Forex: Past events shook market; rush to see force of Upcoming events

Forex News:

Fewer Americans filed claims for jobless benefits last week, bringing the average over the last month to the lowest level since 2008 as the economic recovery prompted companies to retain staff. Initial jobless applications fell by 6,000 to 439,000 in the week ending March 27th. The number of people receiving unemployment insurance was almost unchanged while the number of people receiving extended benefits rose.

Employers are slowing job cuts, a sign of confidence, as the U.S. emerges from the worst recession since the 1930s. Sustained employment gains are needed to boost consumer spending, which accounts for about 70% of the economy. Economists had predicted a drop in weekly claims to 440,000, from a previously estimated 442,000 for the week ended March 20th.

Yesterday a report from ADP Employer Services showed that companies had unexpectedly cut payrolls in March. The 23,000 decline in payrolls was the smallest in two years and followed a revised drop of 24,000 claims the previous month.

In other news the US manufacturing sector has expanded in March at its fastest rate in six years. The Institute of Supply Managements PMI rose to 59.6 points in March, up from 56.5 in February. The PMI is calculated from data on new orders, production, employment, and purchasing. An index reading above 50 indicates that activity is rising. Anything under 50 shows contraction. March was the eight month in succession that US manufacturers have increased output.

The ISM’s latest monthly figure for the US exceeded the market expectation of 57 and comes as the wider economy is continuing to recover. The institute said growth was strongest among clothing manufacturers. Other recent economic data showed that consumer spending rose in February but at its slowest rate since September of last year.

In the forex online market yesterday the US Dollar gained 0.72% against the Pound closing trading at GBP 1.5288. Against the Euro the US Dollar climbed 0.58% to close at EUR 1.3585.

Across the water in Europe, retail sales in Germany, the Euro Zones largest economy, fell for the second month in February as bad weather and concern that unemployment might rise kept consumers at home. German consumer confidence slipped to an eight month low in March and the coldest weather in 14 years kept people at home. At the same time rising energy prices pushed inflation to 1.3% in March. But German unemployment fell unexpectedly in March as the economy recovered from recession.

European PMI data showed yesterday that manufacturing across the Euro Zone expanded at a faster pace than initially estimated in March as the recovery in the global economy prompted companies to increase output. According to figures released by the London based Market Economics yesterday the European PMI rose to 56.6 from 54.2 in February. That is above the initial estimate of 56.3 and the fastest rate of growth since November 2008.

European manufacturers are bolstering the recovery from near stagnation in the fourth quarter of 2009 as the Euro’s 5.7% drop against the US Dollar this year makes European exports more competitive abroad.

From http://forextradingguru.blogspot.com

Forex News: Eur soars high against the Greenback

Forex News:

On Friday the Euro strengthened against the US Dollar and the Pound after EU leaders agreed on a financial aid package for Greece. The deal includes funds from the International Monetary Fund and totals around 22bn Euros which could be made available to Greece should the country have difficulty borrowing money to service its high level of debt.

Against the US Dollar the Euro rose by more than one cent to $1.3422 before falling back slightly to close trading at $1.3414 before the start of the weekend. It rose around two-fifths of a cent against Sterling to close trading at GBP 0.9003 in the forex online market.

On Wednesday the Euro had fallen to a ten month low against the US Dollar amid fears a deal would not be reached after Germany indicated Greece did not need assistance. This followed close on the heels of a credit downgrade for Portugal which further weakened the currency.

The deal may allay fears that the problems which Greece has experienced could spread out to affect other countries in the Euro Zone. Following the announcement that a deal had been reached yields, that is the interest rate investors are paid on loans to the government, on Greek bonds fell slightly, an indication that investors viewed them as slightly less risky. Analysts feel the real test will come when Greece hold its next sale of government bonds which will almost certainly happen in the coming weeks. This will be a crucial test for Greece as well as setting the tone for what is to come in the Euro Zone.

According to Moody’s credit rating agency, disagreement among Euro Zone partners could undermine the deal: “The key credit question is whether market confidence will be strengthened by the support package, or whether it will be weakened by the contentious conditions under which this package was agreed.”

