In the US, American Federal Reserve nomination vote will focus on the appointment of 3 FOMC members. The US Senate will vote on Sarah Bloom Raskin, Peter Diamond and Janet Yellen, in a vote that will shape future decisions for quite a while. If they arent approved, or if many questions are raised, the dollar could be hurt.
Later in the US, The producer price index in May fell 0.3 percent after dipping 0.1 percent in April. A drop of 0.2 percent is expected now. But at the core level, the PPI gained 0.2 percent in May, matching the rate in April. Another gain of 0.1% is expected now.
More in the US, Unemployment Claims forecasted another small drop to 453K after a surprising decrease to 454K last week. Further improvement below 430K will give a serious boost to the job market.
Industrial Production, the main gauge of industrial activity measuring the output of factories, mines and utilities is forecasted to slow down with industrial output flattening at 0.0% in June, compared with the 1.3% increase in May.
Empire State Manufacturing Index surveying 200 manufacturers is forecasted to reach 18.9 points following the drop from 31.9 to the level of 19 points in April and May however this is still a positive reading.
Capacity Utilization Rate measuring percentage of available resources being utilized by manufacturers, mines, and utilities expected to rise 0.1% to 74.2%.
Finally in the US, Philly Fed Manufacturing Index expected to rise to 11.4 points following a steep drop from 21.4 to 8 points in May.
In Canada, Manufacturing Sales predicted to advance 0.4% from 0.2% in May. Manufacturing sales have risen in 9 of the past 10 months and have been trending upward since the low reached in May 2009.
For more on USD/CAD, read the Canadian dollar forecast.
In Europe, European Central Bank Monthly Bulletin reveals the statistical data that the ECB Governing Board evaluated when making the latest interest rate decision, and provides detailed analysis of current and future economic conditions from the banks viewpoint.
For more on the Euro, read the EUR/USD forecast and Casey Stubbs latest analysis.
In Great Britain, David Miles an external member of the monetary policy committee of the bank of England speaks at the Business Forum in Bristol could determine a rise in interest rates.
Read more about the Pound in the GBP/USD forecast.
In Switzerland, The Swiss ZEW Expectations Survey came in significantly lower, with a 17.5 reading in June on Mays 40.5 reading. Expectations of economic contraction on the back of Euronation austerity measures are cited as cause. A further drop is expected.
In Australia, MI Inflation Expectations fell to 3.4% in the previous quarter from 3.6%. A drop under 3% will weaken the Aussie and New Motor Vehicle Sales predicted a small rise following the sharp drop from 9.0% to -3.0% in May.
For more on the Aussie, read the AUD/USD forecast.
In New Zealand, Consumer Price Index forecasted 0.5% rise in the second quarter following a disappointing 0.4% rise in Q1 when 0.6% was expected.
In Japan, Tertiary Industry Activity measuring change in the total value of services purchased by businesses is foreseen a 0.7% drop following the 2.1% rise in April.
Thats it for today. Happy forex trading!
BEIJING, March 12 (Reuters) - The United States should not make a political issue out of the yuan, a Chinese central banker said on Friday, as the two countries lurched towards a potential bust-up over Beijing's currency regime.The US will stop making a political issue out of it when China unleashes that puppy to run freely. How about that? So lets commend President Obama for calling out Chinas currency policy which could be dubbed politically dictated, at least.
The latest rhetorical salvoes underlined how long-running friction caused by the yuan's de facto dollar peg could come to a head next month when U.S. President Barack Obama's administration decides whether to brand China as a "currency manipulator".
People's Bank of China Vice Governor Su Ning said the United States should look to itself to boost exports and not cast blame on other countries, when asked to comment on remarks on Thursday by Obama, who called on China to move to a "more market-oriented exchange rate".
But then lets ask President Obama to further consider a good portion of his own policies and ideas ... and how well they line up with the free market process.
Either way, the US does need to worry about its own exports; we do need to get serious about maintaining a suitable environment in which our businesses can thrive. But it still isnt fun when, in this ever-integrated global economy, one major player isnt playing by the rules (this is not to presume anyone is perfect on this score, but any way you slice the numbers, the Chinese currency is significantly undervalued; this by no means any revaluation will be a magic elixir for Western trade; its never that easy, nor should it be).
Okay, heres another story making news ...
