Chuch E Cash's Forex Blog
EUR Slips to $1.5547 on German Unemployment, US GDP
May 29, 2008
Perhaps the table has turned..
Last week it was the Euro looking like it had a bright future on expectations for a ECB rate hike.
The last 2 days,.a string of positives has put the greenback on a positive footing.
In the latest headlines, German unemployment rose by an unexpected 4k applicants. Expectations had been for a 25k drop. Adding to that, Eurozone consumer confidence fell to a 32 month low of -15. Expectations had been for a stable reading of -12. However, it would be a mistake to miss why the ez confidence number fell. It appears the main driver was a rise in consumer prices across the Euorzone, which rose 3.3%. This is consistent with the inflation rate of 3% reported by Germany yesterday.
On a more positive note, Eurozone Retail PMI rose to 53.1 from a reading of 41.8 in April. This is the largest year-over-year increase in 13 months. Sales rose in Germany and France, but fell in Italy.
Back here in the States, US Q1 GDP was revised up from 0.6% to 0.9%. The revision was largely driven by exports, as the annualized trade deficit fell to $480.2 billion. That is the smallest since 2002. In addition, Dallas Fed President Fisher and Minneapolis President Gary Stern came out with warnings on inflation. You can, and should, read their comments at CNBC.
In other news, Japanese retail sales fell to 0.1%, far below expectations for an 0.6% reading.
The EURUSD has fallen to $1.5533 in early hours on the West Coast. It may test the $1.550 resistance depending on comments later today from Fed Chairman Bernanke (2:30 est) and Vice Chairman Kohn (7pm est). The greenback has climbed to ¥105.164 yen, well above the 10 day moving average.
Greenback, Euro, GDP, jobs report, EUR, USD
Fed Dove Mishkin Leaving in August
May 28, 2008
In a surprising move, Frederic "Ric" Mishkin turned in his resignation letter today. His last meeting will be August 5th, and he will formally finish service on August 31.
The resignation may be an important cue of future FOMC decisions. Mr. Mishkin was seen by many as a key ally to Chairman Bernanke, and a proponent of formal inflation targets. Mr. Mishkin took office Sept 2006, with his term set to expire in January 2014. That he leaves after serving only 2 years may be highly indicative of a change to the Fed's stance on inflation targets.
Mr. Mishkin's departure leaves the Fed with 3 empty slots on the 7 member board. President Bush has nominated 2 candidates to fill the open slots, but the Senate banking Committee, led by Chris Dodd (D - Conn) has not taken any action. The 4 remaining members will be:
Ben Bernanke (Chairman)
Donald Kohn (Vice Chairman)
Kevin Warsh
Randall Kroszner
Mr. Kroszner's term has expired, but he is allowed to remain until a new governor is sworn in.
All members of the Fed have been appointed by President Bush, so the Dems may be trying to hold out until next year with the hope of getting some of their "own" appointed. This can be evidenced by the Senate's reluctance to move on Larry Klane's nomination. He was nominated Nov 27, 2007 with little progress since. His experience as president of Capital One's financial services division likely would have been invaluable when markets got rocked from Decemeber - March. Incidentally, it was Chris Dodd who held up the late fix for the AMT, which slowed IRS refund checks for some 13 million Americans this spring. Chuck is not a big fan of Sen Chris Dodd.
Futures markets are now pricing in a 30% chance of a rate hike in September, vs 21% last week.
dove, Fed
US Durable Goods Beat Expectations, Oil Demand Falling
May 28, 2008
In major news, the US Durable Goods (items lasting more than 3 years) fell 0.5% in April. Analysts had expected a 1.0 - 1.5% drop. The business spending proxy (which excludes defense and aircraft) orders jumped 4.2% - making it the largest rise since December. Shipments (exports) rose 1.2%. And most impressively, electrical orders surged a record 27.8%! This is definitely not a recessionary reading.
Quick Note: Chuck has long thought this US down turn would ultimately end with another tech boom - as the effects of high bandwidth 15 Mbps at home, (OMG I would have thought it impossible when I was on 28.8kbps in 1995), HD (VHS to DVD was a big part of the late 90s boom), and other technology improvements to the web will likely result in a 2nd "dot-com" era. Check out http://www.searchme.com to see what Cash means. That electrical orders were up sharply (partly on orders for High-Def products) is a sign that Chuck may be right.
