US Consumer Confidence Bounce back in March

U.S. consumer confidence rebounded in March after falling sharply in the prior month, the Conference Board said Tuesday. The consumer confidence index rose to 52.5 in March from 46.4 in February. Confidence had dropped significantly in February from 56.5 in January. The gain in confidence was greater than forecast, economists had predicted the index would increase to 51.0.

However Lynn Franco, director of the Conference Board's consumer research center was cautious about the pick-up, saying that consumers continue to express concern about current business and labor market conditions.

"Their outlook for the next six months is still rather pessimistic," Franco said. “Despite this month’s increase, consumers continue to express concern about current business and labor market conditions. Overall, consumer confidence levels have not changed significantly since last spring.”

The share of consumers who said jobs are plentiful advanced to 4.4% from 4%. The proportion of people who said jobs are hard to get decreased to 45.8, the fewest since August. More people also anticipated incomes and employment would improve in the next six months, the report showed.

Data also showed that home prices unexpectedly rose in February. Rising stock prices, a stabilizing housing market and fewer firings may be giving households hope that the recovery from the worst recession since the 1930s will be sustained. The 184,000 increase in payrolls economists project for this month shows it will take years for the economy to reverse the loss of 8.4 million jobs since the contraction began in December 2007.

Home prices in 20 U.S. cities rose 0.3% in January, indicating the housing market is stabilizing as the economy expands. The S&P/Case-Shiller home-price index climbed from the prior month on a seasonally adjusted basis after a similar gain in December.

Cheaper homes, low borrowing costs and government incentives have combined to support the housing market after its collapse helped trigger the recession. Fed officials this month signaled the U.S. recovery isn’t strong enough to stoke inflation, reduce unemployment quickly or justify an end to record-low interest rates.

While the economy has “continued to strengthen,” policy makers said in a statement after their March 16 meeting that “employers remain reluctant to add to payrolls.” Unemployment is projected to end the year at 9.5%.

The US Dollar rose against Sterling yesterday as the Pound slipped 0.64% to close the day's trading at GBP 1.5071. The US Dollar slid 0.38% against the Euro closing at EUR 1.3424.

Later today American ADP Non-Farm Payrolls are due for release. The figures always shake the markets but it is not always a good predictor of Non-Farm Payrolls which will be released on Friday. Last time the figure showed a loss of 20,000 jobs. This time an increase of 41,000 jobs is predicted.

Yesterday saw the Canadian Dollar rise for the second day against its US counterpart as gains in global equities and crude oil spurred demand for commodity currencies. It gained 0.20% against the US Dollar during trading to close at CAD 1.0192. The previous day it advanced 0.51% or 0.05 cents against the US Dollar to CAD 1.0214.

The currency has gained 3.6% against the US Dollar so far this year, the second best performer after the Mexican Peso among the 16 most traded currencies in the forex online market. It will be the fourth straight quarterly rise for the currency, which tends to rise and fall with commodity prices.

"The Canadian Dollar remains a market favorite and after a brief correction last week appears to be back on track for a move towards parity", said Steve Butler, director of foreign exchange trading in Toronto at Bank of Nova Scotia, Canada's third largest lender. The Canadian GDP monthly figures are due for release later today.

Read more...

Forex News: Eur soars high against the Greenback

On Friday the Euro strengthened against the US Dollar and the Pound after EU leaders agreed on a financial aid package for Greece. The deal includes funds from the International Monetary Fund and totals around 22bn Euros which could be made available to Greece should the country have difficulty borrowing money to service its high level of debt.

Against the US Dollar the Euro rose by more than one cent to $1.3422 before falling back slightly to close trading at $1.3414 before the start of the weekend. It rose around two-fifths of a cent against Sterling to close trading at GBP 0.9003 in the forex online market.

On Wednesday the Euro had fallen to a ten month low against the US Dollar amid fears a deal would not be reached after Germany indicated Greece did not need assistance. This followed close on the heels of a credit downgrade for Portugal which further weakened the currency.

The deal may allay fears that the problems which Greece has experienced could spread out to affect other countries in the Euro Zone. Following the announcement that a deal had been reached yields, that is the interest rate investors are paid on loans to the government, on Greek bonds fell slightly, an indication that investors viewed them as slightly less risky. Analysts feel the real test will come when Greece hold its next sale of government bonds which will almost certainly happen in the coming weeks. This will be a crucial test for Greece as well as setting the tone for what is to come in the Euro Zone.

According to Moody's credit rating agency, disagreement among Euro Zone partners could undermine the deal: "The key credit question is whether market confidence will be strengthened by the support package, or whether it will be weakened by the contentious conditions under which this package was agreed."

Further concern that the EU's rescue plan could fail arises from concerns that EU leaders may have underestimated how great the problems facing the Euro Zone are. This particular plan was drawn up in response to the Greek crisis, however there are many other members who are struggling, most notably Ireland, Spain, Portugal and Italy. Greek Prime Minister George Papandreou must now prove that he can keep the nations finances afloat as failure to do so could spark a fresh crisis and trigger the use of the aid package. Looking forward the Euro will remain heavily dependent on smooth market conditions in the short term to immediate future.

Across the water in the US, Friday saw the news that the US GDP was revised downward to an annualized rate of 5.6% for the last quarter of 2009. It was revised down from 5.9% according to figures released by the US Commerce Department.

Read more...

Forex News: U.K Retail sales rebounded

In the UK retail sales rebounded more than economists forecast in February with the biggest jump since May 2008 as Britons raised spending on goods from electrical items to auto fuel. Sales rose 2.1% from January, when they slumped by a more-than-previously-expected 3% in the longest cold snap for three decades. Excluding fuel, sales rose 1.6%, the most since June.