March 12 (Bloomberg) -- Federal Reserve Bank of San Francisco President Janet Yellen is President Barack Obamas pick for vice chairman of the central bank in Washington, two people with knowledge of the selection process said.Should this maneuver come as any surprise? No. Should the US dollar be immediately and substantially impacted by this news? Doubtful. Could the US dollar be impacted in the future by this move? Absolutely. Two words: interest rates.
The nomination is pending completion of vetting by the Obama administration, one person said. The vice chairman gets a four-year term, subject to Senate approval, and a separate term on the Fed Board of Governors. The people spoke on condition of anonymity because the selection hasnt yet been announced.
Yellen, 63, would replace Donald Kohn, a 40-year Fed veteran who resigned last week effective June 23. Yellen, who served as President Bill Clintons chief economist in the 1990s, said last month that the U.S. economy still needs the support of extraordinarily low interest rates. She would gain a permanent vote on monetary policy, instead of having a vote one year out of every three as a regional Fed chief.
As recently as February of this year Yellen apparently said, Even with my moderate growth forecast, the economy will be operating well below its potential for several years. If it were possible to take interest rates into negative territory I would be voting for that.
I hear, as congratulations to being appointed to this position, Bernanke is going to make her a copy of the keys to his helicopter. Where is China when you need them? I mean, cant some big thinker in the Far East tell us how we should be handling monetary policy too?
Are we still wondering if sub-par growth is due to a lack of sufficient money supply? Are we no longer wondering if ample liquidity bred excesses that helped exacerbate the credit crisis/recession? Hey, the folks over at Alcoholics Anonymous have done a good job recognizing their problems and changing their ways; what do you say we take them out for beers to celebrate?
And to round out this mornings discussion ...
WASHINGTON (AP) The government ran up the largest monthly deficit in history in February, keeping the flood of red ink on track to top last year's record for the full year.Ok, yeah, this isnt a surprise either. But for heavens sake it should be a surprise -- a brutally awful one. Otherwise how in the world could this be tolerated?
The Treasury Department said Wednesday that the February deficit totaled $220.9 billion, 14 percent higher than the previous record set in February of last year.
The deficit through the first five months of this budget year totals $651.6 billion, 10.5 percent higher than a year ago.
The Obama administration is projecting that the deficit for the 2010 budget year will hit an all-time high of $1.56 trillion, surpassing last year's $1.4 trillion total. The administration is forecasting that the deficit will remain above $1 trillion in 2011, giving the country three straight years of $1 trillion-plus deficits.
The administration says the huge deficits are necessary to get the country out of the deepest recession since the 1930s. But Republicans have attacked the stimulus spending as wasteful and a failure at the primary objective of lowering unemployment.
The administration defends the economic stimulus bill that Congress passed in February 2009 with a pricetag at the time of $787 billion as the right medicine to get the economy back on its feet. President Barack Obama has said even more is needed to battle an unemployment rate that remained stuck in February at 9.7 percent.
And huge deficits are necessary to get the country out of the deepest recession since the 1930s, really?
Even more is needed, really?
Naturally, with an improvement in the economic activity in the US, the focus is turning towards stabilizing the job market. Thus, the government taking the opportunity to save the day ... again ... for all those who are in crappy situations.
The thing is, the government wants to promise large amounts of additional funds to create jobs. Lucky for us, the government has the foresight that the private sector does not; theyll be able to pinpoint exactly where efficient jobs can and should be created, yielding the most benefit for the greater good ...
Errrrrrrrrrrrrrrr uhhhmmmmmm .. uhhhhhhhhhh nevermind ...
Its Friday.
John Ross Crooks III
www.blackswantrading.com
- 22/02/2010 22:47GMT
Versus the Japanese yen, the greenback rebounded to an intra-day high of 91.90 after Friday's decline on the support from huge Japanese Investment trust ('Toushin') demand (250 billion yens, i.e. $2.72 billion issue, from Mizuho under Shinko Investment on Monday). However, the greenback retreated from the Asian high on talk of sizeable offers by Japanese exporters and seasonal repatriation talk as firms with poor cash flow domestically may repatriate funds from overseas and there may be the need among corporates to hedge their foreign exchange exposure. The pair declined further to 91.02 low in NY mid-day on active cross-buying in the yen (gbp/jpy fell from 142.18 high to 140.83 low). The dollar remained under pressure in U.S. afternoon and closed at 91.14 as Fed Bank of San Francisco President Janet Yellen said the U.S. economy still needs low interest rates to gain strength.
