Forex Traders In For A Quiet Session With Little News Or Data Due Today

Forex Traders In For A Quiet Session With Little News Or Data Due Today
Forex Traders In For A Quiet Session With Little News Or Data Due Today
The euro is recovering this morning adding 10 pips to trade at 1.3704 after just a week ago traders were hoping to see the currency break the 1.40 level. Market focus this morning is an upcoming speech from the Director of the German Central Bank, which has already endorsed additional stimulus program urging the ECB to act at its next meeting. ECB officials faced with a stumbling economy and inflation stuck at less than half their goal have flirted with the idea of adding stimulus via asset purchases, akin to quantitative easing, only to be confronted with a shortage of suitable instruments. The complexity presented by 18 government debt markets means Draghi is instead priming investors for more limited action such as interest-rate cuts for now.

Eurozone data showed GDP expanded just 0.2 per cent last quarter, half as much as economists predicted, with France unexpectedly stagnating and economies from Italy to the Netherlands shrinking. Inflation has been below one per cent since October, compared with the ECB’s goal of just under two per cent. Draghi said last week that officials are “comfortable” with acting at their next monetary policy meeting, and ECB Executive Board member Yves Mersch said yesterday that policy makers are working on a broader range of instruments that “might even strike the most fertile imagination.” The ECB’s 24-member Governing Council will release revised macroeconomic forecasts at its meeting on June 5 in Frankfurt. That’ll help it decide whether the medium-term outlook for prices is worsening, a contingency which Draghi said last month would justify broad-based asset purchases.

The other major currencies were equally quiet after a peaceful weekend with little and little news. The greenback traded at 80.08, near where it closed last week after notching up a modest 0.2 percent gain.

eurusd monday

Commodity currencies were sluggish as well with the Australian dollar just a touch firmer at $0.9366 following a flat week. Traders said the 94 U.S. cent level is still providing a cap for the Aussie for now. The kiwi was in the green at 0.8649 climbing after the release of PPI which gained more than expected moving up to 0.1%

This week’s main market focus will be the release of FOMC minutes on Wednesday and UK GDP updates. Minutes of the Federal Reserve April 29-30 policy meeting could shake up the markets as well as the HSBC survey on China’s manufacturing sector for May.

USDJPY(15 minutes)20140519065020The Japanese yen is trading at 101.56 against the greenback and at 139.18 against the weak euro. Last week data showed that Japan’s economy grew an annualized 5.9 percent from the previous quarter, the fastest pace since 2011 as companies stepped up investment and consumers splurged before the first sales-tax rise in 17 years last month. The growth rate compared with a 4.2 percent median estimate in a Bloomberg survey of economists. There is no news expected in the Asian region today so currency markets are expected to remain quiet.

Asian Forex Markets Digesting BoJ Minutes & Chinese Data

Asian Forex Markets Digesting BoJ Minutes & Chinese Data
Asian Forex Markets Digesting BoJ Minutes & Chinese Data
This morning’s big news in the currency markets included falling inflation in China and the Bank of Japan meeting minutes. The Japanese yen is trading at 101.65 gaining momentum after the release of the minutes. A single member of the Bank of Japan policy board said it is possible that the weak yen is having a bigger impact on pushing up consumer prices than previously thought, minutes of the central bank’s March 10-11 meeting showed on Friday. Board members agreed that the economy and consumer prices are moving in line with the central bank’s main scenario, the minutes showed. Members also agreed that the increase in the sales tax will not derail consumer spending as the labor market and wages are improving. The BOJ kept policy steady at the meeting. At a subsequent meeting on April 7-8 the BOJ also stood pat on policy. Bank of Japan board members shared the view that the effects of the aggressive easy policy launched in April 2013 are steadily working and the degree of accommodative financial environment is strengthening, the minutes of the March 10-11 policy meeting released on Friday showed. They also agreed that real interest rates are falling on the back of a rise in inflation expectations and stable nominal interest rates, the minutes also showed.

Deutsche Bank thinks that the BoJ will decide when to ease further based on (1) coordination with the government’s economic policy, (2) receding inflation expectations, and (3) a surprise effect. Easing further at yesterday’s meeting probably would not have been out of the question if the BoJ was only aiming for a surprise effect.

 “The BoJ is therefore expected to ease further in June along with the government’s growth strategy, or in July when the Bank announces its Interim Assessment of the Outlook Report. However, we think the BoJ may be still able to show confidence on achieving 2% CPI target in many factors,” DB projects.

The euro climbed against the JPY to trade at 141.21 adding 22 points after a surprising Greek bond sale.  ECB member Vitor Constancio said gave an interview on Thursday at the Brookings Institute. Asked about the preference for private versus sovereign assets in any QE program of the ECB, Constancio said, “We are considering everything, but no decision.” He noted that various colleagues of his had publicly indicated already “that private assets will be included in any decision that may be taken. So that would make a slight difference with other policies in other central banks. And we are looking in what assets would be, say, easier to operate, if indeed we will take such a decision.” The euro climbed to trade at 1.3893 gaining 6 points after a positive sentiment shift. During the panel, Constancio affirmed that had major central banks not pursued innovative policies after 2009, then “I think the world would be in a worse position” today.

The Aussie and the kiwi are both trading in the red this morning with the AUD trading at 0.9381 and the kiwi at 0.8642 after Chinese inflation numbers missed expectations. The Australian and New Zealand dollars dropped as a decline in Asian shares damped demand for higher-yielding currencies. Gains in both currencies are forecast to stall as China’s demand for the resources eases. The Aussie will weaken almost 8 percent by the year-end, while New Zealand’s currency depreciates about 5 percent, analyst estimates compiled by Bloomberg show. China reported a decline in March imports and exports yesterday, whereas economists had expected increases.

 

 

 

April Fools Does Fool Eco Data As Asian Markets Kick Off A Busy Day

April Fools Does Fool Eco Data As Asian Markets Kick Off A Busy Day
April Fools Does Fool Eco Data As Asian Markets Kick Off A Busy Day
Wall Street ended the month on a higher note as Federal Reserve Chair Janet Yellen reassured investors on ultra-easy monetary policy. Yellen said, Fed is likely to begin raising interest rates by the middle of next year. Meanwhile, traders largely shrugged off a report from MNI Indicators showing that Chicago area business activity grew at a notably slower rate in the month of March. European markets, however, ended the day mixed, owing to mounting speculation that the European Central Bank will offer stimulus to combat low inflation.

The first day of April was an active morning in the Asian region. Asian stocks gained as investors weighed reports on China’s manufacturing that underscored weakness in the world’s second-biggest economy. Key benchmark indices in Hong Kong, China, Singapore, South Korea, Japan and Taiwan were up 0.13% to 1.72%. Japan’s Nikkei Average fell 0.28%.

The non- official Purchasing Managers’ Index fell to 48 in March, the lowest reading since July, from 48.5, HSBC and Markit Economics said today. A separate PMI from the government, with a larger sample size, registered 50.3 from 50.2 in February.

The Chinese reports underscore what Premier Li Keqiang last week called “difficulties and risks” in the world’s second-largest economy as he tries to control surging debt and pollution shrouding cities across AUDUSD(15 minutes)20140401071115China. Li said the nation has policies in reserve to support growth after the cabinet said it would accelerate construction spending. The Premier’s statements last week sent the Aussie and the kiwi to record highs. The Aussie is trading at 0.9268 after topping the 93 price level this morning as the RBA held rates and policy as expected. The kiwi is trading at 0.8674 on hopes of stimulus from the Chinese government.

