expenditures – seen slipping slightly to 1.9% from 2.0%. The PCE deflator is expected to edge higher to 2.4% from 2.2%. Meanwhile, personal spending for May is seen rising to 0.7% from 0.5% and personal income is forecasted to reverse the prior month’s 0.1% decline, edging up by 0.6%. Also slated for release today will be the June Chicago PMI, which is expected to drop to 57.1, compared with 61.7 in the previous month
Dollar Gained After FOMC
The greenback gained slightly after the Fed announced to keep its interest rate unchanged at 5.25% as expected this afternoon.
The Fed repeated their view on the inflation and economy as shown in the previous FOMC statement. Despite the unchanged tone, the Fed dropped the word “elevated” from the description of core inflation. Instead, they said in a similar way that the core inflation has improved modestly. Their assessment of the broad economy and the housing market provided no surprise either. The Fed said that economic growth moderates in the first half of the year and housing adjustment is ongoing. At the end, they reiterated that future policy depends on evolution of economy and growth. Following the FOMC announcement, the euro dipped below 1.3450 and refreshed session low to 1.3425 against the dollar.
Earlier in the session, the GDP report released this morning did little impact to the market as investors were waiting for the FOMC decision due later. The report showed the nation’s economy grew at a rate of 0.7% in the first quarter, the slowest pace in the more than four years. Core PCE prices for the first quarter increased from 2.2% to 2.4%, indicating core inflation remains elevated.
The Fed repeated their view on the inflation and economy as shown in the previous FOMC statement. Despite the unchanged tone, the Fed dropped the word “elevated” from the description of core inflation. Instead, they said in a similar way that the core inflation has improved modestly. Their assessment of the broad economy and the housing market provided no surprise either. The Fed said that economic growth moderates in the first half of the year and housing adjustment is ongoing. At the end, they reiterated that future policy depends on evolution of economy and growth. Following the FOMC announcement, the euro dipped below 1.3450 and refreshed session low to 1.3425 against the dollar.
Earlier in the session, the GDP report released this morning did little impact to the market as investors were waiting for the FOMC decision due later. The report showed the nation’s economy grew at a rate of 0.7% in the first quarter, the slowest pace in the more than four years. Core PCE prices for the first quarter increased from 2.2% to 2.4%, indicating core inflation remains elevated.
FX Awaits US Data, FOMC
At 8:30 AM US Weekly Jobless Claims (exp 318k, prev 324k)
US Q1 GDP (exp 0.8%, prev 0.6%)
US Q1 core PCE (exp 2.2%, prev 2.2%)
At 2:15 PM FOMC Monetary Policy Decision (Exp 5.25%, Prev 5.25%)
Garnering the lion’s share of market attention today will be the FOMC monetary policy decision, due out in the afternoon at 2:15 PM. While the Fed is widely expected to leave rates unchanged at 5.25%, traders are eager to decipher the accompanying statement – particularly for any acknowledgement of the continued deterioration in the housing market stemming from the sub-prime debacle. Further, the overall outlook for inflation will be closely scrutinized as markets continue to assess the likelihood for a possible shift to an easing stance over the remainder of the year. We’re not anticipating any significant alterations from the previous statement, except for a minor comment on the sub-prime market and more specifically, reassuring markets’ fears of any spillover and discounting the situation as more of an isolated incident.
US economic data due out in the coming session will see the final reading for Q1 GDP, expected to edge up to 0.8% from 0.6% and the Q1 core PCE price index, seen unchanged. Weekly jobless claims are expected to slip to 318k, compared with the prior week at 324k.
US Q1 GDP (exp 0.8%, prev 0.6%)
US Q1 core PCE (exp 2.2%, prev 2.2%)
At 2:15 PM FOMC Monetary Policy Decision (Exp 5.25%, Prev 5.25%)
Garnering the lion’s share of market attention today will be the FOMC monetary policy decision, due out in the afternoon at 2:15 PM. While the Fed is widely expected to leave rates unchanged at 5.25%, traders are eager to decipher the accompanying statement – particularly for any acknowledgement of the continued deterioration in the housing market stemming from the sub-prime debacle. Further, the overall outlook for inflation will be closely scrutinized as markets continue to assess the likelihood for a possible shift to an easing stance over the remainder of the year. We’re not anticipating any significant alterations from the previous statement, except for a minor comment on the sub-prime market and more specifically, reassuring markets’ fears of any spillover and discounting the situation as more of an isolated incident.
US economic data due out in the coming session will see the final reading for Q1 GDP, expected to edge up to 0.8% from 0.6% and the Q1 core PCE price index, seen unchanged. Weekly jobless claims are expected to slip to 318k, compared with the prior week at 324k.
Thursday, June 28, 2007
Yen Rallied on Carry Trades Unwinding
The carry trades direction is the key driver of the market since the beginning of this week. The yen rallied across the board as investors unwound short yen carry trades. Beside, a report released last night showed Japanese corporate service price increased more than expected, pushing the currency higher further.
Japanese Finance Minister Koji Omi yesterday warned investors of the risk of one-way bet on the yen exchange rate. A round of carry trades liquidation surged since this week, bringing the yen away from the lows against most high-yielding currencies. The yen on Wednesday posted a third straight daily gain.
USDJPY encounters interim resistance at 122.80, backed by 123 and 123.30. Subsequent ceilings will emerge at 123.50, followed by 123.80 and 124. On the downside, support begins at 122.30 and 122, followed by 121.80. Additional floors are eyed at 121.50, backed by 121.30 and 121.
Japanese Finance Minister Koji Omi yesterday warned investors of the risk of one-way bet on the yen exchange rate. A round of carry trades liquidation surged since this week, bringing the yen away from the lows against most high-yielding currencies. The yen on Wednesday posted a third straight daily gain.
USDJPY encounters interim resistance at 122.80, backed by 123 and 123.30. Subsequent ceilings will emerge at 123.50, followed by 123.80 and 124. On the downside, support begins at 122.30 and 122, followed by 121.80. Additional floors are eyed at 121.50, backed by 121.30 and 121.
FX Consolidates Amid Dearth of Data
At 5:30 AM Swiss KOF June Leading Indicator (exp 2.06, prev 1.96)
At 8:30 AM US May Durable Goods Orders (exp –1.0%, prev 0.8%)
US May Core Durable Goods Orders (exp 0.2%, prev 1.9%)
The major currency pairs were little changed in early Wednesday trading, with the greenback holding steady versus the euro around 1.3450 and hovering around 123 against the yen. With markets awaiting key releases slated for the latter part of the week, including the FOMC decision and accompanying statement, as well as the PCE report – traders have taken to the sidelines in anticipation.
In the coming session though, markets will digest the typically volatile US durable goods orders, seen declining by 1.0% for May compared with a 0.8% increase in April. The core reading is forecasted to edge up by 0.2%, but down from the prior month at 1.9%. The dollar has, for the most part remained resilient to the slate of soft economic reports, including this week’s lackluster housing and consumer confidence data – suggesting greater emphasis on the news later in the week.
At 8:30 AM US May Durable Goods Orders (exp –1.0%, prev 0.8%)
US May Core Durable Goods Orders (exp 0.2%, prev 1.9%)
The major currency pairs were little changed in early Wednesday trading, with the greenback holding steady versus the euro around 1.3450 and hovering around 123 against the yen. With markets awaiting key releases slated for the latter part of the week, including the FOMC decision and accompanying statement, as well as the PCE report – traders have taken to the sidelines in anticipation.
