Currency Report
New home sales do not bode well for the US dollar. The market was quite sad to see the report for February, which solidifies the weakness in the home construction industry. The Commerce Department believes sales of newly constructed homes have fallen to 7 year lows; interest being dampened due to the colder temperatures. Purchases have dropped nearly 4% to 848,000 on an annualized basis for the month, which was higher than the expected 985,000 for the month. The only good news seen is the sale of existing homes, which appears somewhat supported in the near term. Bearish sentiment is abound in markets, in which there are now rumors of "spillover effects". Attention will be paid to Bernanke's rhetoric in his upcoming meeting with the Joint Economic Committee, where he will speak on the condition of the economy as a whole. No changes are expected from the FOMC. Their focus will be on how the housing markets will affect near term growth and will question consumer spending as lagging housing fragility.
The Euro and its economy is the near opposite of the American economy in terms of direction. The market remained optimistic on Euro releases and continue to bid up the price. French business confidence unexpectedly rose this month, rising to a one year high of 109, due to strength in near term domestic orders. Combined with other positive news, the Euro gained ground versus the USD, to a high of over 1.33. These reports are also likely to boost speculation for the German IFO report tomorrow. Data points to strong factory orders as production continues ahead 1.9%. The only bad news is the Belgian business confidence survey, which preceding the IFO will probably be bearish for the Euro. The growth in the region is still good regardless of the high interest rates and all the changes that have occured. This may soon signal another rate hike, with a benchmark at 4.0 being priced in and expected to be in place by October of this year.
The pound also went up today in light of more positive news for the housing market. According to Hometrack, a property research group, property values have increased the most in the economy in four years. The results are highly in line with the information provided by the RICS andNationwinde, adding to the positive news for the economy. According to the report, prices have gone up about 6.7% due to rising wages and the tight labor market. This also plays into the sentiment that the BOE's effort has not stymmied inflation well enough. It has reached to about 3% earlier this year. This means that a 25 basis point hike may well be on the way, topping the US dollar in the coming months.
The Japanese Yen was relatively flat to the US dollar. The minutes from the Bank of Japan meeting further confirm that the rate will stay at .50. Some are against the hike from before, as wage growth and prices are respectively sluggish and uncertain. The economic releases will do very little to negate this commentary, especially with headline and core CPI to remain in place. The only way the Yen can avoid risk is through making carry trades unpopular, as its strength is undermined by its weak fundamentals.
The high yielding commodity currencies, namely the Australian and New Zealand Dollars were propelled higher due to lessening risk aversion and despite the geopolitical tension from the British hostage situation with Iran. The AUD managed to reach .8100, and the NZD managed to reach .7200, both their respective one year highs. The Canadian dollar, though oil was higher, was relatively flat due to an empty calendar. It may go up due to industrial production prices, which are expected to increase from higher commodity prices. GDP is expected to slow to .2% from .4%. While this may not bode well, an increase in the commodity prices is likely to make the Bank of Canada more hawkish.
The Euro and its economy is the near opposite of the American economy in terms of direction. The market remained optimistic on Euro releases and continue to bid up the price. French business confidence unexpectedly rose this month, rising to a one year high of 109, due to strength in near term domestic orders. Combined with other positive news, the Euro gained ground versus the USD, to a high of over 1.33. These reports are also likely to boost speculation for the German IFO report tomorrow. Data points to strong factory orders as production continues ahead 1.9%. The only bad news is the Belgian business confidence survey, which preceding the IFO will probably be bearish for the Euro. The growth in the region is still good regardless of the high interest rates and all the changes that have occured. This may soon signal another rate hike, with a benchmark at 4.0 being priced in and expected to be in place by October of this year.
The pound also went up today in light of more positive news for the housing market. According to Hometrack, a property research group, property values have increased the most in the economy in four years. The results are highly in line with the information provided by the RICS andNationwinde, adding to the positive news for the economy. According to the report, prices have gone up about 6.7% due to rising wages and the tight labor market. This also plays into the sentiment that the BOE's effort has not stymmied inflation well enough. It has reached to about 3% earlier this year. This means that a 25 basis point hike may well be on the way, topping the US dollar in the coming months.
The Japanese Yen was relatively flat to the US dollar. The minutes from the Bank of Japan meeting further confirm that the rate will stay at .50. Some are against the hike from before, as wage growth and prices are respectively sluggish and uncertain. The economic releases will do very little to negate this commentary, especially with headline and core CPI to remain in place. The only way the Yen can avoid risk is through making carry trades unpopular, as its strength is undermined by its weak fundamentals.
The high yielding commodity currencies, namely the Australian and New Zealand Dollars were propelled higher due to lessening risk aversion and despite the geopolitical tension from the British hostage situation with Iran. The AUD managed to reach .8100, and the NZD managed to reach .7200, both their respective one year highs. The Canadian dollar, though oil was higher, was relatively flat due to an empty calendar. It may go up due to industrial production prices, which are expected to increase from higher commodity prices. GDP is expected to slow to .2% from .4%. While this may not bode well, an increase in the commodity prices is likely to make the Bank of Canada more hawkish.
posted by Ian Bellamy at
4:32 PM
0 Comments:
Post a Comment
<< Home