Currency Report
Hello all. Here is the currency report for the week.
The US dollar is doing a little better against the yen contrary to last week. However, the trend will only last so long as the Chinese stock market continues its upward movement. While there has been a rally in the Dow, it is not yet enough to cover the decline it has taken from last week. Non-farm productivity and labor costs have increased but the weakness in home sales and the decline in factory orders has removed some of the luster from this good news. Manufacturing continues to struggle even with an increase in last weeks ISM report. The housing market is still the thing to watch especially with the sub-prime lending dilemma that looms on the horizon. Economic releases to look for are the ADP labor report, the consumer credit report, the Fed Beige Book report and a speech by President Moskow, who will most likely try to bring peace to the tumultuous markets. Go figure!
The Euro is still doing better than the US dollar even though retail sales have decreased in the region. The Yen appears to be dictating the move in this currency. In the pair Eur/Jpy, the 890 pip drop coincided with the drop in the Usd/Jpy by 595 pips. That being so, the gain in the Euro coincides with gains in these two currencies. The 1% drop (expected to be .4%) in sales in Germany surprised investors. No economic releases are scheduled for the Euro so far.
The Swiss franc was sold off in response to slower growth reported in the fourth quarter. However, rates are on track to be increased in the next few weeks.
The Pound has also gained some ground against the US and Euro dollars as a result of the gain in the Gbp/Jpy pair. The 3.3% rise in BRC retail sales has contributed to the bullishness of the pound, especially since it is an upside surprise to expected growths of 3.1% and 2.3%. This may also mean there may be stronger consumer confidence in the Nationwide Consumer confidence report. A rate increase is not on the way even though this has happened.
The rebound in the Chinese stock market has weakened the Yen. No data was released recently to show any market flow influencing this price action. While this move signals a long overdue reversal in the Yen, as it was shorted for so many years, it is unknown whether traders are liquidating their carry trades or if liquidation stopped out the carry traders altogether. It is felt that the great downward move in the Yen on February 23 burned more traders than helped them, so they are scared to enter the market again. A big rally in the Yen, regardless of when these traders come back, will curtail any ideas of a rate hike.
The commodity currencies did better, recovering from carry trade liquidations and gaining a few pips over the US dollar. The economic releases from New Zealand are few in number, but the upcoming monetary policy decision may bring the rate up to 7.5%. Canadian data has shown strength, with building permits up 11.3%. The main event for the Canadian dollar however was the monetary policy decision, where rates were kept the same but a hawkish undertone was present, with the citation of strenght in the Canadian economy and "roughly balanced risks" to projected inflation.
The US dollar is doing a little better against the yen contrary to last week. However, the trend will only last so long as the Chinese stock market continues its upward movement. While there has been a rally in the Dow, it is not yet enough to cover the decline it has taken from last week. Non-farm productivity and labor costs have increased but the weakness in home sales and the decline in factory orders has removed some of the luster from this good news. Manufacturing continues to struggle even with an increase in last weeks ISM report. The housing market is still the thing to watch especially with the sub-prime lending dilemma that looms on the horizon. Economic releases to look for are the ADP labor report, the consumer credit report, the Fed Beige Book report and a speech by President Moskow, who will most likely try to bring peace to the tumultuous markets. Go figure!
The Euro is still doing better than the US dollar even though retail sales have decreased in the region. The Yen appears to be dictating the move in this currency. In the pair Eur/Jpy, the 890 pip drop coincided with the drop in the Usd/Jpy by 595 pips. That being so, the gain in the Euro coincides with gains in these two currencies. The 1% drop (expected to be .4%) in sales in Germany surprised investors. No economic releases are scheduled for the Euro so far.
The Swiss franc was sold off in response to slower growth reported in the fourth quarter. However, rates are on track to be increased in the next few weeks.
The Pound has also gained some ground against the US and Euro dollars as a result of the gain in the Gbp/Jpy pair. The 3.3% rise in BRC retail sales has contributed to the bullishness of the pound, especially since it is an upside surprise to expected growths of 3.1% and 2.3%. This may also mean there may be stronger consumer confidence in the Nationwide Consumer confidence report. A rate increase is not on the way even though this has happened.
The rebound in the Chinese stock market has weakened the Yen. No data was released recently to show any market flow influencing this price action. While this move signals a long overdue reversal in the Yen, as it was shorted for so many years, it is unknown whether traders are liquidating their carry trades or if liquidation stopped out the carry traders altogether. It is felt that the great downward move in the Yen on February 23 burned more traders than helped them, so they are scared to enter the market again. A big rally in the Yen, regardless of when these traders come back, will curtail any ideas of a rate hike.
The commodity currencies did better, recovering from carry trade liquidations and gaining a few pips over the US dollar. The economic releases from New Zealand are few in number, but the upcoming monetary policy decision may bring the rate up to 7.5%. Canadian data has shown strength, with building permits up 11.3%. The main event for the Canadian dollar however was the monetary policy decision, where rates were kept the same but a hawkish undertone was present, with the citation of strenght in the Canadian economy and "roughly balanced risks" to projected inflation.
posted by Ian Bellamy at
7:14 PM
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