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.
Tuesday, March 9, 2010
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.
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