Further concern that the EU’s rescue plan could fail arises from concerns that EU leaders may have underestimated how great the problems facing the Euro Zone are. This particular plan was drawn up in response to the Greek crisis, however there are many other members who are struggling, most notably Ireland, Spain, Portugal and Italy. Greek Prime Minister George Papandreou must now prove that he can keep the nations finances afloat as failure to do so could spark a fresh crisis and trigger the use of the aid package. Looking forward the Euro will remain heavily dependent on smooth market conditions in the short term to immediate future.

Across the water in the US, Friday saw the news that the US GDP was revised downward to an annualized rate of 5.6% for the last quarter of 2009. It was revised down from 5.9% according to figures released by the US Commerce Department.

From http://forextradingguru.blogspot.com

Canadian Economy making a moderate recovery

Forex News:

Last week the Euro fell against 15 of its 16 major peers as EU leaders appeared unable to agree a cohesive plan to bailout Greece. On Friday it tumbled 0.60% against the US Dollar closing trading at $1.3528. The previous day it had fallen as much as 0.93% against the USD.

Late last week Greek Prime Minister George Papandreou issued EU leaders with a one week deadline to come up with a concrete rescue plan for Greece and challenged Germany to abandon its doubts about rescue plans. Papandreou said he may turn to the IMF to overcome Greece’s debt crisis unless leaders agree to set up a lending facility before an EU summit due to be held in Brussels on March 25th and 26th. The EU commission President Jose Manuel Barrosa has urged immediate action on the matter and said the EU should spell out its rescue plan at the summit later this week.

Friday saw the release of Germany’s producer price index which remained unchanged in February after increasing by 0.8% in January. Market expectations had been for a 0.1% increase. Year-on-year Germany’s PPI fell 2.9% in February, versus a 3.4% decline in January.

Canada’s core inflation rate unexpectedly rose last month on higher costs for automobile insurance and accommodation during the Vancouver Winter Olympics. The increase will pressure the central bank to raise interest rates and drive the value of the Loonie higher. The Canadian economy is accelerating out of last year’s recession with retail sales also rising more than expected. Recent manufacturing reports also indicated rapid economic growth.

The speed of the rebound may change how fast Governor Mark Carney decides to raise the benchmark interest rate from its current record low level of 0.25%. He had pledged to keep the interest rate in place through June unless the inflationary outlook changed. The banks next interest rate decision is scheduled for April 20th.

On a monthly basis, core consumer prices rose 0.7%, the fastest since November 2008 and overall inflation was up 0.4%. Economists had predicted the monthly rates would be 0.3% for both total and core inflation. Retail sales rose 0.7% in January, as consumers stocked up on home improvement supplies before a federal tax credit expired. Wholesale sales rose at the fastest pace in three years in January and factory sales gained four times what economists had predicted.

During the middle of last week in the forex online market the Loonie traded within one cent parity with its American counterpart before dropping back 0.23% on Thursday as crude oil prices, the country’s largest export fell. On Friday the Loonie opened at USD $1.0137 and fell back a further 0.31% to close trading at USD $1.0169.

From http://forextradingguru.blogspot.com

Impact of the US National Capital Long Term Purchases report on the Greenback

Forex News:

The US National Capital Long Term Purchases report was published yesterday. This indicator represents the difference between foreign investments in the US and US investments abroad and demonstrates foreign confidence in the US economy. Figures showed that Net foreign purchases of long-term securities slowed markedly in January according to the Treasury Department. Total holdings of equities, notes and bonds increased a net $19.1 billion in January. This is down from $63.3 billion in the previous month. The figure had leaped to $126 billion two months ago, but was then cut to half.

The Dollar in the forex online market closed down significantly against the GBP in the wake of this news. It started the day trading at 1.5774 against the Pound but slid to 1.5044 at the close of the day. It also dropped against the Euro, although not as significantly, opening trading at 1.3762 before going on to close at 1.3758.

Elsewhere in the US manufacturing in the New York region expanded in March for an eighth straight month, indicating factories are sustaining production and lifting the U.S. economy. The index plunged in December but has since recovered. The report showed orders, sales and employment increased in March, a sign that manufacturing gains may last for months and help spur the rest of the economy. The Empire State index is of interest to investors and economists primarily because it is seen as an early indicator of what the Institute for Supply Management’s March national factory survey due out in two weeks may show. In February, the ISM manufacturing index inched lower to 56.5 but continued to point to solid growth in the factory sector.