..back on topic. The US Dept of Transportation reported that Americans drove 4.3% fewer miles in March (thats 11 billion miles). This is the largest drop since the agency started keeping track in 1942. In addition, the EIA reported gasoline demand is down 0.6% this year and will see the first annual decline since 1991. The EIA estimates demand will fall for all of petroleum's finished products - including jet fuel, diesel, and heating oil.
Proving how rumor/momentum based energy is these days - oil futures initially fell more than $2, but rebounded to close $2.18 after Morgan Stanley's Richard Berner forecast $150 per barrel this year. Mr. Berner basis his comments on continued demand from developing countries. However, some asian markets have already started to cut subsidies, and others are likely to follow suit. In a related note, Indonesia pulled out of OPEC today, as they had become a net importer of oil. No - not because of peak oil - but because foreign firms are uncomfortable with local laws and government corruption. The move leaves OPEC with only 12 members (Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Suadia Arabia, UAE, and Venezuala).
US Q1 GDP may be revised up from 0.6% to 0.9% today. Keep an eye on that!
In late trading, the USD rose to ¥104.93, the upper end of the ¥102 - ¥105 range, but above the ¥104.90 resistance.
GDP, durable goods, USD
Data Bad, But Dollar rebounds on Oil Drop
May 27, 2008
First, the good news. Oil fell $3.34 (2.5%) today to close at $128.85.
Now the bad news. The Conference Board's Consumer Confidence Index fell more than expected to 57.2. That is the lowest reading since October 1992, which is really scary when we consider that neither the dot-com bust or 9/11 was bad enough to create such negative sentiment. Market participants had expected a reading of 61. Digging deeper, business conditions fell sharply while jobs sentiment remained fairly flat.
In housing, new home sales were up 3.3% from March. However, that number obfuscates the fact that March was revised from 526k to 509k. Year over year, new US home sales are down more than 40%. Given that February to June is the typical apex in new home sales, these weak numbers look concerning. The median price rose by 1.5% to $242.5k, but that too hides the extras thrown in by homebuilders to move units. Echoing the minor improvements in price and sales, April inventory fell to a 10.6 month supply (from 11.1 in March).
The Case-Shiller index was down 14% YoY, the biggest drop since the index was created in 1988.That number can probably be taken with a grain of salt, as it only measures the 20 largest cities and the index did not exist during the late 80s housing bust.
Again, despite the pessimistic news, the Oil number seemed to matter most, as the USD was up against most of the majors Tuesday.
Greenback, housing, oil, USD
EUR, GBP See Minor Breakouts, Retreat on Pessimism
May 27, 2008
Backing up comments from several prominent Germans last week, Q1 GDP for Germany came in at 1.5%. Annualized rates are at 2.6%, the strongest growth in 12 years for the Eurozone's largest economy. Digging deeper, construction and business investment were strong drivers for the German growth. The Euro reached as high as $1.5818.
However, the Euro run was short lived as the Gfk consumer sentiment index fell more than expected. The Gfk data came in at 4.9, far below expectations of a 5.8 reading. All 3 components - economic outlook, spending, and personal income were down. In late trading, the EURUSD is at $1.5709. The pair closed at $1.5775 on Friday.
The Pound reached $1.9825 before retreating. BBA mortgage approvals saw an 8.8% rise in mortgage approvals to slightly over 38,700. However, that is still almost 40% lower than last year. In late trading, the Pound is at $1.9751, slightly below Friday' close of $1.9794.
In other European news, the UBS consumption indicator - which measures domestic demand - fell to 2.18 in April from an upwardly revised reading of 2.25 in March. This is still above the long term average of 1.50, but may be a prime indicator of the global toll of the oil. The CHFUSD was $1.0315 at press time.
Euro, GDP, EUR, GBP, Pound
A Bundle of US Data This Week May Move Dollar Trades
May 27, 2008
The US will see a number of potentially trade driving reports in this holiday shortened week.
On Tuesday May 27
The S&P Case-Shiller Index at 9am est.
At 10am, New Home Sales and consumer confidence will be reported.
Wednesday May 28
Durable goods will be reported at 8:30am est, before equity markets open.
Thursday May 29
Revised Q1 GDP and weekly jobless claims are reported at 8:30am est.
Also, Fed Chief Ben Bernanke speaks at 2:30pm in Basel Switzerland. And Fed Vice Chairman Kohn talks at 7pm.
On Friday May 30
Consumer sentiment will be reported at 10am est
Other notable forex movers will be the German Unemployment numbers May 29 and Canada's Q1 GDP.