In the coming session though, markets will digest the typically volatile US durable goods orders, seen declining by 1.0% for May compared with a 0.8% increase in April. The core reading is forecasted to edge up by 0.2%, but down from the prior month at 1.9%. The dollar has, for the most part remained resilient to the slate of soft economic reports, including this week’s lackluster housing and consumer confidence data – suggesting greater emphasis on the news later in the week.
Yen Gains as Carry Trades Nervous
The yen traded higher against its major rivals as risk aversion led to some carry trades liquidation. Japan’s Finance Minister Koji Omi said that “disorderly moves of foreign exchange rates are undesirable”. His comments made investors nervous and unwind some carry trade positions. The dollar/yen probed the 122.80 level, and is likely to rebound if it holds above this support.
USDJPY encounters interim resistance at 124, backed by 124.20 and 124.50. Subsequent ceilings will emerge at 124.80, followed by 125 and 125.30. On the downside, support begins at 123.50 and 123.20, followed by 123. Additional floors are eyed at 122.80, backed by 122.50 and 122.20.
USDJPY encounters interim resistance at 124, backed by 124.20 and 124.50. Subsequent ceilings will emerge at 124.80, followed by 125 and 125.30. On the downside, support begins at 123.50 and 123.20, followed by 123. Additional floors are eyed at 122.80, backed by 122.50 and 122.20.
Yen Recoups on Jawboning
At 4:00 AM Swiss UBS May Consumption Indicator (exp 2.4, prev 2.346)
At 10:00 AM US June Richmond Fed Manufacturing Index (exp –8, prev –10)
US May New Home Sales (exp 925k, prev 981k)
US June Consumer Confidence (exp 105.5, prev 108)
At 12:30 PMUS Fed Moskow Speaks
Carry trade activity continues to be the key activity in the currency market, with the yen recovering from excessive selling in recent weeks. The focus will shift to US economic data this week with several key reports slated for release. In the coming trading day, traders will digest June consumer confidence, May new home sales, and the June Richmond Fed manufacturing index. Also scheduled for today will be a speech from the Fed’s Moskow. The FOMC deliberates policy this week, but is largely expected to leave policy unchanged.
At 10:00 AM US June Richmond Fed Manufacturing Index (exp –8, prev –10)
US May New Home Sales (exp 925k, prev 981k)
US June Consumer Confidence (exp 105.5, prev 108)
At 12:30 PMUS Fed Moskow Speaks
Carry trade activity continues to be the key activity in the currency market, with the yen recovering from excessive selling in recent weeks. The focus will shift to US economic data this week with several key reports slated for release. In the coming trading day, traders will digest June consumer confidence, May new home sales, and the June Richmond Fed manufacturing index. Also scheduled for today will be a speech from the Fed’s Moskow. The FOMC deliberates policy this week, but is largely expected to leave policy unchanged.
Monday, June 25, 2007
Sterling Touched $2
The sterling broke through 2 versus the dollar for the first time since May 1, on speculation that the Bank of England may quicken its monetary tightening process. Interest rate futures indicate traders have priced in two more rate increases till the year-end. Some even expect that the central bank may lift interest rates by 25 basis points as early as next month.
The dollar was little changed after a report showed the housing market slowed down slightly as expected. US existing home sales dropped 0.3% to an annual rate of 5.97 million units in May. The market will focus on the new home sales report due tomorrow for more clues on the US housing market. Other important data to be released this week include US Durable goods orders, personal income and spending, and Chicago PMI. Beside, the FOMC is scheduled to announce interest rate decision this Thursday afternoon. The Fed is widely expected to hold rates at 5.25% unchanged.
GBPUSD encounters interim resistance at 2.0000, backed by 2.0040 and 2.0080. Subsequent ceilings will emerge at 2.0100, followed by 2.0130 and 2.0150. On the downside, support begins at 1.9950, followed by 1.9930 and 1.99. Additional floors are eyed at 1.9880, backed by 1.9850 and 1.9830.
The dollar was little changed after a report showed the housing market slowed down slightly as expected. US existing home sales dropped 0.3% to an annual rate of 5.97 million units in May. The market will focus on the new home sales report due tomorrow for more clues on the US housing market. Other important data to be released this week include US Durable goods orders, personal income and spending, and Chicago PMI. Beside, the FOMC is scheduled to announce interest rate decision this Thursday afternoon. The Fed is widely expected to hold rates at 5.25% unchanged.
GBPUSD encounters interim resistance at 2.0000, backed by 2.0040 and 2.0080. Subsequent ceilings will emerge at 2.0100, followed by 2.0130 and 2.0150. On the downside, support begins at 1.9950, followed by 1.9930 and 1.99. Additional floors are eyed at 1.9880, backed by 1.9850 and 1.9830.
Sunday, June 24, 2007
Dollar Slid Broadly, German IFO Was Ignored
The dollar slid across the board as the impact of the bond yield on the greenback is still seen. The euro held firmly above 1.34 versus the dollar despite weaker-than-expected German IFO report.
The IFO business climate index fell from 108.6 to 107 in June, falling short of the estimate of 108.4. The expectations index came out at 102.8, down from 104.8 in the previous month. The current assessment index declined to 111.4, below the estimate of 112.5 and the prior reading of 112. Though the numbers are not exciting, they are still of high levels compared with historical data. This did not affect the expectations that the ECB will raise rates at least one more time this year. ECB chairman Trichet said the bank will continue its tightening process to ensure price stability. Therefore, the euro has the fundamental support to rally further against the dollar in the medium term. The pair broke the obstacle at 1.3440, and is likely to rise further to test 1.3480 and even 1.3520.
GBPUSD encounters interim resistance at 2.0000, backed by 2.0040 and 2.0080. Subsequent ceilings will emerge at 2.0100, followed by 2.0130 and 2.0150. On the downside, support begins at 1.9950, followed by 1.9930 and 1.99. Additional floors are eyed at 1.9880, backed by 1.9850 and 1.9830.
The IFO business climate index fell from 108.6 to 107 in June, falling short of the estimate of 108.4. The expectations index came out at 102.8, down from 104.8 in the previous month. The current assessment index declined to 111.4, below the estimate of 112.5 and the prior reading of 112. Though the numbers are not exciting, they are still of high levels compared with historical data. This did not affect the expectations that the ECB will raise rates at least one more time this year. ECB chairman Trichet said the bank will continue its tightening process to ensure price stability. Therefore, the euro has the fundamental support to rally further against the dollar in the medium term. The pair broke the obstacle at 1.3440, and is likely to rise further to test 1.3480 and even 1.3520.
GBPUSD encounters interim resistance at 2.0000, backed by 2.0040 and 2.0080. Subsequent ceilings will emerge at 2.0100, followed by 2.0130 and 2.0150. On the downside, support begins at 1.9950, followed by 1.9930 and 1.99. Additional floors are eyed at 1.9880, backed by 1.9850 and 1.9830.
