As global markets are sizing the Euro-zone sovereign risks and the Chinese reserve requirement, the U.S. economy is giving tangible signs of recovery. The U.S. dollar, in the mean time, is finding good resistance points at current levels.
U.S: Recovery unfolding
Bringing some order inside the troubled finances remains the main target this year in the United States and in Europe. Nevertheless, with the job market layouts having probably topped at current levels, especially in the U.S., consumer spending should rise in the coming months, albeit at a lower level compared to previous recessions. In January, consumer spending moved up by 0.5% month-on-month, more than the expected 0.4%. December and November numbers were revised up as well. The first moved to -0.1% from -0.3% and the second jumped to 2.0% from 1.8%. January’s rise was broad-based confirming that households keep on spending even after the holiday season. Sells rose 0.8% excluding auto, gasoline and building equipment. The housing market remains at contrary a corner stone of the U.S. recovery, but prices might struggle to find their way out of the bottom. Housing starts are stalling, also due to the adverse weather conditions, although the uptrend should continue. The Federal Reserve will maintain the gradual removal policy, as the initial step toward higher rates that could materialize later in the year. Policymakers still expects low growth and low inflation for the months ahead. In effect, December’s trade deficit confirms that the economic recovery is unfolding in the United States. The deficit increased to $ 40.2 billion from November’s $ 36.4 billion. Both export and import rose. The first moved up by 3.3% and the second increased by 4.8%. So, the Gross Domestic Product (GDP) might pass 3.5% this year. Core retail sales rose almost 6.0% annually in the past six months. The vast majority of key U.S. companies have overcome Q4 forecasts with profits rising on a pace of over 15% year-on-year excluding financials.
Tuesday, March 9, 2010
U.S.: Growth To Expand. How Much?
Concerns on credit’s availability are putting a cap on growth prospective, while the U.S. dollar is once again the safe haven currency. However, the correction might be temporary and prices should again move to the upside in the coming months. We are only in the mid of a long inflationary cycle which contemplates higher commodity prices and a lower dollar. Current sell-offs might be only in anticipation of milder growth in the months ahead for the United States and the rest of the world.
U.S.: output to expand
The global financial reshuffling is underway, as worldwide markets are in a selling tone and the U.S. dollar is once again the safe haven currency. So, from stocks to crude oil, the decline is unfolding and it might continue for the shorter term as well. The escalation of fiscal and credit challenges for some European countries is keeping the Euro under pressure. Proposals, both in the U.S. and in Europe, for tougher rules for financial institution activities are increasing concerns on credit’s availability and economic expansion. Finally, the possibility of inflation in leading economic nations, such as China and India, is questioning the magnitude of current recovery. However, the correction might be temporary and prices should again move to the upside in the coming months. In effect, we are only in the mid of a long inflationary cycle which contemplates higher commodity prices and a lower dollar. In addition, the U.S. economy has just moved away from the bottom, output reached the positive territory only in 2009, and upside potentiality remains intact for now.
U.S.: output to expand
The global financial reshuffling is underway, as worldwide markets are in a selling tone and the U.S. dollar is once again the safe haven currency. So, from stocks to crude oil, the decline is unfolding and it might continue for the shorter term as well. The escalation of fiscal and credit challenges for some European countries is keeping the Euro under pressure. Proposals, both in the U.S. and in Europe, for tougher rules for financial institution activities are increasing concerns on credit’s availability and economic expansion. Finally, the possibility of inflation in leading economic nations, such as China and India, is questioning the magnitude of current recovery. However, the correction might be temporary and prices should again move to the upside in the coming months. In effect, we are only in the mid of a long inflationary cycle which contemplates higher commodity prices and a lower dollar. In addition, the U.S. economy has just moved away from the bottom, output reached the positive territory only in 2009, and upside potentiality remains intact for now.
EUROPE: Rescue Package Needed
The economy is on the move again in the United States, but the Federal Reserve will keep rates low for few more months. In Europe, instead, concerns over the European fiscal and sovereign debt are still keeping the European currency under pressure. The next important support level is at 1.37 against the U.S. dollar.
U.S.: Fed’s policy confirmed for now
The U.S. economy is clearly improving, albeit the recovery remains challenged by high unemployment rate and tight credit conditions. Beating expectations, the first estimate of the fourth-quarter 2009 Gross Domestic Product (GDP) grew 5.7% compared to both the forecasted 4.8% and the up-move of 2.2% in the third-quarter of last year. The increase was broad-based with final sales increasing at a 2.2% pace. The up-trend should continue this year as well. Household spending rose on goods and services, but consumers will remain caution over the year. In effect, consumer confidence moved up to 55.9 in January from December’s 53.6, as consumers expect the current situation to improve, although prospects of job conditions remained tepid. Nonetheless, durable goods orders increased 0.3% in December stopping two months slide. Uncertainty over the extension of the first time home buyer tax credit (it was extended until the end of April 2010) weighted instead on home sale numbers in December. As a result, existing home sales fell almost 17% month-on-month, while home prices rose 1.5% compared to the previous year. Both condos and single homes showed heavy losses and the month of supply of unsold houses rose to 7.2 months from 6.5. New home sales fell 7.6% during the same month, while inventories of unsold new homes rose to 8.1 months from 7.6 months in November. Declines were broad-based, but sales stay above the record low of 329,000 registered in January 2009. The Federal Reserve should keep rates low for few more months, although it expects the economy to continuing strengthening. The Fed also confirmed it will decrease the pace of purchase of agency debt and agency MBS and will complete the program by the end of March.
U.S.: Fed’s policy confirmed for now
The U.S. economy is clearly improving, albeit the recovery remains challenged by high unemployment rate and tight credit conditions. Beating expectations, the first estimate of the fourth-quarter 2009 Gross Domestic Product (GDP) grew 5.7% compared to both the forecasted 4.8% and the up-move of 2.2% in the third-quarter of last year. The increase was broad-based with final sales increasing at a 2.2% pace. The up-trend should continue this year as well. Household spending rose on goods and services, but consumers will remain caution over the year. In effect, consumer confidence moved up to 55.9 in January from December’s 53.6, as consumers expect the current situation to improve, although prospects of job conditions remained tepid. Nonetheless, durable goods orders increased 0.3% in December stopping two months slide. Uncertainty over the extension of the first time home buyer tax credit (it was extended until the end of April 2010) weighted instead on home sale numbers in December. As a result, existing home sales fell almost 17% month-on-month, while home prices rose 1.5% compared to the previous year. Both condos and single homes showed heavy losses and the month of supply of unsold houses rose to 7.2 months from 6.5. New home sales fell 7.6% during the same month, while inventories of unsold new homes rose to 8.1 months from 7.6 months in November. Declines were broad-based, but sales stay above the record low of 329,000 registered in January 2009. The Federal Reserve should keep rates low for few more months, although it expects the economy to continuing strengthening. The Fed also confirmed it will decrease the pace of purchase of agency debt and agency MBS and will complete the program by the end of March.
U.S.: Unemployment Rate Topping?
In the U.S., retail sales came out worst than expected. However, the underline numbers are pointing to recovery, as discretionary spending has been up-trending for over two months. In Europe, concerns are mounting over the creditworthiness of some
U.S.: imports to increase further?
The economic recovery is underway in the United State with some drawdown here and there. Unexpectedly, retail spending declined 0.3% in December (+0.4%), after having increased 1.8% in November and 1.2% in October. Motor vehicle and parts fell 0.8% compared to the gain of 1.2% registered the previous month. The poor weather conditions might have played a role in December. In addition, consumers have been used recently to do their Christmas shopping earlier in the year, so to take advantage of pre-holiday discounts. Consumer spending remains overall bumpy with the job and credit markets remaining weak. However, quarterly data confirms that the uptrend has already begun, as discretionary spending has been in green for two consecutive months. The jobless rate appears to stabilizing at current levels. Jobless claims rose slightly for the week ending January 9, but the four-week moving average declined to 441,000 from 450,000.
U.S.: imports to increase further?
The economic recovery is underway in the United State with some drawdown here and there. Unexpectedly, retail spending declined 0.3% in December (+0.4%), after having increased 1.8% in November and 1.2% in October. Motor vehicle and parts fell 0.8% compared to the gain of 1.2% registered the previous month. The poor weather conditions might have played a role in December. In addition, consumers have been used recently to do their Christmas shopping earlier in the year, so to take advantage of pre-holiday discounts. Consumer spending remains overall bumpy with the job and credit markets remaining weak. However, quarterly data confirms that the uptrend has already begun, as discretionary spending has been in green for two consecutive months. The jobless rate appears to stabilizing at current levels. Jobless claims rose slightly for the week ending January 9, but the four-week moving average declined to 441,000 from 450,000.
Europe: ECB Steady For Now
In the United States, the unemployment rate appears to be topping near the important level of 10.0%, although temporary upswings are possible. In Europe, exports are increasing, but the economic recovery stays uneven.
U.S.: Unemployment topping?
The global economic growth is gaining momentum, supported by China, India and Brazil. With exports increasing, the Gross Domestic Product (GDP) will move toward 3.0% this year, after having performed poorly in 2009. Domestic demand is on the move as well, although it still remains subdued by tight credit and high unemployment rate. Its success would be critical in rebalancing economic deficiencies. Nevertheless, in December, the U.S. economy has lost 85,000 jobs with more than half coming from the private sector. Although numbers were expected to remain unchanged compared to the previous month, losses are decreasing from the beginning of 2009. Revisions, at the contrary, were mixed. In fact, while November manifested to first gains since 2007 with 4000 new positions, October showed a drop of 127,000.
U.S.: Unemployment topping?
The global economic growth is gaining momentum, supported by China, India and Brazil. With exports increasing, the Gross Domestic Product (GDP) will move toward 3.0% this year, after having performed poorly in 2009. Domestic demand is on the move as well, although it still remains subdued by tight credit and high unemployment rate. Its success would be critical in rebalancing economic deficiencies. Nevertheless, in December, the U.S. economy has lost 85,000 jobs with more than half coming from the private sector. Although numbers were expected to remain unchanged compared to the previous month, losses are decreasing from the beginning of 2009. Revisions, at the contrary, were mixed. In fact, while November manifested to first gains since 2007 with 4000 new positions, October showed a drop of 127,000.
EUROPE: Exports To Increase
The economic recovery has faced some setbacks during the Winter in the U.S., but should accelerate in Spring and Summer. The euro currency, in the mean time, is challenging important resistance lines against the U.S. dollar.
U.S.: Awaiting for March numbers.
There is only modest recovery, so far. This is what stands out from the latest Fed’s Beige Book prepared before Feb. 22nd. Consumer spending is rising, but activity remained modest, also due to the poor weather conditions. Inventories have been rebuilt, as manufacturers are showing optimism and planning to increase their investments. In effect, personal income moved up 0.1% month-on-month in January, while spending rose 0.5% during the same period. However, the job market remains weak, albeit improving. In February, the workforce contracted only by 36,000, better than the expected decline of 50,000. The unemployment rate, which also surveys 60,000 households, stayed unchanged at 9.7%, but below October’s high of 10.1%.
U.S.: Awaiting for March numbers.
There is only modest recovery, so far. This is what stands out from the latest Fed’s Beige Book prepared before Feb. 22nd. Consumer spending is rising, but activity remained modest, also due to the poor weather conditions. Inventories have been rebuilt, as manufacturers are showing optimism and planning to increase their investments. In effect, personal income moved up 0.1% month-on-month in January, while spending rose 0.5% during the same period. However, the job market remains weak, albeit improving. In February, the workforce contracted only by 36,000, better than the expected decline of 50,000. The unemployment rate, which also surveys 60,000 households, stayed unchanged at 9.7%, but below October’s high of 10.1%.
EUROPE: Exports To Increase
The economic recovery has faced some setbacks during the Winter in the U.S., but should accelerate in Spring and Summer. The euro currency, in the mean time, is challenging important resistance lines against the U.S. dollar.
U.S.: Awaiting for March numbers.
There is only modest recovery, so far. This is what stands out from the latest Fed’s Beige Book prepared before Feb. 22nd. Consumer spending is rising, but activity remained modest, also due to the poor weather conditions. Inventories have been rebuilt, as manufacturers are showing optimism and planning to increase their investments. In effect, personal income moved up 0.1% month-on-month in January, while spending rose 0.5% during the same period. However, the job market remains weak, albeit improving. In February, the workforce contracted only by 36,000, better than the expected decline of 50,000. The unemployment rate, which also surveys 60,000 households, stayed unchanged at 9.7%, but below October’s high of 10.1%.
U.S.: Awaiting for March numbers.
There is only modest recovery, so far. This is what stands out from the latest Fed’s Beige Book prepared before Feb. 22nd. Consumer spending is rising, but activity remained modest, also due to the poor weather conditions. Inventories have been rebuilt, as manufacturers are showing optimism and planning to increase their investments. In effect, personal income moved up 0.1% month-on-month in January, while spending rose 0.5% during the same period. However, the job market remains weak, albeit improving. In February, the workforce contracted only by 36,000, better than the expected decline of 50,000. The unemployment rate, which also surveys 60,000 households, stayed unchanged at 9.7%, but below October’s high of 10.1%.
Markets Drift on One Year Anniversary of Recession Lows by Michael Boutros
Asian markets were mixed today after US markets closed largely unchanged yesterday. Markets had rallied on better than expected employment data out of the world's largest economy on Friday. Non-farm payroll figures showed the US had shed some 36k jobs, beating analyst forecasts for a drop of 68k. Although job loss continues to plague the workforce, a decrease in jobs lost suggests that unemployment may be bottoming, with the rate coming in unchanged at 9.7%. US markets had rallied sharply on the data Friday, boosting Asia Pacific markets yesterday, with the Nekkei 225 and the Hang Seng index both gaining nearly 2%. As markets digest the news, eyes once again return to the sovereign debt issues in the eurozone. Over the weekend, French President Nicolas Sarkozy had reaffirmed the EU's commitment to Greece and the euro currency as a whole, spurring an increase in risk appetite as investors look to higher yielding currencies. The euro's gains were subdued however, on remarks from Greek Prime Minister Papandreou who warned that the country's current borrowing costs are "unsustainable," and that further deterioration in Greece could lead to another global financial crisis.