In Japan the Bank of Japan’s tankan report printed below expectations weakening the JPY, which is trading at 103.30 against the dollar and at 142.30 against the euro. Today is sale tax day, the day that investors and consumers have been worrying about for months as the sales tax jumps to 8% higher than the wage increases in Japan, which is now expected to weigh heavily on consumer spending.  The Tankan index of sentiment among large manufacturers was at 17 in March, climbing from 16 in December, a Bank of Japan report showed today, below the median estimate of 19 in a Bloomberg News survey of economists. The index is forecast to drop to 8 in June, worse than economists’ forecast of 13. The dollar touched a three-week high of ¥103 in Tokyo trading Monday following rises in overseas trading, although the dollar-yen pair was stuck in a narrow range on the final day of Japan’s fiscal year.

USDJPY(15 minutes)20140401071122

Chinese Data Disappoints Forex Traders

Chinese Data Disappoints Forex Traders
Chinese Data Disappoints Forex Traders
The focus in the forex markets today will be the lackluster Chinese HSBC PMI data which missed its mark again, printing at 48.1 against expectations of 48.7. An index of China’s manufacturing activity showed further weakness in March, slumping to an eight-month low and suggesting that first-quarter growth for the world’s No. 2 economy will be disappointing. Analysts also said that the weak manufacturing data, combined with disappointing figures in the previous months, pointed to a need for government support for the economy. The preliminary HSBC Purchasing Managers’ Index was in contraction territory for the third straight month, slipping below expectations for a slight improvement after the effects of the Lunar New Year holiday over the first two months of the year. Traders can expect Beijing to launch a series of policy measures to stabilize growth. From disappointing economic data, to the country’s first-ever domestic bond default and a spike in yuan volatility, there is plenty for China bears to chew over. Last week, the yuan suffered its biggest weekly drop against the dollar to hit 13-month lows, although there were signs the currency may be finding a base.

While the decline was engineered by the central bank, which has stepped up efforts to shake out hot money from the market, there are worries it could have unintended consequences. Top Chinese officials over the weekend reaffirmed the country will introduce market-based interest rates and a market-based exchange rate for the yuan currency.

The weak data is weighing heavily on the Australia and New Zealand currency this morning as the Tasmanian currencies remain resilient near recent highs even against a stronger dollar. The Aussie is trading on Monday morning at 0.9072 and the kiwi is holding at 0.8534 down by 2 points. Last week’s turmoil has left currency traders a bit uneasy and confused. The tensions caused by Russian-Crimea annexation and the FOMC decision to continuing tapering as well as a change to its forward guidance led markets to believe that the central bank may consider raising interest rates earlier than expected. The US dollar has climbed steadily to trade this morning at 80.32.

The euro tumbled 0.9 percent last week but was still not far from a 2-1/2 year high of $1.3967 set earlier in the month. That resilience prompted the president of the European Council, Herman Van Rompuy, to complain on Friday that the common currency was too strong for euro zone exporters. The euro is holding at 1.3798 this morning. Partly supporting the euro has been the perception that the European Central Bank is highly reluctant to ease policy any further. ECB President Mario Draghi will have a chance to press home the message that the bank will stick to a very accommodative policy stance for a long time when he speaks in Paris on Tuesday.

The Japanese yen fell against the euro to trade at 141.42 and against the US dollar at 102.49 after a speech from central bank Kudora showed that the bank would consider to pursue their current course to force the economy towards its 2% inflation rate as traders worry about the effects on the sale tax increase due next week.

Forex Traders Expecting A Quiet Friday

Forex Traders Expecting A Quiet Friday
Forex Traders Expecting A Quiet Friday
Friday morning’s Asian session has been very quiet with Japan markets shuttered for a long holiday weekend. Japan is celebrating the Spring Equinox and it seems all of Asia is relaxing today. There are no major data releases scheduled during the Asian session and most of the day is expected to remain light. The only big events on the calendar are for Canada where traders will see retail sales and inflation data late in the day. The Japanese yen is sitting tight at 102.35.

The markets remain focused on the US while they still evaluate a surprise comment from Federal Reserve Chief Janet Yellen. She seemed to indicate in her question and answer session that markets could expect to see an interest rate increase within 6 months of the ending of the tapering program. The current monetary program is set to end in December if the Fed continues to ease at the current rate and if the US economy remains in recovery and if inflation remains tame. There are a lot of ifs in this possibility but speculators around the globe are now using this as their projection for interest rates in the US. This will obviously set the pace for other central banks. Yellen was also rather hawkish firmly believing in the ongoing recovery in the US which helped the US dollar to rebound from the 79.60 range to trade at 80.33 this morning.

On Thursday the US saw some positive data that helped support the greenback. The Conference Board’s index of leading indicators increased 0.5 per cent following a slight 0.1 per cent rise in January and a 0.1 per cent decline in December. The Federal Reserve Bank of Philadelphia said separately that manufacturing rebounded in that region in March as new orders increased. The number of people seeking US unemployment benefits rose 5,000 last week to a seasonally-adjusted 320,000, the Labor Department said. That’s close to pre-recession levels and suggests a stable job market. The dollar gained on the euro late Friday but eased a bit this morning with the euro exchanging at 1.3782. The GBP is holding at 1.6509 ahead of a difficult data week including GDP and retail sales. The UK saw a significant drop in unemployment claims this week.

There is little in the way of key economic data out of Asia on Friday ahead of the HSBC manufacturing PMI released scheduled over the weekend as investors keep a close eye on the yuan, which skidded to its lowest in more than a year at 6.2334 per dollar. The Chinese currency is facing the prospect of posting its biggest weekly loss since 1992 after the People’s Bank of China at the weekend doubled the currency’s trading range to 2 percent either side of the midpoint it fixes daily.

The Aussie jumped 20 points this morning on overall positive sentiment to trade at 0.9060, while the kiwi is flat at 0.8532 after a local consumer confidence report dipped.

 

A Busy Data Morning For Asian Currencies

A Busy Data Morning For Asian Currencies
A Busy Data Morning For Asian Currencies
US markets are closed today, in celebration of the Presidents Day holiday. With Wall Street shuttered it should be a light trading day. Asian markets though started the week off with a bang with a stream of Japanese and New Zealand data, all of which printed in the red.

The little island nation of New Zealand has been plodding along nicely, with exports to China climbing as China’s domestic demand for kiwi dairy products continued to boom. The local currency known as the kiwi has trade in a fairly tight range, although Bank of New Zealand Wheeler continues to express his opinion that the currency is overpriced while the internal housing market continues to soar. This morning release of lackluster retail sales took markets by surprise. Although the kiwi seems little changed for the session trading at 0.8373 it should have been well in the green as the US dollar tumbled 9 points hiding the weakness in the NZD. New Zealand retail sales rose 1.2 percent in the final three months of 2013, according to Statistics New Zealand, short of the 1.5 percent growth predicted in a Reuters survey of economists. Still, the kiwi didn’t fall out of favor after a manufacturing report in the US showed industrial production reported its biggest decline in more than four years as the harsh winter disrupted the world’s biggest economy.

Not far off its shores, the kiwi’s cousin the Aussie has recovered nicely from lackluster jobs data last week and continues to trade in the green well above the 90 mark. The Aussie is exchanging at 0.9053 up by 18 points against the very weak US dollar. The Reserve Bank of Australia will publish minutes to this month’s monetary policy review tomorrow, which will give traders some insight into the central bank board’s view. They kept the key rate unchanged at 2.5 percent, while removing the prospect of another rate cut.