Friday, June 22, 2007
Philly Fed Boosted Dollar
6/22 02:15 Swiss May Trade Balance (exp CHF1.5 bln, prev CHF0.63 bln)
6/22 04:00 German June IFO Business Climate (exp 108.4, prev 108.6)
6/22 04:00 German June IFO Expectations (exp 104.9, prev 104.8)
6/22 04:00 German June IFO Current Assessment (exp 112, prev 112.5)
6/22 08:45 US Fed Pianalto Speaks at Bank¡¯s Conference
The dollar had a knee-jerk rally after a report showed manufacturing activity in the Philadelphia area accelerated at the fastest test pace in more than two years. The Philadelphia Fed Index for April came out at 18, far above the consensus forecast of 6 and a 4.2 reading a month earlier.
Other data released earlier today were mixed, having little impact on the market. US weekly initial jobless claims rose from 311k to 324k, slightly worse than the estimate of 310k. US leading indicators increased 0.3%% in May, reversing a ¨C0.5% reading in the previous month and beating the expectation of a 0.2% increase.
6/22 04:00 German June IFO Business Climate (exp 108.4, prev 108.6)
6/22 04:00 German June IFO Expectations (exp 104.9, prev 104.8)
6/22 04:00 German June IFO Current Assessment (exp 112, prev 112.5)
6/22 08:45 US Fed Pianalto Speaks at Bank¡¯s Conference
The dollar had a knee-jerk rally after a report showed manufacturing activity in the Philadelphia area accelerated at the fastest test pace in more than two years. The Philadelphia Fed Index for April came out at 18, far above the consensus forecast of 6 and a 4.2 reading a month earlier.
Other data released earlier today were mixed, having little impact on the market. US weekly initial jobless claims rose from 311k to 324k, slightly worse than the estimate of 310k. US leading indicators increased 0.3%% in May, reversing a ¨C0.5% reading in the previous month and beating the expectation of a 0.2% increase.
Sterling Boosted by Hawkish BOE
Sales (exp 1.0%, prev 1.9%)
6/21 08:30 Canada April Core Retail Sales (exp 0.5%, prev 1.1%)
6/21 08:30 US Weekly Initial Jobless Claims (exp 310k, prev 311k)
6/21 08:30 US May Leading Indicators (exp 0.2%, prev –0.5%)
6/21 12:00 US June Philadelphia Fed Index (exp 6, prev 4.2)
The sterling gained after the June meeting minutes from the Bank of England boosted market expectations for an earlier rate hike.
The minutes showed four out of nine policymakers, including BOE governor Mervyn King, voted for a 25 basis point rate increase on June meeting. It is already almost certain that the bank will raise interest rates to 6% by the year. The surprise this MPC vote brought us is that the bank may move earlier than expected. The currency rose sharply from 1.9870 to 1.9920 versus the dollar, and hit a fresh 15-year high versus the yen.
6/21 08:30 Canada April Core Retail Sales (exp 0.5%, prev 1.1%)
6/21 08:30 US Weekly Initial Jobless Claims (exp 310k, prev 311k)
6/21 08:30 US May Leading Indicators (exp 0.2%, prev –0.5%)
6/21 12:00 US June Philadelphia Fed Index (exp 6, prev 4.2)
The sterling gained after the June meeting minutes from the Bank of England boosted market expectations for an earlier rate hike.
The minutes showed four out of nine policymakers, including BOE governor Mervyn King, voted for a 25 basis point rate increase on June meeting. It is already almost certain that the bank will raise interest rates to 6% by the year. The surprise this MPC vote brought us is that the bank may move earlier than expected. The currency rose sharply from 1.9870 to 1.9920 versus the dollar, and hit a fresh 15-year high versus the yen.
Wednesday, June 20, 2007
Greenback Slid Broadly
6/19 19:50 Japan April All Industry Activity Index (exp 1.0%, prev –1.4%)
6/19 19:50 Bank of Japan Monetary Policy Meeting Minutes for May
6/20 04:30 Bank of England Minutes
6/20 08:30 Canada May Leading Indicators (exp 0.5%, prev 0.4%)
6/20 08:30 Canada April Wholesale Sales (exp 0.3%, prev 1.9%)
6/20 10:00 US Treasury Secretary Paulson Testifies on the International Financial System
6/20 11:30 US Fed Yellen, Geither Speaks
The dollar edged lower against the euro and sterling as US bond yield premiums over a comparable Japanese and euro zone’s narrowed down. It should be noted that this linkage between yield spreads and the dollar strength is just temporary and not likely to persist. Fundamental factors, such as the Fed rate outlook and rising oil prices, will still be the primary driver of the dollar.
US housing starts report released today showed a 2.19% decline to 1474k in May. The building permit increased from 1457k to 1501k, indicating some strength in future construction. The market is looking for more poor housing data in the coming months.
6/19 19:50 Bank of Japan Monetary Policy Meeting Minutes for May
6/20 04:30 Bank of England Minutes
6/20 08:30 Canada May Leading Indicators (exp 0.5%, prev 0.4%)
6/20 08:30 Canada April Wholesale Sales (exp 0.3%, prev 1.9%)
6/20 10:00 US Treasury Secretary Paulson Testifies on the International Financial System
6/20 11:30 US Fed Yellen, Geither Speaks
The dollar edged lower against the euro and sterling as US bond yield premiums over a comparable Japanese and euro zone’s narrowed down. It should be noted that this linkage between yield spreads and the dollar strength is just temporary and not likely to persist. Fundamental factors, such as the Fed rate outlook and rising oil prices, will still be the primary driver of the dollar.
US housing starts report released today showed a 2.19% decline to 1474k in May. The building permit increased from 1457k to 1501k, indicating some strength in future construction. The market is looking for more poor housing data in the coming months.
Tuesday, June 19, 2007
Euro Bounced Back on ECB Rate Outlook
The euro gains further against the dollar as the market shifted its attention back to the disparity in central bank rate outlook between the European and US after digesting the change in the Fed rate cut chance. The euro climbed to above 1.34 versus the dollar, while the sterling gained 100 pips today to as high as 1.9845.
Besides, the yield premium of US 10-year Treasury notes over German equivalents narrowed to 0.505% from a four-month high of 0.684% on June 12. This reduced the attractiveness of the US dollar-denominated-assets.
Tomorrow will see two housing data from US. Housing starts are expected to decline from 1528k to 1470k in May. Building permits are forecasted to increase slightly to 1470k from 1457k a month earlier.
Besides, the yield premium of US 10-year Treasury notes over German equivalents narrowed to 0.505% from a four-month high of 0.684% on June 12. This reduced the attractiveness of the US dollar-denominated-assets.
Tomorrow will see two housing data from US. Housing starts are expected to decline from 1528k to 1470k in May. Building permits are forecasted to increase slightly to 1470k from 1457k a month earlier.
Monday, June 18, 2007
U.S. consumer sentiment decrease to 83.7
U.S. consumer sentiment eased in early June, according to a monthly survey released Friday by the University of Michigan.
The consumer sentiment index fell to 83.7 from 88.3 in May. Economists were expecting the index to fall to 87.0.
The current conditions index dropped to 100.2 from 105.1. The expectations index fell to 73.0 from 77.6. Inflation expectations for the next year rose to 3.5% from 3.3%.
The consumer sentiment index fell to 83.7 from 88.3 in May. Economists were expecting the index to fall to 87.0.