Euro Trends Lower
Markets drifted today as uncertainty about conditions in the Eurozone once again weigh heavily on investors. The euro was softer pre market open in London having testing the 1.37 handle yesterday. Bearish sentiment persists as the single currency remains under heavy pressure. Sitting just below the 1.36 figure, support for the euro rests at 1.3570 followed by 1.3520 and the 1.35 handle. A break under the figure leaves additional demand at 1.3450 and lower at 1.3370. To the upside, resistance holds steady at 1.3650 backed by the 1.37 handle. Critical resistance rests with the upper band of the downward channel dating back to the Dec 3rd high at 1.3790. A break here leaves additional ceilings at 1.3830 followed by 1.3920 and 1.3980.
Euro Trends Lower
Markets drifted today as uncertainty about conditions in the Eurozone once again weigh heavily on investors. The euro was softer pre market open in London having testing the 1.37 handle yesterday. Bearish sentiment persists as the single currency remains under heavy pressure. Sitting just below the 1.36 figure, support for the euro rests at 1.3570 followed by 1.3520 and the 1.35 handle. A break under the figure leaves additional demand at 1.3450 and lower at 1.3370. To the upside, resistance holds steady at 1.3650 backed by the 1.37 handle. Critical resistance rests with the upper band of the downward channel dating back to the Dec 3rd high at 1.3790. A break here leaves additional ceilings at 1.3830 followed by 1.3920 and 1.3980.
Markets Rally Pre NFP- USD Holds Gains by Michael Boutros
The dollar was slightly firmer as investors are cautious ahead of today's US jobs report. Asian and European markets were broadly stronger early in London trade after yesterdays positive US close, with the Nikkei 225 gaining more than 2% on speculation that the Bank of Japan is considering implementing further easing measures. This comes as Chinese Premier Wen Jiabao stated today that China will "continue to implement a proactive fiscal policy and moderately easy monetary policy." These reaffirmations prompted short-term traders to move into higher yielding currencies, putting pressure on the yen which fell to 89.40 vs. the greenback, pre-market open in London. Resistance rests with the monthly pivot, at 89.90 with additional ceilings at the 61.8% Fibonacci extension taken from the Feb 4th and March 4th troughs, at 90.30. Here the extension converges with the upper bound of the wedge formation dating back to the Jan 8th high, which if overcome, leaves significant room for advances for the greenback. Demand sits at 88.50 with additional support at 88.10 backed by 87.90.
Greece Braces for Demonstrations
Greek Prime Minister George Papandreou meets with Chancellor Merkel in Germany today as tension between the two countries has risen in recent days. No announcements are expected with regards to any type of bailout for the debt laden country. With a better than expected bond auction yesterday, investors softened their heavy bearish views, improving sentiment among the Eurozone countries. Domestically however, Greece faces increasing civil unrest, with unions planning additional strikes to protest the latest round of austerity measures. These protests are expected to shut down schools, airports, and cause other major disruptions.
Greece Braces for Demonstrations
Greek Prime Minister George Papandreou meets with Chancellor Merkel in Germany today as tension between the two countries has risen in recent days. No announcements are expected with regards to any type of bailout for the debt laden country. With a better than expected bond auction yesterday, investors softened their heavy bearish views, improving sentiment among the Eurozone countries. Domestically however, Greece faces increasing civil unrest, with unions planning additional strikes to protest the latest round of austerity measures. These protests are expected to shut down schools, airports, and cause other major disruptions.
Germany Not Convinced - USD Firmer by Michael Boutros
Asian markets were sharply lower today after an uneasy US session yesterday, as investors are cautious ahead of the US jobs report tomorrow. Although the ADP employment report was in line with analyst forecasts, severe weather in the US in recent weeks is thought to have had a negative impact that may skew the report. In Europe, Greece announced another round of deficit cuts to the tune of 4.8 billion euros yesterday. Prime Minister George Papandreou has made it clear that Greece has "fulfilled to the utmost all that we must from our side; now it's Europe's turn." Although the ECB and other EU members have acknowledged Greece's decisive austerity measures, Germany, the unions largest economy, doesn't seem convinced the government has made enough reforms to address the underlying structural problems and meet its pledge to reduce the deficit to 8.7% of GDP this year. German Chancellor Angela Merkel has explicitly stated that tomorrow's meeting with the Greek Prime Minister will not be "about aid commitments, but about good relations between Germany and Greece." As investors wait to see how the sovereign debt crisis will play out, the Eurozone finds itself at a crossroad. Civil unrest continues to increase with additional strikes scheduled to be held in Greece and now in Portugal as well, as unions protest recent austerity measures taken by both governments. The question arises as to whether these countries can make the necessary changes needed to reduce their national deficits while attempting to appease the escalating tensions between the government and civil servants.
Euro Rally Fades
The euro was softer today having made advances against the greenback, lifting the single currency to 1.3736 at 11:30am in New York yesterday. The euro still faces considerable downward pressure although profit taking on record short positions have provided some interim strength for the currency. Support rests at 1.3630, followed by the 1.35 handle. Additional price floors are seen at 1.3460 and 1.3380. Advances past the 61.8% Fibonacci extension taken from the Dec 18th '08 and the Nov 25th '09 highs, at 1.3740, opens the door to modest gains, with targets at the 1.38 figure followed by 1.3830.
Euro Rally Fades
The euro was softer today having made advances against the greenback, lifting the single currency to 1.3736 at 11:30am in New York yesterday. The euro still faces considerable downward pressure although profit taking on record short positions have provided some interim strength for the currency. Support rests at 1.3630, followed by the 1.35 handle. Additional price floors are seen at 1.3460 and 1.3380. Advances past the 61.8% Fibonacci extension taken from the Dec 18th '08 and the Nov 25th '09 highs, at 1.3740, opens the door to modest gains, with targets at the 1.38 figure followed by 1.3830.
USD Tumbles on Improved Risk-Appetite by Korman Tam
The greenback fell sharply across the board, sliding to 1.3735 against the euro, 0.9084 versus the Aussie and 1.0277 against the Canadian dollar. Appetite for risk improved as Greece passed a plan to cut its deficit by 4.8 billion euros and mitigating sovereign-debt fears to prompt a sharp rally in the euro – which surged by over 140-pips in the Wednesday session. Crude oil extended gains further above the $80-level, up by over 1.4% to $80.80 while the US equity indexes were predominantly flat for the day.
The economic reports released today saw key indicators for the US labor market including the Challengers layoffs and ADP private-sector payrolls. The Challenger layoffs signaled improving conditions in the beleaguered US jobs market, with planned layoffs falling to its lowest level in 4-years at -77.4% to 42,090. Meanwhile, the ADP private-sector payrolls report printed inline with consensus estimates, shedding 20k jobs in February compared with 22k jobs lost in the previous month. The February services ISM improved by more than estimated, increasing to 54.8 from 52.2 previously. The Fed’s Beige Book report reflected “modest” increases, with 9 of the 12 regional banks reporting improved economic activity.
Traders will look ahead to central bank monetary policy decisions from both the Bank of England (7:00 AM EST) and the European Central Bank (7:45 AM EST). Both central banks are expected to leave interest rates unchanged. The subsequent press conference from ECB President Trichet will be analyzed for revisions to the Bank’s growth outlook as well as signals on how the ECB will rein-in emergency liquidity measures
The economic reports released today saw key indicators for the US labor market including the Challengers layoffs and ADP private-sector payrolls. The Challenger layoffs signaled improving conditions in the beleaguered US jobs market, with planned layoffs falling to its lowest level in 4-years at -77.4% to 42,090. Meanwhile, the ADP private-sector payrolls report printed inline with consensus estimates, shedding 20k jobs in February compared with 22k jobs lost in the previous month. The February services ISM improved by more than estimated, increasing to 54.8 from 52.2 previously. The Fed’s Beige Book report reflected “modest” increases, with 9 of the 12 regional banks reporting improved economic activity.
Traders will look ahead to central bank monetary policy decisions from both the Bank of England (7:00 AM EST) and the European Central Bank (7:45 AM EST). Both central banks are expected to leave interest rates unchanged. The subsequent press conference from ECB President Trichet will be analyzed for revisions to the Bank’s growth outlook as well as signals on how the ECB will rein-in emergency liquidity measures
The European Debt Threat by Michael Boutros
The euro was firmer against the dollar at market open in London. Optimism on the Greek debt threat, in combination with profit taking, pushed the single currency to a high of 1.3654. Greece is set to unveil a new austerity package today after EU officials said that more steps are needed to reduce the deficit. The government faces increasing civil unrest with more strikes being scheduled to be held in Athens next week. The euro remains under pressure despite optimism about the government's expected 4 billion euro cut in spending. Concerns about other EU nations are mounting as Spain's 1.6 trillion dollar economy faces pressures to reduce their growing deficit as well. With over 19% unemployment, and an 11% debt to GDP ratio, the 4th largest economy in the EU is quickly reaching 'Greek' status as analysts question whether the government can effectively implement strict austerity measures to make any significant reduction in the nations deficit. With an economy the size of Greece, Ireland, and Portugal combined, investors are shifting their focus to Spain, which is now viewed by many as the main risk to the union. Much emphasis has been put on the EU's handling of the Greek crisis as questions arise as to who will be next in line to need EU assistance.
Having tested 1.3650, the single currency faces ceilings at the 100% Fibonacci extension taken from the Nov 25th and Jan 13th highs at 1.3660 followed by 1.3680. Ultimately, the euro would need to make advances past the 61.8% Fibonacci extension taken from the Dec 18th '08 and the Nov 25th '09 highs, using the Mar 4th lows, at 1.3740 to signal a trend reversal. Support rests at the 1.35 handle, which the currency has attempted to break several times in the past weeks. Downside risk increases with a break of 1.3450 with additional demand sitting at the 1.34 handle followed by 1.3380.
Having tested 1.3650, the single currency faces ceilings at the 100% Fibonacci extension taken from the Nov 25th and Jan 13th highs at 1.3660 followed by 1.3680. Ultimately, the euro would need to make advances past the 61.8% Fibonacci extension taken from the Dec 18th '08 and the Nov 25th '09 highs, using the Mar 4th lows, at 1.3740 to signal a trend reversal. Support rests at the 1.35 handle, which the currency has attempted to break several times in the past weeks. Downside risk increases with a break of 1.3450 with additional demand sitting at the 1.34 handle followed by 1.3380.
RBA Tightens, BoC Stands Pat by Korman Tam
Central bank decisions dominated the headlines in the Tuesday session, as the results of the policy deliberations were largely in line with consensus expectations. The Reserve Bank of Australia tightened monetary policy, raising interest rates by 25-basis points to 4.0% while the Bank of Canada kept policy unchanged at 0.25%.
In the accompanying statement, RBA Governor Stevens said “interest rates to most borrowers remain lower than average” and given Australia’s “growth likely to be close to trend and inflation close to target over the coming year, it is appropriate for interest rates to be closer to average”. The Australian dollar was initially softer following the policy announcement, sliding to 0.8956 in a knee-jerk reaction, but has since recovered above the 0.90-figure to extend gains toward 0.9056.
The Bank of Canada held policy unchanged at 0.25%, as expected. The BoC reiterated its “commitment to hold current policy rate until the end of the second quarter of 2010”. The Bank acknowledged yesterday’s robust GDP report of 5% -- saying “the level of economic activity in Canada has been slightly higher than the Bank had projected in its January MPR” and attributing the growth rate to vigorous domestic spending and further recovery in exports. The BoC added that “the main macroeconomic risks to the inflation projection are roughly balanced”. Further, the Bank tempered expectations for policy tightening saying “the persistent strength of the Canadian dollar and the low absolute level of US demand continue to act as significant drags on economic activity in Canada”. Traders bid the Loonie higher against the greenback, touching 1.0311 in the morning session
In the accompanying statement, RBA Governor Stevens said “interest rates to most borrowers remain lower than average” and given Australia’s “growth likely to be close to trend and inflation close to target over the coming year, it is appropriate for interest rates to be closer to average”. The Australian dollar was initially softer following the policy announcement, sliding to 0.8956 in a knee-jerk reaction, but has since recovered above the 0.90-figure to extend gains toward 0.9056.
The Bank of Canada held policy unchanged at 0.25%, as expected. The BoC reiterated its “commitment to hold current policy rate until the end of the second quarter of 2010”. The Bank acknowledged yesterday’s robust GDP report of 5% -- saying “the level of economic activity in Canada has been slightly higher than the Bank had projected in its January MPR” and attributing the growth rate to vigorous domestic spending and further recovery in exports. The BoC added that “the main macroeconomic risks to the inflation projection are roughly balanced”. Further, the Bank tempered expectations for policy tightening saying “the persistent strength of the Canadian dollar and the low absolute level of US demand continue to act as significant drags on economic activity in Canada”. Traders bid the Loonie higher against the greenback, touching 1.0311 in the morning session
GBP Pounded on Political Uncertainty by Korman Tam
The British pound whipsawed against the majors at the start of the week, plunging sharply from 1.5251 to 1.4785 against the dollar before settling around the 1.50-mark by afternoon trading. Political uncertainty in the UK was the primary catalyst for the steep sell-off in the sterling. Meanwhile, the greenback was softer against the euro and the Canadian dollar as traders pushed US equities higher, with the Dow Jones up by 0.72% and the Nasdaq improving by almost 1.5%. Crude oil came under pressure in the New York session, retreating beneath the $79-mark to slide to $78.87.
The economic reports released at the start of the week moved the foreign exchange markets, particularly a sharply better than expected reading in Canada’s GDP data. The Canadian economy expanded at its fastest pace since 2000 with fourth quarter GDP printing at 5.0%, outpacing consensus estimates for growth of 4.1% compared with an upwardly revised growth rate of 0.9%. On a quarterly basis, the economy posted a robust 1.2% expansion compared with a revised 0.2% increase.
The US reports saw January personal consumption, personal income, PCE and the February manufacturing ISM index. The personal consumption figure printed higher at 0.3% while the personal income reading was lower than expected at 0.1%. The February manufacturing ISM report posted its seventh consecutive monthly expansion, printing at 56.5, albeit less than market expectations and down from 58.4 from January.
The economic reports released at the start of the week moved the foreign exchange markets, particularly a sharply better than expected reading in Canada’s GDP data. The Canadian economy expanded at its fastest pace since 2000 with fourth quarter GDP printing at 5.0%, outpacing consensus estimates for growth of 4.1% compared with an upwardly revised growth rate of 0.9%. On a quarterly basis, the economy posted a robust 1.2% expansion compared with a revised 0.2% increase.