Industrial production unexpectedly rose in February, due in part to gains in demand for computers and semiconductors that signal the pickup in U.S. business investment is being sustained. Production climbed 0.1%, the eighth consecutive increase, as utility use and mining increased according to figures from the Federal Reserve. Capacity utilization or the proportion of plants in use, climbed to 72.7% from 72.5%. The gauge averaged 80% over the past two decades and suggests inflation will remain low. The amount of spare capacity is among reasons analysts anticipate Fed policy makers will reiterate a pledge to keep interest rates low. The US Federal Reserve is expected to hold interest rates near zero when they are announced later today.

Before the Fed Rate is announced the Building Permits and Housing Starts figures for the month of February are due to be announced. The housing sector had a big contribution to the downturn in the global economy and is now showing signs of a slight recovery. Building permits dropped to 620K in January, they are expected to be down to 619K; housing starts are expected to drop from 590K to 570K.

From http://forextradingguru.blogspot.com

Britain’s Trade deficit widens

Forex News:

Britain’s goods trade deficit with the rest of the world unexpectedly swelled in January to reach its widest level since August 2008, fueling concerns about the strength of the country’s broader economic recovery. Yesterday, the Office for National Statistics reported that Britain’s trade deficit widened to 7.987 billion pounds from 7.010 billion in December, well above market expectations of 7 billion, as lower sales of chemicals and other commodities prompted a steep slump in exports. This disappointing figure will most likely fuel policy maker’s concerns that the sharp depreciation in the value of the Pound has not led to the expected increase in exports. Bank of England policy maker Kate Barker said yesterday that Britain’s economy has shown a “disappointing” response to the weakness of the pound, which has fallen about a quarter in the past three years on a trade-weighted basis. Government Officials want gross domestic product to refocus on exporting as they try to entrench Britain’s recovery. The deterioration in the global trade balance was the direct result of a 6.9% fall in exports, the biggest decrease since July 2006; while there was speculation that the Britain’s unseasonably harsh winter could have hampered the movement of goods, according to officials there was no firm evidence to support this theory. Imports fell just 1.6%.

Following the release of this disappointing news, the GBP slipped as much as 0.2% against the U.S Dollar and was trading down 0.9% on the day at $1.4957. After closing at $1.49991 yesterday, the Sterling plunged another 0.54% this morning to touch on $1.49176 in the forex online market.

Later this morning (930GMT), the Office for National Statistics will announce the U.K’s manufacturing production for January. After increasing 0.9% between November and December of last year, the growth in manufacturing production is expected to slow, with the market expecting a rise of 0.3% between December and January.

Also later today (1900GMT), the U.S Treasury Department will release the Federal Budget Balance. While it is no secret that the U.S government is in serious debt, last month the size of the budget fell to a more acceptable level of -42.6B. This month, the market predicts that the deficit will to surge back up to 207.5B, weighing heavily on the value of the U.S dollar.

Tomorrow, both the US and Canada will simultaneously release their Trade Balance. This double-feature release always triggers action in USD/CAD. The American deficit is expected to remain high at around 40 billion, while Canada is expected to turn from a deficit of 0.2 to a surplus of 0.4 billion.

Later this afternoon (1800GMT), the European Central Bank president Jean-Claude Trichet will speak. As head of the ECB, which controls short term interest rates, Trichet has more influence over the Euro’s value than any other person, and so his words will be carefully listened to. Today’s speech, held at the the inauguration ceremony of the Language of Money in Frankfurt, will be followed by a second, held at Institute of Economic Policy Research in Stanford, this Friday.

From http://forextradingguru.blogspot.com

In Anticipation of BOE and ECB’s rate decission

Forex News:

Early this morning, Germany released its monthly retail sales report. Despite a predicted drop of 0.5%, retail sales were unexpectedly stable for January, while December gains were revised upwards modestly- fueling hopes that consumer supported recovery may emerge within the coming months. This will be followed by the publication of the entire Euro Zone’s monthly retail sales for January, predicted to show a decrease of 0.3% from the previous month. With no other important news coming out for the rest of the day, investors will turn their attention to tomorrow’s impeding ECB rate announcement. Once again, Jean-Claude Trichet, president of the ECB, is expected to maintain the minimum bid rate at its current record low level of 1.0%.

