USD

USD mixed across the board

 

FXstreet.com (Buenos Aires) - Dollar ends another day mixed across the board, after Gbp, Aud and Cad appreciate to multi weeks high and remain close to those levels, while Japanese Yen, Swiss Franc and specially Euro that came under pressure Wednesday with a pullback in assets associated with risk and on mounting expectations for non-standard policy measures from the ECB, lost ground. Despite the European currency remains bearish, further losses were halted by a late rally in Wall Street, that after a negative starting, managed to close the day gaining 109 points, again barely above the 8000 points level, still struggling to define a trend. Fed’s Beige book, released late in the American afternoon, show that 5 of the 12 districts noted a moderation in the pace of decline, and several signs that activity is some sectors was stabilizing at a low level. Despite that, manufacturing activity weakened across the country. Beige book also show housing markets remained depressed overall, but there were some signs that conditions may be stabilizing. 

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• Sanjay Madgavkar, Global Head, Retail FX Trading, Citi Markets and Banking, CITI 
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• Parker King, Chief Investment Officer of Currencies, PUTNAM INVESTMENTS 
• Pierre Lequeux, Chief Investment Officer, Currency Management, FORTIS INVESTMENTS 
• Thomas Kressin, Senior Vice President, Portfolio Manager, PIMCO EUROPE LTD. 
• Jamie Thorsen, Executive Manager Director, BMO 
• Misha Malyshev, MD & Head of High Frequency Trading, CITADEL INVESTMENT GROUP LLC

Asia Session

 

 Risk aversion seemed to flee from the markets today in Asia as stocks followed the path forged by Wall Street earlier, but a less than stellar Chinese GDP number sent buyers to the Yen and Dollar. Early deals in Asia saw the Aussie and other high yielders such as the Kiwi Dollars gain good ground early on, with the AUD/USD hitting .7314, and AUD/JPY hitting 72.74 on murmurs that the upcoming Chinese GDP data would be better than expected. As well, NZD/USD hit 0.5935 and NZD/JPY hit 57.85 but once the GDP came out at 6.1% when most were expecting a number closer to 8% the hammer fell and traders fled to the Yen and US Dollar. From the highs, the AUD/JPY lost a full big figure and the NZD/JPY lost a little over a big figure as well.

USD/JPY made a move from 99.50 to 98.91 and the EUR/JPY fell from just under 132.00 to lows under 130.40 in a pretty swift move. The move was a routine risk adverse play even in the face of higher equities. The Dollar improved against the Euro on the data, as the EUR/USD pair fell from 1.3268 to current lows at 1.3180 as of this writing. The markets will look to tomorrow's earnings reports for a few of the big financial institutions in the US to se which path to take.....risky, or risk adverse.

Upcoming Economic Data Releases (London Session):

4/15/2009	23:01	UK	BRC March Retail Sales Monitor	15-Apr
4/16/2009	6:00	EC	EU 25 New Car Registrations	MAR	-18.00%	- -
4/16/2009	7:15	SZ	Producer & Import Prices (MoM)	MAR	-0.60%	-0.20%
4/16/2009	7:15	SZ	Producer & Import Prices (YoY)	MAR	-1.80%	-2.40%
4/16/2009	9:00	EC	Euro-Zone CPI (MoM)	MAR	0.40%	0.40%
4/16/2009	9:00	EC	Euro-Zone CPI (YoY)	MAR F	0.60%	0.60%
4/16/2009	9:00	EC	Euro-Zone CPI - Core (YoY)	MAR	1.70%	1.40%
4/16/2009	9:00	EC	Euro-Zone Ind. Prod. sa (MoM)	FEB	-3.50%	-2.50%
4/16/2009	9:00	EC	Euro-Zone Ind. Prod. wda (YoY)	FEB	-17.30%	-18.00%

Daily Market Outlook

 

   U.S. dollar rises on Wednesday on lowered risk appetite

The greenback strengthened against most of the major currencies on Wednesday as investors continued to buy the safe-haven U.S. dollar due to persistent worries over the economic recession. In late New York afternoon session, the ICE futures dollar index eased from intra-day high of 85.343 and was last trading up 0.11 percent to 84.888. The dollar rose to session highs of 99.68 and 1.1488 versus the yen and swiss franc respectively in earlier session before profit-taking occurred.  

  
The euro came under pressure after ECB Governing Council member Axel Weber said the central bank will announce a package of ‘non-standard measures’ to boost the eurozone economy in May. The single currency fell to as low as 1.3146, 0.8787 and 129.91 against the dollar, sterling and yen respectively before stabilising.  
  
Meanwhile, the British pound rallied above 1.5000 against the dollar and touched a multi-month high of 1.5038 as Royal Institution of Chartered Surveyors showed that the slump in U.K. house prices eased last month after more than a year of declines lured buyers back into the market. The number of real-estate agents and surveyors saying prices fell was 73.1 percentage in March, compared with 78.1 in February (the highest figure in 13 months).   
  