The increase in sales for February was led by an 11.2% jump at household goods stores, the statistics office said. Auto fuel sales rose by 9.1% and textile, clothing and footwear shops had a 1.1% gain. Food stores showed a 1.2% drop, the most since June 2008.

The January sales drop was revised down from a decline of 1.8% previously reported because of late returns of data from retailers, the statistics office said.

Next, the U.K.’s second-biggest clothing retailer said today full-year earnings rose 20% as it expanded Internet and catalog sales and sold more goods at full price in stores.

UK Chancellor of the Exchequer Alistair Darling, presenting his budget report to Parliament Wednesday said that to start cuts in public spending before the recovery was assured “would be both wrong and dangerous.” The ruling Labor Party’s resistance to faster spending cuts have helped it narrow the lead of the opposition Conservatives ahead of a general election due by June.

Jobless claims fell last month at the fastest pace since 1997, though the number of people in work in the three months through January dropped to a four-year low of 28.9 million.

In the forex online market yesterday the Pound continued to decline against the US Dollar. It fell 0.50% to close at GBP 1.4811. At also dropped 0.10% against the Euro closing the day at GBP 0.8960.

Yesterday was day one of the two day EU economic summit being held in Brussels. News has emerged that all 16 Euro Zone countries have backed a financing plan to help debt-laden Greece. The plan will also include assistance from the International Monetary Fund.

The safety net would total up to 22bn Euros. It would apply only if market lending to Greece dried up. Euro Zone nations would grant co-ordinated bilateral loans, totaling some two-thirds of the funding, French President Nicolas Sarkozy said.

Greek PM George Papandreou called it "a very satisfactory" move. The president of the European Council, Herman Van Rompuy, said the deal was significant "not just for Greece, but for the stability of the Euro Zone". He added that the deal should tell markets to "have confidence that the Euro Zone will never abandon Greece".

European Commission President Jose Manuel Barroso said he was "extremely happy that we've reached this deal", calling it "a right decision". The deal still needs to be backed by the rest of the 27-member EU. The Euro Zone had avoided seeking an IMF loan for Greece, preferring a European solution and anxious to maintain global confidence in the euro.

Chancellor Merkel has stressed the need to learn lessons from the crisis, saying that she wants a treaty change to allow sanctions to come into force should a Euro Zone country ever default on its debts. Mr. Papandreou urged EU leaders to act to stabilize the Euro.

The single currency hit a 10-month low against the US Dollar on Wednesday after a credit downgrade for Portugal, which is also struggling with heavy debts. The Euro reversed a three day slide against the US Dollar in trading yesterday, gaining 0.43% to close at EUR 1.3329.

Read more...

Mr. Darling predicts growth in UK Economy

In a highly political UK budget Chancellor of the Exchequer Alistair Darling has cut his growth forecast for next year to between 3% and 3.5%. He had earlier predicted growth would reach 3.75%. He stuck to his prediction the economy will expand by 1.5% this year.

The Chancellor also revealed that Britain's budget deficit will be smaller than the £178bn expected in the pre-Budget report. The UK will borrow £167bn this financial year and £163bn next year. The central issue in the Budget has been the deficit, which standing at 12% of GDP is one of the largest in Europe. It has made the handling of the nation's finances by Prime Minister Gordon Brown and Chancellor Darling a key election issue
.
Uncertainty about the possible outcome of the General Election, due to be held on May 6th has weakened the Pound the international currency market. Polls have indicated that the Conservatives lead is narrowing, raising the risk of a hung parliament. This would make any proposed spending cuts more difficult to implement. Yesterday's budget postponed measures to curb the deficit until after the election is held.

Investors reckon that only after the election the next Government - whether Labor, Conservative or a coalition – will spell out in detail the scale of the cuts in public spending and rises in tax required to return the public finances to health. Credit rating agencies have indicated they will wait until this time to judge whether Britain deserves to keep its much-prized 'AAA' rating, a measure of a borrower's creditworthiness.

Out later today are UK retail sales figures. Last month figures were disappointing with a fall of 1.8% in sales volume. A rise of 0.6% is predicted this time.

In the forex online market yesterday the Pound dropped 0.81% against the US Dollar to close at GBP 1.4896. It also dropped against the Euro by 0.22% to close at GBP 0.8945.

Across the Atlantic, US orders for durable goods rose in February for a third month, while inventories and backlogs climbed by the most in more than a year, indicating the manufacturing rebound will keep propelling the U.S. recovery.

The 0.5% increase in bookings for durable goods was in line with expectations and followed a 3.9% gain the prior month, the Commerce Department said today in Washington. Excluding transportation equipment orders rose 0.9%, more than anticipated.

Business spending on new equipment, inventory restocking and a pickup in global demand mean companies like Boeing can look forward to sustained sales gains. A pickup in employment is still needed to broaden the expansion as the economy heals from the worst recession since the 1930s.

“Manufacturing has and will continue to drive this recovery,” David Semmens, an economist at Standard Chartered Bank in New York, said before the report. “Export demand will continue to grow, domestic orders continue to rise and the inventory liquidation cycle has stopped dragging on growth.”

Elsewhere in the US, new home sales fell unexpectedly in February to a record low as blizzards, unemployment and foreclosures depressed the market. Purchases decreased 2.2 % to an annual pace of 308,000, according to figures from the Commerce Department. The average sales price climbed by the most in more than two years.
The new-home market is vying with foreclosure-induced declines in prices for existing homes in an economy where unemployment is forecast to average 9.6% this year, close to a 26-year high. Treasury Secretary Timothy F. Geithner said on Tuesday that it would take a “long time” to repair the housing market as the administration takes steps to overhaul real-estate financing and regulation.

Read more...

Forex Market: New Home Sales data to be out today

In the US figures for sales of existing homes fell in February for the third month indicating that the high unemployment level is hindering demand in the housing sector. Sales dropped 0.6% to a 5.02 million annual rate, the lowest level in eight months. The expansion and extension of a federal tax credit that helped to stabilize the housing market in 2009 hasn't taken effect so far this year due to continuing high unemployment levels.