In light volume May 26, the EURUSD held above the $1.5750 support. Given the upbeat comments from the Germans last week, and the negative mood from the US Fed, this week's data has the potential for sending the EURUSD above the $1.58 resistance - we shall see.
GDP, jobs report, housing, Bernanke, upcoming reports, consumer confidence, Fed
Euro Up on Comments, UK and US Holidays. But Face It, the Data was Bad This Week.
May 23, 2008
The Euro closed up at $1.5775 on Friday, just shy of the $1.58 resistance. Overall, the Euro gained 1.2% against the dollar this week.
Eurozone data finished a week of negative news with 1 more bad report. The Purchasing Manager's Index (PMI) fell to 51.1, lower than the expected reading of 51.7 and last month's reading of 51.9. Services fell 1.4 to 50.6, manufacturing was also down slightly to 50.5. Germany and France - which are the 2 largest Eurozone economies - experienced significant declines in services.
Despite the string of negative news this week, forex traders remained in bull mode. This was fueled by growing expectations that the ECB may actually raise rates this year despite ever growing signs of a European slowdown.
Traders were also preparing for holidays in the UK and US Monday, when markets will be closed. closed market holidays typically create illiquid markets and greater volatility.
The Euro has a strong chance of testing $1.60 next few weeks, as the US will see a significant amount of macro data next week and then earnings reports from the major financial institutions in early June.
The British Pound rose slightly to $1.9794, testing the $19.8 level. UK GDP came in at 0.4% and remains on pace for an annual growth of 2.5%.
ECB, Euro, GDP, EUR, Pound
Dollar Drops on Homes, Oil
May 23, 2008
The US Dollar was down against most currencies on Friday. The usual suspects - surging energy prices and a further decline in housing - were to blame.
The National Association of Realtors reported that US Home sales slid 1% to 4.89 million units. That was better than the market expected number of 4.55 million units. However, the markets found no reason to be optimistic as supply continued to grow and prices kept dropping.
Home sales were down 17.5% YoY (5.93 million) and a whopping 30% from the peak of September 2005 (7.2 million). The lack of home buying has sent the supply up to 11.2 months - a record level. The median price for existing single family homes declined 8.5% YoY, to a little over $200k.
On the energy front - oil rose $2.67 to close at $131.65. Other futures marched along. Gas rose 6.43¢ to $3.3687, diesel was up 1.9¢ to $4.558, heating futures rose 7.11 ¢ to $3.8461, and nat gas rose 19.8¢ to $11.563.
Bring back the sanity! IMO, no way fundamentals support the energy numbers. Demand for gas is down, gas inventories stand at near all time highs, and several pipeline projects that will reduce risk premiums and make transportation more efficient. These new pipeline routes will begin to open in the next few years.
On the heels of this pessimistic data, the US Dollar finished lower against the Euro, Japanese Yen, Swiss Franc, and Australian Dollar. Notably, the USD was flat against the Pound and up slightly vs the Canadian Dollar.
Greenback, housing, oil, USD
Dollar bounces back on Oil, Jobs, and Bill Gross.
May 22, 2008
The dollar was up against most world currencies today as signs of recovery keep peaking out from the trough of bad news. After hitting $135 in overnight trading, oil slipped to $130.81. Phil Flynn, the famous energy trader, has an excellent article at OnTheBid suggesting the oil bull run may be over. In addition, jobless claims dropped to the lowest in 4 weeks.
Further fueling beliefs that the Fed may now battle inflation, PIMCO Chief Investment Officer Bill Gross came out with strong arguments for battling inflation. He asked others to join him "in lobbying for change in US leadership...and the market's assumption of low relative US inflation in comparison to our global competitors." PIMCO runs the world's largest bond fund.
Now the bad news. The oil spikes of 73, 79, and 90 all led to quarterly contractions. Crude prices have risen 35% since April! Yeah, thats a spike. While the Us has so far avoided outright contraction, the bull run in crude is sure to be felt. In addition, according to OFHEO, house prices fell 3.1% in Q1 2008 YoY, and 1.7% since Q4 2007
The National Association of Realtors will release April existing home sales at 10:00am est tomorrow. The expected number is 4.85 million, the lowest since the number started tracking in 1999. (I wonder how times the existing home sales figure was cited by realtors during the run up? 'Existing home sales are at an all time high! Get in ow or forever be priced out!' Blah). President Bush will speak a short time later at 10:35 est, so don't run away from your TV after the NAR report.
jobs report, housing, oil, USD
EURUSD Hits $1.5814, Then Retreats on Data, French Finance Minister
May 22, 2008
March Eurozone industrial orders dropped 1% month-over-month (MoM), twice the expected drop of 0.5%. Orders were down a whopping 7.3 Year-over-Year (YoY). Some traders who had predicted a testing of $1.60 (*cough* me), were stunned.