Remaining in the Pacific region, Japan was hit by a wave of red data this morning as GDP and industrial production reported under forecast. The JPY still managed to strength against the USD to trade at 101.65 and it held its own against the euro at 139.39. The poor data was offset by a mounting rise in risk aversion. There has been speculation that the BoJ will expand its easy-money policies later this year, but policymakers are widely expected to hold off fresh measures after the BoJ wraps up its meeting on Tuesday. Easing measures tend to weigh on a currency. This morning’s data showed Japan’s economy grew just 0.3 percent in the fourth quarter of last year, compared with the previous quarter, confounding forecasts of a 0.7 percent gain. The disappointing result will keep pressure on the Bank of Japan to support the economy once an increase in the sales tax goes through in April. 

Sticking to Asia, there was better news on China as data showed banks there disbursed the highest volume of loans in any month in four years in January; a surge that suggests the world’s second-biggest economy may not be cooling as much as some fear. Chinese banks made 1.32 trillion yuan ($218 billion) worth of new yuan loans in January, beating a 1.1 trillion yuan forecast and nearly three times December’s level. It is usual for loans to spike in January, when banks try to lend as much as they can to grab market share, but last month’s surge was still the largest since January 2010.

The next hurdle will be Thursday’s HSBC flash PMI survey of manufacturers for February, given that January’s disappointing result sent ripples through global markets.

A Weak Greenback Pushes Up The Euro, Aussie, Kiwi & The Yen

A Weak Greenback Strenghtens Up The Euro, Aussie, Kiwi & The Yen
A Weak Greenback Strenghtens Up The Euro, Aussie, Kiwi & The Yen

It seems within seconds of the mixed and confusing release of the jobs report the US dollar tumbled. Within a minute of the release the dollar index fell to trade at 80.595 from 81.29. The dollar has continued to decline in Asian trading on Monday morning to trade at 80.58 down by 16 points. The nonfarm payroll report showed that the US had only created 74,000 jobs against a forecast of 190,000 jobs. Traders went into immediate shock. The shock was lessened when the unemployment rate fell from 7% to 6.7%.

The US Dollar Index fell by around 0.2 percent in the last week taking cues from favorable trade balance and unemployment data from the country. However, sharp downside was capped on the back of rise in risk aversion in market sentiments which led to increase in demand for the low yielding currency. Also, hints of further QE taper by the Federal Reserve after minutes of the FOMC meeting were released acted as a supportive factor for the currency.

With the fall of the greenback, the euro was able to climb to trade at 1.3682 up 13 pips this morning. The euro rose by 0.6 percent in the last week on account of statement of European Central Bank President Mario Draghi that lower interest rates will continue for a longer period in order to protect economic growth. The euro faced downside risks after European Central Bank (ECB)president Mario Draghi last week said the ECB governing council had discussed using “all eligible instruments allowed by the (EU) treaty” if inflation in the 18-nation economic bloc continues to fall.

The dollar hit its lowest level in nearly a month versus the yen on Monday after surprisingly soft US jobs data disappointed dollar bulls, with traders reassessing how quickly the Federal Reserve can scale back stimulus. The dollar slid 0.6 per cent to 103.48 yen, having fallen to 103.26 yen at one point, its lowest level since December 18. The greenback’s losses accelerated after it breached Friday’s intraday low of 103.83 yen. Another round of economic stimulus replete with lush fiscal spending will be set up when the government decides to complete the doubling of the consumption tax to 10 percent in 2015, economic and fiscal policy minister Akira Amari confirmed Sunday. Amari said the decision on whether to proceed with the second stage of the sales tax hike to 10 percent is expected in December.

The Australian and New Zealand dollar are trading on an up note this morning on weakness in the US dollar along with regional data that was supportive of the currencies. The Aussie is trading at 0.9032 up by 36 points after positive housing data and the kiwi has climbed by 25 points to trade at 0.8328 after reports showed a jump in the GDP outlook on rebuilding of Christchurch. The kiwi’s been holding up well ahead of the RBNZ (Reserve Bank of New Zealand) policy meeting at the end of the month.

Why Is A Strong Recovery In The US Bad For The Greenback ?

Why Is A Strong Recovery In The US Bad For The Greenback ?
Why Is A Strong Recovery In The US Bad For The Greenback ?

This morning the euro is trading flat along with the pound. The euro is exhausted after trading at 1.3705 climbing steadily after the release of the US nonfarm data on Friday. The US Dollar declined marginally around 0.4 percent in the last week on the back of mixed concerns over the QE tapering by the Federal Reserve. Further, favorable economic data from the country during the week exerted downside pressure on the currency. The dollar touched a weekly low of 80.22 and closed at 80.315 on Friday. The US GDP Q3 data showed that the economy expanded by 3.6% whereas both the private and government backed payrolls data also showed a decent increase. However, the stronger economic data in the US fuelled expectations that the Federal reserve is on track to taper its monthly bond purchase program. While the major European equity indices also ended the week on a negative note due to the Fed tapering concerns, additional pressure came in from the ECB side due to the European Central Bank’s rate decision which kept rates unchanged at 0.25%. Eventually, comments from the Heads of the ECB over the economy and future monetary policy elevated the euro to trade comfortably above $1.3660, which pulled the dollar index lower

The payroll data on Friday surprised most traders printing well above expectation as data showed a rise in new jobs to 203,000 in November from 200,000 in October. Unemployment Rate declined to 7 percent in November from 7.3 percent in October. Later in the day on Friday, Prelim UoM Consumer Sentiment jumped to 82.5 level in December from 75.1-mark in November. The euro gained 0.8 percent in the last week on the back of no cut in interest rates by the European Central Banks (ECB) meeting during the week.

The pound is flat this morning at 1.6348 on a weekly basis, Sterling depreciated marginally around 0.1 percent taking cues from weak global market sentiments. However, weakness in the DX along with favorable economic data from the country cushioned sharp fall in the currency. The Pound touched a weekly low of 1.6296 and closed at 1.6347 on Friday. The UK’s Halifax HPI gained 1.1 percent in November as against a gain of 1.3 percent in October. Consumer Inflation Expectations raised to 3.6 percent in the quarter ended September from 3.2 percent in the prior quarter.

Over the weekend data from China was very supportive. The New Zealand dollar held gains after figures on the weekend showed China lifted exports by more than expected last month, and after strong US jobs growth on Friday undershot optimistic forecasts by some traders. The kiwi traded at 82.91 Investors rallied behind the trans-Tasman currencies after government figures showed China’s trade surplus widened to US$33.8 billion in November, the biggest since January 2009, indicating the world’s second-biggest economy may recover from a brief slowdown earlier this year.

Traders were already chasing risk-sensitive assets after figures on Friday showing strong US jobs growth fell short of overly optimistic expectations, which could have prompted the Federal Reserve to start scaling back its asset purchase programme as early as this month. Its cousin the Aussie continued to decline on worry over US tapering. The Aussie is down 13 points this morning at 0.9090.

The JPY broke the 103 level against the US dollar this morning and is trading at 103.07 weighing on the yen, official data Monday showed Japan logged a surprise 127.9 billion yen deficit in its current account — the broadest measure of trade with the rest of the world. The reading reversed a 420.8 billion yen surplus a year ago. The Government announced that economic growth in the three months to September eased to 0.3 percent quarter on quarter, from the 0.5 percent initially stated and well down from the 0.9 percent in the previous three months.