Existing home sales were forecast to fall to a 5 million annual rate from a 5.05 million rate in January. Data on existing home sales, which accounts for more than 90% of the market, is compiled from contract closings and may reflect purchases agreed weeks or even months earlier. This is why many economists consider new home sales figures, recorded when a contract is signed a more accurate and timely reflection of the market.

Data on new home sales is due to be published later today. The Commerce Department is expected to report that the figure rose last month after slumping in January to the lowest level since records began in 1963.

While borrowing costs are low and prices are down, sustained jobs gains are the missing ingredient in promoting a rebound in the housing market. The unemployment rate which reached a 26 year high of 10.15% in October is projected to end the year at 9.5%.

Also out in the US today are reports for core durable goods orders. The figure is expected to climb for the third month in a row adding to evidence of a recovery in the manufacturing sector. The projected rise in durable goods orders would follow a 2.6% jump in January that was the biggest since July 2009.

The US Dollar in the forex online market continued to gain on both the Pound and the Euro in yesterday's trading. The USD rose 0.58% against the Pound to close at GBP 1.5020. It appreciated 0.71% against the Euro which closed at EUR 1.3468.

In Britain yesterday figures revealed that the UK's inflation rate dropped more than forecast in February. Consumer prices rose 3% from a year earlier, after increasing 3.5% in January according to the Office for National Statistics. On the month, prices rose by 0.4%.

The Pound rose against the Euro yesterday, gaining 0.14% to close trading at GBP 0.8964.

The inflation rate fell because of large downward movements on prices from items like toys, books and gas bills. UK gas prices have been cut three times in the last 12 months with the last cut seeing prices fall by 7%, saving the average household 55 Pounds or $83 per year.

Read more...

Forex News: Greek Economy fallen into a vicious circle

Yesterday saw the U.S. Dollar gain against all of its major counterparts in the forex online market except for the Japanese Yen as German Chancellor Angela Merkel told investors they shouldn’t expect a European Union summit due to be held in Brussels on Thursday and Friday of this week to agree on assistance for Greece.

The US Dollar gained 0.40% against the Euro overall yesterday, with the Euro closing at $1.3566. Against the Pound the US Dollar rose by 0.76% with Sterling closing at $1.5109.

The US report on existing home sales is due to be announced later today. Economists are predicting that the figure will fall for the third month in a row as unemployment remains close to 10%. Existing homes account for almost 90% of the housing market. It is believed that the extension and expansion of a federal tax credit for housing has not yet had the desired effect as the labor market remains depressed.

Across the water in Europe European Central Bank President Jean-Claude Trichet said yesterday that aid should only be given to Greece if it will include an element of stabilization for the 16-country Euro Zone as a whole. He also said it was of the upmost importance for other Euro Zone members to maintain fiscal discipline.

The the Greek Central Bank said yesterday that Greece's economy is in a "vicious circle" and this year it will contract more severely than the government says. The Bank of Greece said economic output in 2010 will fall by 2%, worse than the government's prediction of between 1.2% and 1.7%. The bank says the recession will be worse due to planned public spending cuts. The bank said that it approves of the government's strategy to bring down the country's budget deficit, but that the impact will be worse than first thought.

"The Greek economy has fallen into a vicious circle with only one way out: the drastic reduction of the deficit and debt," the Bank's annual monetary policy report says. The report warned that the Euro Zone's economic recovery remains fragile, having relied to a large extent on fiscal stimulus, which must gradually be reversed as it is leading to large budget deficits.

Greece's budget deficit last year was 12.9% of GDP, more than four times greater than the EU allows. Germany has irritated some of its European partners with its opposition to a financial aid package to help Greece overcome its debt crisis, believing that Greece can solve the problem itself.

Elsewhere in the Euro Zone, Germany's coalition government is reportedly planning a banking levy to protect taxpayers from the costs of bank bail-outs. Leading conservative politician Volker Kauder said the money would stop banks from relying on state-funded rescues.

The levy would raise "billions of Euros" from the financial sector, he has predicted. The German government dug deep into its treasury coffers to provide a €500 billion ($679 billion) rescue package to shore up the banking system late in 2008. The new proposal seems to be designed to dissuade banks from taking risks in future which would see them begging for more government hand-outs.

The International Monetary Fund (IMF) has been asked by the G20 group of wealthiest countries to examine how banks can best contribute to the costs of insuring themselves against failure. But so far countries have adopted a piecemeal approach to the issue.

Read more...

Canadian Economy making a moderate recovery

Last week the Euro fell against 15 of its 16 major peers as EU leaders appeared unable to agree a cohesive plan to bailout Greece. On Friday it tumbled 0.60% against the US Dollar closing trading at $1.3528. The previous day it had fallen as much as 0.93% against the USD.

Late last week Greek Prime Minister George Papandreou issued EU leaders with a one week deadline to come up with a concrete rescue plan for Greece and challenged Germany to abandon its doubts about rescue plans. Papandreou said he may turn to the IMF to overcome Greece’s debt crisis unless leaders agree to set up a lending facility before an EU summit due to be held in Brussels on March 25th and 26th. The EU commission President Jose Manuel Barrosa has urged immediate action on the matter and said the EU should spell out its rescue plan at the summit later this week.

Friday saw the release of Germany’s producer price index which remained unchanged in February after increasing by 0.8% in January. Market expectations had been for a 0.1% increase. Year-on-year Germany’s PPI fell 2.9% in February, versus a 3.4% decline in January.

Canada’s core inflation rate unexpectedly rose last month on higher costs for automobile insurance and accommodation during the Vancouver Winter Olympics. The increase will pressure the central bank to raise interest rates and drive the value of the Loonie higher. The Canadian economy is accelerating out of last year’s recession with retail sales also rising more than expected. Recent manufacturing reports also indicated rapid economic growth.

