Weekly Forex and Economic Report On Market Ups and Down

Forex online market has shown a moderate growth with low inflation rate in this whole week. Yes, we have seen some growth in the market but it is not at all as anticipated by the government. There was a gain noticed in the private sector jobs but this will impacts the public sector to deficit. This week is not at all good for the USD currency as the last week although this benefits the EURO currency as it goes high in this week and shocked the investors who are thinking that the euro zone countries will remain in loss. The Japan economic recovery also benefits the Global economy as it was predicted after reaching to 4.8 percent in the Q4 but it remains to only 3.9 percent GDP growth in first quarter of year 2010.

Today, we can say about US and European countries that policymakers are expecting more for both the countries but due o low inflation rate to maintain a new economic structure is still difficult. As in this week we have seen that job growth is still in the state of non-existent and credit growth is also moderate while there is a fall is shown in housing recovery. In terms of economy there are two factors that leads to inflation are the fall in building permits along with the housing income growth is also limited. The intermediate goods have shown growth of 5.6 percent as compared from the past year. Due to improving Global demand there was a hike in prices of commodities is shown. However it can be said that Asian market is well stabilized instead the Europe has shown the instability in their economy and captures the attention of the investors.

There was a positive outcome shown in the Japan's economy since the fourth quarter of past year and the expectations of investors becomes high but in the current year the GDP growth is only 3.9 percent only despite the fact that that the experts after seeing growth in q4 was expecting a high rate in GDP. But it can be said that about the economy of Japan that there was a growth rate shown in the exports and Japan's government is now making plans to invest more capital for buying latest equipments to improve the outcomes from the manufacturing companies. It was predicted about the Japan's economy that it will be accelerated to nearly 3.4 percent before getting in the pause state of 1.8 percent in the year 2011. Taiwan's economy rate added further heft in the strong Asian economy by leading to 13.27 percent high from the past year's growth. It can be said that the Asian market will lead to be a good base for the Global economic recovery this year.

Now about the US market which leads to hike results in euro currency deficits. The rise of USD dumps the prices of commodities and equities in US. There was a second largest inflow is shown in the US financial assets as the foreign investors invested their $ 100 in buying treasury securities in the month of March. It was fore-casted about the Treasury that it will be at low of 4 percent at the year's end. Since beyond the major problems in US financial conditions there will be a return game is played after the investment. The main driving factor that leads to the US dollars to high is the drop down of EURO currency. It can be predicted that the Fed government can take measures to increment the fund rates in this year.

Now looking ahead for the next week forex session it can be said that the inference of number of financial data's that are released yesterday will lead some instability in the market. Since EU finance ministers are set to meet yesterday for discussing about the euro zone countries financial matter and economic recovery measures. German Finance minster has presented a plan that include the measures taken for budget cuts and also the cost cutting along with the penalties for the countries that not follow rules and regulations. BOJ has decided to unchanged their interest rate that is to be 0.1 percent after seeing the GDP growth rate of Japan. Dollar index is seen to be snugged at the short term rate of 87.6. There was a high shown in EUR/CHF after the gain of EURO currency from 1.2150 to 1.2644 points. The coming week mainly focuses on German info, UK public sector current borrowing and lastly the euro zone PMI's.

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Improved Housing signaled widened recovery but consumer confidence slacked

US Housing starts climbed to an annual rate of 626,000 last month, up 1.6% from February’s 616,000 pace, according to Commerce Department figures released Friday in Washington. Building permits, an indicator of future construction, climbed to the highest level since October 2008. An improvement in the housing market, after a crash that contributed to the deepest recession since World War II ended signals a broadening of the economic recovery.

New-home construction rose 20% in March from the same month last year. Permits were up 34% in the 12 months ended in March. Construction of single-family houses decreased 0.9% to a 531,000 rate in March, while permits increased 5.6%. Work on multifamily homes, such as townhouses and apartment buildings, climbed 19% to an annual rate of 95,000. The increase in starts was concentrated in the South. New construction fell in the rest of the country.

A separate report showed consumer confidence unexpectedly slumped in April, indicating Americans are worried the expansion will be too slow to bolster the labor market. The Reuters/University of Michigan preliminary index of consumer sentiment unexpectedly dropped to 69.5 this month from a final reading of 73.6 in March. The gauge was projected to rise to 75.

A measure of current conditions, which reflects Americans’ perceptions of their financial situation and whether it’s a good time to buy big-ticket items like cars, dropped to the lowest level this year. The index of expectations six months from now, which more closely projects the direction of consumer spending, posted its weakest reading since March 2009.