The current conditions index dropped to 100.2 from 105.1. The expectations index fell to 73.0 from 77.6. Inflation expectations for the next year rose to 3.5% from 3.3%.
U.S. industrial output flat in May
The factory sector has rebounded from doldrums seen during the first three months of the year, but the improvement remains moderate.
Output at the nation's factories and utilities was flat in May, the Federal Reserve said. In addition, production was weaker in April that initially estimated: industrial output in April rose 0.4%, as opposed to the 0.7% growth previously projected. On a year-over-year basis, industrial production is up 1.6%.
Capacity utilization dropped slightly in May, down to 81.3% from 81.5% in April. Over the past year, capacity has grown 2.1%.
Output at the nation's factories and utilities was flat in May, the Federal Reserve said. In addition, production was weaker in April that initially estimated: industrial output in April rose 0.4%, as opposed to the 0.7% growth previously projected. On a year-over-year basis, industrial production is up 1.6%.
Capacity utilization dropped slightly in May, down to 81.3% from 81.5% in April. Over the past year, capacity has grown 2.1%.
Saturday, June 16, 2007
Euro Rebounded Versus Dollar
The euro and sterling rebounded against the dollar as traders almost finished adjusting positions according to recent changes in expectations for the Fed rate outlook. The euro broke a technical obstacle at 1.3340, and initiated an upward trend to reverse recent loss. Should the pair stand firm above the 1.3260 base of the decline from 1.3680 to 1.3260, the upward trend holds with next targets at 1.3430 and 1.3520.
The US CPI report for May came in basically in line the consensus forecast, and had no impact on the market perception that the inflation tends to be moderate and the Fed is likely to hold interest rates unchanged at 5.25%. The CPI rose 0.7%, above the estimate of 0.6%. The core index rose 0.1%, below the forecast of 0.2%.
The euro gained after the ECB council member Axel Weber said the bank is ready to contain inflation, signaling further rate increase. Futures market indicated traders priced in at least one more rate hike by the ECB within the year.
The US CPI report for May came in basically in line the consensus forecast, and had no impact on the market perception that the inflation tends to be moderate and the Fed is likely to hold interest rates unchanged at 5.25%. The CPI rose 0.7%, above the estimate of 0.6%. The core index rose 0.1%, below the forecast of 0.2%.
The euro gained after the ECB council member Axel Weber said the bank is ready to contain inflation, signaling further rate increase. Futures market indicated traders priced in at least one more rate hike by the ECB within the year.
Friday, June 15, 2007
Dollar Rose Above 123 Yen
EST Exp Prev
00:00 Japan Bank of Japan Monetary Policy Decision 0.5% 0.5%
01:00 Japan BoJ June Monthly Report n/a n/a
01:00 Japan April Leading Indicator n/f 20.0
08:30 US Q1 Current Account Deficit $201.0 bln $195.79 bln
08:30 US May Real Earnings 0.1% -0.5%
08:30 US June NY Fed Manufacturing Survey 10.8 8.03
08:30 US May CPI y/y 2.6% 2.6%
08:30 US May CPI-x y/y 2.3% 2.3%
08:30 US May CPI-x m/m 0.2% 0.2%
08:30 US May CPI m/m 0.6% 0.4%
09:00 US April TICS n/f $67.7 bln
09:15 US May Capacity Utilization 81.6% 81.6%
09:15 US May Industrial Production m/m 0.2% 0.7%
10:00 US June University of Michigan Survey prelim 88.0 88.3
The dollar rose above a technical resistance at 123 versus the yen on Thursday. After breaking the key level at 122.20 yesterday, the pair initiated an upward trend with next target at 123.50.
The Bank of Japan is widely expected to leave interest rates unchanged at 0.5% on it policy meeting tonight. US interest rate futures indicated that traders have already priced out a chance of a Fed rate cut within the year. The US bond yield premium over Japan equivalents widened further, pushing the dollar trade higher versus the yen.
00:00 Japan Bank of Japan Monetary Policy Decision 0.5% 0.5%
01:00 Japan BoJ June Monthly Report n/a n/a
01:00 Japan April Leading Indicator n/f 20.0
08:30 US Q1 Current Account Deficit $201.0 bln $195.79 bln
08:30 US May Real Earnings 0.1% -0.5%
08:30 US June NY Fed Manufacturing Survey 10.8 8.03
08:30 US May CPI y/y 2.6% 2.6%
08:30 US May CPI-x y/y 2.3% 2.3%
08:30 US May CPI-x m/m 0.2% 0.2%
08:30 US May CPI m/m 0.6% 0.4%
09:00 US April TICS n/f $67.7 bln
09:15 US May Capacity Utilization 81.6% 81.6%
09:15 US May Industrial Production m/m 0.2% 0.7%
10:00 US June University of Michigan Survey prelim 88.0 88.3
The dollar rose above a technical resistance at 123 versus the yen on Thursday. After breaking the key level at 122.20 yesterday, the pair initiated an upward trend with next target at 123.50.
The Bank of Japan is widely expected to leave interest rates unchanged at 0.5% on it policy meeting tonight. US interest rate futures indicated that traders have already priced out a chance of a Fed rate cut within the year. The US bond yield premium over Japan equivalents widened further, pushing the dollar trade higher versus the yen.
Thursday, June 14, 2007
Dollar Hits 4 ½ Yr High vs Yen
The dollar hits a 4 ½-year high against the yen as US 10-year Treasury note yield rose to the highest since April 2002, which encouraged carry trades. Rising global bond yields and widening yield premiums of US bonds over Japan’s equivalents support the dollar.
The greenback strengthened against the euro earlier following a robust US retail sales report. US retail sales brose 1.4% in April, reversing a 0.2% decline in the previous month and beating the estimate of 0.6%. Excluding automobiles, core retail sales grew 1.3%, above the forecast of 0.2%.
The losses in the euro and sterling versus the dollar were limited by substantial difference in the central bank rate outlook between European and US. The euro rebounded to break 1.33 level against the dollar and the sterling stays above 1.97 versus the dollar.
The greenback strengthened against the euro earlier following a robust US retail sales report. US retail sales brose 1.4% in April, reversing a 0.2% decline in the previous month and beating the estimate of 0.6%. Excluding automobiles, core retail sales grew 1.3%, above the forecast of 0.2%.
The losses in the euro and sterling versus the dollar were limited by substantial difference in the central bank rate outlook between European and US. The euro rebounded to break 1.33 level against the dollar and the sterling stays above 1.97 versus the dollar.
Wednesday, June 13, 2007
Dollar Holds Firm as Rate Cut Expectations Faded
The dollar holds firm against the euro and the yen as expectations for a Fed interest rate cut within the year faded. The market expects upbeat numbers from US retail sales and consumer prices reports due this week. The greenback hovers near a major resistance at 122 against the yen, while stays around a 2 ½ -month peak against the euro.
Tomorrow will see UK employment report, US retail sales report and US business inventories index. US retail sales are estimated to reverse previous month’s decline and grow 0.6% in May. Excluding automobiles, core index is forecasted to increase 0.7%.
The losses in the euro maybe limited by expectations that the European Central Bank may lift interest rates twice in the rest of the year. ECB President Trichet said yesterday that borrowing costs are low enough to support economic expansion, signaling further rate hikes.