The speed of the rebound may change how fast Governor Mark Carney decides to raise the benchmark interest rate from its current record low level of 0.25%. He had pledged to keep the interest rate in place through June unless the inflationary outlook changed. The banks next interest rate decision is scheduled for April 20th.

On a monthly basis, core consumer prices rose 0.7%, the fastest since November 2008 and overall inflation was up 0.4%. Economists had predicted the monthly rates would be 0.3% for both total and core inflation. Retail sales rose 0.7% in January, as consumers stocked up on home improvement supplies before a federal tax credit expired. Wholesale sales rose at the fastest pace in three years in January and factory sales gained four times what economists had predicted.

During the middle of last week in the forex online market the Loonie traded within one cent parity with its American counterpart before dropping back 0.23% on Thursday as crude oil prices, the country's largest export fell. On Friday the Loonie opened at USD $1.0137 and fell back a further 0.31% to close trading at USD $1.0169.

Read more...

US Dollar post gains against the Euro

The cost of living in the US was unchanged in February, underlining the Federal Reserve’s prediction that inflation will remain low as the economy continues to recover. It is the first time the consumer price index did not rise since it decreased in March 2009 and followed a 0.2% gain in January according to figures released by the Labor Department in Washington yesterday. Excluding food and energy costs the core index rose by 0.1% in line with forecasts, capping the smallest year on year gain since 2004. Markets have remained very competitive with big retailers such as Wal-Mart keeping prices low as unemployment nears 10% and foreclosures mount. The lack of inflation is one of the reasons why the Federal Reserve maintained the benchmark interest close to zero earlier this week.

Another Labor Department report yesterday showed fewer Americans filed first time claims for jobless benefits last week, for the third consecutive time, a sign that the labor market is improving. The number of first time jobless applications dropped by 5,000 to 457,000 in line with expectations.

Growth in the manufacturing sector is continuing, manufacturing in the Philadelphia region expanded in March at the fastest pace so far this year. The Federal Reserve Bank of Philadelphia’s general economic index rose to 18.9%, in line with expectations. Earlier this week figures from the New York Fed showed business activity in that region expanded for an eight straight month in March. Another central bank report showed industrial production increased in February for an eighth month and capacity utilization rose to the highest level in more than a year. Fed policy makers this week said the economic recovery is still constrained by unemployment and persistent weakness in real estate and pledged to keep the benchmark interest rate near zero for an “extended period.”

In the forex online market the USD gained 0.9% on the Euro yesterday fuelled by renewed uncertainty surrounding the proposed bailout for Greece. It closed trading at EUR 1.3607. Tomorrow US Fed Chair Ben Bernanke is due to deliver a speech to the Independent Community Bankers of America National Convention. It is expected that he will continue to defend the position of the Federal Reserve in relation to the bank's supervisory role.

In the UK, government borrowing could be less than forecast this financial year after better than expected figures for February. The UK government borrowed £12.4bn in February, less than economists had expected, according to figures released by the National Statistics Office yesterday. The figure for January was also revised sharply downwards, to £43m from £4.3bn. Borrowing in the current financial year has now reached £131.9bn, but analysts say the full-year total may be less than the government's £178bn forecast. Until recently, most analysts thought the government's borrowing forecast was too optimistic.

The borrowing figure for February was not as bad as some had feared, partly because of the rise in VAT at the beginning of this year and new taxes on bankers' bonuses. The government is also paying out slightly less in benefits because unemployment is falling. The figures will give a boost to Gordon Browns Labor government ahead of next Wednesday’s budget.
Sterling gained 1.1% on the US Dollar yesterday ending the session at USD 1.5245. It rose 0.31% against the Euro closing trading at EUR 0.8931.

Read more...

Bernanke defends Fed small bank supervision role

The Chairman of the US Federal Reserve Ben Bernarke has said the central bank is best qualified to oversee the largest financial institutions and should retain its oversight of smaller banks as well. The Fed’s “wide range of expertise” makes it “uniquely suited to supervise large, complex financial organizations and to address both safety and soundness risks and risks to the stability of the financial system as a whole,” Bernanke said in testimony yesterday to the House Financial Services Committee. The hearing is assessing the merits of proposed legislation to overhaul financial regulation in order to prevent a repeat of the crisis that prompted taxpayer-funded bailouts of firms including CitiGroup Inc and American International Group Inc.

Bernanke and regional Fed bank presidents are opposing efforts by Congress to remove much of the central bank’s supervisory role, saying such authority complements monetary policy. Bernanke said the Fed’s role as a supervisor of smaller banks “provides useful information about the economy and financial conditions throughout the nation.”

Wholesale prices in the US plunged in February by the largest amount in seven months as a large drop in energy prices offset higher food costs. According to figures released by the Labor Department yesterday wholesale inflation dropped 0.6% in February, much larger than the 0.2% decline economists had expected. Excluding food and energy, prices edged up a slight 0.1%, in line with expectations.

The deep recession and weak economic rebound are keeping inflation at bay and giving the Federal Reserve leeway to maintain record low interest rates in an effort to build momentum towards stronger economic growth. While overall wholesale prices have risen 4.4% over the past 12 months, core inflation, which excludes energy and food, has risen by a much more modest 1% during the past year. Updated monthly core CPI data is due out later today. As food and energy prices which are quite volatile are removed from the core figure it a much better gauge of overall inflation and a better way to judge the overall change in the price of goods and services purchased by consumers. The figure is expected to come out at 0.1%, from -0.1% last month.

Paul Dales, an economist at Capital Economics, said much of the downward pressure on prices stemming from the nation's steep recession has yet to be felt. For that reason, Dales said the Fed will be able to keep interest rates low for many more months.