Stocks fell on Friday, halting a six-day rally, after the Securities and Exchange Commission charged Goldman Sachs Group Inc. with fraud. The Standard & Poor’s 500 Index declined 1.6% to close at 1,192.13. As a result Friday saw the US Dollar climb against the Euro for the second day, the Dollar gained 0.50% to close at EUR 1.35011. In the Forex online market the US Dollar also climbed against the Pound for the second day in a row, appreciating 0.65% to close at GBP 1.53607.

Gold was steady on Friday, as safe-haven buying related to worries about Greece's debt crisis helped the metal defy pressure from a rising U.S. Dollar.

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Forex Market: In Anticipation of Non-Farm Payrolls

In the US the ADP Non-Farm Payroll has shown that companies there unexpectedly cut payrolls in March. The 23,000 decline was the smallest in two years and followed a revised 24,000 drop the prior month, data from ADP Employer Services showed today. Over the previous six months, ADP’s initial figures have overstated the Labor Department’s first estimate of private payroll losses by as little as 2,000 in February to as much as 151,000 in November.

A March payroll gain in line with the median estimate is due to the fact that the ADP’s figures aren’t influenced by weather and don’t include government payrolls which will reflect the hiring of temporary workers to conduct the census. The government has been hiring thousands of workers to conduct the regular 10-year U.S. Census, but those jobs are temporary. ADP includes only private employment and doesn’t take into account hiring by government agencies.
Analysts feel that companies are still hesitant to add workers until they are convinced that the economic recovery has taken hold. Joel Prakken, chairman of Macroeconomic Advisers LLC in St. Louis, which produces the figures with ADP said “the economic recovery has not been long enough or strong enough along the way yet to produce the kind of rapid employment that people are hoping for.”

Tomorrow's release of Non-Farm Payrolls is expected to show growth of 200,000 nonfarm jobs for March. Some economists are even predicting gains of up to 250,000. If the forecasts prove accurate, it would be the largest expansion since November 2007 and only the second advance in the past 27 months.

Although government statisticians try to account for season factors, severe snowstorms throughout the country skewed the data in February. In fields such as retail, construction and transportation, workers missed time and companies delayed hiring decisions. As a result, some of the increase in hiring that should have taken place in February got pushed into March.
Before Non-Farm Payroll data is released tomorrow American unemployment claims are due to be published later today. The figures have been improving in recent weeks dropping from 496K to 442K. Another drop in claims would raise expectations ahead of tomorrow's release however the figures are expected to remain almost unchanged.

Also due out later today is the manufacturing report issued by the Institute for Supply Management. The ISM report for March is projected to rise to 57.4% from 56.5%, according to a MarketWatch survey. Readings above 56% are viewed as consistent with strong growth in manufacturing.

In trading yesterday the US Dollar fell 0.62% against the Euro to close at EUR 1.3507. It gained 0.73% on the Pound to close at GBP 1.5182.

North of the border, Canada’s economy expanded at the fastest pace in three years in January, led by manufacturing, wholesaling and construction, adding to evidence that the country is recovering more quickly than policy makers expected.

Gross domestic product increased 0.6% from December, the fifth straight gain and the biggest since December 2006, according to data from Statistics Canada. The report suggests first-quarter economic growth is still coming in faster than the Bank of Canada predicted, after output expanded at the highest quarterly rate since 2000 in the October-December period. Investors have raised bets that Governor Mark Carney will increase his key interest rate in the next few months on signs of quicker inflation and growth.

Carney has pledged to keep his key lending rate at a record low 0.25% through June unless the inflation outlook shifts. He also said March 24 the commitment is “expressly conditional” on inflation, and said that a key measure of inflation has increased faster than expected.
The central bank predicted the economy will grow at a 3.5 % pace this quarter and a 4.3% rate in the April- June period before slowing through next year. Canada’s 5% growth in the fourth quarter exceeded the Bank of Canada’s 3.3 % estimate. Gross domestic product was 1.3% greater in January than in the same month a year ago. The country’s first recession since 1992 ended in the third quarter of last year.

In a separate report, Statistics Canada said that non-farm payrolls were unchanged at 14.53 million in January from December, and down 1.1% from the year-earlier month. Prime Minister Stephen Harper has said job creation is a top priority for his government this year.
In the forex online market the Loonie climbed up 0.39% against its American counterpart yesterday to close trading at CAD 1.0157.