The US reports saw January personal consumption, personal income, PCE and the February manufacturing ISM index. The personal consumption figure printed higher at 0.3% while the personal income reading was lower than expected at 0.1%. The February manufacturing ISM report posted its seventh consecutive monthly expansion, printing at 56.5, albeit less than market expectations and down from 58.4 from January.
The Greek Fix - Cable Falls by Michael Boutros
Asian markets and European markets were broadly stronger today on hopes the Greek debt crisis is nearing a resolution. As EU officials commenced with discussions in Athens today, top monetary official Olli Rehn urged Greece to take greater austerity measures and asked that the "government announce new measures in the coming days." Statements from EU officials reaffirming their support to the Greek people and authorities had given the euro some footing. With the Eurozone reporting an unexpected fall in unemployment, the single currency had rallied up to 1.3650 early in London trade before diving down to 1.3510 at noon local time. The euro resumes its downward trend, holding its downward channel dating back to the Dec 3rd highs. A move below the 1.35 handle leaves support at 1.3420, followed by 1.34 and 1.3380. Traders are eyeing longer term targets at 1.3090 followed by the 1.30 handle and 1.2880. A sustained rally is possible with a break of 1.3660, leaving supply at 1.3750 and 1.3830.
Cable Takes a Pounding
Speculation on the risk of a hung parliament over the weekend put pressure on the pound today as it plummeted to 10-month lows vs. the greenback, and one-year lows vs. the yen. A hung parliament is sure to add uncertainty to an already fragile market, as questions arise as to how this may affect the strength of the UK's already weak recovery. This comes a week after Bank of England Governor Mervyn King hinted to the possibility of implementing additional quantitative easing measures to prevent a slide back into recession. Reports on Mortgage approvals today came in weaker than expected, triggering a heavy sell off, sending cable down 2.5% below the 1.49 handle vs. the dollar and 132 vs. the yen. Having broken through the 1.5070 support level, the sterling now faces further losses down to 1.4780. A break here leaves demand at 1.4720 followed by 1.4590. Stability for the pound takes footing with a break above 1.5240 which rests with the 61.8% Fibonacci extensions level using the Jan 19th and Feb 17th crests, and the Feb 5th trough. Further up, resistance lies at the monthly pivot at 1.5325 followed by 1.5542.
Cable Takes a Pounding
Speculation on the risk of a hung parliament over the weekend put pressure on the pound today as it plummeted to 10-month lows vs. the greenback, and one-year lows vs. the yen. A hung parliament is sure to add uncertainty to an already fragile market, as questions arise as to how this may affect the strength of the UK's already weak recovery. This comes a week after Bank of England Governor Mervyn King hinted to the possibility of implementing additional quantitative easing measures to prevent a slide back into recession. Reports on Mortgage approvals today came in weaker than expected, triggering a heavy sell off, sending cable down 2.5% below the 1.49 handle vs. the dollar and 132 vs. the yen. Having broken through the 1.5070 support level, the sterling now faces further losses down to 1.4780. A break here leaves demand at 1.4720 followed by 1.4590. Stability for the pound takes footing with a break above 1.5240 which rests with the 61.8% Fibonacci extensions level using the Jan 19th and Feb 17th crests, and the Feb 5th trough. Further up, resistance lies at the monthly pivot at 1.5325 followed by 1.5542.
Wednesday, February 24, 2010
U.S.: Back To Normal?
The economic growth is expanding globally and few nations have already begun to unfold some of the recovery measures. So, after China and Australia, among the leading economic countries, also the U.S. has increased interest rates by 25 basis points. It should be the first step of the normalization process that will characterize this year economic scenario.
U.S.: normalization has begun
The U.S. economy is moderately, but consistently, moving out of the recent recession, as the manufacturing sector is witnessing the fastest seven months growth in more than ten years and housing stays supportive, despite some setbacks. In January, housing starts moved up 2.8% to 591,000 from 575,000 in December. At the contrary, permits fell slightly by 4.9% after having increased 10.9% the previous month. However, they are up almost 17% year-on-year, the highest point in the past six years. January’s up move was broad-based. In fact, both single and multiple components rose, while all the major regions of the U.S., except for the West, were in green last month. Industrial production moved instead at a 0.9% pace in January from 0.7% in December, while capacity utilization climbed to 72.6% from 71.9%, the highest level since December 2008. The manufacturing activity should support further job growth in the industry, after January’s first increase in almost three years. Companies will soon begin to reinvest excess cash gained from recession cuts into new hiring.
U.S.: normalization has begun
The U.S. economy is moderately, but consistently, moving out of the recent recession, as the manufacturing sector is witnessing the fastest seven months growth in more than ten years and housing stays supportive, despite some setbacks. In January, housing starts moved up 2.8% to 591,000 from 575,000 in December. At the contrary, permits fell slightly by 4.9% after having increased 10.9% the previous month. However, they are up almost 17% year-on-year, the highest point in the past six years. January’s up move was broad-based. In fact, both single and multiple components rose, while all the major regions of the U.S., except for the West, were in green last month. Industrial production moved instead at a 0.9% pace in January from 0.7% in December, while capacity utilization climbed to 72.6% from 71.9%, the highest level since December 2008. The manufacturing activity should support further job growth in the industry, after January’s first increase in almost three years. Companies will soon begin to reinvest excess cash gained from recession cuts into new hiring.
Europe is Still Under Pressure
As global markets are sizing the Euro-zone sovereign risks and the Chinese reserve requirement, the U.S. economy is giving tangible signs of recovery. The U.S. dollar, in the mean time, is finding good resistance points at current levels.
U.S: Recovery unfolding
Bringing some order inside the troubled finances remains the main target this year in the United States and in Europe. Nevertheless, with the job market layouts having probably topped at current levels, especially in the U.S., consumer spending should rise in the coming months, albeit at a lower level compared to previous recessions. In January, consumer spending moved up by 0.5% month-on-month, more than the expected 0.4%. December and November numbers were revised up as well. The first moved to -0.1% from -0.3% and the second jumped to 2.0% from 1.8%. January’s rise was broad-based confirming that households keep on spending even after the holiday season. Sells rose 0.8% excluding auto, gasoline and building equipment. The housing market remains at contrary a corner stone of the U.S. recovery, but prices might struggle to find their way out of the bottom. Housing starts are stalling, also due to the adverse weather conditions, although the uptrend should continue. The Federal Reserve will maintain the gradual removal policy, as the initial step toward higher rates that could materialize later in the year. Policymakers still expects low growth and low inflation for the months ahead. In effect, December’s trade deficit confirms that the economic recovery is unfolding in the United States. The deficit increased to $ 40.2 billion from November’s $ 36.4 billion. Both export and import rose. The first moved up by 3.3% and the second increased by 4.8%. So, the Gross Domestic Product (GDP) might pass 3.5% this year. Core retail sales rose almost 6.0% annually in the past six months. The vast majority of key U.S. companies have overcome Q4 forecasts with profits rising on a pace of over 15% year-on-year excluding financials.
U.S: Recovery unfolding
Bringing some order inside the troubled finances remains the main target this year in the United States and in Europe. Nevertheless, with the job market layouts having probably topped at current levels, especially in the U.S., consumer spending should rise in the coming months, albeit at a lower level compared to previous recessions. In January, consumer spending moved up by 0.5% month-on-month, more than the expected 0.4%. December and November numbers were revised up as well. The first moved to -0.1% from -0.3% and the second jumped to 2.0% from 1.8%. January’s rise was broad-based confirming that households keep on spending even after the holiday season. Sells rose 0.8% excluding auto, gasoline and building equipment. The housing market remains at contrary a corner stone of the U.S. recovery, but prices might struggle to find their way out of the bottom. Housing starts are stalling, also due to the adverse weather conditions, although the uptrend should continue. The Federal Reserve will maintain the gradual removal policy, as the initial step toward higher rates that could materialize later in the year. Policymakers still expects low growth and low inflation for the months ahead. In effect, December’s trade deficit confirms that the economic recovery is unfolding in the United States. The deficit increased to $ 40.2 billion from November’s $ 36.4 billion. Both export and import rose. The first moved up by 3.3% and the second increased by 4.8%. So, the Gross Domestic Product (GDP) might pass 3.5% this year. Core retail sales rose almost 6.0% annually in the past six months. The vast majority of key U.S. companies have overcome Q4 forecasts with profits rising on a pace of over 15% year-on-year excluding financials.
Europe is Still Under Pressure
As global markets are sizing the Euro-zone sovereign risks and the Chinese reserve requirement, the U.S. economy is giving tangible signs of recovery. The U.S. dollar, in the mean time, is finding good resistance points at current levels.
U.S: Recovery unfolding
Bringing some order inside the troubled finances remains the main target this year in the United States and in Europe. Nevertheless, with the job market layouts having probably topped at current levels, especially in the U.S., consumer spending should rise in the coming months, albeit at a lower level compared to previous recessions. In January, consumer spending moved up by 0.5% month-on-month, more than the expected 0.4%. December and November numbers were revised up as well. The first moved to -0.1% from -0.3% and the second jumped to 2.0% from 1.8%. January’s rise was broad-based confirming that households keep on spending even after the holiday season. Sells rose 0.8% excluding auto, gasoline and building equipment. The housing market remains at contrary a corner stone of the U.S. recovery, but prices might struggle to find their way out of the bottom. Housing starts are stalling, also due to the adverse weather conditions, although the uptrend should continue. The Federal Reserve will maintain the gradual removal policy, as the initial step toward higher rates that could materialize later in the year. Policymakers still expects low growth and low inflation for the months ahead. In effect, December’s trade deficit confirms that the economic recovery is unfolding in the United States. The deficit increased to $ 40.2 billion from November’s $ 36.4 billion. Both export and import rose. The first moved up by 3.3% and the second increased by 4.8%. So, the Gross Domestic Product (GDP) might pass 3.5% this year. Core retail sales rose almost 6.0% annually in the past six months. The vast majority of key U.S. companies have overcome Q4 forecasts with profits rising on a pace of over 15% year-on-year excluding financials.
U.S: Recovery unfolding
Bringing some order inside the troubled finances remains the main target this year in the United States and in Europe. Nevertheless, with the job market layouts having probably topped at current levels, especially in the U.S., consumer spending should rise in the coming months, albeit at a lower level compared to previous recessions. In January, consumer spending moved up by 0.5% month-on-month, more than the expected 0.4%. December and November numbers were revised up as well. The first moved to -0.1% from -0.3% and the second jumped to 2.0% from 1.8%. January’s rise was broad-based confirming that households keep on spending even after the holiday season. Sells rose 0.8% excluding auto, gasoline and building equipment. The housing market remains at contrary a corner stone of the U.S. recovery, but prices might struggle to find their way out of the bottom. Housing starts are stalling, also due to the adverse weather conditions, although the uptrend should continue. The Federal Reserve will maintain the gradual removal policy, as the initial step toward higher rates that could materialize later in the year. Policymakers still expects low growth and low inflation for the months ahead. In effect, December’s trade deficit confirms that the economic recovery is unfolding in the United States. The deficit increased to $ 40.2 billion from November’s $ 36.4 billion. Both export and import rose. The first moved up by 3.3% and the second increased by 4.8%. So, the Gross Domestic Product (GDP) might pass 3.5% this year. Core retail sales rose almost 6.0% annually in the past six months. The vast majority of key U.S. companies have overcome Q4 forecasts with profits rising on a pace of over 15% year-on-year excluding financials.
U.S.: Growth To Expand. How Much?
Concerns on credit’s availability are putting a cap on growth prospective, while the U.S. dollar is once again the safe haven currency. However, the correction might be temporary and prices should again move to the upside in the coming months. We are only in the mid of a long inflationary cycle which contemplates higher commodity prices and a lower dollar. Current sell-offs might be only in anticipation of milder growth in the months ahead for the United States and the rest of the world.
U.S.: output to expand
The global financial reshuffling is underway, as worldwide markets are in a selling tone and the U.S. dollar is once again the safe haven currency. So, from stocks to crude oil, the decline is unfolding and it might continue for the shorter term as well. The escalation of fiscal and credit challenges for some European countries is keeping the Euro under pressure. Proposals, both in the U.S. and in Europe, for tougher rules for financial institution activities are increasing concerns on credit’s availability and economic expansion. Finally, the possibility of inflation in leading economic nations, such as China and India, is questioning the magnitude of current recovery. However, the correction might be temporary and prices should again move to the upside in the coming months. In effect, we are only in the mid of a long inflationary cycle which contemplates higher commodity prices and a lower dollar. In addition, the U.S. economy has just moved away from the bottom, output reached the positive territory only in 2009, and upside potentiality remains intact for now.
U.S.: output to expand
The global financial reshuffling is underway, as worldwide markets are in a selling tone and the U.S. dollar is once again the safe haven currency. So, from stocks to crude oil, the decline is unfolding and it might continue for the shorter term as well. The escalation of fiscal and credit challenges for some European countries is keeping the Euro under pressure. Proposals, both in the U.S. and in Europe, for tougher rules for financial institution activities are increasing concerns on credit’s availability and economic expansion. Finally, the possibility of inflation in leading economic nations, such as China and India, is questioning the magnitude of current recovery. However, the correction might be temporary and prices should again move to the upside in the coming months. In effect, we are only in the mid of a long inflationary cycle which contemplates higher commodity prices and a lower dollar. In addition, the U.S. economy has just moved away from the bottom, output reached the positive territory only in 2009, and upside potentiality remains intact for now.
U.S.: Growth To Expand. How Much?
Concerns on credit’s availability are putting a cap on growth prospective, while the U.S. dollar is once again the safe haven currency. However, the correction might be temporary and prices should again move to the upside in the coming months. We are only in the mid of a long inflationary cycle which contemplates higher commodity prices and a lower dollar. Current sell-offs might be only in anticipation of milder growth in the months ahead for the United States and the rest of the world.
U.S.: output to expand
The global financial reshuffling is underway, as worldwide markets are in a selling tone and the U.S. dollar is once again the safe haven currency. So, from stocks to crude oil, the decline is unfolding and it might continue for the shorter term as well. The escalation of fiscal and credit challenges for some European countries is keeping the Euro under pressure. Proposals, both in the U.S. and in Europe, for tougher rules for financial institution activities are increasing concerns on credit’s availability and economic expansion. Finally, the possibility of inflation in leading economic nations, such as China and India, is questioning the magnitude of current recovery. However, the correction might be temporary and prices should again move to the upside in the coming months. In effect, we are only in the mid of a long inflationary cycle which contemplates higher commodity prices and a lower dollar. In addition, the U.S. economy has just moved away from the bottom, output reached the positive territory only in 2009, and upside potentiality remains intact for now.