Other releases due in the US today are the unemployment figures showing the number of people who filed for unemployment assistance for the first time in the past week and the Philadelphia Manufacturing Index. Unemployment figures are expected to be relatively unchanged from the previous figure 456k.

Read more...

US FED Reserve to Maintain its Interest Rates

Last night the US Federal Reserve announced that it would continue to maintain the benchmark interest rate at 0.25% while giving an indication that US economic recovery was gathering momentum. The Fed said that the labor market was “stabilizing” which is a more optimistic view than was voiced at the last meeting in January when the committee said only that deterioration in the labor market was “abating”. The banks hint that the economic outlook is becoming more positive has fuelled speculation that it will move away from its promise to keep borrowing costs close to zero and that rate hikes may come in the next several months.

The Fed has held the benchmark interest rate near zero since December 2008 to shore up the US economy and help it through the most severe global recession in decades. Last March it committed to holding rates very low for “an extended period”. The US economy resumed growth in the second half of last year and grew by 5.9% in the last quarter.

The US Dollar fell against both the Euro and the Yen in the forex online market following the announcement. It opened the day trading at 1.3671 against the Euro before dropping to 1.3762 by the day's close. It closed at 90.31 JYP having started the day trading at 90.41 JPY.

Two factors believed to have contributed to the Fed’s interest rate decision included housing starts data and import price data, both of which were announced earlier yesterday. Housing starts in the US fell in February as record snowfall in parts of the country hampered construction. Also fewer building permits were issued signaling that demand is slackening.
Builders started construction on 575,000 new homes last month. This is a decrease of 5.9% on the previous month's upwardly revised figure of 611,000. Increasing numbers of foreclosures are making it more difficult to clear backlogs and are discouraging new construction.

A separate report showed that the price of goods imported into the US dropped more than expected last month, indicating few signs of inflationary pressure from abroad. The import price index fell 0.3%, its first decline in seven months. The current lack of growth in the labor market that could stimulate demand in the housing sector as well as the lack of inflationary signals contributed to the Federal Reserve's decision to maintain the benchmark interest rate at its current level. The producer price index is due to be announced later today with a drop of 0.2% expected. This figure serves as a warm up for the consumer price index which will be published tomorrow. This figure will be closely watched as any increase in consumer prices is key in terms of future rate hikes.

Later tonight Federal Reserve Chairman Ben Bernanke is due to testify, along with former Federal Reserve Chairman Paul Volcker, on a link between Fed Bank supervision and monetary policy before the House Financial Services Committee, in Washington. These speeches are always closely watched as they can contain important indicators for the future direction of interest rates.

Read more...

Impact of the US National Capital Long Term Purchases report on the Greenback

The US National Capital Long Term Purchases report was published yesterday. This indicator represents the difference between foreign investments in the US and US investments abroad and demonstrates foreign confidence in the US economy. Figures showed that Net foreign purchases of long-term securities slowed markedly in January according to the Treasury Department. Total holdings of equities, notes and bonds increased a net $19.1 billion in January. This is down from $63.3 billion in the previous month. The figure had leaped to $126 billion two months ago, but was then cut to half.

The Dollar in the forex online market closed down significantly against the GBP in the wake of this news. It started the day trading at 1.5774 against the Pound but slid to 1.5044 at the close of the day. It also dropped against the Euro, although not as significantly, opening trading at 1.3762 before going on to close at 1.3758.

Elsewhere in the US manufacturing in the New York region expanded in March for an eighth straight month, indicating factories are sustaining production and lifting the U.S. economy. The index plunged in December but has since recovered. The report showed orders, sales and employment increased in March, a sign that manufacturing gains may last for months and help spur the rest of the economy. The Empire State index is of interest to investors and economists primarily because it is seen as an early indicator of what the Institute for Supply Management's March national factory survey due out in two weeks may show. In February, the ISM manufacturing index inched lower to 56.5 but continued to point to solid growth in the factory sector.

Industrial production unexpectedly rose in February, due in part to gains in demand for computers and semiconductors that signal the pickup in U.S. business investment is being sustained. Production climbed 0.1%, the eighth consecutive increase, as utility use and mining increased according to figures from the Federal Reserve. Capacity utilization or the proportion of plants in use, climbed to 72.7% from 72.5%. The gauge averaged 80% over the past two decades and suggests inflation will remain low. The amount of spare capacity is among reasons analysts anticipate Fed policy makers will reiterate a pledge to keep interest rates low. The US Federal Reserve is expected to hold interest rates near zero when they are announced later today.

Before the Fed Rate is announced the Building Permits and Housing Starts figures for the month of February are due to be announced. The housing sector had a big contribution to the downturn in the global economy and is now showing signs of a slight recovery. Building permits dropped to 620K in January, they are expected to be down to 619K; housing starts are expected to drop from 590K to 570K.

Read more...

Canadian Dollar hits 7 months high against the Greenback

Last week saw the Dollar retreat on most fronts. The week ended with the USD down 2.07% against the Euro and down 2.25% against the GBP. The week ahead will be dominated by US announcements, chief amongst them being the American Fed rate decision, due out on Tuesday at 18:15 GMT. An absence of job growth and few signs of inflation are reasons why Federal Reserve policy makers may decide to keep interest rates near zero.

Later today at 1300 GMT the Treasury International Capital Long Term Purchases report will be announced. This gauge represents the difference between foreign investments in the US and US investments abroad and shows foreign confidence in the US economy. The figure leaped to $126 billion two months ago, but was then cut to half. This time, it’s expected to stand at $38 billion.
In Canada, the outlook was positive as more jobs than expected were created in February and the jobless rate fell to a 10-month low, cementing Prime Minister Stephen Harper’s view that the economic recovery is under way. The Canadian dollar surged after the report, strengthening to its highest level since July 2008-the Lonnie closed trading standing at $1.0191 against the USD on Friday. Employment rose by 20,900 last month, the fifth gain in seven months, Statistics Canada said. The rate of unemployment fell to 8.2 percent.