French Finance Minister Christine Lagard came out in favor of the Dollar, as she called the Euro's rise against the dollar "a major misalignment". Lagarde backed ECB concern over inflation, but hinted that Trichet may be "overly focused". She went on to say that other tools - including cash, and Trichet's comments when "he opens his mouth" were also available to the ECB chief. (Read more of Lagarde's comments at CNBC
On the other hand, ECB council member Axel Weber (another German, hmm, Eich bein Fx Manipulators?) came out today re-enforcing the notion the ECB may have to raise rates later this year.
In late trading, the EURUSD was at $1.5729
Greenback, Euro, EUR, Trichet, USD
Euro, Swiss Franc, and Pound Move on Latest News
May 21, 2008
The latest round of news from Europe was generally positive for their major currencies.
First, on the heels of the ZEW President Franz's prediction of an ECB rate hike, the IFO business confidence survey was up in 3 categories - business climate, expectations, and current assessment. With that extra kick of good news, the Euro crossed the 1.570 mark, and is at 1.5768 in late trading. Having broken the $1.53 - $1.56 range, the Euro is almost defintely going to test the $1.60 level.
The Swiss also posted their share of good news, with a drop in unemployment. FX traders frequently turn to the Swiss franc when exiting carry trades, the continued global stock sell off may have been a more important macro driver today.
The minutes from the Bank of England showed that only one of nine members voted for a 25 bp rate cut on may 8. With March inflation at 0.8% and annual numbers hovering around 3%, the BOE seems to be handcuffed to a policy of rate cut aversion. However, it should be noted, that Ernst and Young Item Club member Peter Spencer has warned that inflation targeting may cripple consumers. Mr. Spencer suggests that the BOE switch to a core number that excludes energy and food (similar to the US). The Pound is at $1.9707 and may soon $2.00 again.
Bank of England, BOE, jobs report, Franc, EUR, minutes, rate hike
Fed Glum, But Hey, No More Rate Cuts
May 21, 2008
In a mixed bout of pessimism with silver linings, the Fed indicated that growth will be worse than originally forecast, but rates are unlikely to be cut again.
The Fed now believes unemployment will be worse than expected, and that housing is unlikely to recover anytime soon. Overall, the Fed cut annual growth to 0.3% - 1.2% (from 1.3% - 2%).
At the same time, the Fed also joined team Trichet in warning of inflation. They indicated the April 25 bp cut was a "close call". Since September, the Fed has cut rates 325 bp to reach the current 2% level. Futures markets are pricing in a 90% chance the Fed keeps rates at 2% in June.
Tomorrow, will have 3 key US government reports by 10:30am est. Weekly jobless claims will be first at 8:30am, OFHEO home price data at 10am, and finally natural gas at 10:30am.
Read more at CNBC
rate cut, Trichet, rate hike, Fed
Forex News to Watch for May 21
May 20, 2008
Forex traders will have their eyes firmly glued to their screens for 3 key pieces of news tomorrow.
First up, the bank of England will release the minutes from their May 8th meeting. As with the Fed, the BOE will have a mighty balancing act - as they try to fight 3% inflation rates AND a slowdown. The minutes will almost certainly contain 1 vote for a 25 basis point cut. Any more vote than that will likely lead to a sell off of the Sterling.
Next will be the Canadian CPI numbers. Canada has seen a severe deterioration in their markets, and CPI is only barely expected to inch up to 1.4%. They cut rates by 50 points in April. A low CPI will all but guarantee another cut in June.
Finally, the US Fed will release minutes from their April 30th meeting at 2pm est. Futures markets indicate the Fed is likely to hold firm in June, and possibly raise rates to 2.5% by early next year. Any change on inflation sentiment - up or down - may have a dramatic effect. Given CPI numbers, the 3% annual inflation, and the hawkish comments out of Europe, I would not be surprised if we see some commentary indicating inflation is becoming a greater concern than a slow down.
Bank of England, BOE, CPI, minutes, Fed
ZEW Predicts More ECB Rate Hikes, US and German Numbers Bad
May 20, 2008
As was expected, the main driving force in Euro FX trades came from the ZEW. However, the devil really was in the details, as the "what" caught traders by surprise. The German ZEW sentiment dropped to -41.4, lower than the expected increase to -37. Worse yet, German PPI came in at 1.1%, far higher than the expected 0.5% reading.