On the data front, German wholesale prices dropped the most in more than 22 years in March after energy costs and prices for agricultural goods plunged, falling 8 percent from a year earlier after a 5.7 percent decline in February. Other reports from U.S. showed that manufacturing in the New York region contracted by the least since September, posting a -14.7 reading compared with -38.23 in March while industrial production in the U.S. fell 1.5 percent in March (14th time in the last 15 months) as factories trimmed unwanted stockpiles.  
  
Economic data releases on Thursday include U.K. BRC retail sales, Japan machine tools orders, Switzerland’s PPI data, eurozone HICP final, industrial orders, and U.S. building permits, housing starts, weekly jobless claims and Philadelphia Fed survey.

Financial And Capital Markets

The Financial And Capital Markets

Capital markets have maintained their broad recovery; but price action seems to be outpacing sentiment. US equities have recovered nearly 20 percent since hitting their decade lows over a month and a half ago; physical commodities have reversed course after months of basing; and risk premiums in debt and derivative markets have shrank. However, despite these improvements, positive growth is still a distant hope and financial uncertainties still very real threats. Policy officials, economists and traders unanimously forecast an eventual recovery in global expansion sometime either later this year or through the first half of 2010. However, whereas politicians and academics can afford to have a long-term outlook, market participants cannot. An ongoing recession dampens rates of return, stifles capital investment and puts the breaks on production. Altogether, the economic hardship is the fuel for a bear market – so how stable is this ‘market recovery?’

 

A Closer Look At Market Conditions

Over the past week, capital markets struggled to keep the momentum behind the developing rebound from late February lows. The Dow has struggled to keep its pace following its push through 8,000 as last week’s drop in liquidity preceded the start of earnings’ season. With most economic parties forecasting a sharper pace of contraction through the first quarter (not much of a stretch considering the horrible monthly data that has crossed the wires), investors are looking for see how revenues fared. This could act as justification or a contradiction to the fragile rebound in investor optimism. Commodities have responded with greater caution with demand wholly in flux.

In gauging the health of the markets, we have to balance the health of risk and return. For a genuine recovery to develop, investors need to see real evidence for a returns to grow and encourage competition amongst investment classes; and they have to be able to comfortably assume there are no major threats to the normal functioning of the markets. In the recent rebound in price action we have been seeing, the development has been completely on the side of risk. It has been months since a major bank or industry has teetered on the edge of collapse (and threatened the credit market), which is allowing for equity in the absence of panic. Without growth, though, this advance may fail.

 

Dollar And Risk

Dollar And Risk Tied To Stress Tests, Fed Forecasts

WEDNESDAY, 15 APRIL 2009 21:47:12 GMT

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Written by John Kicklighter, Currency Strategist

Investor confidence in the US and across the globe remains in limbo. The market is waiting for an indisputable sign that growth and rates of return are nearing a turning point; but so far, the weight of recession and lingering financial troubles hasn’t let up.

The Economy And The Credit Market

Investor confidence in the US and across the globe remains in limbo. The market is waiting for an indisputable sign that growth and rates of return are nearing a turning point; but so far, the weight of recession and lingering financial troubles hasn’t let up. However, in the meantime, fear that further financial seizures are just around the corner (a high probability risk just six months ago) has encouraged capital to find its way back into the capital markets from risk-free assets like Treasuries and money market accounts. Looking ahead, there are a few major events that could alter the market’s perception of risk: more optimistic economic forecasts from policy makers and the outcome of the first quarter earnings season. Today, the Fed released its Beige Book with the usual grim assessments. But, this time around there were a few bright spots hinting to the inevitable recovery. Whereas, a return to growth may be a long ways off, the appraisal of business health is active and ongoing. Particular interest will be paid to the revenues of the large US banks - who have so far bested expectations and raised the outlook for the Fed’s ‘stress tests.’

 

A Closer Look At Financial And Consumer Conditions

Market operations and confidence continue to improve. Though demand for short-term Treasuries and relatively risk-free money market paper holds stubbornly to recent record highs, there has been clear interest in reinvesting into the more speculative areas of the financial markets. The more time that passes since the last credit market seizure, the more likely it is that the financial crisis has passed. There are still milestones to risk going forward. In the US, the government’s ‘stress tests’ loom. While this evaluation of health for the nation’s 19 largest banks will be backed by infusions of capital for those struggling, investors will nonetheless take it as a vote of confidence.

The world’s largest economy has yet to mark the worst of its economic recession. Today, the Federal Reserve’s Beige Book painted a dreary (yet unsurprising) picture of activity. Among the highlights, from the economic paper used by FOMC members to determine monetary policy, was a “generally bleak” outlook for employment, warnings that manufacturing shrank nationwide, “weak” consumer spending and altogether signs that national growth was still contracting. However, there were also preliminary signs of improvement. Housing was showing a few signs of stability. More remarkable, the report said 5 of the nation’s 12 Fed districts’ reported contractions were easing.

 

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