Over the weekend both the US and Canada moved in to daylight saving time. This is expected to have a significant impact on the forex online market for the next two weeks as the major sessions between the US and the UK will overlap for five hours a day instead of four. During this time traders will have less time to react to data released in the British market before US data is released and can expect to see increased levels of volatility in the market.

Read more...

Despite of Growing Trade Balance Loonie dips down

The U.S Dollar fell against most of its major counterparts after a report on U.S. trade indicated the global economic recovery may be slowing, reducing demand for higher-yielding assets.

The U.S trade deficit narrowed unexpectedly by 6.6% in January, as demand for foreign oil and automobiles dropped. The deficit fell to $37.3 billion from a revised $39.9 billion in December as Americans imported the fewest barrels of crude oil in a decade. Exports fell 0.3%, the first decline since April, on fewer shipments of commercial aircraft and autos. In addition, the U.S. trade deficit with China narrowed to $18.30 billion compared with $20.57 billion in the same month last year.

Across the border Canada’s trade balance grew more than expected in January to 0.8B, as higher prices for commodities such as gold boosted exports, while imports fell. According to the figures released by Stats Canada January's surplus was the largest since March 2009. The pace of growth in exports slowed, as volumes fell 0.3%, on the back of smaller sales of autos as well as machinery and equipment. The Canadian dollar has risen about 25% against its U.S. counterpart over the past 12 months, making the country’s goods more expensive abroad leading to its decline in exports. However, this was offset by a 0.8% jump in prices, led by industrial goods and materials including precious metals, aluminum and alloys.

Despite beating market expectations, the Canadian Dollar fell against 14 of its 16 major currency counterparts in the forex online market, as the event was overshadowed by the unforeseen 6.6% fall in the U.S trade deficit. The Loonie weakened as much as 0.7% to C$1.0322 per U.S. dollar from C$1.0292, prior to announcement of the trade balances.

At noon today (1200GMT), Statistics Canada will release the unemployment rate for February. Last month, the number of employed Canadian’s increased by 43,000, more than three times market expectations – pulling the unemployment rate down to 8.3%, its lowest level since May of last year. The unemployment rate is expected to remain unchanged at 8.3%, as the market predicts that number of employed people will rise by 17,500, supplying a strong week ending for the Canadian dollar.

Read more...

EUR surging high against the Greenback

The Euro surged to a 2-day high against the U.S. dollar yesterday, as a wave of risk demand swept the markets in the wake of upbeat economic data from both the United States and China. After suffering losses against several of its major counterpart yesterday, the USD continued to fall as the dollar index traded at 80.441 this morning, down from 80.484 late last night.
Later today (1330GMT) the U.S Department of Labor will release its first Unemployment Claims report after the release of the Non-Farm Payrolls. The market predicts that the, jobless claims will show a slight improvement – a drop from 469K to 452K, pushing the U.S dollar higher.

Also out today (1330GMT), the US and Canada will simultaneously release their trade balances. This double-feature release always triggers action in USD/CAD at the forex online market. For a third month the U.S trade deficit is predicted to widen slightly from 40.2B to 40.9B, as imports are expected to have grown faster than exports. North of the boarder, the market forecasts that Canada’s trade deficit will cross into a surplus of 0.3B.

Yesterday, the USD/CAD touched on a 5 month low, as the Canadian dollar continued to rise for the ninth straight day against its neighboring U.S. currency - the longest streak since 2004. The Loonie continued to trade at its strongest level in almost two months as crude oil, the nation’s largest export, neared $82 a barrel. Tomorrow, Statistics Canada will release the nation’s unemployment change. Last month, the unemployment dropped to 8.3%, following a rapid surge in jobs of 43,000. The market expects that the number of employed people will increase by 17.5K in February, holding the unemployment rate steady at 8.3%

Across the Atlantic, the Pound fell for a third day against the Euro and the U.S Dollar as U.K factory production unexpectedly dropped in January for the first time in five months, signaling that manufacturing sector is struggling to shake off the nation’s longest recession in history. The office of National Statistics announced yesterday that manufacturing production fell 0.9% between December and January, against market expectations of a 0.3% increase. Following the release of the report, the Pound tumbled against 15 of its 16 major currency counterparts. The GBP fell 0.4% against the U.S dollar to touch on $1.4934, and slide 0.5% down against the Euro to hit a near three month high. This disappointing drop in factory production adds to economists’ speculation that U.K. gross domestic product will be weak or may even be negative for the first quarter of this year. The GBP/USD closed at 1.49819, down 0.114% from its opening price.

Read more...

Britain's Trade deficit widens

Britain's goods trade deficit with the rest of the world unexpectedly swelled in January to reach its widest level since August 2008, fueling concerns about the strength of the country's broader economic recovery. Yesterday, the Office for National Statistics reported that Britain's trade deficit widened to 7.987 billion pounds from 7.010 billion in December, well above market expectations of 7 billion, as lower sales of chemicals and other commodities prompted a steep slump in exports. This disappointing figure will most likely fuel policy maker's concerns that the sharp depreciation in the value of the Pound has not led to the expected increase in exports. Bank of England policy maker Kate Barker said yesterday that Britain’s economy has shown a “disappointing” response to the weakness of the pound, which has fallen about a quarter in the past three years on a trade-weighted basis. Government Officials want gross domestic product to refocus on exporting as they try to entrench Britain’s recovery. The deterioration in the global trade balance was the direct result of a 6.9% fall in exports, the biggest decrease since July 2006; while there was speculation that the Britain's unseasonably harsh winter could have hampered the movement of goods, according to officials there was no firm evidence to support this theory. Imports fell just 1.6%.