Depsite the bad fundamental news, markets moved on future expectations from the ZEW of an ECB rate hike. Wolfgang Franz, head of ZEW, supplied a mild jolt to the market when he indicated the ECB may increase rates "in the near future". For months now, many traders have thought the ECB was moving towards a rate cut - the global credit crunch, negative Eurozone consumer sentiment, and a crash in housing in many European countries was thought to portend a very bad slowdown. Nevertheless, as Mr. Trichet reiterated last week and yesterday, inflation remains concern #1 for the ECB.
In the US, wholesale inflation was up 0.2% for April, an ok number after the 1.1% jump in March. However, core inflation was worse than expected, coming in 0.4% vs the expected 0.2% increase. On top of the core inflation and record oil prices (which are just insane and way out of whack with the fundamental decline in gas demand + inventory increases), the US government raised their forecast for food price increases to a 4.5% - 5.5% range. That would be the largest annual growth since 1990. Overall, US inflation is up 3% in the last year, making it the largest increase since 1991.
In late trading, the EURUSD was up more than a cent to $1.5660, the GBPUSD was up to $1.9682. The dollar was also off against the Yen and Swiss Franc.
ECB, European Central Bank, inflation, ZEW Survey, EUR, USD
Quick Pips: JCB Holds at 0.5%, Carry Trades Off
May 20, 2008
As expected the Japanese Central Bank held interest rates steady at 0.5% overnight. Despite the bank's desire to raise rates, fears of a looming international slowdown held policy makers in check.
The global slowdown echoed through out the currency markets Tuesday. High energy prices, sluggish profits, and inflation fears are leading forex traders away from the carry trades. New Zealand, Australia, and Columbia where all notably off. Conversely, the Yen - the grandfather of all carry trades - was up despite the JCB holding firm.
Bank of Japan, Carry Trade, interest rates
Forex Traders Keep Your Eyes Open - A Bevy of Currency Data Tomorrow
May 19, 2008
Tomorrow will be one of those fun days to watch the ticker, as a slew of data will be coming from around the world. I always love watching the morning ticker while at the gym on these days. Keeps my emotions in check, and on rare occasion I met another investor/trader when I see faces reacting with glee/horror to the latest report.
Anyways, the reports. Overnight, the Japanese Central bank will meet and decide on rates. They are expected to hold steady at 0.5%. A shocker, eh?
Also overnight, the German ZEW sentiment will be reported. Some traders think a positive report will lead the Euro out of the $1.53 - $1.56 range. Interestingly, Trichet came out today warning that the Credit Crunch is still ongoing, but inflation remains the top concern. Combine that with France's weak GDP number (0.3% expected for Q2, half of Q1) and methinks things may not look rosy for the Germans. Of course, the fine folks at Barclay's disagree, and the UK actually saw a rise in home prices (wtf?!).
And finally, the US producer price index will be released tomorrow. The German ZEW and US PPI can definitely move things, so watch for any break through of the Euro range!
Bank of Japan, ZEW Survey, PPI, interest rates, BOJ
US Dollar Rises On Positive Data
May 19, 2008
An index of leading US economic indicators was up 0.1% on Monday, 0.2% better than the expected. In other good news for the greenback, housing showed a surprising rebound, as construction (+8.2%) and building permits (+4.9%) rose. In addition, Southern California, one of the largest US markets in terms of value, rose 22% from March to April. The data supports the belief of many traders that the US may avoid a recession altogether. While the recovery is slow and weak, the US has not had 2 quarters of negative growth.
The housing data should be taken with a grain of salt. Construction is being driven by new apartment complexes and Spring typically sees an upswing in home purchases In a mixed sign, much of the buying was for foreclosures. While each foreclosure came with the pain of a default, purchases help to set a bottom. I personally thought most buyers would wait a while longer. The fact that people are coming off the sidelines now is further proof the worst may be over for the US.
In late trading, EURUSD is at $1.5527, the GBPUSD is at $1.8510, and the USDJPY is at ¥104.15.
Greenback, housing, USD
Having Screwed Up the Futures Markets, Indian Government Turns to the Forex Markets
May 19, 2008
Indian is quickly turning into one of the worst places for speculative traders AND hedgers. Last year, they banned futuers trading in wheat, rice, tur, and urad. This year they added a ban on trading futures in the Soya complex. (It should be noted they were gracious enough to avoid a ban on sugar trading - so far).