The ECB’s rate decision will be preceded the Bank of England’s announcement of its overnight rate. The BoE is expected to keep its key lending rate at its current record low level, despite signs that Britain is emerging from the recession at a faster pace than previously anticipated. While the country’s GDP may have grown 0.3% (revised) for the fourth quarter of last year, analysts predict that it is highly unlikely that the central bank will opt to exit its “easy” monetary policy so quickly.

Yesterday, the Sterling plunged to a new 10 month low against the greenback in the forex online market as speculation continued to increase that neither the Labor nor the Conservative party would win an outright majority in Parliament in the coming June election- obstructing efforts to cut the country’s historically high budget deficit. After slipping 1.045% on Monday (at one point diving a record 3% to a $1.4784, its lowest level since April 2009), the GBP continued to fall against its American counterpart yesterday – deprecating an additional 0.2314%, to close at $1.49607.

Despite increasing chances of a “hung” parliament in addition to a plummeting currency, U.K consumer confidence jumped in February to a two-year high. The index of consumer sentiment increased 6 points from the previous month, to a new level of 80.

Yesterday, the U.K released its construction PMI, showing a fall from its previous level of 48.6 to 48.5 (a number greater than 50.0 indicates expansion, while number below shows contraction). Early this morning (930GMT), the U.K will release its Service PMI- while this report is the last PMI for the week, it is the most important. The service sector, which includes the financial sector, was improving up until last month. After falling to 54.5, analysts predict a slight increase of 0.5 points this month, to a new level of 55.0.

The U.S dollar weakened across the board, falling against 15 of its 16 major currency counterparts, following the release of the Bank of Dallas Fed Chairman’s statement that borrowing costs should continue to remain low until the economy picks up- which according to him “won’t happen for some time”.

Later today (1315GMT), the U.S will release its ADP Non-Farm Employment Change. While generally considered a predictive index for Friday’s highly anticipated Change in Non-Farm Payrolls, the ADP is expected to show a drop of 15K. With Payrolls have declined in 24 out of the past 25 months and economists are predicting another decline of 40,000 in February.

From http://forextradingguru.blogspot.com

Greenback sliding against the EUR and the Yen

Forex News:

In reaction to the news that the FOMC would be keeping its benchmark interest rates exceptionally low for some time, the greenback slide against both the Euro and the Yen.

In addition, despite signs that the U.S housing market was beginning to recover, sales of New Homes fell to its lowest level on record- further fueling the dollar’s decline against its major currency counterparts.

Purchases of new homes within the U.S tumbled below expectations to an annual pace of 309,000, signaling that the added extension of the government tax credit may not be enough to revive demand.

This report further highlights Fed. Chairman Bernanke’s prior comments that even though the economic situation of the U.S is making a promising recovery, homebuilders continue to face intense competition from foreclosed properties that are continually driving down the prices in the market, while at the same time robbing the demand for new homes.

The result of which causes a chain reaction –decrease sales of new homes leads to a decrease in demand for construction, thus a decreased amount of employees in that field – directly effecting the level of employment for the country.

Following the release of Bernanke’s testimony to the House Financial Services Committee, and pessimistic U.S. Home Sales data – the U.S dollar plunged against its major counterparts. The EUR/USD broke a session high at 1.36250, and closed at 1.35371, up 0.18% from the day’s opening price at the Forex online market.

Today is the second half of Bernanke’s testimony of Congress; in addition, the U.S will release the Unemployment claims for last week, expected to drop to 461K, from the previous week’s 473K joblessness claims. Also out today (1330GMT), the monthly Core Durable Goods Order.

Orders have been revised to the upside in the past month, from 0.3% to 1%; while, Core orders have been revised to 1.4%. The positive trend is expected to continue, with a rise a rise of 1.6% in orders and 1.2% in core orders. This figure doesn’t touch the consumers, but has a long term impact on the economy.