U.S.: output to expand
The global financial reshuffling is underway, as worldwide markets are in a selling tone and the U.S. dollar is once again the safe haven currency. So, from stocks to crude oil, the decline is unfolding and it might continue for the shorter term as well. The escalation of fiscal and credit challenges for some European countries is keeping the Euro under pressure. Proposals, both in the U.S. and in Europe, for tougher rules for financial institution activities are increasing concerns on credit’s availability and economic expansion. Finally, the possibility of inflation in leading economic nations, such as China and India, is questioning the magnitude of current recovery. However, the correction might be temporary and prices should again move to the upside in the coming months. In effect, we are only in the mid of a long inflationary cycle which contemplates higher commodity prices and a lower dollar. In addition, the U.S. economy has just moved away from the bottom, output reached the positive territory only in 2009, and upside potentiality remains intact for now.
EUROPE: Rescue Package Needed
The economy is on the move again in the United States, but the Federal Reserve will keep rates low for few more months. In Europe, instead, concerns over the European fiscal and sovereign debt are still keeping the European currency under pressure. The next important support level is at 1.37 against the U.S. dollar.
U.S.: Fed’s policy confirmed for now
The U.S. economy is clearly improving, albeit the recovery remains challenged by high unemployment rate and tight credit conditions. Beating expectations, the first estimate of the fourth-quarter 2009 Gross Domestic Product (GDP) grew 5.7% compared to both the forecasted 4.8% and the up-move of 2.2% in the third-quarter of last year. The increase was broad-based with final sales increasing at a 2.2% pace. The up-trend should continue this year as well. Household spending rose on goods and services, but consumers will remain caution over the year. In effect, consumer confidence moved up to 55.9 in January from December’s 53.6, as consumers expect the current situation to improve, although prospects of job conditions remained tepid. Nonetheless, durable goods orders increased 0.3% in December stopping two months slide. Uncertainty over the extension of the first time home buyer tax credit (it was extended until the end of April 2010) weighted instead on home sale numbers in December. As a result, existing home sales fell almost 17% month-on-month, while home prices rose 1.5% compared to the previous year. Both condos and single homes showed heavy losses and the month of supply of unsold houses rose to 7.2 months from 6.5. New home sales fell 7.6% during the same month, while inventories of unsold new homes rose to 8.1 months from 7.6 months in November. Declines were broad-based, but sales stay above the record low of 329,000 registered in January 2009. The Federal Reserve should keep rates low for few more months, although it expects the economy to continuing strengthening. The Fed also confirmed it will decrease the pace of purchase of agency debt and agency MBS and will complete the program by the end of March.
U.S.: Fed’s policy confirmed for now
The U.S. economy is clearly improving, albeit the recovery remains challenged by high unemployment rate and tight credit conditions. Beating expectations, the first estimate of the fourth-quarter 2009 Gross Domestic Product (GDP) grew 5.7% compared to both the forecasted 4.8% and the up-move of 2.2% in the third-quarter of last year. The increase was broad-based with final sales increasing at a 2.2% pace. The up-trend should continue this year as well. Household spending rose on goods and services, but consumers will remain caution over the year. In effect, consumer confidence moved up to 55.9 in January from December’s 53.6, as consumers expect the current situation to improve, although prospects of job conditions remained tepid. Nonetheless, durable goods orders increased 0.3% in December stopping two months slide. Uncertainty over the extension of the first time home buyer tax credit (it was extended until the end of April 2010) weighted instead on home sale numbers in December. As a result, existing home sales fell almost 17% month-on-month, while home prices rose 1.5% compared to the previous year. Both condos and single homes showed heavy losses and the month of supply of unsold houses rose to 7.2 months from 6.5. New home sales fell 7.6% during the same month, while inventories of unsold new homes rose to 8.1 months from 7.6 months in November. Declines were broad-based, but sales stay above the record low of 329,000 registered in January 2009. The Federal Reserve should keep rates low for few more months, although it expects the economy to continuing strengthening. The Fed also confirmed it will decrease the pace of purchase of agency debt and agency MBS and will complete the program by the end of March.
U.S.: Unemployment Rate Topping?
In the U.S., retail sales came out worst than expected. However, the underline numbers are pointing to recovery, as discretionary spending has been up-trending for over two months. In Europe, concerns are mounting over the creditworthiness of some member states, while the Eurocurrency stays under pressure for now.
U.S.: imports to increase further?
The economic recovery is underway in the United State with some drawdown here and there. Unexpectedly, retail spending declined 0.3% in December (+0.4%), after having increased 1.8% in November and 1.2% in October. Motor vehicle and parts fell 0.8% compared to the gain of 1.2% registered the previous month. The poor weather conditions might have played a role in December. In addition, consumers have been used recently to do their Christmas shopping earlier in the year, so to take advantage of pre-holiday discounts. Consumer spending remains overall bumpy with the job and credit markets remaining weak. However, quarterly data confirms that the uptrend has already begun, as discretionary spending has been in green for two consecutive months. The jobless rate appears to stabilizing at current levels. Jobless claims rose slightly for the week ending January 9, but the four-week moving average declined to 441,000 from 450,000
U.S.: imports to increase further?
The economic recovery is underway in the United State with some drawdown here and there. Unexpectedly, retail spending declined 0.3% in December (+0.4%), after having increased 1.8% in November and 1.2% in October. Motor vehicle and parts fell 0.8% compared to the gain of 1.2% registered the previous month. The poor weather conditions might have played a role in December. In addition, consumers have been used recently to do their Christmas shopping earlier in the year, so to take advantage of pre-holiday discounts. Consumer spending remains overall bumpy with the job and credit markets remaining weak. However, quarterly data confirms that the uptrend has already begun, as discretionary spending has been in green for two consecutive months. The jobless rate appears to stabilizing at current levels. Jobless claims rose slightly for the week ending January 9, but the four-week moving average declined to 441,000 from 450,000
Europe: ECB Steady For Now
In the United States, the unemployment rate appears to be topping near the important level of 10.0%, although temporary upswings are possible. In Europe, exports are increasing, but the economic recovery stays uneven.
U.S.: Unemployment topping?
The global economic growth is gaining momentum, supported by China, India and Brazil. With exports increasing, the Gross Domestic Product (GDP) will move toward 3.0% this year, after having performed poorly in 2009. Domestic demand is on the move as well, although it still remains subdued by tight credit and high unemployment rate. Its success would be critical in rebalancing economic deficiencies. Nevertheless, in December, the U.S. economy has lost 85,000 jobs with more than half coming from the private sector. Although numbers were expected to remain unchanged compared to the previous month, losses are decreasing from the beginning of 2009. Revisions, at the contrary, were mixed. In fact, while November manifested to first gains since 2007 with 4000 new positions, October showed a drop of 127,000.
U.S.: Unemployment topping?
The global economic growth is gaining momentum, supported by China, India and Brazil. With exports increasing, the Gross Domestic Product (GDP) will move toward 3.0% this year, after having performed poorly in 2009. Domestic demand is on the move as well, although it still remains subdued by tight credit and high unemployment rate. Its success would be critical in rebalancing economic deficiencies. Nevertheless, in December, the U.S. economy has lost 85,000 jobs with more than half coming from the private sector. Although numbers were expected to remain unchanged compared to the previous month, losses are decreasing from the beginning of 2009. Revisions, at the contrary, were mixed. In fact, while November manifested to first gains since 2007 with 4000 new positions, October showed a drop of 127,000.
EUR/USD will move toward 1.60 by the end of 2010?
The U.S. economy is expected to improve tangibly in 2010, supported by the industrial and housing sectors. In Europe, at the contrary, the economic growth is uneven, but the Euro currency stays well supported over the long term against the U.S. dollar.
U.S.: fiscal and monetary policies at a crucial point
The U.S. economy is expected to improve tangibly in 2010 supported by the industrial and housing sectors. In effect, despite being lowered from previous estimates, the Gross Domestic Product (GDP) was above 2.0% in the final estimates, suggesting the positive growth should stay intact without the government incentives. Consumer spending remained practically unchanged, while government spending was lowered to 2.6% from 3.1%. So, household wealth could begin to rise again, after more than two years of rebates, as the unemployment rate might top next year. The U.S. economy lost only 11,000 jobs lately, the smallest number since January 2008. However, consumer confidence remained mixed so far with the Philly Fed index increasing, while the Empire State and Richmond Fed indices both declining. In reality, spending moved up 0.5% in November. It has been the second straight month of increase and it covered both durables and non-durables. Personal income climbed instead 0.4%, while savings stayed at 4.7% for the second straight month, up from 2.6% shown in 2008. Personal spending rose almost 3.0% in the third quarter, supported by the cash-for-clunkers program.
U.S.: fiscal and monetary policies at a crucial point
The U.S. economy is expected to improve tangibly in 2010 supported by the industrial and housing sectors. In effect, despite being lowered from previous estimates, the Gross Domestic Product (GDP) was above 2.0% in the final estimates, suggesting the positive growth should stay intact without the government incentives. Consumer spending remained practically unchanged, while government spending was lowered to 2.6% from 3.1%. So, household wealth could begin to rise again, after more than two years of rebates, as the unemployment rate might top next year. The U.S. economy lost only 11,000 jobs lately, the smallest number since January 2008. However, consumer confidence remained mixed so far with the Philly Fed index increasing, while the Empire State and Richmond Fed indices both declining. In reality, spending moved up 0.5% in November. It has been the second straight month of increase and it covered both durables and non-durables. Personal income climbed instead 0.4%, while savings stayed at 4.7% for the second straight month, up from 2.6% shown in 2008. Personal spending rose almost 3.0% in the third quarter, supported by the cash-for-clunkers program.
USD Stems Losses by Korman Tam
The greenback relinquished some of its previous session’s gains against the majors in early Wednesday trading, briefly trading below the 1.36-figure against the euro. The dollar recovered some of those earlier losses by the afternoon session as markets digested Bernanke’s semi-annual testimony.
Fed Chairman Bernanke, as expected, stressed that interest rates needed to remain low for an extended period of time to support the nascent economic recovery. He added that “the Federal Reserve will at some point need to begin to tighten monetary conditions to prevent the development of inflationary pressures” and expressed confidence that the Fed “has the tools needed to firm the stance of monetary policy at the appropriate time”. Bernanke acknowledged that the sharp rise in economic growth in the second half of 2009 was “attributed to the progress firms made in working down unwanted inventories of unsold goods, which left them more willing to increase production” with the economy forecast to grow at 3 to 3 1/2 % in the coming year and for the unemployment rate to decline slowly.
New home sales missed estimates for an increase to 360k, instead falling by 11.2% in January to 309k units versus 342k units in December. Economic reports scheduled for Thursday will see weekly jobless claims, January durable goods orders and December home prices. Weekly jobless claims are expected to improve to 455k, down from 473k in the previous week. The headline durable goods orders are forecast to edge up to 1.5% in January compared with a 1.0% reading in December while new core goods orders are estimated to slip to 0.8% from 1.4%.
Fed Chairman Bernanke, as expected, stressed that interest rates needed to remain low for an extended period of time to support the nascent economic recovery. He added that “the Federal Reserve will at some point need to begin to tighten monetary conditions to prevent the development of inflationary pressures” and expressed confidence that the Fed “has the tools needed to firm the stance of monetary policy at the appropriate time”. Bernanke acknowledged that the sharp rise in economic growth in the second half of 2009 was “attributed to the progress firms made in working down unwanted inventories of unsold goods, which left them more willing to increase production” with the economy forecast to grow at 3 to 3 1/2 % in the coming year and for the unemployment rate to decline slowly.
New home sales missed estimates for an increase to 360k, instead falling by 11.2% in January to 309k units versus 342k units in December. Economic reports scheduled for Thursday will see weekly jobless claims, January durable goods orders and December home prices. Weekly jobless claims are expected to improve to 455k, down from 473k in the previous week. The headline durable goods orders are forecast to edge up to 1.5% in January compared with a 1.0% reading in December while new core goods orders are estimated to slip to 0.8% from 1.4%.
A Market In Peril by Michael Boutros
Asian markets were down today following a selloff in US equity markets overnight. Lower than expected US consumer confidence numbers dampened risk appetite, pushing the Dow Jones Industrials down more than 100 points to 10282.41. European markets were flat, lacking clear direction as investors wait to hear from Fed Chairman Ben Bernanke today.
The Rate Debate
The euro was slightly firmer as market participants were cautious ahead of the highly anticipated Bernanke testimony before the House Financial Services Committee today at 10am in New York. Traders are looking for assurance that the Fed has not yet embarked on a monetary tightening policy, and for clues to a possible timeline on interest rate hikes. In his semi-annual report, the Chairman is expected to provide an outline on an exit strategy for the extraordinary measures taken during the worst recession since the 1930s. Consumer confidence fell to a 10 month low in February, sparking fears that unemployment may be weighing heavily on spending that is needed to sustain the economic recovery. Meanwhile, strikes in Greece over austerity measures once again have eyes on the debt-laden country. With the IFO economic sentiment falling yesterday, the single currency still faces considerable opposition as uncertainty about the strength and sustainability of the recovery in the Eurozone continues to plague the region. The euro tested the 1.35 handle today before settling around 1.3545. Support levels appear at 1.3460, 1.3385, and 1.3310. An upward move past 1.3660 leaves room for further gains to 1.3740 followed by 1.3830.
The Rate Debate
The euro was slightly firmer as market participants were cautious ahead of the highly anticipated Bernanke testimony before the House Financial Services Committee today at 10am in New York. Traders are looking for assurance that the Fed has not yet embarked on a monetary tightening policy, and for clues to a possible timeline on interest rate hikes. In his semi-annual report, the Chairman is expected to provide an outline on an exit strategy for the extraordinary measures taken during the worst recession since the 1930s. Consumer confidence fell to a 10 month low in February, sparking fears that unemployment may be weighing heavily on spending that is needed to sustain the economic recovery. Meanwhile, strikes in Greece over austerity measures once again have eyes on the debt-laden country. With the IFO economic sentiment falling yesterday, the single currency still faces considerable opposition as uncertainty about the strength and sustainability of the recovery in the Eurozone continues to plague the region. The euro tested the 1.35 handle today before settling around 1.3545. Support levels appear at 1.3460, 1.3385, and 1.3310. An upward move past 1.3660 leaves room for further gains to 1.3740 followed by 1.3830.