And last Friday, it became the forex market's turn, as the government enacted a 0.25% tax on all buys AND sells. Most brokers have already passed the cost of the full tax onto retail customers. However, the wholesale industry, which makes up about 60% of the forex market in India, is unsure about the tax. On Friday, wholesale currency traders bought a mere 5% of their norm - yikes! One Mumbai dealer commented that with &#quot;wafer-thin" margins of 0.35% - 0.75%, a 0.25% would leave nothing for the wholesalers.
Read more at India Times
Rupee, India
Go Oz! Minutes from May 6 RBA Meeting Sends the Aussie Dollar to 24 Year High
May 19, 2008
The Reserve bank of Australia released their minutes from the May 6th meeting today. During that meeting, they held rates steady at 7,25%. However, the minutes show policy makers spent a great deal of time discussing a further rate hike. Inflation "was uncomfortably high" for many policy makers.
The Australian Dollar is up 12.8% vs the US Greenback so far this year. With an upside bias, and New Zealand falling off the rate hiking bandwagon, the trend may continue. According to Okasan Securities, the Aussie currency has broken a trendline from 107.87 (Oct 31) - 99.84 (May 7), suggesting a move to as much as 100.35.
Read more at Bloomberg
AUD, Aussie, RBA, Reserve Bank of Australia
A Fundamental and Technical Look at the GBPUSD
May 17, 2008
Starting in early March (right around the time Bear Stearns was bought by JP Morgan), the USD staged a comeback against the Sterling. And then negative US data last Thursday and Friday - contraction in manufacturing, weakest consumer confidence number in 28 years - combined to slam the dollar.
From one fundamental perspective, things look bad for the dollar. While the cheap dollar is definitely helping to boost exports, the trade imbalance hurdle is very high. In 2007, the deficit ran at a whopping $738.6 billion! And that is down -9% from 2006 ($811.5 billion). In addition, other major central banks remain reluctant to cut rates, as was reinforced by the May 8th BOE and ECB decisions to hold interest rates steady. Indeed, Trichet was very clear that inflation - not economic slowdowns - remained the number 1 concern.
Yet glimmers of hope remain for the greenback. Foreign inflow has risen from $56.7 billion in January to $80.4 billion in March. And futures markets show an expectation that the US Fed is done cutting rates, with a 50-50 chance of a hike by October.
It is at confusing times like these that Chuck turns to his good friend - technical analysis. Recently Chuck has became an ardent fan of MarketClub's Trading Triangle. They offer a lot of the standard stuff - a trade score based on common indicators, quotes, and tutorials. But the real meat and potatoes of their analysis suite is their trés cool charting tool. Not only does Cash find this to be a highly intuitive and easy interface (see below), but the indicators are working great. On April 1st, they put out this great video analyzing the GBPUSD pair. Using fibonacci retracements and weekly indicators, they called for a downturn to the 38% retracement level of 1.951 (from the high of 2.10) And low and behold, where did the GBPUSD hit? Just under 1.95. If you are unsatisfied with your current indicators, or just looking to try out a new set, definitely check out Market Club
Greenback, technical analysis, fundamental, GBP, USD
China Warned on Renminbi, but Not Cited. Earthquake Damage at $20 billion
May 15, 2008
Citing "the risks China is creating for itself, the Asian region, and the world economy", the US Treasury warned that China should continue the appreciation in the undervalued Renminbi (RMB or yuan) The yuan has appreaiated 18% since 2005, with faster growth from mid-2007 - April 08. However, the yuan has been flat since 08 (heh, isn't that when the US dollar turned around?)
The US government it could not cite China, as it could not tell whether the renminibi was kept down to gain an ubnfair trade advantage. However, the Treasury cited an overly large surplus (11% of GDP) and massive reserves ($1.68 trillion USD) as signs of manipulation.
Overall, the US has taken a global approach to the yuan currency problem, hoping to avoid a bilateral showdown. In the long term, this will probably play out on favor of the US, as Germany and Japan remain closer to American politcally.
in other news, the massive 7.9 earhtquake in China's Sichuan province will ost an estimated $20 billion. Insurance companies may be on teh hook for only $1 billion, just 5% of the total.