A Day Full of Economic Data Gives Traders Something To Keep Them Busy

A Day Full of Economic Data Gives Traders Something To Keep Them Busy
A Day Full of Economic Data Gives Traders Something To Keep Them Busy
The euro is down again on Friday morning after stronger data in the US helped buoy the US dollar. The EUR/USD traded on a flat note in yesterday trade taking cues from strength in the DX. However, sharp downside in the currency was cushioned as a result of recovery in market sentiments coupled with favorable economic data from the region. The euro touched 1.3354 on Thursday.

French Flash Manufacturing Purchasing Managers’ Index (PMI) remained unchanged at 49.7 while services PMI fell by 0.9 points to 47.7 against a rise of 48.6-level in July. German Flash Manufacturing PMI rose by 1.3 points to 52-level in August from 50.7 July. European Flash Manufacturing printed at 51.3 August with respect to 50.3. European Flash Services PMI rose by 1.2 points to 51 current month as compared to 49.8 the previous month. The euro traded on a flat note in yesterday trade taking cues from strength in the DX. However, sharp downside in the currency was cushioned as a result of recovery in market sentiments coupled with favorable economic data from the low of 1.3297 and closed.

The US dollar is trading at 81.60 this morning gaining 10 points after unemployment claims and manufacturing data gave traders a bit of joy. Unemployment Claims increased by 13,000 to 336,000ending on 16th August as against a rise of 323,000 in prior week. Although the report was below expectations it continued to report close to a 6 year low. Flash Manufacturing Purchasing Managers’ Index (PMI) rose by 0.2 points to 53.9-mark in August from 53.7-level in July showing that US factories were working full out offsetting the disappointing regional releases from the Federal Reserves. The US Dollar Index (DX) appreciated around 0.4 percent on the back of rise in risk aversion in global market in early part of the trade which led to rise in demand for the low yielding currency. Statement from Federal Reserve Chairman Ben Bernanke and its members that QE tapering is possible by end of the year if economy improves which supported an upside in the currency. Investors learned yesterday that Mr. Bernanke would not be attending the Jackson Hole conference thereby lowering expectations for this weekend.

Sterling fell by 0.45 percent in the yesterday’s trading session on the back of strength in Dollar Index. Further, weak economic data from the country kept sterling pound under pressure. However, sharp downside in the currency was cushioned on the back of rise in risk appetite in the global markets. In the yesterday’s trading session, GBP touched an intraday low of 1.5559 and closed at 1.5584 against dollar and declined a bit more this morning to trade at 1.558.

The yen slid to a one-month low against the euro before Bank of Japan Governor Haruhiko Kuroda speaks tomorrow at the Federal Reserve’s annual monetary conference in Jackson Hole, Wyoming. The JPY is trading at 98.67 this morning and is continuing to decline against the dollar. The USD/CAD is trading at 1.0537 with the greenback gaining Friday morning. Canada’s dollar fell to its lowest level in six weeks as a report showed retail sales shrank more than forecast in June, adding to evidence that economic growth is slowing.

Global Financial Highlights

Global Financial Highlights
Global Financial Highlights

Australia’s dollar headed for its biggest weekly gain in more than a month as signs of improvement in the global economy supported demand for riskier investments. Yesterday China’s data met and some exceeded expectations, while GDP fell to 7.4% which was disappointed but expected.

Consumer confidence rose to a six- month high and an index of US leading indicators climbed as a nascent housing recovery started to ripple through the world’s largest economy. The Bloomberg Consumer Comfort Index rose to minus 34.8 in the week ended Oct. 14, the highest level since April, from minus 38.5 the previous week.

US stocks fell for the first time in four days after Google Inc. reported lower-than-estimated earnings. The yen weakened, while Spain’s bonds rose as the nation raised more than planned at a debt sale. The overall view in the US is that the economy is back on a recovery road, as we have had a week of solid eco data, except for a mixed, confusing unemployment report, that might involve some statistical errors. The Philly Fed Index surprised markets coming in well above forecast.

European leaders committed to their goal of establishing a euro-area bank supervisor by year-end, opening the prospect of direct aid to Spain’s banking sector. The EU will seek to agree on a framework that makes the European Central Bank the main supervisor by Jan. 1. The marquee event today will be the press release from the EU Summit due early this afternoon. Traders are worried that Spain will not ask for a bailout, leaving markets hanging. Greece has been given a two year extension on austerity measures while their creditors review this budgets and plans. Yesterday violent riots broke out in Athens over the austerity measures and many people think that additional time will not help Greece and that more drastic economic might need to be implemented.

UK retail sales rose more than economists forecast in September on increased demand for winter clothing and school uniforms. The UK’s FTSE 100 Index climbed for a fourth day, reaching a seven-month high, as European Union leaders gathered in Brussels to tackle the region’s debt crisis.

China’s stocks swung between gains and losses as overseas investment dropped and a Chinese central bank adviser said the government won’t provide big stimulus after data yesterday signaled the economy may be picking up.

FDI in China fell for the 10th time in 11 months, as companies reined in spending amid a slowdown in the world’s second biggest economy.

 Japanese shares swung between gains and losses as exporters rose on the Yen’s seven-day advance against the dollar. Traders are now expecting the Bank of Japan to offer additional stimulus on their October 30th meeting.

Monday Morning Market Update September 10, 2012

Australia’s building industry shrank in August at the fastest pace in 11 months, led by a slump in apartments and weaker engineering construction as resource industry demand wanes, a private gauge showed. The construction performance index fell to 32.2 last month from 32.6 in July. The AUD remained strong trading at 1.0368 on the weakness in the USD on hopes of stimulus

Last week in the US, President Barack Obama, a day after getting his highest approval rating in more than a year, was confronted by a worse-than-expected slowdown in the job market that threatened to undercut enthusiasm for his re-election.

Treasury yields rose for the first time in three weeks as European official’s detailed plans to curb the region’s debt crisis and investors braced for more stimuli from the Federal Reserve as the US economic recovery falters. Thirty-year bond yields climbed the most on concern the announcement of a third round of debt buying at next week’s Fed policy meeting may lead to an acceleration in inflation.

Although the weakness in the jobs data was hailed by traders and speculators as it was the final puzzle piece needed to secure support for additional QE by the FOMC at its meeting on September 12-13th. Odd makers are now making book at more than a 66% chance of stimulus from the Feds.

European stocks posted the largest weekly advance since June as European Central Bank President Mario Draghi outlined an unlimited bond-buying program to regain control of interest rates and stem the sovereign debt crisis. The new Outright Monetary Transaction program for buying bonds and sterilizing them through the ECB is being accepted positively by politicians and economists around the globe.

UK stocks advanced, extending a two-week high for the FTSE 100 Index, as industrial production surged by the most in 25 years. Last week was a positive week for UK eco data, with PPI and PMI reporting above forecast.

Asia’s benchmark stock index posted its first advance in three weeks as shares rallied by the most in nine months on Sept. 7, after the European Central Bank unveiled a bond-buying program and China boosted stimulus measures.

This morning the Japanese releases were negative showing a continued slow down, each month Japan releases all of its data at one time.

Chinese President Hu Jintao said a slowdown in exports is putting downward pressure on the world’s second-biggest economy, and he pledged to boost domestic demand and promote more balanced growth. Over the weekend China began its monthly data dump, with pretty lackluster results, overall showing that the government efforts to turn around the declines have not helped so far. There is more and more reason to believe that the Chinese government will follow the US with stimulus of its own.

The Chinese President noted that the economy faces “notable downward pressure,” signaling more stimulus may follow approvals for subway and road projects as the government kicks off a huge infrastructure program.