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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.

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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
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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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Greenback sliding against the EUR and the Yen

In reaction to the news that the FOMC would be keeping its benchmark interest rates exceptionally low for some time, the greenback slide against both the Euro and the Yen.

In addition, despite signs that the U.S housing market was beginning to recover, sales of New Homes fell to its lowest level on record- further fueling the dollar’s decline against its major currency counterparts.

Purchases of new homes within the U.S tumbled below expectations to an annual pace of 309,000, signaling that the added extension of the government tax credit may not be enough to revive demand.

This report further highlights Fed. Chairman Bernanke’s prior comments that even though the economic situation of the U.S is making a promising recovery, homebuilders continue to face intense competition from foreclosed properties that are continually driving down the prices in the market, while at the same time robbing the demand for new homes.

The result of which causes a chain reaction –decrease sales of new homes leads to a decrease in demand for construction, thus a decreased amount of employees in that field – directly effecting the level of employment for the country.

Following the release of Bernanke’s testimony to the House Financial Services Committee, and pessimistic U.S. Home Sales data - the U.S dollar plunged against its major counterparts. The EUR/USD broke a session high at 1.36250, and closed at 1.35371, up 0.18% from the day’s opening price at the Forex online market.

Today is the second half of Bernanke’s testimony of Congress; in addition, the U.S will release the Unemployment claims for last week, expected to drop to 461K, from the previous week’s 473K joblessness claims. Also out today (1330GMT), the monthly Core Durable Goods Order.

Orders have been revised to the upside in the past month, from 0.3% to 1%; while, Core orders have been revised to 1.4%. The positive trend is expected to continue, with a rise a rise of 1.6% in orders and 1.2% in core orders. This figure doesn’t touch the consumers, but has a long term impact on the economy.

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Greenback sustains its bearish trend

Consumer confidence in the U.S fell sharply in February, plugging to its lowest level since April 2009. After reaching a 16-month high, of an upwardly revised of 56.6 this past January, the CB Consumer Confidence index sank a record 11 points to 56.0, as Americans turned more pessimistic about job prospects and the U.S economy.

For the seventh consecutive month, home prices in 20 U.S cities rose in December, signaling that the housing prices, concerned to be at the center of the worse economic recession since the Great Depression, are begin to stabilize.

Yesterday’s S&P/Case-Shiller Indexes showed that home prices increased 0.3% from the previous month on a seasonally adjusted basis- increasing more than expected, and matching gains seen in last November. While the index reports that housing prices were down 3.1% from December 2008, this decrease is has been the smallest yearly change seen since May of 2007. The S&P/Case-Shiller indicator came one day ahead of New Homes report.

Two months ago, this leading indicator took a dive, plugging to a new low showing everybody that the housing sector is heavily depended on government aid- since then, it has not been able to return to its previous levels. Last month’s low number of new homes sales is predicted to be followed by a slight increase this month, analyst predict sales to edge up to 354K. While the New Homes sales indicator generally has a big impact on the market, the report will most likely be overshadowed by Bernanke’s testimony.

Despite a drastic fall in consumer confidence yesterday, the greenback was able to maintain its bearish trend against its European counterpart, hitting as low as 1.34952. Although throughout the course of the day, the highly traded currency pair managed to bounce back slightly, the closing at 1.35118, down 0.65% from its opening daily price of 1.36001. Conversely, the greenback dropped a total of 1.09% against the Yen as investors flocked to the safe haven status of the Japanese currency in trading sessions yesterday. The USD/JPY plugged a drastic 1.4% before leveling out and closing at 90.194.

With the most significant economic indicators being released today revolving around the U.S. economy; the Dollar is likely to see some heavy volatility against its major currency counterparts, especially against the Euro and Yen.

Today, forex online investors will want to pay careful attention as US Federal Reserve Chairman Ben Bernanke is set to begin his two will begin his two day annual Humphrey-Hawkins testimony on monetary policy before Congress. In anticipation of the speech, the dollar index, which measure the US unite against a trade-weighted basket of six major currencies, fell to 80.788 in today’s Asian afternoon session from 80.874 in late North American trading Tuesday.

Following last Thursday’s unexpected rate hike for emergency bank loans, anticipation is high for any new news regarding the state of the U.S. economy. Positive sentiment will likely lead to major gains for the greenback, while If Bernanke’s statement “discourage an early monetary tightening policy” the dollar may likely be forced to forfeit some of last week’s heavy gains.

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