Following the release of this disappointing news, the GBP slipped as much as 0.2% against the U.S Dollar and was trading down 0.9% on the day at $1.4957. After closing at $1.49991 yesterday, the Sterling plunged another 0.54% this morning to touch on $1.49176 in the forex online market.

Later this morning (930GMT), the Office for National Statistics will announce the U.K's manufacturing production for January. After increasing 0.9% between November and December of last year, the growth in manufacturing production is expected to slow, with the market expecting a rise of 0.3% between December and January.

Also later today (1900GMT), the U.S Treasury Department will release the Federal Budget Balance. While it is no secret that the U.S government is in serious debt, last month the size of the budget fell to a more acceptable level of -42.6B. This month, the market predicts that the deficit will to surge back up to 207.5B, weighing heavily on the value of the U.S dollar.

Tomorrow, both the US and Canada will simultaneously release their Trade Balance. This double-feature release always triggers action in USD/CAD. The American deficit is expected to remain high at around 40 billion, while Canada is expected to turn from a deficit of 0.2 to a surplus of 0.4 billion.

Later this afternoon (1800GMT), the European Central Bank president Jean-Claude Trichet will speak. As head of the ECB, which controls short term interest rates, Trichet has more influence over the Euro's value than any other person, and so his words will be carefully listened to. Today’s speech, held at the the inauguration ceremony of the Language of Money in Frankfurt, will be followed by a second, held at Institute of Economic Policy Research in Stanford, this Friday.

Read more...

Japanese Yen soaring high against the EUR

After closing down against the USD, for the 6th time out the past seven weeks, the Euro appreciated against 11 of its 16 major currency counterparts in the forex online market following French comments that helped aid risk appetite. Following the meeting between the French President Nicolas Sarkozy and Greek Prime Minister George Papandreou, the French President reportedly vowed to help Greece if needed and pledged to crackdown on market speculators targeting the country. The EUR/USD, however, has been having rather mixed reactions and continues to remain within its consolidation phase as the highly traded pair has been unable to rise toward last Wednesday’s highs of 1.3735.

After meeting with both the German Chancellor and the French President, the Greek Prime Minister will travel today to Washington D.C to meet with President Barak Obama.

Yesterday morning, Germany announced that its industrial productions rose in January as energy output surged throughout the unseasonably cold winter, helping to offset a collapse in the construction activity. Germany’s recovery from the recession froze at the end of 2009 and the coldest winter in the past 14 years is not helping to heat up the country’s economic recovery. While Industrial Production came out below market expectations of 1.1%, the 0.6% rise between December and January indicates that Germany could be resuming its path towards economic recovery. The euro was little changed after the report and traded at $1.3654.

The Japanese Yen rose against the Euro, snapping a two-day drop, on speculation that Japanese companies are bringing home overseas earnings before the nation’s fiscal year ends this month. The Yen appreciated against all of its 16 major currency counterparts following China’s foreign-exchange regulator statement that speculative capital is flowing into the country, fueling optimism the funds will also boost neighboring economies. The Yen rose to 122.58 per Euro early this morning (6:38 GMT), from 123.13 per Euro in New York yesterday when it dropped to 123.90 per Euro, the weakest level since Feb. 23. Japan’s currency gained against the US Dollar, jumping from yesterday’s 89.99 to 90.31 this morning.

Read more...

NFP Results help Greenback to March ahead

Last Friday, the US Bureau of Labor Statistics released the highly anticipated Non-Farm Employment Change, marking the end of one of the busiest weeks for the forex online market this year.

While the U.S Non-Farm Payrolls (referred to as NFP) declined for the 25th time in the past 26th months, the world’s largest economy shed a smaller-than-expected 36,000 jobs throughout February - to a seasonally adjusted 129.5 million. For over the past year, this vital economic indicator has consistently showed a drop in the number of employed Americans. While last month analysts predicted that the NFP would re-enter positive territory and the number of employed Americans would increase by 10K, the Non-Farm Payrolls continued to fall throughout January by 20K.

Economists had predicted that the NFP for February would fall by an additional 56,000, pushing the unemployment rate up by 0.1% to 9.8%. However, Friday’s NFP showed that U.S employers cut a smaller than expected 36,000 jobs throughout February, leaving the unemployment rate steady at 9.7% - bolstering views that the labor market is on the brink of a full economic recovery.

The dollar posted its biggest five-day gain versus the Japanese Yen in two weeks, as risk appetite returned to the market following the better than expected NFP. Last week the greenback rose 1.5% to 90.28 Yen, from 88.97 on February 26th. Following the announcement of the NFP, the USD gained as much as 1.76% against the yen, the biggest intra-day move since December 11th of last year. The volatile pair closed at 90.265, up 1.3% from the day’s open.

The Canadian dollar posted its biggest weekly gain in two months versus the greenback as the improvement in its largest trading partner’s outlook could provide a boost for Canada’s economy. The USD/CAD pair fell 0.19% on Friday, as the Loonie rose to a six-week high of 0.972USD. Later today (1315GMT) will publish the number of Housing Starts for February - the number of new residential buildings on which construction was begun during the previous month. Economists expect 190,000 starts, annualized basis, up from 185,600 the previous month.

Read more...

Will the ECB lend covered loans to financial institutions?

The Euro rose 0.64% to $1.36938 against the US Dollar yesterday as Greece unveiled a new austerity package. Since news broke of Greece’s 300bn Euro debt, the single European currency in the forex online market has been tumbling against its major counterparts – striking a 10 month low against the dollar, this past Tuesday.

Yesterday the Greek government unveiled an austerity package worth 4.8bn Euros -a host of tax increases and spending cutbacks. Greek government officials hoped this will bolster the Euro in international markets and convince European leaders that they are doing enough to merit a possible bailout.