In the commodities markets gold rose by 0.17% after US Federal Reserve’s last meeting showed many members favored more stimuli unless the pace of the economic recovery picks up. Gold’s fall after seven-day advance is the longest such streak since June.  Some physical “buying” of gold from Europe this week drenched the bullion price, while the amounts have been “quite small” so far. Silver also increase by 0.82%.

Oil fell by 0.05% for the first time in three days in New York on concern eased that rising economic worries faltering demand of oil will be a passé, however a cause of concern’ as US Federal Reserve is all geared for a next round of easing.

Copper fell by 0.10% and traded near the lowest on hopes that Chinese Government will initiate some relief stimulus to provide some force to the Chinese economy in the near-term.

China Takes to the Financial Headlines this Week

After a generally sleepy week for Asia, things heat up a bit next week by way of potential global market ramifications.  Over the weekend, reports showed that China’s home prices rose 0.1 percent in July from June, a second month of modest uptick that raises the risk Beijing may seek to bolster a two-year campaign to curb housing inflation but which also weighs on the wider economy.

Home prices fell 1.5 percent year-on-year, according to Reuters calculations based on data from the National Bureau of Statistics, but the trend of month-on-month falls seen in October through to May has been reversed in June and July.

A new trend does appear to be materializing as home prices continue on an upward trajectory after the Chinese government began to loosen certain levers to address concerns around a slowing economy.

The shift follows a slew of pro-growth measures from Beijing since autumn 2011, as well as unauthorized policy relaxation by more than 30 local governments that have revived housing demand.

One of the major upcoming risks is that there is the ever-present risk of rate cuts or cuts to the required reserve ratio in China given the lack of a formal schedule for such moves. 

China’s Premiere Wen said this week that “growing room for monetary policy operations” gives his government room to step on the stimulus accelerator. Chinese funding markets agree, but they are not pricing interest rate cuts in the next two months implying a bet that the first stimulus measures will be an easing of reserve ratio requirements — which Chinese officials tend to announce over weekends. 

Second, how fast is the Chinese economy growing?

Manufacturing PMIs have been shooting off mixed signals, with the state’s official PMI indicating oscillation between growth and contraction while a prominent private sector manufacturing PMI has shown the manufacturing sector receding during the balance of the year so far. We’ll get a look at the latter on Wednesday in what is probably the main data release on the Asian economic ledger. Lastly CPI data from Hong Kong (often looked at as an alternate source for information on price growth in major Chinese cities) will be released Monday night. 

With China being the 3rd largest economy, behind the US and the Eurozone, their growth, policies and actions will affect global markets. Also regional markets such as Australia, Japan and New Zealand depend on their trade with China.

Chinese GDP OK other Eco data No Bad

In Asian trading this morning, base metals are trading mixed with Aluminum and Nickel slightly down while other metals are up by 0.2 percent at LME electronic platform. The Asian share markets are also trading mostly weak after the much eyed Chinese GDP release. As expected, Chinese GDP contracted to more than three years lows, (7.6%) however the worse got prevented as industrial production was  in line with expectation and may support slight optimism. Riskier assets including base metals have declined in the recent past on expectation of de-railed Chinese economy.

The surprise was a much improved retail sales print in China and the disappointing Japanese industrial production, reporting in well below forecast, markets had expected a decline of 3.1% but actual showed a drop of 3.4%.

However, after today’s release in early morning, the situation improved slightly and may support buying as emerging economies including industrial production of India and China have remained intact and may spur gains.

Fundamentally, the inventories witnessed slight drawdown while the cancelled warrants have also increased slightly indicating downstream physical demand and may continue to support future prices. Further, Italy is scheduled to auction bond but, after recent down gradation the yields may continue to march northwards and weaken the shared currency extending losses to financial assets including base metals. From the economic data front, while the US producer prices may continue to deteriorate due to piling wholesale inventory and lower demand. Even the Michigan confidence is expected to remain weak and may continue to weaken base metals in today’s session. Increased divergence among metals has been witnessed in recent past and hence, constituent metals of the pack are likely to follow the same in today’s session.

Today, is expected to be a very light day in the currency markets, with little in eco data other then mentioned above, it was an Asian data day, but news flow will have some serious consequences. More should be heard on Italy and Spain in light of the rating downgrade of Italian government bonds by two notches.

Yesterdays, US unemployment numbers were pretty much in line with forecast and overall market neutral. A lot of press is looking and the season adjustments, but those numbers are used in the forecast and the actual so it is basically an even shake.

USD/CNY Fundamental Analysis May 14, 2012 Forecast

Analysis and Recommendation: (close of Asian session)

The USD/CNY is trading up at 6.3188 from yesterday’s close following the release of China’s trade figures, where gross volumes for both exports and imports remained elevated within their 2011 ranges.   The trade surplus exceeded expectations of $9.9bn, at $18.4bn, as a result of the relative resiliency in exports, which rose at a pace of 4.9% y/y, while import growth was flat.   However this pace was well below expectations, leaving a darker cloud on the horizon.  Consumer inflation slowed last month while wholesale prices headed lower. The CPI rose 3.4% from a year earlier, contracting 0.1% on a month-on-month basis. The result was in line with expectations. The CPI rose 3.6% in March, following a 3.2% gain recorded in February, slightly beyond a 0.5% decline forecast by economists.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports, which cover the current week and are published by Sunday before the new week begins. Daily as the markets close we share any new events, forecasts or analysis that affect the current day. To achieve a full accurate understanding it is important that you study all of our data and analysis as a whole. Please click on the links to find the most recent reports for this asset.

Economic Data for May 10-11, 2012 actual v. forecast

 

 

EUR

 

 

Dutch CPI (YoY) 

2.40%

 

2.40% 

 

2.50% 

 

 

 

 

GBP

 

 

Industrial Production (MoM) 

-0.3%

 

-0.3% 

 

0.4% 

 

 

 

 

GBP

 

 

Manufacturing Production (MoM) 

0.9%

 

0.5% 

 

-1.1% 

   

 

 

GBP

 

 

Industrial Production (YoY) 

-2.6%

 

-2.6% 

 

-2.3% 

 

 

 

 

GBP

 

 

Interest Rate Decision 

0.50%

 

0.50% 

 

0.50% 

 

 

 

 

GBP

 

 

BOE QE Total 

325B

 

325B 

 

325B 

 

 

 

 

USD

 

 

Import Price Index (MoM) 

-0.5%

 

-0.2% 

 

1.5% 

   

 

 

CAD

 

 

Trade Balance 

0.4B

 

1.0B 

 

0.3B 

   

 

 

USD

 

 

Trade Balance 

-51.8B

 

-50.0B 

 

-45.4B 

   

 

 

USD

 

 

Initial Jobless Claims 

367K

 

369K 

 

368K 

   

 

 

USD

 

 

Continuing Jobless Claims 

3229K

 

3278K 

 

3290K 

   

 

 

GBP

 

 

NIESR GDP Estimate 

0.1%

 

 

 

-0.2% 

   

 

 

USD

 

 

Federal Budget Balance 

59.1B

 

30.0B 

 

-198.2B 

 

 

May 11

 

GBP

 

 

Nationwide Consumer Confidence 

44

 

52 

 

53 

 

 

 

 

CNY

 

 

Chinese CPI (YoY) 

3.4%

 

3.3% 

 

3.6% 

 

 

 

 

CNY

 

 

Chinese PPI (YoY) 

-0.7%

 

-0.5% 

 

-0.3% 

 

 

 

 

CNY

 

 

Chinese CPI (MoM) 

-0.1%

 

-0.2% 

 

0.2% 

 

 

 

