Currency Report
Welcome back from Spring Break everyone. I hope money is on your mind because here is the report for the currency market.
The US. Dollar has been slightly bullish over the Yen, Canadian Dollar and the Euro, but failed to hold ground against the Pound due to bullish sentiment in England. Believe it or not, this strength came despite a dismal NAHB housing report, which came in lower this month than expected due to worries in the subprime market. The report, coming in lower by 3 points, at 36, show respondents feel negative on overall market conditions. Homebuilders are also struggling as they no longer have any demand for new houding, and are coming shorter on sales. Needless to say, this has put some pressure on the Federal Reserve to possibly lower rates by 25 basis points, or .25% to 5.00% before the third quarter. The market is so convinced of this, futures contracts are coming out to speculate that even 2 or 3 rate cuts will happen.
The Euro lost a little today, though the data behind it was bullish. The reason has to do with the creditability questions that undermined the hawkishness of ECB policy makers. French Interior Minister Sarkozy questioned that the focus on keeping inflationary pressures down have strengthened the Euro and slowed down growth.
The Swiss enjoyed good 4th quarter economic growth numbers. Industrial production and year over year comparisons were both at highest since 6 years. Price action was sadly bearish, as investors decided to go with carry trades instead of trading from the economic release.
The Pound enjoyed some success as the housing market remained firm. Housing prices have risen by 1.5% for the month and 12.2% on an annualized basis. This means that there may be another rate hike. Yay! There also appears to be good demand resilience in the housing sector even after three rate hikes. These results are being compared to the retail sales figures and will play a bigger role when the consumer price report is released tomorrow. It is expected to remain high at 2.7%. Though it is short of the 2.9% there is a suggestion of strong inflation. Markets have begun to move with this notion and have priced futures contracts for a hike that may happen as early as this month.
The rebound in foreign equity markets has proved beneficial for the Yen which trades in the mid 117 region against the US. Dollar. There was very little to attract attention as Tokyo Department Store Sales lowered but Nationwide Department Sales increased. Trading will probably remain slow. Rates are expected to remain steady, though, investors will be looking towards rhetoric from the central bank and timing for policy tightening as price growth remains slow and deflation has not yet finished.
Last but not least are the commodity based currencies of the CAD, AUD and NZD or Canadian, Australian and New Zealand Dollars. Carry trades were the order of the day as the New Zealand Dollar went above .700 against the dollar and the Australian Dollar went to test the .800 line. There was not much released on the Canadian side. Wholesale figures fell in January after posting gains in December. This may bode particularly bad for the retail sales figure to be released on Wednesday. Consumer prices may serve to prove better. This may prove for speculation among Canadian Dollar bulls who see that the market is heeding a technical resistance. This would fuel the notion that rates will be stable in the long term as the market has already priced in a rate cut due to slower forecasted growth.
Here ends the report.
With love,
Ian
The US. Dollar has been slightly bullish over the Yen, Canadian Dollar and the Euro, but failed to hold ground against the Pound due to bullish sentiment in England. Believe it or not, this strength came despite a dismal NAHB housing report, which came in lower this month than expected due to worries in the subprime market. The report, coming in lower by 3 points, at 36, show respondents feel negative on overall market conditions. Homebuilders are also struggling as they no longer have any demand for new houding, and are coming shorter on sales. Needless to say, this has put some pressure on the Federal Reserve to possibly lower rates by 25 basis points, or .25% to 5.00% before the third quarter. The market is so convinced of this, futures contracts are coming out to speculate that even 2 or 3 rate cuts will happen.
The Euro lost a little today, though the data behind it was bullish. The reason has to do with the creditability questions that undermined the hawkishness of ECB policy makers. French Interior Minister Sarkozy questioned that the focus on keeping inflationary pressures down have strengthened the Euro and slowed down growth.
The Swiss enjoyed good 4th quarter economic growth numbers. Industrial production and year over year comparisons were both at highest since 6 years. Price action was sadly bearish, as investors decided to go with carry trades instead of trading from the economic release.
The Pound enjoyed some success as the housing market remained firm. Housing prices have risen by 1.5% for the month and 12.2% on an annualized basis. This means that there may be another rate hike. Yay! There also appears to be good demand resilience in the housing sector even after three rate hikes. These results are being compared to the retail sales figures and will play a bigger role when the consumer price report is released tomorrow. It is expected to remain high at 2.7%. Though it is short of the 2.9% there is a suggestion of strong inflation. Markets have begun to move with this notion and have priced futures contracts for a hike that may happen as early as this month.
The rebound in foreign equity markets has proved beneficial for the Yen which trades in the mid 117 region against the US. Dollar. There was very little to attract attention as Tokyo Department Store Sales lowered but Nationwide Department Sales increased. Trading will probably remain slow. Rates are expected to remain steady, though, investors will be looking towards rhetoric from the central bank and timing for policy tightening as price growth remains slow and deflation has not yet finished.
Last but not least are the commodity based currencies of the CAD, AUD and NZD or Canadian, Australian and New Zealand Dollars. Carry trades were the order of the day as the New Zealand Dollar went above .700 against the dollar and the Australian Dollar went to test the .800 line. There was not much released on the Canadian side. Wholesale figures fell in January after posting gains in December. This may bode particularly bad for the retail sales figure to be released on Wednesday. Consumer prices may serve to prove better. This may prove for speculation among Canadian Dollar bulls who see that the market is heeding a technical resistance. This would fuel the notion that rates will be stable in the long term as the market has already priced in a rate cut due to slower forecasted growth.
Here ends the report.
With love,
Ian
posted by Ian Bellamy at
11:20 PM
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