Read more at CNCBC covering Treasury and CNN covering earthquake costs
Japan Economy Grows More Than Expected, Yen Edges Up Against Dollar
May 15, 2008
Japan's economic revival continued, with news the economy had grown 0.8% in Q1 2008 (3.3% annualized). This was the 3rd staright quarter of expansion, diven by exports and private residential investments. This was 0.01% over the expected 0.7% for the first quarter. The Nikkei was up 0.6%
Forex traders reacted tepidly, sending the Yen up 0.07% (104.89 ¥) in late trading. Considering the weak US manufacturing data (see below), and the recent dollar peak of 105.70 hit earlier this month - this is far from a resounding vote of confidence for the yen.
Read more at Fox News
GDP, JPY, Yen
Indian Rupee at 13 Month Low, Housing Hit Hard Q1
May 15, 2008
The Rupee was down 0.7% Thursday, hitting 42.75/76 against the dollar. This is the lowest level since mid April 2007. High oil prices plus weak housing data in the first quarter have steadily lead currency traders out of the Rupee.
Housing has suffered in India's major markets this year. Markets in Bangalore, Mumbai, Chennai, and Pune are reporting a 15-20% decline in prices. Other major locales such Delhi, Maharani Bagh, and Hauz Khas have seen 5-10% declines.
Oil is India's biggest import, as such the meteroic price increase has hit them especially hard. India' oil import bill was up more than 33% for their economic year of 07-08.
Read more at the India Times on Rupee and India Times on Housing
Rupee, India, housing
Weak Manufacturing Data, Jobs Sends US Dollar Down Against Commodity Currencies.
May 15, 2008
US Manufacturin data continue to show signs of contraction on Thursday. The Empire Manufacturing index and the Philly Fed showed signs of contraction for a 6th month. The Empire Manufacturing reading came in at -3.2, down from 0.6. The Philly Fed did show some signs of life, rising to -15.6 from -24.9 Overall, Industrial production was down to -0.7%, after the biggest decline since Hurricane Katrina. In addition, jobless claims rose by 6,000 to 371k.
Depsite the bevy of bad news, the dollar was little moved agasinst non commodity currencies. (Perhaps these are lagging indicators?? Hmmmm). The greenback was up against the Swiss Franc and Euro.
Tomorrow could be a bigger day - with Housing Starts and the University of Michigan Confidence Index. reporting.
Read more at Yahoo
Greenback, Euro, jobs report, Franc, USD
BOE, ECB Hold Rates Steady
May 8, 2008
In moves that were largely expected, the Bank of England (BOE) and the European Central Bank (ECB) held rates steady at 5% and 4% respectively.
ECB President Jean Trichet did not produce the dovish commentary some currency traders thought might be coming. A string of bad news in Germany and throughout Europe seemed to suggest the Eurozone economy was cooling. However, Mr. Trichet held his ground, stating that inflation remained the "highest priority" (I wonder if their some German version of Cramer screaming 'They know nothing').
In England, a series of bad news also had some currency traders speculating the bank might cut by 0.25%. Like the ECB, they held to their view that inflation was the number one priority. Minutes from the BOE meeting will be released May 21, and will likely contain some votes for a rate cut.
Both currencies were largely flat against the Dollar. The Euro gained 0.0003 to close at $1.5404, the Pound was up 0.0004 to $1.9534
Read more at Yahoo on ECB and Yahoo on BOE
Bank of England, ECB, European Central Bank, BOE, interest rates
Job Reports, Inflation Drive Australian dollar Up, New Zealand dollar Down
May 8, 2008
New Zealand reported the largest decline in employment in 19 years yesterday. The deterioration of New Zealand's economy in recent months has shown that the Central banks efforts to cool the economy have largely worked. Many forex traders now believe the central bank will begin to cut rates from the record 8.25%. Rates may fall as much as 1% in the ne3xt year according to a Credit Suisse Index.
In Australia, jobs grew for a record 18th month, and the central bank raised inflation forecasts. Australia's dollar was trading at NZ$1.2187 (+1.2%).
read more at Bloomberg
jobs report, AUD, Aussie
US Dollar gains ground on Bad News Europeans
May 7, 2008
The US Labor Department reported Wednesday that worker productivity was up 2.2% for Q1 2008. Labor costs also slowed.
In contrast, Germany reported the worst euro-zone retail sales since 1995. Britain reported declining production and a lower consumer sentiment.
The Euro fell to $1.5401 (-0.0132),and the Pound fell to $1.9531 (-0.0199).
The European and British Central Banks will meet Thursday.