Upcoming Economic Events that affect the AUD, NZD, JPY, CNY and USD

May 14

02:30

 

AUD

 

 

Home Loans (MoM) 

 

 

 

 

-2.5% 

 

 

May 16 

01:30

 

AUD

 

 

Westpac Consumer Sentiment 

 

 

 

 

-1.60% 

 

 

 

02:30

 

AUD

 

 

Wage Price Index (QoQ) 

 

 

 

 

1.0% 

 

 

 

23:45

 

NZD

 

 

PPI Input (QoQ) 

 

 

 

 

0.5% 

 

 

May 17

00:50

 

JPY

 

 

GDP (QoQ) 

 

 

0.9% 

 

-0.2% 

 

 

 

05:30

 

JPY

 

 

Industrial Production (MoM) 

 

 

 

 

1.0% 

 

 

Government Bond Auctions (this week)

Date  Time  Country 

May 14 08:30 Spain

May 14 09:10 Italy

May 14 09:10 Slovakia

May 14 09:10 Norway

May 14 09:30 Germany

May 14 10:00 Norway

May 15 09:30 Belgium

May 15 09:30 UK

May 16 08:50 France

May 16 09:10 Sweden

May 16 09:30 Germany

May 16 09:50 France

May 16 14:30 Sweden

May 17 08:30 Spain

May 17 15:00 US

May 17 17:00 US

USD/CNY Fundamental Analysis May 11, 2012 Forecast

Analysis and Recommendation: (close of Asian session)

The USD/CNY is up at 6.3132 as the US dollar continues to mount strength on the migration of equities and higher risk assets to the safety of the USD. Compounded by disappointing data released in China last evening and this morning, showing a continued slowdown in their economy and growth.

With weaker than expected exports and stalling headline import growth signaling that government spending is the crucial factor keeping the economy moving.

Annual growth in imports in April was just 0.3 percent, far below forecasts of an 11 percent increase, while exports managed growth of just 4.9 percent versus expectations of 8.5 percent, customs data on Thursday showed.

Shipments to emerging economies experienced a drop alongside well-flagged European weakness.

Hurt by a recession in Europe and a patchy economic recovery in the United States – China’s two biggest trading partners -export growth has slumped to single-digit levels this year, a long way from growth of more than 20 percent seen in 2010.

China’s export sector dragged on the economy in the first quarter of 2012, with net exports subtracting 0.8 percentage points from GDP, which grew at its slowest annual rate in nearly three years at 8.1 percent

Economic Reports for May 9-10, 2012 actual v. forecast

 May 10

 

AUD

 

 

 

Employment Change 

15.5K

 

-5.5K 

 

44.0K 

 

 

 

 

AUD

 

 

 

Unemployment Rate 

4.9%

 

5.3% 

 

5.2% 

 

 

 

 

CNY

 

 

 

Chinese Trade Balance 

18.40B

 

8.50B 

 

5.35B 

 

 

 

Upcoming Economic Events that affect the AUD, NZD, JPY, CNY and USD

 May 11 

02:30

 

CNY

 

 

 

Chinese PPI (YoY) 

 

 

 

 

-0.3% 

 

 
 

02:30

 

CNY

 

 

 

Chinese CPI (MoM

 

 

 

 

0.2% 

 

 

 

06:30

 

CNY

 

 

 

Chinese Fixed Asset Investment (YoY) 

 

 

 

 

20.9% 

 

 

 

06:30

 

CNY

 

 

 

Chinese Industrial Production (YoY) 

 

 

 

 

11.9% 

 

 

 

06:30

 

CNY

 

 

 

Chinese Retail Sales (YoY) 

 

 

 

 

15.2% 

 

 

 

13:30

 

USD

 

 

 

Core PPI (MoM) 

 

 

 

 

0.3% 

 

 

 

13:30

 

USD

 

 

 

PPI (MoM

 

 

 

 

0.0% 

 

 

 

14:55

 

USD

 

 

 

Michigan Consumer Sentiment 

 

 

 

 

76.4 

 

 

Government Bond Auctions (this week)

Date  Time  Country 

May 11  09:10  Italy   BOT auction

May 11  10:00  Belgium

USD/CNY Fundamental Analysis May 10, 2012 Forecast

Analysis and Recommendation: (close of Asian session)

The USD/CNY is up trading at 6.3110 after opening at 6.3091. It seems that the new rules from China on the freeing the yuan movement are helping the swing and building interest in the currency.

Yesterday’s trading was all about risk aversion. With several important China eco reports due this week including trade balance, PPI & CPI as well as retail sales. We should see a lot of activity. In the meantime, global sentiment has been an overall run to the safety of the USD and the yen pushing both of the currencies to recent highs.

The markets are hoping the upcoming numbers support the “soft landing” course for China

Economic Reports for May 8-9, 2012 actual v. forecast

 May 8

 

EUR

   

German Industrial Production (MoM) 

2.8%

 

0.8% 

 

-0.3% 

   

 

 

CAD

 

 

Housing Starts 

244.9K

 

204.0K 

 

214.8K 

   

 

Upcoming Economic Events that affect the AUD, NZD, JPY, CNY and USD

May 10 

02:30

 

AUD

 

 

 

Employment Change 

 

 

-5.5K 

 

44.0K 

 

 

 

02:30

 

AUD

 

 

 

Unemployment Rate 

 

 

5.3% 

 

5.2% 

 

 

 

TBD

 

CNY

 

 

 

Chinese Trade Balance 

 

 

7.93B 

 

5.35B 

 

 

 

13:30

 

USD

 

 

 

Import Price Index (MoM) 

 

 

-0.2% 

 

1.3% 

 

 

 

13:30

 

USD

 

 

 

Trade Balance 

 

 

-50.0B 

 

-46.0B 

 

 

 

13:30

 

USD

 

 

 

Initial Jobless Claims 

 

 

369K 

 

365K 

 

 

 

13:30

 

USD

 

 

 

Continuing Jobless Claims 

 

 

3278K 

 

3276K 

 

 

 

14:30

 

USD

 

 

 

Fed Chairman Bernanke Speaks 

 

 

 

 

 

 

 

 

19:00

 

USD

 

 

 

Federal Budget Balance 

 

 

30.0B 

 

-198.2B 

 

 

 May 11 

02:30

 

CNY

 

 

 

Chinese PPI (YoY) 

 

 

 

 

-0.3% 

 

 
 

02:30

 

CNY

 

 

 

Chinese CPI (MoM

 

 

 

 

0.2% 

 

 

 

06:30

 

CNY

 

 

 

Chinese Fixed Asset Investment (YoY) 

 

 

 

 

20.9% 

 

 

 

06:30

 

CNY

 

 

 

Chinese Industrial Production (YoY) 

 

 

 

 

11.9% 

 

 

 

06:30

 

CNY

 

 

 

Chinese Retail Sales (YoY) 

 

 

 

 

15.2% 

 

 

 

13:30

 

USD

 

 

 

Core PPI (MoM) 

 

 

 

 

0.3% 

 

 

 

13:30

 

USD

 

 

 

PPI (MoM

 

 

 

 

0.0% 

 

 

 

14:55

 

USD

 

 

 

Michigan Consumer Sentiment 

 

 

 

 

76.4 

 

 

Government Bond Auctions (this week)

Date  Time  Country 

May 10  15:00  US 

May 10  17:00  US 

May 11  09:10  Italy   BOT auction

May 11  10:00  Belgium

USD/CNY Fundamental Analysis May 9, 2012 Forecast

Analysis and Recommendation: (close of Asian session)

The USD/CNY is exchanging at 6.2858

 Yuan took their biggest tumble in three weeks on speculation that a worsening outlook for exports will dissuade China from allowing its currency to gain value. Later this week, there are a slew of eco reports due from China. Markets are hoping to see a slight improvement, or at least some support of a soft landing. With the eurozone deep in recession and the US spring stall in full effect, investors are worried about the overall affects it will have on growth and exports from China.