Tomorrow will see UK employment report, US retail sales report and US business inventories index. US retail sales are estimated to reverse previous month’s decline and grow 0.6% in May. Excluding automobiles, core index is forecasted to increase 0.7%.
The losses in the euro maybe limited by expectations that the European Central Bank may lift interest rates twice in the rest of the year. ECB President Trichet said yesterday that borrowing costs are low enough to support economic expansion, signaling further rate hikes.
Tuesday, June 12, 2007
UK Inflation Takes Centerstage
At 1:00 AM Japan May Confidence Index (exp n/f, prev 47.4)
At 4:30 AM UK May CPI m/m (exp 0.3%, prev 0.3%)
UK May CPI y/y (exp 2.6%, prev 2.8%)
UK May RPI m/m (exp 0.4%, prev 0.5%)
UK May RPI y/y (exp 4.3%, prev 4.5%)
UK May RPI-x m/m (exp 0.4%, prev 0.5%)
UK May RPI-x y/y (exp 3.3%, prev 3.6%)
UK April Trade Balance (exp –7.0 bln stg, prev –7.04 bln stg)
At 5:00 AM E-13 April Industrial Production m/m (exp 0.2%, prev 0.4%)
E-13 April Industrial Production y/y (exp 4.4%, prev 3.7%)
At 2:00 PM US May Federal Budget (exp $-70.0 bln, prev $42.91 bln)
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GBP Edges Higher Ahead of Inflation Reports
Cable recovered the 1.97-level in early Tuesday trading with several key indicators of UK inflation due out later in the session. Markets will try to discern how aggressive the Bank of England will be over the coming months to rein in inflation as CPI continues to hover well above its 2% target. The barrage of reports today consist of May CPI, RPI, RPI-x and April trade balance.
At 4:30 AM UK May CPI m/m (exp 0.3%, prev 0.3%)
UK May CPI y/y (exp 2.6%, prev 2.8%)
UK May RPI m/m (exp 0.4%, prev 0.5%)
UK May RPI y/y (exp 4.3%, prev 4.5%)
UK May RPI-x m/m (exp 0.4%, prev 0.5%)
UK May RPI-x y/y (exp 3.3%, prev 3.6%)
UK April Trade Balance (exp –7.0 bln stg, prev –7.04 bln stg)
At 5:00 AM E-13 April Industrial Production m/m (exp 0.2%, prev 0.4%)
E-13 April Industrial Production y/y (exp 4.4%, prev 3.7%)
At 2:00 PM US May Federal Budget (exp $-70.0 bln, prev $42.91 bln)
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GBP Edges Higher Ahead of Inflation Reports
Cable recovered the 1.97-level in early Tuesday trading with several key indicators of UK inflation due out later in the session. Markets will try to discern how aggressive the Bank of England will be over the coming months to rein in inflation as CPI continues to hover well above its 2% target. The barrage of reports today consist of May CPI, RPI, RPI-x and April trade balance.
Monday, June 11, 2007
NZD Slumped After RBNZ Intervention
The New Zealand dollar posted its largest decline in more than a year on Monday after the Reserve Bank of New Zealand intervened the foreign exchange market by selling its currency in the thin trading session.
This is the first time the RBNZ intervened the market since it allowed the currency freely float in 1985. The kiwi hit a 22-year high against the dollar last week after a surprise rate hike by the central bank. The governor of the RBNZ, Alan Bollard, said that current level of the exchange rate was unjustifiably high in terms of economic fundamentals. The currency today tumbled 1.9% to 0.7495 versus the dollar, while fell 1.6% to 91.27 against the yen.
This is the first time the RBNZ intervened the market since it allowed the currency freely float in 1985. The kiwi hit a 22-year high against the dollar last week after a surprise rate hike by the central bank. The governor of the RBNZ, Alan Bollard, said that current level of the exchange rate was unjustifiably high in terms of economic fundamentals. The currency today tumbled 1.9% to 0.7495 versus the dollar, while fell 1.6% to 91.27 against the yen.
Inflation Data in Focus This Week
At 4:30 AM UK May core PPI m/m (exp 0.3%, prev 0.1%)
UK May core PPI y/y (exp 2.3%, prev 2.4%)
At 8:30 AM Canada Q1 Capacity Utilization (exp 83.5%, prev 82.5%)
The dollar remains supported heading into the week against the euro, sterling and yen – as traders continue to price in an unchanged Fed for the rest of the year. Yields on US Treasuries climbed higher last week as the 10-year yield jumping past the 5% mark. The outlook for US growth and inflation remains mixed, resulting in increased scrutiny over incoming economic data.
The coming week will see several key pieces of data, consisting of May retail sales, business inventories, producer price index, NY Fed manufacturing survey, consumer price index, current account deficit, capacity utilization, TICS, and the University of Michigan sentiment survey. Traders will closely analyze US inflation reports as well as bond market reaction to gauge market sentiment of the Fed’s interest rate outlook.
UK May core PPI y/y (exp 2.3%, prev 2.4%)
At 8:30 AM Canada Q1 Capacity Utilization (exp 83.5%, prev 82.5%)
The dollar remains supported heading into the week against the euro, sterling and yen – as traders continue to price in an unchanged Fed for the rest of the year. Yields on US Treasuries climbed higher last week as the 10-year yield jumping past the 5% mark. The outlook for US growth and inflation remains mixed, resulting in increased scrutiny over incoming economic data.
The coming week will see several key pieces of data, consisting of May retail sales, business inventories, producer price index, NY Fed manufacturing survey, consumer price index, current account deficit, capacity utilization, TICS, and the University of Michigan sentiment survey. Traders will closely analyze US inflation reports as well as bond market reaction to gauge market sentiment of the Fed’s interest rate outlook.
Sunday, June 10, 2007
Dollar Rallies On Rising Bond Yield
The greenback rallied across the board as global equity market and US bond market declined. The euro broke a resistance at 1.3370 to as low as 1.3320 versus the dollar. The sterling fell sharply below last month¡¯s low at 1.9675 and reached 1.9624 against the dollar.
US 10-year Treasury notes yield rose to 5.2%, the highest in 11 months. Also, the yield differential between US 10-year notes and German equivalents widened to a 2 month high. There are two main factors that pushed the yield up and drove bond prices down. Firstly, New Zealand central bank unexpectedly raised interest rates to 8% and the European central bank lifted rates to 4%. This indicates an upward trend in the global interest rates. Secondly, the market finally eliminated speculations about a Fed rate cut within this year under recent robust US data.
The dollar remained firm after a report today showed US trade deficit narrowed from 63.5 billion to 54.9 billion in April.
US 10-year Treasury notes yield rose to 5.2%, the highest in 11 months. Also, the yield differential between US 10-year notes and German equivalents widened to a 2 month high. There are two main factors that pushed the yield up and drove bond prices down. Firstly, New Zealand central bank unexpectedly raised interest rates to 8% and the European central bank lifted rates to 4%. This indicates an upward trend in the global interest rates. Secondly, the market finally eliminated speculations about a Fed rate cut within this year under recent robust US data.
The dollar remained firm after a report today showed US trade deficit narrowed from 63.5 billion to 54.9 billion in April.
Friday, June 8, 2007
The deficit of US international trade unexpectedly declined in April
The deficit of US international trade unexpectedly declined in AprilThe Ministry of Trade reported today that US international trade deficit unexpectedly declined in April to $58.5bln. Positive data on US international trade is most likely to consolidate dollar against major currencies. The deficit of international trade for March was revised from $63.9bln to $62.4. The analysts expected deficit increase to $64.0bln.