From http://forextradingguru.blogspot.com

Recession Continues to steal jobs across the British Island

Forex News:

U.K jobless claims unexpectedly jumped this past January to the highest level since April 1997, as the recession continues to steal jobs from businesses across the British Island.

Yesterday morning’s Claimant Count Change reported that the number of people receiving unemployment benefits rose to a record 1.64 Million, increasing by a drastic 23,500 claims from the previous month.

Last month the number of joblessness claims had dropped by 14.6K – this month, economists were expecting unemployment claims to continue to fall by another 9.6K. Despite this increase, the unemployment rate stayed as expected at 7.8%.

In regards to salary, the average earnings index rose a dismal 0.8% last December over the year (1.2% excluding bonuses), versus expected 1.2% – the lowest recorded yearly change in salaries.

Despite the disappointing job figures, The GBP saw little change in the Forex online market trading, after the release of the worse than expected claimant count, trading at $1.5770 down 0.115% from the day’s opening of $1.57882.

Moreover, the Bank of England meeting minutes were released and showed that BoE policy makers agreed unanimously pause their £200 billion bond purchasing program.

Tuesday’s bullish trend for the GBP/USD took a turn for the worse, as the combination of the BoE vote to suspend its asset purchase program along, push the sterling down 0.744% against the greenback – the pair closed at $1.56647.

Early this morning, Britain’s bureau of National Statistics will release the Public Net Borrowing Figure – the difference in spending and income from public operations, central government and local governments.

British public expenditure is eyed by the opposition and by investors alike. After many months of extended borrowing, the British government is expected to report negative borrowing of 2.4B,something that could potential help the Pound regain some of yesterday’s losses.

From http://forextradingguru.blogspot.com

Trade balance curved in the market Unbalance

Forex News:

Early yesterday afternoon, the US and Canada simultaneously released their Trade Balance. The U.S December Trade Balance came out wider than expected – the deficit rose to -40.2B as imports surged more than exports.

Forex Analysts had predicted that the deficit would contract to 35.8B from its previous reported level of 36.4B, instead the US trade gap unexpectedly widened to its biggest level this year.

Even though exports climbed to their highest level since October ’08, this eighth consecutive rise in exports was trumped by an 8.4% increase in Imports (particularly petroleum).

The result of faster economic growth in emerging countries combined with a drop in the dollar’s value is allowing American goods are becoming more competitive and may in fact propel gains in sales overseas that will spur further gains in U.S. manufacturing.

On the other side of the 49th parallel, Canada also saw their Trade Deficit widen more than expected. As imports slightly outpaced exports, Canada’s trade deficit remained at 0.2B, versus the expected forecast that the trade deficit would shrink to 0.1B. The 1.7% increase in exports was slightly outpaced by a 1.8% rise in imports resulting in Canada’s trade deficit with the world widening to $246 million in December from $201 million in November.

According to the Bank of Canada, the combination of low U.S demand and strong Canadian dollar are a “significant drag” on the economy. Governor Mark Carney has pledged to keep his benchmark lending rate at a record 0.25 percent through June to stimulate demand unless the inflation outlook shifts.

Following the release of both countries trade balances, the Canadian currency tumbled against the USD- the pair increased from the day’s open of 1.06651 USD/CAD to 1.0686; however, by yesterday’s close, the Loonie managed to regain some of its lost ground against its US counterpart- closing at 1.06265.

Across the Atlantic, the Euro continues to move away from its 8 month low against the USD, as speculations increase that today’s EU summit will shed light on a possible rescue package for Greece. With the EU holding their 1 day summit today, the EUR increased from yesterday’s close of 1.37336USD to a high of 1.37995 in Asian markets early this morning.

While the Euro continues to rise versus its American counterpart, the British Pound continues to plummet against the USD. Yesterday, the Sterling was hit hard as the BoE Inflation report forecasted low inflation for a long period, suggesting more quantitative easing ahead; the Pound plunged 0.88% from its opening price of 1.57088 to 1.55701, finishing off the day at 1.55974.

Yesterday, the Bank of England lowered U.K.’s economic outlook and forecast inflation to undershoot its 2% target. The central bank Governor Mervyn King also kept the door open for further quantitative easing.