The People’s Bank of China, the country’s central bank, lowered its daily reference rate by 0.22 percent, the most since March 12, to 6.2858 a dollar on Monday.

Export orders at China’s Canton Fair dropped 2.3 percent from a year ago, the first decline since 2009, the newspaper China Securities Journal reported on Monday. 

Economic Reports for May 7-8, 2012 actual v. forecast

   

 

AUD

 

 

 

Building Approvals (MoM) 

7.4%

 

3.1% 

 

-8.8% 

 

 

 

 

 

AUD

 

 

 

NAB Business Confidence 

4

 

 

 

 

 

 

 

 

AUD

 

 

 

Retail Sales (MoM) 

0.9%

 

0.2% 

 

0.3% 

   

 

 

 

CHF

 

 

 

Unemployment Rate 

3.1%

 

3.1% 

 

3.0% 

   

 

 

 

CHF

 

 

 

CPI (MoM) 

0.1%

 

0.2% 

 

0.6% 

 

 

 

 

 

EUR

 

 

 

German Factory Orders (MoM) 

2.2%

 

0.5% 

 

0.6% 

   

 

 

 

CAD

 

 

 

Building Permits (MoM) 

4.7%

 

-1.5% 

 

7.6% 

   

May 08

 

 

GBP

 

 

 

RICS House Price Balance 

-19%

 

-10% 

 

-10% 

 

 

 

 

 

AUD

 

 

 

Trade Balance 

-1.59B

 

-1.40B 

 

-0.75B 

   

 

Upcoming Economic Events that affect the AUD, NZD, JPY and CNY

May 08

02:30

 

AUD

 

 

 

Trade Balance 

-1.59B

 

-1.40B 

 

-0.75B 

   

 

16:45

 

USD

 

 

 

FOMC Member Fisher Speaks 

 

 

 

 

 

 

 

May 10 

02:30

 

AUD

 

 

 

Employment Change 

 

 

-5.5K 

 

44.0K 

 

 

 

02:30

 

AUD

 

 

 

Unemployment Rate 

 

 

5.3% 

 

5.2% 

 

 

 

Tentative

 

CNY

 

 

 

Chinese Trade Balance 

 

 

7.93B 

 

5.35B 

 

 

 

13:30

 

USD

 

 

 

Import Price Index (MoM) 

 

 

-0.2% 

 

1.3% 

 

 

 

13:30

 

USD

 

 

 

Trade Balance 

 

 

-50.0B 

 

-46.0B 

 

 

 

13:30

 

USD

 

 

 

Initial Jobless Claims 

 

 

369K 

 

365K 

 

 

 

13:30

 

USD

 

 

 

Continuing Jobless Claims 

 

 

3278K 

 

3276K 

 

 

 

14:30

 

USD

 

 

 

Fed Chairman Bernanke Speaks 

 

 

 

 

 

 

 

 

19:00

 

USD

 

 

 

Federal Budget Balance 

 

 

30.0B 

 

-198.2B 

 

 

 May 11 

02:30

 

CNY

 

 

 

Chinese PPI (YoY) 

 

 

 

 

-0.3% 

 

 
 

02:30

 

CNY

 

 

 

Chinese CPI (MoM) 

 

 

 

 

0.2% 

 

 

 

06:30

 

CNY

 

 

 

Chinese Fixed Asset Investment (YoY) 

 

 

 

 

20.9% 

 

 

 

06:30

 

CNY

 

 

 

Chinese Industrial Production (YoY) 

 

 

 

 

11.9% 

 

 

 

06:30

 

CNY

 

 

 

Chinese Retail Sales (YoY) 

 

 

 

 

15.2% 

 

 

 

13:30

 

USD

 

 

 

Core PPI (MoM) 

 

 

 

 

0.3% 

 

 

 

13:30

 

USD

 

 

 

PPI (MoM) 

 

 

 

 

0.0% 

 

 

 

14:55

 

USD

 

 

 

Michigan Consumer Sentiment 

 

 

 

 

76.4 

 

 

 

Government Bond Auctions (this week)

Date  Time  Country 

May 09  09:10  Sweden 

May 09  09:30  Germany 

May 09  09:30  Swiss 

May 09  09:30  UK 

May 09  14:30  Sweden 

May 09  15:30  Italy  

May 09  17:00  US 

May 10  15:00  US 

May 10  17:00  US 

May 11  09:10  Italy   BOT auction

May 11  10:00  Belgium

USD/CNY Fundamental Analysis May 8, 2012 Forecast

Analysis and Recommendation: (close of Asian session)

The USD/CNY is trading at 6.3028 as the USD has picked up momentum against all of its trading partners in early trading on Monday. With Asia back from a on again off again week of holidays markets are now seeing normal volume again. The elections in France are over with the upset as expected with Hollande defeating Sarkozy.

After a negative jobs report in the US, speculators found a silver lining and are now looking for more “accommodation” from the US Federal Reserve, where last month Ben Bernanke said that the Fed’s would be willing to offer additional policy changes if it was required.

At the end of the week and through the Asian session on Monday, crude oil continued to fall trading at the 96.00 range, which is a huge positive for the USD.

 

AUD

 

 

 

AIG Construction Index 

34.9

 

 

 

36.2 

 

 

 

JPY

 

 

 

Monetary Policy Meeting Minutes 

 

 

 

 

 

 

 

 

TWD

 

 

 

Taiwanese CPI (YoY) 

1.44%

 

1.40% 

 

1.25% 

   

 

AUD

 

 

 

Building Approvals (MoM) 

7.4%

 

3.1% 

 

-8.8% 

   

 

AUD

 

 

 

NAB Business Confidence 

4

 

 

 

 

 

 

AUD

 

 

 

Retail Sales (MoM) 

0.9%

 

0.2% 

 

0.3% 

   

 

AUD

 

 

 

ANZ Job Advertisements (MoM) 

-3.10%

 

 

 

0.70% 

   

 

IDR

 

 

 

Indonesian GDP (YoY) 

6.3%

 

6.3% 

 

6.5% 

 

 

 

CHF

 

 

 

Unemployment Rate 

3.1%

 

3.1% 

 

3.1% 

 

 

 

Economic Events for May 8, 2012

00:01   GBP              RICS House Price Balance                           -10%               -10%

02:30   AUD             Trade Balance                                              -1.40B             -0.48B

06:45   CHF               GDP                                                                                        0.1%

06:45   CHF              SECO Consumer Climate                            -18                   -19

13:15   CAD             Housing Starts                                               202K             216K

Government Bond Auctions (this week)

Date  Time  Country 

May 08  09:15  Austria 

May 08  09:30  Belgium 

May 08  14:30  UK 

May 08  15:30  Italy  

May 08  17:00  US 

May 09  09:10  Sweden 

May 09  09:30  Germany 

May 09  09:30  Swiss 

May 09  09:30  UK 

May 09  14:30  Sweden 

May 09  15:30  Italy  

May 09  17:00  US 

May 10  15:00  US 

May 10  17:00  US 

May 11  09:10  Italy   BOT auction

May 11  10:00  Belgium

USD/CNY Weekly Fundamental Analysis May 7 – 11, 2012, Forecast

Introduction:  For years, other countries have been asking China to let the yuan, also called then renminbi, to float more freely on the currency market. It appears that China is doing that now, with an announcement that the yuan will be allowed to float more freely against the US dollar.