Imports fell in April to $187.98bln from $191.63bln in March. Exports increased to $129.49bln from $126.24 in the preceding month.
Imports fell in April to $187.98bln from $191.63bln in March. Exports increased to $129.49bln from $126.24 in the preceding month.
UK industrial production rose by 0.3% in
The index of industrial production in Great Britain rose by 0.3% in April, the National Office of Statistics reported today. The index was expected to increase by 0.1%. In March UK industrial production also increased by 0.3%.
Manufacturing output rose in April by 0.3%, which was up to analysts’ estimates, but below the preceding reading (0.6%).
The annual increase of industrial production was in April 0.3%, compared with the decrease by 0.2% in March. According to previous economists’ estimates annual increase of industrial production was 0.5%. Annual manufacturing output rose by 1.3%, compared with the preceding reading 1.4% and estimates 0.9%
Manufacturing output rose in April by 0.3%, which was up to analysts’ estimates, but below the preceding reading (0.6%).
The annual increase of industrial production was in April 0.3%, compared with the decrease by 0.2% in March. According to previous economists’ estimates annual increase of industrial production was 0.5%. Annual manufacturing output rose by 1.3%, compared with the preceding reading 1.4% and estimates 0.9%
USD Buoyed on Interest Rates
At 2:00 AM Eurozone April Trade Balance (exp 15.4 bln euros, prev 15.5 bln euros)
At 4:30 AM UK April Industrial Production m/m (exp 0.2%, prev 0.3%)
UK April Industrial Production y/y (exp 0.6%, prev -0.2%)
UK April Manufacturing Production m/m (exp 0.2%, prev 0.3%)
UK April Manufacturing Production y/y (exp 1.4%, prev 0.9%)
At 7:00 AM Canada May Unemployment Rate (exp 6.1%, prev 6.1%)
Canada May Jobs-Change (exp 19.0k, prev –5.2k)
At 8:30 AM US April Trade Deficit (exp $63.5-bln, prev $63.89 bln)
Canada April Trade Balance (C$4.9bln, prev C$4.64bln)
The greenback remains supported against the majors following yesterday’s jump in yields for US Treasuries – with the yield on the 10-year edging to its highest level in almost a year at 5.14%. The bond market is pricing in no change in the Fed Funds rate for the remainder of the year, thereby providing support for the dollar – in which prior expectations for a rate cut were detrimental for the currency. Meanwhile, the sterling remains under pressure following the Bank of England’s announcement to leave rates unchanged despite being inline with expectations due to hopes for a surprise 25-bp hike to tame inflation.
Economic data from North America consist of Canada’s May unemployment rate, job-change, April trade Balance and US April trade deficit. Canada’s unemployment rate is forecasted to remain unchanged for May at 6.1%, with an increase of 19.0k in jobs-change versus a 5.2k decline in the previous month. The US trade deficit for April is expected to be largely unchanged, moving down slightly to $63.5 billion compared with $63.89 billion from March.
At 4:30 AM UK April Industrial Production m/m (exp 0.2%, prev 0.3%)
UK April Industrial Production y/y (exp 0.6%, prev -0.2%)
UK April Manufacturing Production m/m (exp 0.2%, prev 0.3%)
UK April Manufacturing Production y/y (exp 1.4%, prev 0.9%)
At 7:00 AM Canada May Unemployment Rate (exp 6.1%, prev 6.1%)
Canada May Jobs-Change (exp 19.0k, prev –5.2k)
At 8:30 AM US April Trade Deficit (exp $63.5-bln, prev $63.89 bln)
Canada April Trade Balance (C$4.9bln, prev C$4.64bln)
The greenback remains supported against the majors following yesterday’s jump in yields for US Treasuries – with the yield on the 10-year edging to its highest level in almost a year at 5.14%. The bond market is pricing in no change in the Fed Funds rate for the remainder of the year, thereby providing support for the dollar – in which prior expectations for a rate cut were detrimental for the currency. Meanwhile, the sterling remains under pressure following the Bank of England’s announcement to leave rates unchanged despite being inline with expectations due to hopes for a surprise 25-bp hike to tame inflation.
Economic data from North America consist of Canada’s May unemployment rate, job-change, April trade Balance and US April trade deficit. Canada’s unemployment rate is forecasted to remain unchanged for May at 6.1%, with an increase of 19.0k in jobs-change versus a 5.2k decline in the previous month. The US trade deficit for April is expected to be largely unchanged, moving down slightly to $63.5 billion compared with $63.89 billion from March.
Thursday, June 7, 2007
AUD Jumps, GBP Awaits BoE
At 7:00 AM Bank of England Rate Decision (exp 5.5%, prev 5.5%)
At 8:30 AM US Weekly Jobless Claims (exp 310k, prev 310k)
The greenback is predominantly lower across the board, struggling near 17-year lows versus the Aussie and 30-year lows against the Loonie. The recent weakness is largely a result of strength in the overseas economies rather than weakness in the US economy, particularly given the recent bout of mixed economic reports.
Sentiment over interest rate differentials will remain a key factor in the currency market, as traders continue to observe the growing disparities between US economic growth and its overseas counterparts – with the US’ clearly lagging. The economic calendar is light today, with just the release of weekly jobless claims, seen unchanged at 310k.
At 8:30 AM US Weekly Jobless Claims (exp 310k, prev 310k)
The greenback is predominantly lower across the board, struggling near 17-year lows versus the Aussie and 30-year lows against the Loonie. The recent weakness is largely a result of strength in the overseas economies rather than weakness in the US economy, particularly given the recent bout of mixed economic reports.
Sentiment over interest rate differentials will remain a key factor in the currency market, as traders continue to observe the growing disparities between US economic growth and its overseas counterparts – with the US’ clearly lagging. The economic calendar is light today, with just the release of weekly jobless claims, seen unchanged at 310k.
Euro Fell on ECB Trichet Comments
The euro fell below 1.35 against the dollar after ECB President Trichet talked down the possibilities of further rate hikes in 2008.
The European Central Bank lifted interest rates from 3.75% to 4.00% as expected on its monetary policy meeting ended today. Trichet said on the post meeting conference that in medium term risks to prices are on the upside, reinforcing the expectations for two more rate increased this year. He added that the inflation is likely to fall in coming months and risks significantly towards end year. He also pointed out that inflation projections for the year 2008 remain unchanged, leading investors price down the likelihood of rate hikes in 2008 to 60% from 80% a day ago.
The dollar was supported after robust US data confirmed the view that the nation¡¯s economy is still in good shape. US productivity index fell from 1.7% to 1.0% in the first quarter. The labor cost rose from 0.6% to 1.8% in the first quarter, above the estimate of 1.2%.
The European Central Bank lifted interest rates from 3.75% to 4.00% as expected on its monetary policy meeting ended today. Trichet said on the post meeting conference that in medium term risks to prices are on the upside, reinforcing the expectations for two more rate increased this year. He added that the inflation is likely to fall in coming months and risks significantly towards end year. He also pointed out that inflation projections for the year 2008 remain unchanged, leading investors price down the likelihood of rate hikes in 2008 to 60% from 80% a day ago.