Markets Hold Their Breath on Bernanke Testimony by Michael Boutros
Asian markets were mixed today as investors eagerly await for Fed Chairman Ben Bernanke's testimony before Congress tomorrow. Traders are looking for assurance that Thursday's discount rate hike was not a shift in monetary policy but rather a technical move towards "normalization." Markets will also pay close attention to the language used in his statement with regards to a timeline for possible hikes in the Fed funds rate. European markets were marginally weaker across the board on weaker than expected data out of Germany, as well as bearish remarks from the BOE.
Euro Volatility
The euro saw considerable volatility early in the London session today. The single currency rallied to the daily pivot at 1.3690 before relinquishing its gains and sliding down below the 1.36 handle, settling around 1.3570. Lower than expected data from the IFO Business Climate survey showed a decrease in sentiment for the first time in 11 months. The euro's upside break of the upper bound of the downward channel dating back to Jan 13th was short lived on the news, putting pressure back on the euro. If the 1.36 resistance holds, the dollar may be back on track to advance further against the single currency. Demand lies at 1.3545 and lower at the 1.35 figure, which represents the 61.8% Fibonacci extension taken from the Feb 18th highs through today's. A break here makes way to lower support levels at 1.3480 and 1.3410. Upside momentum strengthens with a break of 1.3690 with subsequent ceilings at 1.3740, 1.3840 and further at 1.3875
Euro Volatility
The euro saw considerable volatility early in the London session today. The single currency rallied to the daily pivot at 1.3690 before relinquishing its gains and sliding down below the 1.36 handle, settling around 1.3570. Lower than expected data from the IFO Business Climate survey showed a decrease in sentiment for the first time in 11 months. The euro's upside break of the upper bound of the downward channel dating back to Jan 13th was short lived on the news, putting pressure back on the euro. If the 1.36 resistance holds, the dollar may be back on track to advance further against the single currency. Demand lies at 1.3545 and lower at the 1.35 figure, which represents the 61.8% Fibonacci extension taken from the Feb 18th highs through today's. A break here makes way to lower support levels at 1.3480 and 1.3410. Upside momentum strengthens with a break of 1.3690 with subsequent ceilings at 1.3740, 1.3840 and further at 1.3875
Monday, February 22, 2010
Greenback extends slide by Korman Tam
The greenback extended its overnight slide into the New York session as US markets returned from the long weekend. Improving global risk appetite pushed the Dow Jones, Nasdaq and S&P 500 higher by over 1% and crude oil up to just beneath the $77-per barrel level. The hawkish RBA minutes set the tone for the markets – revealing its upbeat expectations for economic growth and increased likelihood for additional rate hikes in the coming months.
The US economic reports released earlier were better than expected with the NY Fed manufacturing survey and NAHB housing market index sharply beating estimates. The February NY Fed manufacturing survey spiked to 24.91, outpacing calls for an improvement to 18.00 from 15.92 in January. The better than forecast manufacturing index marked its strongest pace in 4-months. Meanwhile, the NAHB housing market index also beat expectations, printing at 17 in February, improving from 15 in January.
Foreign demand for US assets slowed in December with net long-term inflows totaling $63.3 billion and down from a downwardly revised $126.4 billion in November. China’s appetite for US Treasuries fell sharply with the data revealing that China was a net seller – reducing holdings by $34.2 billion to $755 billion in December, its steepest monthly decline in almost 10-years.
The US economic reports released earlier were better than expected with the NY Fed manufacturing survey and NAHB housing market index sharply beating estimates. The February NY Fed manufacturing survey spiked to 24.91, outpacing calls for an improvement to 18.00 from 15.92 in January. The better than forecast manufacturing index marked its strongest pace in 4-months. Meanwhile, the NAHB housing market index also beat expectations, printing at 17 in February, improving from 15 in January.
Foreign demand for US assets slowed in December with net long-term inflows totaling $63.3 billion and down from a downwardly revised $126.4 billion in November. China’s appetite for US Treasuries fell sharply with the data revealing that China was a net seller – reducing holdings by $34.2 billion to $755 billion in December, its steepest monthly decline in almost 10-years.
Greenback extends slide by Korman Tam
The greenback extended its overnight slide into the New York session as US markets returned from the long weekend. Improving global risk appetite pushed the Dow Jones, Nasdaq and S&P 500 higher by over 1% and crude oil up to just beneath the $77-per barrel level. The hawkish RBA minutes set the tone for the markets – revealing its upbeat expectations for economic growth and increased likelihood for additional rate hikes in the coming months.
The US economic reports released earlier were better than expected with the NY Fed manufacturing survey and NAHB housing market index sharply beating estimates. The February NY Fed manufacturing survey spiked to 24.91, outpacing calls for an improvement to 18.00 from 15.92 in January. The better than forecast manufacturing index marked its strongest pace in 4-months. Meanwhile, the NAHB housing market index also beat expectations, printing at 17 in February, improving from 15 in January.
Foreign demand for US assets slowed in December with net long-term inflows totaling $63.3 billion and down from a downwardly revised $126.4 billion in November. China’s appetite for US Treasuries fell sharply with the data revealing that China was a net seller – reducing holdings by $34.2 billion to $755 billion in December, its steepest monthly decline in almost 10-years.
The US economic reports released earlier were better than expected with the NY Fed manufacturing survey and NAHB housing market index sharply beating estimates. The February NY Fed manufacturing survey spiked to 24.91, outpacing calls for an improvement to 18.00 from 15.92 in January. The better than forecast manufacturing index marked its strongest pace in 4-months. Meanwhile, the NAHB housing market index also beat expectations, printing at 17 in February, improving from 15 in January.
Foreign demand for US assets slowed in December with net long-term inflows totaling $63.3 billion and down from a downwardly revised $126.4 billion in November. China’s appetite for US Treasuries fell sharply with the data revealing that China was a net seller – reducing holdings by $34.2 billion to $755 billion in December, its steepest monthly decline in almost 10-years.
Sovereign Debt Fears Subside by Michael Boutros
Fears of the sovereign debt crisis in the eurozone subsided today as investors flocked to riskier , higher yielding assets. Asian and European markets were stronger after US equity markets rallied more than 1.5% overnight, with the Dow Industrial Average closing at 10268.81. The euro is slightly weaker today having jumped more than 1% vs. the greenback in the previous trading session. The single currency tested the 1.3780 level several times before sliding to 1.3740. A Fibonacci extension from the Feb 5th through the Feb 12th lows with the crest peaking at 1.3838 on Feb 9th, points to strong resistance at the 1.3780 level. A break to the upside here leaves room for the euro to advance up to the key level of 1.3893, where the 100% Fibonacci extension overlaps the daily pivot. Downside risk gains momentum with a break of the 1.3640 support, and sets up for significant losses past 1.3571.
UK Jobless Claims Jump
Cable was weaker today after worse than expected employment numbers were released early in the London trading session. While unemployment held steady at 7.8%, the economy shed 23,500 jobs in January, sharply lower than analysts' forecasts of an increase of 10,000 jobs. This comes on news that the BOE had unanimously voted to halt bond purchases at the Feb 4th meeting. Sterling had made sharp advances vs. the greenback as increasing risk appetite reduced the demand for the safe haven currency early in the New York session yesterday. Having tested the 1.5810 level, cable slid back .5% on the negative news to 1.5732 before consolidating back to the 1.5770 range. Cable remains in an upward channel since Feb 8th and stands to make considerable advances with an upside break of the formation, currently resting at 1.5820. Support lies at 1.5687 and further at 1.5608.
UK Jobless Claims Jump
Cable was weaker today after worse than expected employment numbers were released early in the London trading session. While unemployment held steady at 7.8%, the economy shed 23,500 jobs in January, sharply lower than analysts' forecasts of an increase of 10,000 jobs. This comes on news that the BOE had unanimously voted to halt bond purchases at the Feb 4th meeting. Sterling had made sharp advances vs. the greenback as increasing risk appetite reduced the demand for the safe haven currency early in the New York session yesterday. Having tested the 1.5810 level, cable slid back .5% on the negative news to 1.5732 before consolidating back to the 1.5770 range. Cable remains in an upward channel since Feb 8th and stands to make considerable advances with an upside break of the formation, currently resting at 1.5820. Support lies at 1.5687 and further at 1.5608.
USD Regains Footing as Equities Drift by Korman Tam
The greenback was higher against the majors in the Wednesday session, recovering from overnight losses to push the euro beneath the 1.36-level and rising above the 91-mark against the yen. US equity bourses relinquished earlier gains for a predominantly flat session. The economic reports released today included better than expected January housing starts, which climbed to 591k units from an upwardly revised 575k units in December and softer building permits at 621k units versus 653k units previously. The industrial production figure was better than forecast in January at 0.9% and up from 0.7% in December. Meanwhile, capacity utilization was in line with expectations at 72.6%.
The minutes from the Federal Reserve’s January meeting had limited impact on the markets as it was already priced in. The Committee deliberated the methods and timing for how to reduce the Fed’s assets and agreed unanimously to reduce its balance sheet in the “near future”. The sole dissenter, Kansas City Fed President Hoenig voiced his objection to leave the “extended period” component of the policy statement and suggested they “express an expectation that the federal funds rate would be low for some time”.
The economic calendar for Thursday will see weekly jobless claims, January PPI, Philadelphia Fed business survey and the leading economic indicators. Weekly jobless claims are seen falling to 435k from 440k. The headline January producer price index is expected to increase to 0.7% from 0.2% in the previous month. The February Philadelphia Fed manufacturing survey is forecast to edge up to 17.0 versus the January report of 15.2.
The minutes from the Federal Reserve’s January meeting had limited impact on the markets as it was already priced in. The Committee deliberated the methods and timing for how to reduce the Fed’s assets and agreed unanimously to reduce its balance sheet in the “near future”. The sole dissenter, Kansas City Fed President Hoenig voiced his objection to leave the “extended period” component of the policy statement and suggested they “express an expectation that the federal funds rate would be low for some time”.
The economic calendar for Thursday will see weekly jobless claims, January PPI, Philadelphia Fed business survey and the leading economic indicators. Weekly jobless claims are seen falling to 435k from 440k. The headline January producer price index is expected to increase to 0.7% from 0.2% in the previous month. The February Philadelphia Fed manufacturing survey is forecast to edge up to 17.0 versus the January report of 15.2.
Commodities Tumble- USD Strength Resumes by Michael Boutros
The dollar was firmer today pushing the euro to near nine-month lows as positive data from the US boosts sentiments on the strength of the recovery. Aiding the greenback was speculation that the Fed will soon begin unwinding stimulus measures as the US recovery gains traction. The euro continued to drift lower, losing a total of 1.8% from yesterdays' highs of 1.3787, to session lows at the daily pivot at 1.3538. The recent 200+ pip swings on back to back sessions is a testament to the uncertainty of the current news driven market. If euro holds beneath the 1.36 figure, the single currency risks losses down to the 1.3530 low tested on Feb 12th. A break here leaves targets at 1.35 and 1.3480, where the weekly pivot converges with the 100% Fibonacci extension taken from the Feb 9th and 17th crests. Further down, demand sits at 1.34 and 1.3353. Significant resistance still lies at 1.3780, then at 1.3875 followed by 1.3933.
Commodities Plummet
Commodities across the board were down today. With news that the IMF is planning on selling more of its gold holdings, the precious metal continued to fall, losing more than 1%, for a total loss of $28 from yesterday's highs of $1127.25. Crude also fell 1.6% to $76.40 early in the session as the dollar continued to push higher. Commodity currencies like the aussie remain under pressure. Having lost .5% pre-market open in London, the aussie tested the .8940 support level before leveling off around .8965. Maintaining its upward channel from the Feb 5th lows, considerable losses are likely with a break of .8940 with additional support at .8911. To the upside, a break of .9040 could make way for advances up to .9090 and then .9169.
Commodities Plummet
Commodities across the board were down today. With news that the IMF is planning on selling more of its gold holdings, the precious metal continued to fall, losing more than 1%, for a total loss of $28 from yesterday's highs of $1127.25. Crude also fell 1.6% to $76.40 early in the session as the dollar continued to push higher. Commodity currencies like the aussie remain under pressure. Having lost .5% pre-market open in London, the aussie tested the .8940 support level before leveling off around .8965. Maintaining its upward channel from the Feb 5th lows, considerable losses are likely with a break of .8940 with additional support at .8911. To the upside, a break of .9040 could make way for advances up to .9090 and then .9169.
Fed Raises Discount Rate-Dollar Soars by Michael Boutros
Asian markets were down today with both the Nikkei 225 and the Hang Seng Index losing more than 2% on news that the Fed raised its discount rate by 25 basis points, bringing the bank lending rate to .75%. Although market participants were expecting an increase in the rate, analysts were surprised by the timing of the Feds decision which comes ahead of the scheduled March 16th meeting. Futures on US indices were down as the implications of the rate hike have investors questioning whether this was the first step in the Feds monetary tightening. Many economists are in agreement about the likelihood of the Fed increasing the benchmark rate before the end of the year. Although officials stressed that this was not a deviation from the current monetary policy, some traders see the Feds actions as a test of the health of the recovery. Bank to bank lending had all but frozen during the worst recession since the 1930s. With rates higher, analysts will be looking to see if lending between banks begins to pick up and whether or not the sector can sustain itself without the use of low cost emergency loans from the Federal Reserve. The debate is sure to continue in the US on whether the Feds actions are a response to improving economic conditions, or whether this is simply the beginning as the Fed starts to reduce its balance sheets and unwind the unprecedented measures taken during the peak of the crisis.
Dollar Strength Continues
The dollar surged as investors flocked to the safe haven currency in response to the surprise hike. The dollar index hit fresh 8-month highs today testing 81.34 while USD/JPY rose to 92, a level not seen since January 12th. The euro broke 9-month lows vs. the greenback today, testing the weekly pivot near 1.3440, before settling just below the 1.35 handle. With worries about the Greek sovereign debt crisis still looming, the euro remains under considerable pressure. Should the 1.3530 resistance level hold, the single currency risks losses down to the short term support at 1.3480. Further down, demand lies at 1.3404 and 1.3290. Upside potential gains momentum past 1.3530 with supply sitting at the 1.36 figure, and 1.3670.