China announced that it will allow the yuan to float a little more freely against the US dollar, allowing the currency to move one per cent to either side of the US dollar currency peg. The yuan will not be a truly free floating currency as a result of the new policy, but it will have a little more flexibility.

For years, Western countries, especially the United States, have charged that the Chinese undervalue their currency, keeping it artificially low against the US dollar. This allows for an edge in exports, as a weaker yuan makes goods cheaper to purchase by consumers in other countries. Many expect that if Chinese policymakers were to ever let the yuan freely float, it would appreciate quite quickly.

Weekly Analysis and Recommendation:

The USD/CNY ended the week at 6.2928

Highest: 6.3111

Lowest: 6.2767

Difference: 0.0344

Average: 6.2901

Change %: 0.09

Business conditions for Chinese manufacturers improved further in April although overall activity still declined, according to the final reading of a monthly survey by HSBC released Wednesday.

Chinese manufacturing expanded for a fifth straight month in April, prompting optimism about a moderate improvement in economic activity.

The state-affiliated China Federation of Logistics and Purchasing said on Tuesday its purchasing managers’ index, or PMI, rose 0.2 percentage points to 53.3 per cent in April, up from March’s 53.1 and February’s 51.0. A reading above 50 signifies expansion. China’s economic growth declined to 8.9 per cent in the final quarter of last year after Beijing increased interest rates and tightened other controls to cool inflation. Chinese leaders reversed course in December and promised more bank lending to help companies cope with a slump in global demand, but changes have been gradual.

Major Economic Events for the past week actual v. forecast

 

AUD

 

 

Interest Rate Decision 

3.75%

 

4.00% 

 

4.25% 

 

 

 

USD

 

 

ISM Manufacturing Index 

54.8

 

53.0 

 

53.4 

 

 

 

USD

 

 

ADP Nonfarm Employment Change 

119K

 

177K 

 

201K 

   

 

NZD

 

 

Unemployment Rate 

6.7%

 

6.3% 

 

6.4% 

   

 

EUR

 

 

Interest Rate Decision 

1.00%

 

1.00% 

 

1.00% 

 

 

 

USD

 

 

Initial Jobless Claims 

365K

 

380K 

 

392K 

   

 

USD

 

 

Nonfarm Payrolls 

115K

 

170K 

 

154K 

   

 

USD

 

 

Unemployment Rate 

8.1%

 

8.2% 

 

8.2% 

 

 

 

CAD

 

 

Ivey PMI 

52.7

 

61.0 

 

63.5

   

 

Economic Highlights of the coming week that affect the AUD,JPY,NZD and USD

May 7

1:30

AUD

 

Building Approvals m/m

   

-7.8%

1:30

AUD

 

Retail Sales m/m

   

0.2%

May 8

1:30

AUD

 

Trade Balance

   

-0.48B

9:30

AUD

 

Annual Budget Release

     

21:00

NZD

 

RBNZ Financial Stability Report

     

May 9

23:50

JPY

 

Current Account

   

0.85T

May 10

1:30

AUD

 

Unemployment Rate

   

5.2%

TBD

CNY

 

Trade Balance

   

5.4B

12:30

USD

 

Trade Balance

   

-46.0B

12:30

USD

 

Unemployment Claims

   

365K

May 11

1:30

CNY

 

CPI y/y

   

3.6%

12:30

USD

 

PPI m/m

   

0.0%

13:55

USD

 

Prelim UoM Consumer Sentiment

   

76.4

Upcoming Government Bond Auctions

Date  Time  Country 

May 08  09:15  Austria 

May 08  09:30  Belgium 

May 08  14:30  UK 

May 08  15:30  Italy  

May 08  17:00  US 

May 09  09:10  Sweden 

May 09  09:30  Germany 

May 09  09:30  Swiss 

May 09  09:30  UK 

May 09  14:30  Sweden 

May 09  15:30  Italy  

May 09  17:00  US 

May 10  15:00  US 

May 10  17:00  US 

May 11  09:10  Italy   BOT auction

May 11  10:00  Belgium

USD/CNY Monthly Fundamental Forecast May 2012

Outlook and Recommendation

The USD/CNY  has been relatively stable all year as forecasts for current account surpluses have narrowed, the central bank has made subtle shifts to their tone and the voice of those looking for CNY appreciation have faded. We have shifted our USDCNY forecast to reflect this, still looking for appreciation, but at a slower pace. We hold a USDCNY year-end target of 6.18. 

The pair ended the month at 6.3108

Highest: 6.3236

Lowest: 6.2776

Difference: 0.0460

Average: 6.3035

Change %: -0.15

China advanced the process of capital account liberalization in April by widening the trading band of the Chinese Renminbi (CNY) versus the USD. Nevertheless, there is no express guarantee that CNY appreciation is the preferred policy for the country’s authorities. In fact, with US$3.3 trillion in foreign exchange reserves, the central bank maintains the ability to place the USDCNY exchange rate at whatever level is needed to ensure trade competitiveness. In fact, non-deliverable forward contracts discount that the CNY will depreciate further over the next 12 months. However, we are of the view that the yuan will gradually strengthen and close the year at 6.18 per USD.

On the growth front, we believe that the economic deceleration bottomed out during the first quarter of the year (real GDP expanded at a year-over-year rate of only 8.1%) and that the economy will expand by 8.4% as suggested by positive manufacturing activity trends since the beginning of the year. Given the growing political sensitivities associated with China’s currency regime during an election year in the United States, bilateral trade and rhetorical friction may intensify in the months ahead. Despite initial steps to introduce more flexibility into China’s exchange rate arrangement, we firmly believe that China will not alter the course of reforms drastically to destabilize the global financial system and that the USD will maintain its role as the world’s preeminent reserve currency. 

Central Bank Name: Peoples Bank of China

Date of next meeting or last meeting: TBD

Current Rate: 6.56 % (+ 0.25)

Statement highlights of last meeting: The participants analyzed current economic and financial situations at home and abroad. In their view, both the real sector and financial sector in China were moving in the direction intended by the macroeconomic management policy, the economy grew in a stable manner, while the growth of the general price slowed down. On the international side, although the European debt crisis abated and the global economy recovered moderately, uncertainties remained.

 

Important Economic events for the month of May affecting AUD, CNY, JPY, NZD and USD

Tuesday, May 01

00:30

 AUD

 

Interest Rate Decision

3.75%

4.00%

4.25%

 

 

00:30

 AUD

 

RBA Rate Statement 

 

 

 

 

 

10:00

 USD

 

ISM Manufacturing Index

54.8

53.0

53.4

 

 

Wednesday, May 02

08:15

 USD

 

ADP Nonfarm Employment Change

 

177K

209K

 

 

18:45

 NZD

 

Unemployment Rate

 

6.3%

6.3%

 

 

Thursday, May 03

08:30

 USD

 

Initial Jobless Claims

 

380K

388K

 

 

Friday, May 04

08:30

 USD

 

Unemployment Rate

 

8.2%

8.2%

 

 

08:30

 USD

 

Nonfarm Payrolls

 

170K

120K

 

 

Thursday, May 10

21:30

 CNY

 

Chinese CPI (MoM)

 

 

0.2%

 

 

21:30

 CNY

 

Chinese CPI (YoY)

 

 

3.6%

 

 

Wednesday, May 16

19:50

 JPY

 

GDP (QoQ)

 

 

-0.2%