The dollar was supported after robust US data confirmed the view that the nation¡¯s economy is still in good shape. US productivity index fell from 1.7% to 1.0% in the first quarter. The labor cost rose from 0.6% to 1.8% in the first quarter, above the estimate of 1.2%.
Euro Creeps Higher, Awaits ECB
At 6:00 AM Eurozone April Industrial Orders m/m (exp –1.0%, prev 2.4%)
At 7:45 AM ECB June Monetary Policy Decision (exp 4.00%, prev 3.75%)
At 8:30 AM ECB President Trichet’s Press Conference
US Q1 Productivity (exp 1.1%, prev 1.7%)
US Q1 Labor Cost (exp 1.2%, prev 0.6%)
The dollar is lower across the board, weighed by yesterday’s comments from Fed Chairman Bernanke. Direction in the foreign exchange market remains largely dictated by sentiment over global interest rate differentials. With Bernanke setting the tone for an unchanged stance for the remainder of the year, traders will scrutinize rate decisions and comments from global central banks this week. Earlier in the session, the Reserve Bank of Australia announced its policy decision, leaving rates unchanged at 6.25%.
US economic data slated for release later will see Q1 productivity and labor cost. Productivity in the first quarter is expected to fall to 1.1%, down from 1.7% in the previous quarter. Meanwhile, labor cost is seen climbing higher to 1.2% versus 0.6% from the last quarter.
At 7:45 AM ECB June Monetary Policy Decision (exp 4.00%, prev 3.75%)
At 8:30 AM ECB President Trichet’s Press Conference
US Q1 Productivity (exp 1.1%, prev 1.7%)
US Q1 Labor Cost (exp 1.2%, prev 0.6%)
The dollar is lower across the board, weighed by yesterday’s comments from Fed Chairman Bernanke. Direction in the foreign exchange market remains largely dictated by sentiment over global interest rate differentials. With Bernanke setting the tone for an unchanged stance for the remainder of the year, traders will scrutinize rate decisions and comments from global central banks this week. Earlier in the session, the Reserve Bank of Australia announced its policy decision, leaving rates unchanged at 6.25%.
US economic data slated for release later will see Q1 productivity and labor cost. Productivity in the first quarter is expected to fall to 1.1%, down from 1.7% in the previous quarter. Meanwhile, labor cost is seen climbing higher to 1.2% versus 0.6% from the last quarter.
Dollar Under Pressure on Bernanke Comments
The greenback dipped further against its major rivals following the Fed Chairman Ben Bernanke’s comments on the US economy. The euro extended its rally to 1.3553 versus the dollar, while the sterling edged higher to 1.9966.
Bernanke said the inflation is very well anchored and the cored inflation seems somewhat elevated. He also said the slowdown in housing market will be a drag on the whole economy for a longer period of time than expected. The expectations of a Fed rate cut have been lowered after a run of robust fundamental data recently. Bernanke’s dovish remarks on the housing market put more pressure on the dollar.
The dollar edged up slightly after a report showed US non-manufacturing ISM unexpectedly rose from 56 to 59.4 in May.
Bernanke said the inflation is very well anchored and the cored inflation seems somewhat elevated. He also said the slowdown in housing market will be a drag on the whole economy for a longer period of time than expected. The expectations of a Fed rate cut have been lowered after a run of robust fundamental data recently. Bernanke’s dovish remarks on the housing market put more pressure on the dollar.
The dollar edged up slightly after a report showed US non-manufacturing ISM unexpectedly rose from 56 to 59.4 in May.
Tuesday, June 5, 2007
USD Softer Ahead of Services Report
At 4:00 AM May Eurozone Services PMI (exp 57.1, prev 57.0)
At 4:30 AM UK May Services PMI (exp 57.0, prev 57.2)
At 5:00 AM Eurozone April Retail Sales m/m (exp 0.5%, prev 0.5%)
Eurozone April Retail Sales y/y (exp 2.0%, prev 2.6%)
At 10:00 AM US May non-manufacturing ISM (exp 55.3, prev 56.0)
The greenback is softer across the board, drifting to new 30-year lows against the Canadian dollar and falling back toward the 1.35-level versus the euro. The focus for the week continues to be global central bank policy, given decisions from the ECB, RBA and BoE.
The US economic calendar is light for the coming session, with the release of the May non-manufacturing ISM report – forecasted to slip to 55.3 versus 56.0 from a month earlier.
At 4:30 AM UK May Services PMI (exp 57.0, prev 57.2)
At 5:00 AM Eurozone April Retail Sales m/m (exp 0.5%, prev 0.5%)
Eurozone April Retail Sales y/y (exp 2.0%, prev 2.6%)
At 10:00 AM US May non-manufacturing ISM (exp 55.3, prev 56.0)
The greenback is softer across the board, drifting to new 30-year lows against the Canadian dollar and falling back toward the 1.35-level versus the euro. The focus for the week continues to be global central bank policy, given decisions from the ECB, RBA and BoE.
The US economic calendar is light for the coming session, with the release of the May non-manufacturing ISM report – forecasted to slip to 55.3 versus 56.0 from a month earlier.
Central Bank Outlook Dominates FX
The euro strengthened across the board on expectations that the European Central Bank will continue its credit tightening process to curb rising inflation. The single currency climbed from 1.3450 to close to 1.35 versus the dollar on Monday.
The ECB is widely expected to lift rates from 3.75% to 4% at its monetary policy meeting on Wednesday. Moreover, the central bank may need to raise rates two more times to 4.5% this year as the euro zone economy grows steadily.
The dollar was little changed following mixed US manufacturing data today. US factory orders fell from 3.1% to 0.3% in April, far below the estimate of 0.7%. The durable goods orders were revised from 0.6% to 0.8%, better than the expectation of 0.6%.
The ECB is widely expected to lift rates from 3.75% to 4% at its monetary policy meeting on Wednesday. Moreover, the central bank may need to raise rates two more times to 4.5% this year as the euro zone economy grows steadily.
The dollar was little changed following mixed US manufacturing data today. US factory orders fell from 3.1% to 0.3% in April, far below the estimate of 0.7%. The durable goods orders were revised from 0.6% to 0.8%, better than the expectation of 0.6%.
Monday, June 4, 2007
U.S. factory orders rise 0.3 pct in April
Factory orders in U.S. climbed less than expected during April. Orders for manufactured goods increased 0.3%, following a revised 4.1% gain in March. March factory orders were originally reported 3.1% higher.
Demand for durable goods, things designed to last at least three years, increased 0.8%. Durables orders rose 5.1% in March. Non-durable goods orders decreased 0.2%, after a 2.9% increase in the prior month.
Meanwhile, a yardstick for business investment demand - non-defense capital goods orders - rose 2.1% in April, after climbing 4.6% in March.
The 0.3% April climb was surprisingly weak. Economists expected an increase of 0.7%
Demand for durable goods, things designed to last at least three years, increased 0.8%. Durables orders rose 5.1% in March. Non-durable goods orders decreased 0.2%, after a 2.9% increase in the prior month.
Meanwhile, a yardstick for business investment demand - non-defense capital goods orders - rose 2.1% in April, after climbing 4.6% in March.