Dollar Strength Continues
The dollar surged as investors flocked to the safe haven currency in response to the surprise hike. The dollar index hit fresh 8-month highs today testing 81.34 while USD/JPY rose to 92, a level not seen since January 12th. The euro broke 9-month lows vs. the greenback today, testing the weekly pivot near 1.3440, before settling just below the 1.35 handle. With worries about the Greek sovereign debt crisis still looming, the euro remains under considerable pressure. Should the 1.3530 resistance level hold, the single currency risks losses down to the short term support at 1.3480. Further down, demand lies at 1.3404 and 1.3290. Upside potential gains momentum past 1.3530 with supply sitting at the 1.36 figure, and 1.3670.
Greenback relinquishes gains by Korman Tam
The greenback relinquished its strength against the majors in the Friday session, sliding back toward the 1.36-figure versus the euro and slumping to 1.0391 against the Loonie. The US equity bourses recouped its earlier losses to trade largely flat by afternoon trading while crude oil edged up closer to the $80-per barrel level. Markets quickly digested the FOMC’s unexpected announcement yesterday afternoon to lift its discount rate from 0.5% to 0.75% with Asian equity bourses selling off overnight and propping up risk-averse currencies. However, the dollar’s gains were short-lived as traders took profits ahead of the weekend.
The economic released earlier in the session saw consumer prices in January print lower than expected with the headline figure at 0.2% m/m and 2.6% y/y. The core CPI readings fell by 0.1% on a monthly basis and up by 1.6% on an annualized basis.
Federal Reserve officials were quick to reassure markets that the FOMC was removing emergency liquidity rather than embarking on a quantitative tightening cycle. NY Fed Bank President Dudley said “the action yesterday was really an action about the improvement in banks” and “is not at all a signal of any imminent tightening”. He added that with little inflationary pressure in the US, the Fed’s focus “has to be on growth and jobs”.
The economic released earlier in the session saw consumer prices in January print lower than expected with the headline figure at 0.2% m/m and 2.6% y/y. The core CPI readings fell by 0.1% on a monthly basis and up by 1.6% on an annualized basis.
Federal Reserve officials were quick to reassure markets that the FOMC was removing emergency liquidity rather than embarking on a quantitative tightening cycle. NY Fed Bank President Dudley said “the action yesterday was really an action about the improvement in banks” and “is not at all a signal of any imminent tightening”. He added that with little inflationary pressure in the US, the Fed’s focus “has to be on growth and jobs”.
Asian Markets Rally- Euro Hovers by Michael Boutros
Asian markets were generally stronger today with the exception of the SSE composite which was off last week for the Chinese lunar new year. The Nikkei hit 3 week highs after US markets closed out a second week of gains on Friday following 4 weeks of decline. Markets in the region saw large sell offs in response to the Fed's increase of the discount rate last week. Contrastingly, the US did not have such strong responses on the news as markets were relatively flat on the session close Friday.
Euro Looses Steam
The euro was largely unchanged early in London trade. Having tested 1.3650, the single currency relinquished its gains and held steady around the 1.36 handle. Fridays' rally off the 9-month low, put a halt to the dollar's recent surge as traders seemingly shrugged off the Feds rate hike with the Dow closing up roughly 10 points. The euro still faces considerable downward pressure as fundamentals still point to economic unrest in the region. Speculation that Germany has prepared a preliminary plan to bail out struggling Greece with some 20 billion euro's did little to support the currency as traders question whether the bailout will be enough to solve the fundamental problems facing the EU. Many analysts see deeper problems with the currency, including additional sovereign debt issues with countries like Portugal and Spain. A break of the interim support at 1.36 leaves room for losses down to 1.3525 and further to 1.3479. Additional support levels appear at 1.3445 and lower at 1.3316. Strong upside momentum picks up with a break of the 1.3670 resistance level. Here the convergence of the upper bound of the downward channel, dating back to Jan 14th, and the 61.8% Fibonacci extension taken from the Feb 18th highs through today's, should keep the euro subdued. A break here however, leaves further ceilings at 1.3750, the 1.38 handle, and higher at 1.3884.
Euro Looses Steam
The euro was largely unchanged early in London trade. Having tested 1.3650, the single currency relinquished its gains and held steady around the 1.36 handle. Fridays' rally off the 9-month low, put a halt to the dollar's recent surge as traders seemingly shrugged off the Feds rate hike with the Dow closing up roughly 10 points. The euro still faces considerable downward pressure as fundamentals still point to economic unrest in the region. Speculation that Germany has prepared a preliminary plan to bail out struggling Greece with some 20 billion euro's did little to support the currency as traders question whether the bailout will be enough to solve the fundamental problems facing the EU. Many analysts see deeper problems with the currency, including additional sovereign debt issues with countries like Portugal and Spain. A break of the interim support at 1.36 leaves room for losses down to 1.3525 and further to 1.3479. Additional support levels appear at 1.3445 and lower at 1.3316. Strong upside momentum picks up with a break of the 1.3670 resistance level. Here the convergence of the upper bound of the downward channel, dating back to Jan 14th, and the 61.8% Fibonacci extension taken from the Feb 18th highs through today's, should keep the euro subdued. A break here however, leaves further ceilings at 1.3750, the 1.38 handle, and higher at 1.3884.
FX Rangebound in Listless Session by Korman Tam
The major currency pairs were little changed in a listless New York session, with the euro hovering just beneath the 1.36-level against the greenback and holding steady around 124 versus the yen. With no US economic reports scheduled for release today, traders took to the sidelines ahead of Fed Chairman Bernanke’s semi-annual testimony before Congress this week. Markets are looking for Bernanke to reaffirm the Fed’s stance to leave monetary policy accommodative and reiterating comments from the minutes of the last policy meeting. He will likely stress last week’s decision to lift the discount rate was part of a move toward “normalization” rather than a shift to quantitative tightening.
The US equity markets traded flat on the day while crude oil relinquished some of its overnight gains to dip beneath the $80-per barrel level. The economic calendar for Tuesday includes the December Case-Shiller home price index, the February Richmond Fed manufacturing survey, and the Conference Board’s consumer confidence survey. Consensus estimates are expecting the S&P Case-Shiller price index to be flat on a monthly basis in December compared with a 0.2% decline in November and post a 3.8% drop on an annualized basis versus a 5.3% fall in the prior year. The February Conference Board’s consumer confidence survey is estimated to edge up marginally to 56.0 versus 55.9 from January.
The US equity markets traded flat on the day while crude oil relinquished some of its overnight gains to dip beneath the $80-per barrel level. The economic calendar for Tuesday includes the December Case-Shiller home price index, the February Richmond Fed manufacturing survey, and the Conference Board’s consumer confidence survey. Consensus estimates are expecting the S&P Case-Shiller price index to be flat on a monthly basis in December compared with a 0.2% decline in November and post a 3.8% drop on an annualized basis versus a 5.3% fall in the prior year. The February Conference Board’s consumer confidence survey is estimated to edge up marginally to 56.0 versus 55.9 from January.
HSBC: Bank of Russia will continue to cut rates
The Bank of Russia today decided to lower the refinancing rate from 8.75% to 8.50%, noting that "the basis for the reduction of interest rates served as a favorable dynamics of consumer price index and the lack of ... in the foreseeable future significant risk of rising inflation and excess of its official forecast for 2010 . Currency strategists HSBC, commenting on the event, noted that the inflation data really looks weak, and support for the measure, while the bank expected further easing of monetary policy, predicting a reduction in the amount of the refinancing rate at 1.50% to 7.00% and the rate of one-day repo to 5.75% to 5.00% - 5.25%. At HSBC adhere to the forecast for the dollar / ruble at 31.40 at the end of the first quarter, predicting a decrease to 30.10 by the end of the second.
HSBC: Bank of Russia will continue to cut rates
The Bank of Russia today decided to lower the refinancing rate from 8.75% to 8.50%, noting that "the basis for the reduction of interest rates served as a favorable dynamics of consumer price index and the lack of ... in the foreseeable future significant risk of rising inflation and excess of its official forecast for 2010 . Currency strategists HSBC, commenting on the event, noted that the inflation data really looks weak, and support for the measure, while the bank expected further easing of monetary policy, predicting a reduction in the amount of the refinancing rate at 1.50% to 7.00% and the rate of one-day repo to 5.75% to 5.00% - 5.25%. At HSBC adhere to the forecast for the dollar / ruble at 31.40 at the end of the first quarter, predicting a decrease to 30.10 by the end of the second.
Credit Agricole: the U.S. dollar will continue to receive support
According to currency analysts Credit Agricole, reaction of the U.S. dollar to increase the discount rate the Fed may have been somewhat excessive given the fact that the target the federal funds rate the Fed is unlikely to be increased to 2011. Nevertheless, the note at the bank, the fact that this decision is the beginning of the transition to a tightening of monetary policy should support the U.S. currency, provided that the economic statistics will continue to testify on the economic recovery, albeit gradual
Credit Agricole: the U.S. dollar will continue to receive support
According to currency analysts Credit Agricole, reaction of the U.S. dollar to increase the discount rate the Fed may have been somewhat excessive given the fact that the target the federal funds rate the Fed is unlikely to be increased to 2011. Nevertheless, the note at the bank, the fact that this decision is the beginning of the transition to a tightening of monetary policy should support the U.S. currency, provided that the economic statistics will continue to testify on the economic recovery, albeit gradual
Standard Bank recommends to sell pound / dollar
Pound / dollar is trying to jump higher with fresh session lows, but sentiment remains negative, and currency strategist at Standard Bank recommends open short positions at current levels with a stop at $ 1.5750. The bank expects a further reduction of the British currency, the original purpose of which will support around $ 1.5170, and the subsequent - $ 1.4950. Pound is currently traded near $ 1.5394.
Green currency rose against the euro and pound
The dollar continued its growth in the Asian session, after the Fed announced its willingness to increase the discount rate from 0.25% to 0.75%, indicating that the Bank will leave its eksponsionistkoy policy. But the application was accompanied by any specific decision. Dollar Index rose to its highest level since June 16, reaching a level of 81,25. Today will be released data on consumer price index from the U.S., which will affect trade in the Dollar.
Euro / dollar fell on the Asian session to its lowest level since May 18, reaching a level of 1.3454, and currently is trading around 1.3474 with signs of oversold conditions of the four-momentum. Now go Eurozone PMI data, which will influence the trading pair.
Pair Pound / dollar fell on the Asian session to its lowest level since May 19, at 1.5408. As expected, based on the daily stochastic indicators, the couple will continue to decline. Today the trading range is within the range 1.5500 - 1.5280.
Couple Dollar / Yen ranges from 91.98 maximum and minimum of 91.67. Today, according to a four-day-and stochastics, expected depreciation. Trading range for today is in the range 92.25 - 91.10.
Euro / dollar fell on the Asian session to its lowest level since May 18, reaching a level of 1.3454, and currently is trading around 1.3474 with signs of oversold conditions of the four-momentum. Now go Eurozone PMI data, which will influence the trading pair.
Pair Pound / dollar fell on the Asian session to its lowest level since May 19, at 1.5408. As expected, based on the daily stochastic indicators, the couple will continue to decline. Today the trading range is within the range 1.5500 - 1.5280.
Couple Dollar / Yen ranges from 91.98 maximum and minimum of 91.67. Today, according to a four-day-and stochastics, expected depreciation. Trading range for today is in the range 92.25 - 91.10.
UBS: the British pound may continue to decline
According to currency analysts UBS, the British pound may continue to decline due to the fact that the sluggish pace of recovery of the UK economy will not allow the Bank of England to begin raising interest rates soon. The bank drew attention to the growing likelihood that the Bank of England will begin the process of normalization policy later than other central banks of the Group of Ten. Thus, medium-term downside risks to the British currency increases. The bank changed the outlook for rates in the UK and now believe that the end of 2011 the central bank will lower the rate to 2.25% (last forecast bank 3%). Now the rate stands at 0.5%. As for the British pound, the bank recommends selling the currency against the U.S. dollar at $ 1.5455 to $ 1.50 and closed position in the case of growth of pound / dollar to $ 1.5610. At the moment couple pound / dollar was at $ 1.5421.
Greece - it is only the first test for the euro
Otmar Issing, one of the founding fathers of the euro, very correctly identified the principles that underpin the single currency. The euro was conceived and created as an instrument of monetary, not political. The member countries of the Union established a single central bank, but not yet submitted this general authority the right to tax its citizens. This principle is enshrined in the Maastricht Treaty, and since then actively interpreted in all ways the German constitutional court. The euro was unique and special creations, and now its viability is severely tested for strength. He has a serious and obvious flaw. Full-fledged currency requires not only the central bank, but the Treasury (Treasury Department). Such treasury can not deal with the constant tax citizens, however, to use this feature if necessary, for example, during the crisis. When the financial system is on the verge of collapse, the central bank can ensure its liquidity, but only the Treasury can solve the problem of solvency. This well-known fact, it is very unlikely that it did not know about those who conceived the euro and participated in its creation. Issing admits that he was among those who see education as a monetary union without political branches of government attempt to put the cart before the horse.
So, put the cart before the horse - was thus created the European Union. There were limited, but politically it is achievable goals and timetables, but all knew that they would not be enough, will require new steps and new steps. For several reasons, the process of gradually stopped. Development of the EU is now frozen at the current stage. The same applies to the euro. 2008 financial crisis, forcing members of the Union to save their banking systems, he opened our eyes to the defects and flaws in its design. The apotheosis was the debt crisis in Greece. If members of the European Union can not get out of their lethargy and continue the process of development, the euro is doomed. Initially, when creating a single currency, it was announced that members of the Union will comply with the restrictions set by the Maastricht Treaty. However, the previous government of Greece committed a serious violation of these restrictions. The government of George Papandreou, elected last October, with the obligation to restore order, reported that the budget deficit in 2009 amounted to 12.7% than that plunged into a deep shock not only markets, but European authorities.
European authorities contented plan for gradually reducing the deficit, with the first step of reduction of 4%. However, the market is not enough. Risk premium on the Greek government bonds are still kept in 3%, which Greece denies most of the advantages of participation in the euro area. If the situation does not change, Greece simply can not pull ourselves out of debt swamp, no matter what she did. Further budget cuts will only depress economic activity is stronger, leading to a reduction in tax revenues and the decline in the ratio of debt to GDP. Thus, the risk premium will not return to the onetime levels without outside assistance. The situation is worsening developments in the market default swaps on loans: now outweighs the camp of those who bets on a decline. When buying a CDS, the risk is automatically reduced if they do not work. This action can be considered the opposite short-selling shares, where, in case of error, the risk automatically increases. Speculation in the CDS market could trigger a further increase in risk premia.