Read more at CNN
ECB, Euro, USD
Worst of Credit Crisis Over - US Sec Treasury Paulson, Merril CEO Thain
May 7, 2008
Both the US Secretary Hank Paulson and Merril Lynch CEO John Thain came out with a positive outlook on the credit crisis Wednesday.
In an interview with the AP, Hank Paulson remarked "we're closer to the end of this than the beginning." However, he cautioned that rising fuel prices will reduce the effect of the stimulus package. The first batch of stimulus checks went out last week - some via direct deposit, others via mail.
CEO Thain indicated that investment banks are likely to reduce the massive losses reported over the last year. He cautioned that banks with large consumer exposure were likely to see some more pain. Specifically, credit cards and home loans are likely to see more delinquencies going forward. On a positive note, Mr. Thain indicated Merrill was unlikely to seek more capital.
It is important to note that Mr. Thain worked at Goldman Sachs while Hank Paulson was the CEO. This 1-2 punch of optimism is almost certainly coordinated.
Read more at MSNBC and CNBC
Credit Crunch, Hank Paulson, USD
Greenback Up Against Swiss Franc, Yen, GBP
May 6, 2008
US Treasuries continued to gain ground against other currencies. Against the Yen, the Dollar was trading at 104.81 (+0.12). The dollar aslgo gained ground on the pound sterling (+0.15) and the Swiss franc (0.009).
Read more at CNBC
Greenback, JPY, Franc, Yen, GBP, Pound, USD
Daily Forex Turnover to Pass $4 trillion?
May 6, 2008
New reports indicate that daily trading turnover in forex markets may pass $4 trillion. This comes on the heels of last year's $3.2 trillion daily, reported by the Bank of International Settlements. Andrew Durrant of the CME reported that demand is being driven by more traders AND larger volumes
Read more at the india Times
Bernake: Foreclosure Issue Requires More Action
May 5, 2008
In a speech at the Columbia School of Business, the US Fed Chief urged more movement to combat the nation's foreclosure problem.
According to Mr. Bernanke, unemployment alone does not account for foreclosure rates in Florida, California, and Colorado. Instead,piggy back loans plus declining home values are working in conjunction to stop people from refinancing out of the problem.
Mr. Bernanke was heard to say "Doing what we can to avoid preventable foreclosures is not just in the interest of lenders and borrowers. It's in everybody's interest."
Read more at CNN
Bernanke, Fed
ISM: US Service Sector Growing
May 5, 2008
In a new report released today, the service sector grew unexpectedly in April. The ISM non-manufacturing index came in at 52.0 in April, vs an expected 49.1. A reading of 50 or above indicates growth.
This comes on the heels of Friday's better than expected job report. Dan Meckstroth of the Manufacturers Alliance commented that "It fits with a scenario of a very mild recession"
Read more at USA Today
ISM, USD
US Jobs Report Better Than Expected
May 2, 2008
April job losses came in at -20,000 according to the US Labor Department. This was significantly below the expected -80,000.
The unemployment rate actually fell -0.1% from 5.1% to 5%.
Construction and manufacturing continued to cut jobs. However, technical and health services posted strong gains.
Read more at CNBC
jobs report, USD
India Inflation at 3 Year High
May 2, 2008
India's wholesale index, which measures inflation at the "factory gate" came in at 7.57%. This is the highest since Novemeber 2004. The government has been battling inflation through price controls, raising bank requirements, and limiting food exports.
Read more at the BBC
India, inflation
HKMA Cuts Rates 0.25%
May 1, 2008
One day after the US Fed cut rates 0.25%, the Hong Kong Monetary Authority (HKMA) cut rates by a similar to 0.25%. This brings rates down to 3.5%. The HKMA indicated they too are likely done cutting for awhile.
Watch the forex analysis video at CNBC
Indian Exports up 23% for the Year, Fall Short of Projections
May 1, 2008
India's exports for fiscal year end March 31 2008 came in at $155.5 billion, up 23% year over year. However, they fell short of the target $160 billion. Exports for 08-09 are unlikely to meet the target of $200 billion. The Indian government has banned some food exports, and is now competing with a weaker US Dollar.
Overall, India's trade deficit widened 45% to $80.4 billion for the year.
Read more at the Times of India and Bloomberg
India, trade balance
There is a substantial risk of loss in forex trading.
You should only trade with risk capital that you can afford to lose without impacting your lifestyle or retirement plans.
The views expressed on this site represent the current good faith views of the authors at the time of publication. Please be advised that these views are subject to change at any time and without notice.