The 0.3% April climb was surprisingly weak. Economists expected an increase of 0.7%
Producer price index in the euro area rose by 0.4% in April
The producer price index in the euro area rose in April by 0.4%, which was above expectations (0.3%) and preceding reading (0.3%).
Annual producer price index rose by 2.4% in April, which was also above expectations (2.3%), but was below the increase in March (2.8%). The index produces substantial effect upon the market, which its increase creates favorable background for euro rate rise.
The producer price index excluding energy rose in April by 0.4% on month and 3.4% on year, compared with the increase by 0.3% and 3.4%, on month and year respectively in the preceding month.
Prices in energy sector rose in April by 0.5% on month and fell by 0.7% at the annual rate.
Annual producer price index rose by 2.4% in April, which was also above expectations (2.3%), but was below the increase in March (2.8%). The index produces substantial effect upon the market, which its increase creates favorable background for euro rate rise.
The producer price index excluding energy rose in April by 0.4% on month and 3.4% on year, compared with the increase by 0.3% and 3.4%, on month and year respectively in the preceding month.
Prices in energy sector rose in April by 0.5% on month and fell by 0.7% at the annual rate.
Nonfarm payrolls in the USA were above expectations in May
Nonfarm payrolls in the USA rose in May by 157K. The index was rather strong in comparison with the preceding reading (88K) and estimates (135000), which creates favorite background for dollar rate rise.
The unemployment rate did not change and was 4.5% in May. The index was up to analysts’ expectations.
Average earnings rose in May by 0.3%, which was up to expectations, but slightly above April reading (0.2%).
Nonfarm payrolls and the unemployment rate produce substantial effect upon the market. Both of them support dollar, when the first index increases, while the other decreases, and visa versa, the increase of the second index and decrease of the first one lay pressure on dollar.
The unemployment rate did not change and was 4.5% in May. The index was up to analysts’ expectations.
Average earnings rose in May by 0.3%, which was up to expectations, but slightly above April reading (0.2%).
Nonfarm payrolls and the unemployment rate produce substantial effect upon the market. Both of them support dollar, when the first index increases, while the other decreases, and visa versa, the increase of the second index and decrease of the first one lay pressure on dollar.
Preliminary GDP for the first quarter in the euro area was up to expectations
Preliminary GDP for the first quarter in the euro area was 0.6%, Eurostat, the Statistical Office of the European Communities reported today. The index was up to analysts’ expectations, but below GDP increase in the forth quarter of 2006 (0.9%).
The annual preliminary GDP for the first quarter was 3.0%, below annual GDP in the forth quarter of 2006 (3.3%) and estimates (3.1%). Exports rose in the first quarter by 0.3%. Imports fell by 1.6%, which provided positive trade balance.
The annual preliminary GDP for the first quarter was 3.0%, below annual GDP in the forth quarter of 2006 (3.3%) and estimates (3.1%). Exports rose in the first quarter by 0.3%. Imports fell by 1.6%, which provided positive trade balance.
Saturday, June 2, 2007
US Data Mixed, Payrolls Eyed
The dollar was mixed in the Thursday session, climbing higher against the yen and euro, while remaining pressured near 30-year lows versus the Loonie. The reports released earlier today continued to reinforce the mixed nature of the US economy and provided support for the greenback, which firmed to a near 3-month high against the yen at 121.96.
The economic data included Q1 GDP, which fell short of consensus forecasts on an annualized basis at 0.6% -- missing estimates for a decline to 0.8% from 1.3% and its slowest pace of growth in over 4 years. The drop in growth was attributed to the burgeoning trade deficit and contraction in inventories. Inflation was slightly softer with the personal consumption expenditures drifting to 3.2%, from 3.3% while the core PCE held steady at 2.2%. Propping the dollar higher was a larger than forecast jump in the May Chicago PMI at 61.7, sharply higher than calls for a 54.0 reading from 52.9 in April. The data confirms the rebound in the manufacturing sector and bodes well for tomorrow’s ISM report.
The highly awaited non-farm payrolls report for May is due out tomorrow morning at 8:30 AM and is expected to jump to 130.0k versus 88.0k a month prior. The unemployment rate is forecasted to stand pat at 4.5% while April core PCE is expected to creep up to 0.2% from a flat reading in the previous month. The May Manufacturing ISM is largely seen unchanged at 54.0, down marginally from a month earlier at 54.7.
The economic data included Q1 GDP, which fell short of consensus forecasts on an annualized basis at 0.6% -- missing estimates for a decline to 0.8% from 1.3% and its slowest pace of growth in over 4 years. The drop in growth was attributed to the burgeoning trade deficit and contraction in inventories. Inflation was slightly softer with the personal consumption expenditures drifting to 3.2%, from 3.3% while the core PCE held steady at 2.2%. Propping the dollar higher was a larger than forecast jump in the May Chicago PMI at 61.7, sharply higher than calls for a 54.0 reading from 52.9 in April. The data confirms the rebound in the manufacturing sector and bodes well for tomorrow’s ISM report.
The highly awaited non-farm payrolls report for May is due out tomorrow morning at 8:30 AM and is expected to jump to 130.0k versus 88.0k a month prior. The unemployment rate is forecasted to stand pat at 4.5% while April core PCE is expected to creep up to 0.2% from a flat reading in the previous month. The May Manufacturing ISM is largely seen unchanged at 54.0, down marginally from a month earlier at 54.7.
Friday, June 1, 2007
FX Awaits Data Barrage
The foreign exchange market was mixed, with the dollar remaining buoyed against the euro and sterling, while losing ground to the yen and Loonie. Yesterday’s stamp-tax hike from China to tame exorbitant gains in its stock market added pressure to carry trades as traders reassessed the scope for increased jawboning against excessively selling the lower yielding currencies such as the yen and Swissie.
Given recent focus on the Bank of Canada further tightening interest rates to contain inflation, markets will closely analyze Canada’s growth report due out at 8:30 AM. Canada’s March GDP is forecasted to jump to a robust 3.5% from 1.4% a monthly earlier. Firmer economic conditions will provide greater scope for the BoC to hike rates after its anticipated July 25-bp tightening.
The FOMC released the minutes from its May meeting, in which the Fed left monetary policy unchanged at 5.25%. The overall tone from the minutes was mixed with the board emphasizing caution to lingering risks to inflation, with its predominant concern being the risk of inflation failing to moderate as expected. However, the minutes did offer a slightly more upbeat assessment for the economic outlook, saying, “recent sub-pay performance probably exaggerated the weakness in underlying demand, and the rate of economic growth was expected to pick up in coming quarters’.
Given recent focus on the Bank of Canada further tightening interest rates to contain inflation, markets will closely analyze Canada’s growth report due out at 8:30 AM. Canada’s March GDP is forecasted to jump to a robust 3.5% from 1.4% a monthly earlier. Firmer economic conditions will provide greater scope for the BoC to hike rates after its anticipated July 25-bp tightening.
The FOMC released the minutes from its May meeting, in which the Fed left monetary policy unchanged at 5.25%. The overall tone from the minutes was mixed with the board emphasizing caution to lingering risks to inflation, with its predominant concern being the risk of inflation failing to moderate as expected. However, the minutes did offer a slightly more upbeat assessment for the economic outlook, saying, “recent sub-pay performance probably exaggerated the weakness in underlying demand, and the rate of economic growth was expected to pick up in coming quarters’.
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