The ministers of the euro area at its last meeting, recognized the complexity of the situation and pledged to "maintain the financial stability of the euro area as a whole. Unfortunately, they still have not found the mechanisms to implement their obligations, because the current institutional arrangements are not suitable for this purpose - although Article 123 of the Treaty of Lisbon and provides the necessary legal framework. Joint issue Eurobonds to refinance the secured, say, 75% of debt to be repaid in the event of Greece promised performance, would be the best solution. Athens remains to string up and finance the rest. Such measures would help to significantly reduce the cost of financing and, in its essence. correspond to the distribution of IMF credit tranches. But now, from a political standpoint, this is impossible, since Germany was categorically opposed to serve as a feeding trough for their hapless neighbors. Thus, no sane alternatives remains.
Papandreou Government intends to correct the mistakes of the past, it is broad public support. When at the helm were their predecessors, the country now and then roll flat waves of mass protests, but now people seem happy to take the path of hardship if it would lead him to get rid of the budget problems - and they are many. Thus, Greece would be enough temporary assistance. However, there is still Spain, Italy, Portugal and Ireland. However, too many of them to be able to do this kind of action. Salvation Greece still does not guarantee the salvation of the euro. Even if he manages to overcome the current crisis, what if you break out a new one? One thing is clear: we need a strict monitoring and control over the implementation of institutional arrangements in the case of assistance under certain conditions. It is also desirable to create a reliable and well-organized Eurobond market. The question is, can Europe build their political will in a fist for these steps.
So, put the cart before the horse - was thus created the European Union. There were limited, but politically it is achievable goals and timetables, but all knew that they would not be enough, will require new steps and new steps. For several reasons, the process of gradually stopped. Development of the EU is now frozen at the current stage. The same applies to the euro. 2008 financial crisis, forcing members of the Union to save their banking systems, he opened our eyes to the defects and flaws in its design. The apotheosis was the debt crisis in Greece. If members of the European Union can not get out of their lethargy and continue the process of development, the euro is doomed. Initially, when creating a single currency, it was announced that members of the Union will comply with the restrictions set by the Maastricht Treaty. However, the previous government of Greece committed a serious violation of these restrictions. The government of George Papandreou, elected last October, with the obligation to restore order, reported that the budget deficit in 2009 amounted to 12.7% than that plunged into a deep shock not only markets, but European authorities.
European authorities contented plan for gradually reducing the deficit, with the first step of reduction of 4%. However, the market is not enough. Risk premium on the Greek government bonds are still kept in 3%, which Greece denies most of the advantages of participation in the euro area. If the situation does not change, Greece simply can not pull ourselves out of debt swamp, no matter what she did. Further budget cuts will only depress economic activity is stronger, leading to a reduction in tax revenues and the decline in the ratio of debt to GDP. Thus, the risk premium will not return to the onetime levels without outside assistance. The situation is worsening developments in the market default swaps on loans: now outweighs the camp of those who bets on a decline. When buying a CDS, the risk is automatically reduced if they do not work. This action can be considered the opposite short-selling shares, where, in case of error, the risk automatically increases. Speculation in the CDS market could trigger a further increase in risk premia.
The ministers of the euro area at its last meeting, recognized the complexity of the situation and pledged to "maintain the financial stability of the euro area as a whole. Unfortunately, they still have not found the mechanisms to implement their obligations, because the current institutional arrangements are not suitable for this purpose - although Article 123 of the Treaty of Lisbon and provides the necessary legal framework. Joint issue Eurobonds to refinance the secured, say, 75% of debt to be repaid in the event of Greece promised performance, would be the best solution. Athens remains to string up and finance the rest. Such measures would help to significantly reduce the cost of financing and, in its essence. correspond to the distribution of IMF credit tranches. But now, from a political standpoint, this is impossible, since Germany was categorically opposed to serve as a feeding trough for their hapless neighbors. Thus, no sane alternatives remains.
Papandreou Government intends to correct the mistakes of the past, it is broad public support. When at the helm were their predecessors, the country now and then roll flat waves of mass protests, but now people seem happy to take the path of hardship if it would lead him to get rid of the budget problems - and they are many. Thus, Greece would be enough temporary assistance. However, there is still Spain, Italy, Portugal and Ireland. However, too many of them to be able to do this kind of action. Salvation Greece still does not guarantee the salvation of the euro. Even if he manages to overcome the current crisis, what if you break out a new one? One thing is clear: we need a strict monitoring and control over the implementation of institutional arrangements in the case of assistance under certain conditions. It is also desirable to create a reliable and well-organized Eurobond market. The question is, can Europe build their political will in a fist for these steps.
RBC. This week, Bernanke will be the star of the screen
According to analysts RBC, this week's star news channels will be Ben Bernanke, speaking before Congress in accordance with the Humphrey-Hawkins Act. Many expect to get answers to questions that have arisen as a result of raising the discount rate the Central Bank last week. "However, we do not believe that the Bank will change the nature of his comments, noted in the bank. In general, this event is seen as key for the euro / dollar. In early U.S. session, the pair rebounded from a minimum of 1.3585 and reached 1.3630 level. Traders point out a possible quasi-official interest in sales in this area during the European session. Break above 1.3630/35 results in the movement to 1.3655. Technical traders are watching this level, both for the restoration of order on Friday and started to sell from this point with a tight stop.
Europe's monetary union has become an instrument of deflation torture
If the aim was to join the euro European diversity and serve as a catalyst for political union, Europe's elites would have to moderate the expression of anti-German sentiment in the Greek parliament last week.
Left recalled the damage from Nazi Germany and its allies, accused the German banks in the infamous game and speculation at the expense of the Greek people. " Centrist Democrats are not better. How Germany could muster the audacity to criticize our financial system, even when she did not pay compensation to victims of war? There are still Greeks, who mourn their lost brothers, "- said the ex-Minister Margaritis Tzimas (Margaritis Tzimas).
This is deeply offensive to a democratic Germany, which is 60 years old with dignity plays its complex role in the history of Europe. No country could do more in order to overcome his demons. She pays the bill, pay again and rarely grumble.
Meanwhile, a decade of monetary union has created a broad and permanent hole between the north and south, that all EU initiatives poisoned. German-Greek relations have never been worse.
Nobel Prize-winning economist Paul Krugman (Paul Krugman) sees no point in blaming any country in this "Evrobesporyadke. "The political elites of Europe have a responsibility," - he said. "This is a big effect on the currency, even if we disregard warnings about what specifically might happen, even Eurosceptics can not assume such a bad scenario." In fact, we have assumed the professor. But thanks anyway.
European Monetary Union is slowly strangling the member states' ups and downs, these countries are trapped in debt deflation, as the EMU operating in the same destructive manner as the Gold Standard in 1930.
Rules of the gold standard were simple: the surplus countries eased policy, scarce - tightened. So keep the balance. World War I shattered this system. U.S. was not willing to take a leading role instead of Britain.
The dollar was undervalued in 1920. America managed a significant surpluses, like China today. France pegged exchange is too low. Both countries have depleted world reserves of precious metals. And yet, no country has softened the policy: the Fed because of the fury of the Chicago Liquidators Bank of France due to the fact that they were still very fresh in the post-war consequences of hyperinflation.
Regulation fell entirely on scarce countries such as Britain. They had to introduce tighter during the recession, keeping debt deflation. Global demand has burst from the inside, until the whole system collapsed. In the end, the U.S. and France were victims of your own stubbornness, but in 1930 or 1931 it was not an obvious fact to all but Keynes.
History of the eurozone. North has a surplus, the South - the deficit. Germany's surplus was equal to 6.4% of GDP in 2008, the Netherlands - 6.5%. Deficiencies in the countries of central Europe prevyshayut14% for Greece and 10% of Iberia (Portugal, Spain, Andorra). The gap has since declined, but remained a structural phenomenon.
This intra-version of the Chinese surplus with the Western bias. Although China is, at least, doing something with his Blitzkrieg fiscal and monetary growth of 30%.
Germany rejected the budget deficit for next year, which allowed the fiscal tightening. IG Metall agreed to freeze payments, again undermining the Spanish and Italian trade unions. As the countries of central Europe can close 30% of the gap between the unit costs for labor and a reduction in release of money supply in Germany?
Brussels enforces the European version of deflationary decree Pierre Laval (Pierre Laval) 1935, a policy which encourages the French third republic to the edge. Now he ordered Greece to reduce the budget deficit by 10% of GDP for three years, or be responsible under 126.9. Spain must reduce the deficit to 8%. France next?
ECB allows inflation to develop its own course. Business lending falls 2.3%, while, as the M3 money supply continues to decline. Frankfurt said the fall in demand for loans, so it does not matter. See.
German growth dropped to zero in the fourth quarter due to the expiration of incentives. Italy once again came to the negative. Spain and not come out of recession. This recovery was L-shaped.
Dr. Krugman said that the EMU has prompted Spain to the debt bubble and left the country in "asymmetric shock" without any protection. "If Spain had its own currency, the currency would have appreciated during the housing boom, and after it - would be devalued. Since this is not and was not, Spain has to suffer because of the painful deflation and high unemployment. " He wants higher inflation deflators rescued from the euro-zone trap. Just as the IMF implicitly. But who in Europe will be able to take such a decision?
Albert Edwards (Albert Edwards) from Société Générale said that the government should use its authority in the context of the exchange rate under Article 219 in order to impose a change in policy. "Politicians must take matters into their own hands and instruct the ECB to lower Euro," - he said.
This is possible only if France believes that the risks outweigh the policy of Laval danger because of neglect by the Bundesbank traditional measures. Until that EMU will be a slow deflationary instrument of torture
Left recalled the damage from Nazi Germany and its allies, accused the German banks in the infamous game and speculation at the expense of the Greek people. " Centrist Democrats are not better. How Germany could muster the audacity to criticize our financial system, even when she did not pay compensation to victims of war? There are still Greeks, who mourn their lost brothers, "- said the ex-Minister Margaritis Tzimas (Margaritis Tzimas).
This is deeply offensive to a democratic Germany, which is 60 years old with dignity plays its complex role in the history of Europe. No country could do more in order to overcome his demons. She pays the bill, pay again and rarely grumble.
Meanwhile, a decade of monetary union has created a broad and permanent hole between the north and south, that all EU initiatives poisoned. German-Greek relations have never been worse.
Nobel Prize-winning economist Paul Krugman (Paul Krugman) sees no point in blaming any country in this "Evrobesporyadke. "The political elites of Europe have a responsibility," - he said. "This is a big effect on the currency, even if we disregard warnings about what specifically might happen, even Eurosceptics can not assume such a bad scenario." In fact, we have assumed the professor. But thanks anyway.
European Monetary Union is slowly strangling the member states' ups and downs, these countries are trapped in debt deflation, as the EMU operating in the same destructive manner as the Gold Standard in 1930.
Rules of the gold standard were simple: the surplus countries eased policy, scarce - tightened. So keep the balance. World War I shattered this system. U.S. was not willing to take a leading role instead of Britain.
The dollar was undervalued in 1920. America managed a significant surpluses, like China today. France pegged exchange is too low. Both countries have depleted world reserves of precious metals. And yet, no country has softened the policy: the Fed because of the fury of the Chicago Liquidators Bank of France due to the fact that they were still very fresh in the post-war consequences of hyperinflation.
Regulation fell entirely on scarce countries such as Britain. They had to introduce tighter during the recession, keeping debt deflation. Global demand has burst from the inside, until the whole system collapsed. In the end, the U.S. and France were victims of your own stubbornness, but in 1930 or 1931 it was not an obvious fact to all but Keynes.
History of the eurozone. North has a surplus, the South - the deficit. Germany's surplus was equal to 6.4% of GDP in 2008, the Netherlands - 6.5%. Deficiencies in the countries of central Europe prevyshayut14% for Greece and 10% of Iberia (Portugal, Spain, Andorra). The gap has since declined, but remained a structural phenomenon.
This intra-version of the Chinese surplus with the Western bias. Although China is, at least, doing something with his Blitzkrieg fiscal and monetary growth of 30%.
Germany rejected the budget deficit for next year, which allowed the fiscal tightening. IG Metall agreed to freeze payments, again undermining the Spanish and Italian trade unions. As the countries of central Europe can close 30% of the gap between the unit costs for labor and a reduction in release of money supply in Germany?
Brussels enforces the European version of deflationary decree Pierre Laval (Pierre Laval) 1935, a policy which encourages the French third republic to the edge. Now he ordered Greece to reduce the budget deficit by 10% of GDP for three years, or be responsible under 126.9. Spain must reduce the deficit to 8%. France next?
ECB allows inflation to develop its own course. Business lending falls 2.3%, while, as the M3 money supply continues to decline. Frankfurt said the fall in demand for loans, so it does not matter. See.
German growth dropped to zero in the fourth quarter due to the expiration of incentives. Italy once again came to the negative. Spain and not come out of recession. This recovery was L-shaped.
Dr. Krugman said that the EMU has prompted Spain to the debt bubble and left the country in "asymmetric shock" without any protection. "If Spain had its own currency, the currency would have appreciated during the housing boom, and after it - would be devalued. Since this is not and was not, Spain has to suffer because of the painful deflation and high unemployment. " He wants higher inflation deflators rescued from the euro-zone trap. Just as the IMF implicitly. But who in Europe will be able to take such a decision?
Albert Edwards (Albert Edwards) from Société Générale said that the government should use its authority in the context of the exchange rate under Article 219 in order to impose a change in policy. "Politicians must take matters into their own hands and instruct the ECB to lower Euro," - he said.
This is possible only if France believes that the risks outweigh the policy of Laval danger because of neglect by the Bundesbank traditional measures. Until that EMU will be a slow deflationary instrument of torture
Forex is not a quick rich scheme.
The British Government risk facing the worst crisis of the budget deficit, than Greece, which raises serious concerns about the economic stability of the country.
Economists argue that the scale of the budget deficit this year could exceed £ 180 billion
Sterling fell to the unexpected news, after official data showed that the Government has taken £ 4.3 billion last month.
For the first time since 1993, public finances went into negative in January and this month, which is usually tax revenues to the Treasury is moving a significant plus. Economists say that the magnitude of the budget deficit this year could exceed £ 180 billion, even higher than the Chancellor's forecast of a record £ 178 billion.
This deficit (12.8% of UK GDP) could be more serious than that faced by Greece, which already faces a widespread financial crisis, and perhaps she will need help from other eurozone countries or the IMF.