Britain’s February Inflation Report depicts economic growth to reach around 3.2% in the second quarter of next year- smaller than the previous estimate of 4%. According the BoE, the strength of the recovery is highly uncertain and output is unlikely to return to a level consistent with its pre-crisis trend for a considerable period.

King forecasted inflation to exceed 3% in January, but estimates the figure to fall below the target quickly. Annual inflation had exceeded the central bank’s 2% target in December for the first time since May 2009 and stood at a nine-month high of 2.9%. “It is more likely than not that inflation will be below the target for much of the forecast period, but the risks are broadly balanced by the end,” the bank said.

Shortly midnight, Australia released its employment change for January as well as its current unemployment rate. With both numbers coming out better than expected – employment change increased to 52.7K versus expected 15.1K causing the unemployment rate to tumble to 5.3% versus expected 5.6% and prior 5.5% – the Aussie rose more than 1% against the dollar and the Yen.

The AUD/USD opened in Asian Markets this morning at 0.87506- after the release of the better than expected employment data, the pair increased 1.75% to a week high of 0.89040

From http://forextradingguru.blogspot.com

Both Britain and Europe to announce rate decision, one day ahead of U.S Non-Farm Payrolls

Forex News:

It is a very busy day ahead, as both the European Central Bank and the Bank of England are scheduled to announce their rate decisions.

Early this afternoon (1245GMT), the European Central Bank will announce its Minimum Bid Rate. The ECB, is expected to keep benchmark interest rates at its current record low level of 1.0%. This prediction come after Jean-Claude Trichet, president of the ECB, indicated that he would like wait for new growth and inflation forecasts in March before deciding when to step up the withdrawal of measures used to battle the financial crisis. Continual concerns over rising unemployment, in addition to increasing apprehensions that Greece’s fiscal problems could spread through the Euro zone, complicate the ECB’s efforts to return the euro-area economy to health.

The ECB announcement comes shortly after the Bank of England’s official rate decision (1200GMT). Analysts do not predict a rate hike- the BoE, is expected to leave the overnight rate at its historical low level of 0.5%. This decision comes out following earlier announcements, and indicators that that the UK emerged, barely, from the recession in the 4th quarter of last year.

The pressure is high for the Euro and the Pound, as these two highly anticipated rate decisions, come one day ahead of the U.S Non-Farm Payroll Change (announce tomorrow at 1330GMT), and follow yesterday’s release of a better than expected ADP Non-Foreign Payroll figure.

The release of ADP Non-Foreign Payroll, widely considered as an indicator for the NFP, fueled the dollar towards appreciating against both the Pound and the Euro. Following the release of the ADP figure yesterday, the EUR/USD, fell below the 1.4 mark, hitting 1.3960. This bearish reversal, further confirms that the Euro is on the cusp of entering a downwards trend against the dollar- any unexpected news in the ECB official bank rate today, could send the Euro spiraling downwards against its USD counterpart.
Moreover, the positive news in regards to U.S employment further caused the Pound to depreciate against the dollar. Yesterday, the GBP/USD tumbled from a 1.6070 session high to close at 1.59003.

For the first time in a long time, analysts are predicting an increase in the US Non-Farm payrolls of 10K. Last month’s Non-Farm Payrolls were disappointing and showed a loss of 85,000 jobs in the US in December. Hopes were already high for the Non-Farm Payrolls, but expectations increased exponentially when yesterday’s ADP Non- Farm Employment Change, was much better than expected. The ADP figure, which measures the jobs in the private sector, showed a loss of 22,000 jobs. While it is still a negative number, it is much lower than the expected loss of 31K, and lasts months loss of 61K.

Apart from increasing against both the GBP and the EUR, the positive results of the ADP figure, triggered the USD/JPY to rebound from 90.05 session low has extended to session high at 90.85 high.

The release of a better than expected positive result in the Non-Farm Payrolls on Friday will certainly further boost the dollar against its major currency counterparts, and raise chances of a future rate hike. While there have been many signs that the U.S is on the road to recovery (namely the higher than expected Q4 GDP, announced last week), a strong number in the NFP, will surely push the USD on the path to regaining some of last year’s traumatic losses.

From http://forextradingguru.blogspot.com

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