Retail Sales in the 16 country zone slipped in January, raising new concerns about the strength of the area’s economic recovery. According to Eurostat, sales volume within the Euro Zone fell 0.3% from December and was 1.3% lower than in January 2009. While the monthly drop in sales was weaker then the market expectations of -0.5%, economists warned that sales could continue to fall in February.

The weakness of this data cemented expectations that the European Central Bank will keep its benchmark interest unchanged at its current record low level of 1.0% (announced later today at 1245GMT). The announcement will be followed by a press conference and there is speculation that the ECB may announce that it will lend covered bonds to financial institutions as part of a strategy to increase collateral. The press conference will be closely watched by traders as it has the potential to cause huge volatility in the market due to the off the cuff format.

Across the Channel the British Pound rose across the board, appreciated against 13 out its 16 major currency counterparts – including gaining a record 0.89% against the USD, to close at $1.50959. This abrupt increase came after the Services PMI unexpectedly jumped to 58.4 from 54.5 in January. The UK dominant services sector expanded sharply to more-than-a-three-year high in February, boosted by strong new orders and business activity- adding evidence that the first-quarter GDP grew at a faster pace than in the final three months of 2009. According to senior economists at the Markit, this latest piece of data highlights the underlying trend that in the private sector remains positive, and is on course to deliver a quarterly expansion above 1.0% in the first quarter. According to economists, this positive survey will reinforce the expectation that the Bank of England's Monetary Policy Committee (MPC) will not be extending its £200bn quantitative easing (QE) program (1200GMT).

At noon today, the BoE will announce whether or not it will raise its benchmark rate from its record low level of 0.5%. Analysts predict that the central bank is unlikely to raise change interest rates, as any raise in the cost of borrowing could jeopardize the country’s fragile economic recovery.

Read more...

In Anticipation of BOE and ECB's rate decission

Early this morning, Germany released its monthly retail sales report. Despite a predicted drop of 0.5%, retail sales were unexpectedly stable for January, while December gains were revised upwards modestly- fueling hopes that consumer supported recovery may emerge within the coming months. This will be followed by the publication of the entire Euro Zone’s monthly retail sales for January, predicted to show a decrease of 0.3% from the previous month. With no other important news coming out for the rest of the day, investors will turn their attention to tomorrow’s impeding ECB rate announcement. Once again, Jean-Claude Trichet, president of the ECB, is expected to maintain the minimum bid rate at its current record low level of 1.0%.

The ECB’s rate decision will be preceded the Bank of England’s announcement of its overnight rate. The BoE is expected to keep its key lending rate at its current record low level, despite signs that Britain is emerging from the recession at a faster pace than previously anticipated. While the country’s GDP may have grown 0.3% (revised) for the fourth quarter of last year, analysts predict that it is highly unlikely that the central bank will opt to exit its “easy” monetary policy so quickly.

Yesterday, the Sterling plunged to a new 10 month low against the greenback in the forex online market as speculation continued to increase that neither the Labor nor the Conservative party would win an outright majority in Parliament in the coming June election- obstructing efforts to cut the country’s historically high budget deficit. After slipping 1.045% on Monday (at one point diving a record 3% to a $1.4784, its lowest level since April 2009), the GBP continued to fall against its American counterpart yesterday – deprecating an additional 0.2314%, to close at $1.49607.

Despite increasing chances of a “hung” parliament in addition to a plummeting currency, U.K consumer confidence jumped in February to a two-year high. The index of consumer sentiment increased 6 points from the previous month, to a new level of 80.

Yesterday, the U.K released its construction PMI, showing a fall from its previous level of 48.6 to 48.5 (a number greater than 50.0 indicates expansion, while number below shows contraction). Early this morning (930GMT), the U.K will release its Service PMI- while this report is the last PMI for the week, it is the most important. The service sector, which includes the financial sector, was improving up until last month. After falling to 54.5, analysts predict a slight increase of 0.5 points this month, to a new level of 55.0.

The U.S dollar weakened across the board, falling against 15 of its 16 major currency counterparts, following the release of the Bank of Dallas Fed Chairman’s statement that borrowing costs should continue to remain low until the economy picks up- which according to him “won’t happen for some time”.

Later today (1315GMT), the U.S will release its ADP Non-Farm Employment Change. While generally considered a predictive index for Friday’s highly anticipated Change in Non-Farm Payrolls, the ADP is expected to show a drop of 15K. With Payrolls have declined in 24 out of the past 25 months and economists are predicting another decline of 40,000 in February.

Read more...

The Pound is tumbling down against the Greenback

After a relatively slow end to last month, the forex online market is set to be hit with a fresh wave of volatility within the next few days, as the month of March kicks off with four central bank’s rate announcements.

Yesterday the Canadian Dollar surged against its American counterpart, on the back of higher than anticipated GDP. The GDP beat expectations and rose by an annualized 4.0% in the fourth quarter of last year fueled by an increase in retail sales, consumer spending, exports and robust housing sector. The USD/CAD plummeted from a session highs of 1.0575 to hit a new session low of 1.0475. The loonie appreciated a total of 1.04% yesterday against its U.S counterpart, to close at $1.04106.

Across the Atlantic, the pound tumbled to a new 10 month low as fears continue to grow that the UK will have a hung parliament. The currency fell 1.6% against the greenback, dropping below the $1.5 mark, for first time since May, as the Labor party’s majority narrows. The Pound suffered across the board sliding to its lowest level against the Euro since early last December, as well as hit a one-year low against the Japanese Yen of 132.07 and plumbed its weakest in 25 years against the high-yielding Australian Dollar.

Despite a better than expected manufacturing PMI, the Pound brushed the news that the manufacturing sector remained at its previously reported 15 year high of 56.6. Out later today, the construction PMI is predicted to show to that house price have continued to rise in the last seven months, however, the rate of increase is expected to have slowed from 0.6% in January to 0.3% in February.

Read more...