Data on loans coincided with the bad news real estate market, as well as the Council of Mortgage Lenders said a fall in lending last month by 32%, beating, thus, the lowest in a decade.
Bank of England also reported a reduction in lending to enterprises, which suggests that the recession is far from complete.
Poor economic performance has become a serious blow to Chancellor Alistair Darling (Alistair Darling) month before the budget, which, he hoped, would give evidence that the economy is recovering.
The news also appeared on the background of the informal launch election campaign Gordon Brown's Labor Party, which the Prime Minister is planning to build on the basis of economic performance and policies.
Tomorrow Brown will announce the election slogans of the Labor in the general election, which is scheduled for May 6. Here they are: "Ensuring recovery", "Protection of basic services", "Support of the majority", "Protection of future jobs and industries.
Despite the growing warnings from economists and businessmen that the size of the deficit is a serious threat to the future of the British economy, the Labor Party say that government spending should not sokrtitsya until 2011/2012.
In his speech in London, the Prime Minister will insist that the Conservative plans to curb the deficit by reducing spending this year could undermine the recovery.
"Instead of helping restore, their contempt for the government's actions could create additional risks for recovery," - says Brown. "Rather than protecting ordinary families, depriving them of opportunities."
Office for National Statistics said that the government has never had to deal in January, adding that the shortage of funds, which led to borrowing £ 122 billion this year, equivalent to the duty of every Briton to £ 2,000.
The scale of the debt was much higher than in past recessions, since the economic recession resulted in a decline in tax revenues, especially from the City, as well as a sharp increase in social benefits and unemployment benefits and the disadvantaged.
Jonathan Loyns (Jonathan Loynes), of Capital Economics said that although Britain's national debt was much lower than the Greek, the deficit in Britain and the speed with which it occupies, can now be even higher.
He said: "With the budget deficit, which tends to 13% of GDP this year, which may exceed even the Greek, it is clear that a more robust plan to rebuild public finances will need immediately after the general elections in order to keep a lid on markets and rating agencies.
A number of economists and businessmen urged the government to reduce the deficit faster and more thoroughly than is done now, based on the opinions of 20 leading scientists warning last week that because of inactivity, the British government could face a devastating financial crisis.
The Conservatives warned that Britain could donate their top credit ratings, only if the next government will take decisive action.
Shadow Chief Secretary of the Treasury, Philip Hammond (Philip Hammond) said: "These horrific data showing a record deficit in January, illustrate the scale of the debt crisis of the Labor Party."
"The Prime Minister must heed the advice of leading economists and business leaders to present a credible plan to curb the deficit, and, starting this year, to put Britain back on its feet. The longer he delays, the greater the recovery and credit rating would be under threat. "
Following the statistics, the Treasury officials spent much of the morning, comforting and encouraging large investors not to panic in the City.
Nevertheless, as the interest rate, the cost of borrowing for the government rose to 4.1%, which is the highest level in 15 months.
The representative of the Treasury, said: "These findings convince us to make a preliminary forecast to publish the budget ... pre-budget report predicted a sharp drop in capital gains tax and income tax paid in this fiscal year, January is always the most important month for these income; today's data clearly show a downturn. "
James Owen (Owen James) from the Centre for Economics and Business Research said: "In light of the continuing problems in Greece, international investors are wary of economies with large deficits. Despite the fragile nature of recovery, Britain should avoid the attention of predatory eyes now to Portugal, Spain, Italy and Ireland. "
"It is important that the appropriate measures to reduce public borrowing has taken the next government, we are skeptical that the pre-election budget will contain measures that will help calm the markets. Today's data highlight the need for clear commitments on future policy. "
James Knightley (James Knightley), an economist at ING Financial Markets said: "Given the concern over public deficits in Europe at the moment, Britain could again become the focus.
Economists argue that the scale of the budget deficit this year could exceed £ 180 billion
Sterling fell to the unexpected news, after official data showed that the Government has taken £ 4.3 billion last month.
For the first time since 1993, public finances went into negative in January and this month, which is usually tax revenues to the Treasury is moving a significant plus. Economists say that the magnitude of the budget deficit this year could exceed £ 180 billion, even higher than the Chancellor's forecast of a record £ 178 billion.
This deficit (12.8% of UK GDP) could be more serious than that faced by Greece, which already faces a widespread financial crisis, and perhaps she will need help from other eurozone countries or the IMF.
Data on loans coincided with the bad news real estate market, as well as the Council of Mortgage Lenders said a fall in lending last month by 32%, beating, thus, the lowest in a decade.
Bank of England also reported a reduction in lending to enterprises, which suggests that the recession is far from complete.
Poor economic performance has become a serious blow to Chancellor Alistair Darling (Alistair Darling) month before the budget, which, he hoped, would give evidence that the economy is recovering.
The news also appeared on the background of the informal launch election campaign Gordon Brown's Labor Party, which the Prime Minister is planning to build on the basis of economic performance and policies.
Tomorrow Brown will announce the election slogans of the Labor in the general election, which is scheduled for May 6. Here they are: "Ensuring recovery", "Protection of basic services", "Support of the majority", "Protection of future jobs and industries.
Despite the growing warnings from economists and businessmen that the size of the deficit is a serious threat to the future of the British economy, the Labor Party say that government spending should not sokrtitsya until 2011/2012.
In his speech in London, the Prime Minister will insist that the Conservative plans to curb the deficit by reducing spending this year could undermine the recovery.
"Instead of helping restore, their contempt for the government's actions could create additional risks for recovery," - says Brown. "Rather than protecting ordinary families, depriving them of opportunities."
Office for National Statistics said that the government has never had to deal in January, adding that the shortage of funds, which led to borrowing £ 122 billion this year, equivalent to the duty of every Briton to £ 2,000.
The scale of the debt was much higher than in past recessions, since the economic recession resulted in a decline in tax revenues, especially from the City, as well as a sharp increase in social benefits and unemployment benefits and the disadvantaged.
Jonathan Loyns (Jonathan Loynes), of Capital Economics said that although Britain's national debt was much lower than the Greek, the deficit in Britain and the speed with which it occupies, can now be even higher.
He said: "With the budget deficit, which tends to 13% of GDP this year, which may exceed even the Greek, it is clear that a more robust plan to rebuild public finances will need immediately after the general elections in order to keep a lid on markets and rating agencies.
A number of economists and businessmen urged the government to reduce the deficit faster and more thoroughly than is done now, based on the opinions of 20 leading scientists warning last week that because of inactivity, the British government could face a devastating financial crisis.
The Conservatives warned that Britain could donate their top credit ratings, only if the next government will take decisive action.
Shadow Chief Secretary of the Treasury, Philip Hammond (Philip Hammond) said: "These horrific data showing a record deficit in January, illustrate the scale of the debt crisis of the Labor Party."
"The Prime Minister must heed the advice of leading economists and business leaders to present a credible plan to curb the deficit, and, starting this year, to put Britain back on its feet. The longer he delays, the greater the recovery and credit rating would be under threat. "
Following the statistics, the Treasury officials spent much of the morning, comforting and encouraging large investors not to panic in the City.
Nevertheless, as the interest rate, the cost of borrowing for the government rose to 4.1%, which is the highest level in 15 months.
The representative of the Treasury, said: "These findings convince us to make a preliminary forecast to publish the budget ... pre-budget report predicted a sharp drop in capital gains tax and income tax paid in this fiscal year, January is always the most important month for these income; today's data clearly show a downturn. "
James Owen (Owen James) from the Centre for Economics and Business Research said: "In light of the continuing problems in Greece, international investors are wary of economies with large deficits. Despite the fragile nature of recovery, Britain should avoid the attention of predatory eyes now to Portugal, Spain, Italy and Ireland. "
"It is important that the appropriate measures to reduce public borrowing has taken the next government, we are skeptical that the pre-election budget will contain measures that will help calm the markets. Today's data highlight the need for clear commitments on future policy. "
James Knightley (James Knightley), an economist at ING Financial Markets said: "Given the concern over public deficits in Europe at the moment, Britain could again become the focus.
WHAT FOREX IS NOT
Forex is not a quick rich scheme.
Forex is not easy even though my blog says so.
Forex is not a place for newbie
Forex is not something you can learn overnight
If you needed the money, dont put it in Forex. Seriously. Go somewhere else.
Forex is a journey, enjoy it.
There is no such thing as holy grail coz there is no perfection in this world. If perfection exist in this world it would be boring. No more room for improvement.
Forex is not rocket science. There is no right or wrong. There is only probability.
Forex is not easy even though my blog says so.
Forex is not a place for newbie
Forex is not something you can learn overnight
If you needed the money, dont put it in Forex. Seriously. Go somewhere else.
Forex is a journey, enjoy it.
There is no such thing as holy grail coz there is no perfection in this world. If perfection exist in this world it would be boring. No more room for improvement.
Forex is not rocket science. There is no right or wrong. There is only probability.
LWMA 55
One of my favorite indi is LWMA 55. I dont know why but the price seems to react a lot of this line. People say that MA is a lagging indicator and I agree with them 100% but do not use MA as a signal generator, instead use them as a dynamic support and resistance.
For those of you who love to experiment, try putting LWMA 55 on a chart and see how price actually interact with the line. Its not magic but its a mathematical calculation.
Dont get me wrong, you may not be able to trade using MA 55 alone. Try putting LWMA 13 in there as well and remember they are not signal generators. Treat them as dynamic support and resistance.
Put it into a simple formula. If price > LWMA 13 & LWMA 55 = long. If price < LWMA 13 & LWMA 55 = short.
Try it, you may like what you find. Just needed to add in a filter to improve accuracy.
For those of you who love to experiment, try putting LWMA 55 on a chart and see how price actually interact with the line. Its not magic but its a mathematical calculation.
Dont get me wrong, you may not be able to trade using MA 55 alone. Try putting LWMA 13 in there as well and remember they are not signal generators. Treat them as dynamic support and resistance.
Put it into a simple formula. If price > LWMA 13 & LWMA 55 = long. If price < LWMA 13 & LWMA 55 = short.
Try it, you may like what you find. Just needed to add in a filter to improve accuracy.
NEW PLACE, NEW SCHEDULE AND A NEW SYSTEM
On April 2009, I moved to Kuala Lumpur. A new place requires me to have new schedule. I dont have much time as I would like in front of a PC which means, shorter time for me to trade. It requires me to adapt to the time I have to trade and make a new system.
In my quest to adapt my existing system to a new time constraint trading requirement, I accidently stumble onto a new system. Its a very simple system that has shown good result for the month of April and May at the moment.
Just to show you what I have stumble upon, here is a screen shot of my demo account that I have used to run the test. It doesn't show high accuracy but it shows a return of over 100% last month and a small return this month so far.
Here is the hard part. What if I say that I can actually have an accuracy of 100%. Meaning I can win all the time with this system. The numbers you see there is me using a demo account trading with limited time with no regards for the system rules.
Would it be nice to actually win all the time. I will keep you guys posted on the result by the end of this month. In the meantime I cannot be online as long as I like to. For my friends, I know my YM is not online for a long time but just leave a message and I will answer when I have the time.
In my quest to adapt my existing system to a new time constraint trading requirement, I accidently stumble onto a new system. Its a very simple system that has shown good result for the month of April and May at the moment.
Just to show you what I have stumble upon, here is a screen shot of my demo account that I have used to run the test. It doesn't show high accuracy but it shows a return of over 100% last month and a small return this month so far.
Here is the hard part. What if I say that I can actually have an accuracy of 100%. Meaning I can win all the time with this system. The numbers you see there is me using a demo account trading with limited time with no regards for the system rules.
Would it be nice to actually win all the time. I will keep you guys posted on the result by the end of this month. In the meantime I cannot be online as long as I like to. For my friends, I know my YM is not online for a long time but just leave a message and I will answer when I have the time.
TRADING THE DAILY CHARTS
Due to restricted time and Internet connection that I have now, I have opted to trading using the daily charts.
Its not as aggressive and thrilling as trading on the shorter time frame but the result is about the same minus the headache. I'm beginning to like daily trading. I need to make decision once in a while and the rest of the time I just hold my position.
On a daily chart, the candlestick is much easier to read and pattern is much clearer. On 13th August I opened 3 position. 2 of which is still holding while 1 has been closed. At the moment all position are in profit.
Daily trading is not for everyone. It took me sometime to adjust on the requirements of daily trading, but once you are there you never look back.
Till next time, good luck everyone
Its not as aggressive and thrilling as trading on the shorter time frame but the result is about the same minus the headache. I'm beginning to like daily trading. I need to make decision once in a while and the rest of the time I just hold my position.
On a daily chart, the candlestick is much easier to read and pattern is much clearer. On 13th August I opened 3 position. 2 of which is still holding while 1 has been closed. At the moment all position are in profit.
Daily trading is not for everyone. It took me sometime to adjust on the requirements of daily trading, but once you are there you never look back.
Till next time, good luck everyone
Sunday, February 21, 2010
DAILY TRADING - THERE IS NO SPOON
Some people are asking me about the secret of daily trading. The answer is there is no secret. It is there for everyone to see but the question is, can you accept what you see.
Trading the daily chart requires patience, lots of it. That is what most of us lack. Patience. If you look at the longer timeframe charts, you will see that price will stop or hover around certain areas. That is your key point. Always start or stop trading around these key point.
The next indicator I use is CCI. CCI alone is a bit of a headache. So I smooth it out with MA. With the MA, I can see the direction of trade clearly. People say MA is a lagging indicator but I dont want to be early going to a party. I like to enter when the party already started.
The last advice is, there is no such thing as holly grail. You just cannot win all the time. The best that we can do is try to win as much as possible and lose a little as possible. In the long run, it would be profitable enough to stay trading. Otherwise you need to find another business to run.
Trading the daily chart requires patience, lots of it. That is what most of us lack. Patience. If you look at the longer timeframe charts, you will see that price will stop or hover around certain areas. That is your key point. Always start or stop trading around these key point.
The next indicator I use is CCI. CCI alone is a bit of a headache. So I smooth it out with MA. With the MA, I can see the direction of trade clearly. People say MA is a lagging indicator but I dont want to be early going to a party. I like to enter when the party already started.
The last advice is, there is no such thing as holly grail. You just cannot win all the time. The best that we can do is try to win as much as possible and lose a little as possible. In the long run, it would be profitable enough to stay trading. Otherwise you need to find another business to run.
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