Euro extended Friday's rally on German weekly newspaper Der Spiegel's report on Saturday that German finance ministry had plans for the EU to provide aids for Greece. Although denial by German official prompted price to retreat, renewed buying interest pushed price marginally higher to an intra-day high at 1.3655 in Asia. The single currency then retreated on profit taking and moved lower afterwards due to worries about heavily indebted eurozone countries, hitting an intra-day low at 1.3574 in U.S. morning on active cross-inspired selling in euro (eur/jpy fell from 125.24 high to 123.65 low) before stabilizing.
Economic data to be released on Tuesday include Japan BoJ meeting minutes in January, Germany Ifo index in February and U.S. consumer confidence in February.
http://www.acetraderfx.com
Geithner ‘believes deeply that it’s very important for the US and the economic health of the US that we maintain a strong dollar’. But which dollar is he referring to? Canadian! Forget the Japanese housewife, it’s the Brown’s, Smiths, Jones etc who have been piling into a global carry trade, similar to Japans’ lost years, using the USD as a vehicle currency. It will eventually end in tears. Is the Obama’s administration policy one of quiet, steady dollar devaluation? With a 26-year high unemployment rate sitting at 10.2%, itching to go higher (real rate supposedly near 17%), is begging Obama to ‘devalue the way to prosperity’!
The US$ is stronger in the O/N trading session. Currently it is higher against 13 of the 16 most actively traded currencies in a ‘subdued’ trading range after the Memorial Day holiday.
Earlier on in the week, Fed voting member Janet Yellen and her dovish comments gave little support to her domestic currency. She stated the obvious when committing the Fed to a tighter monetary mandate ‘at some point’ in the future. She highlighted that US unemployment could stay elevated ‘for years to come’, and that the countries recovery will ‘be gradual and vulnerable’ to shocks. The Fed expects the commercial real estate sector to weigh down this recovery as their prospects are rather ‘worrisome’ to the committee. The Fed’s Bank of Dallas President Richard Fisher said that US economic growth and inflation may persist below ideal levels into 2011, making the central bank’s current interest-rate stance ‘appropriate’. Despite the equity rally going some ways to rebuild household wealth, ‘strength, durability of expansion are in question’, as prospects for ‘consumer spending remain cloudy’. Not a strong endorsement to wear a train driver’s hat Buffett style.
Ok, we all know that the Chinese economy after this week’s data sits upon the 8% growth hurdle. However, analysts are pointing out that there are two facets of concern within the reports. Firstly, there was a marked slowdown in bank lending, which was more pronounced than expectations. Secondly and more importantly, there was the unexpected worsening in deflation. That’s a kinda odd combination when you have a headline growth rate of 8%! Everything not what it seems me thinks.
The USD$ is currently higher against the EUR -0.10%, GBP -0.11%, CHF -0.10% and lower against JPY +0.06%. The commodity currencies are stronger this morning, CAD +0.01% and AUD +0.30%. At 96c or 1.0417 expect the BOC to contemplate drawing ‘their’ line in the sand. Governor Carney has insisted that they will use a combination of currency intervention, credit and quantitative easing options to influence the loonies’ value. The BOC believes that a strong currency is detrimental to economic growth. In the O/N session, the loonie has appreciated to its strongest level in 2-weeks vs. its southern trading partner on the back of the G20 maintaining their economic stimulus measures. Keeping the status quo is boosting speculators risk appetite for the higher yielding asset classes and commodity based currencies. Last week the Canadian economy managed to pare -43k jobs in Oct. (the market was expecting a gain of +10k) and push the unemployment rate up 2-ticks to an unexpected +8.6%. The data provides much stronger evidence that Canada has some ways to go to exit this recession, but, the data will make it easier for Governor Carney to follow through on his pledge to keep borrowing costs at record lows until June of next year to promote growth unless of course the inflation outlook changes materially. For now the loonie remains in a tight 3cent trading range with dealers continuing to play the support and resistance levels until fundamentally or technically told otherwise or commodity prices start to fall off a cliff!
The AUD managed to print its strongest level in over a year after a surprising Oct. employment numbers last night. The number of new employees jumped +24.5k vs. a market expectation of a decline of -10k. The unemployment rate however advanced 1-tick to +5.8%. Other factors this week have also aided the currency. China, their largest trading partner, said that their industrial production (+16.1%) and retail sales (+16.2) accelerated last month. The currency has also climbed on speculation that the Fed will now have to keep its O/N borrowing costs low for a considerable period of time after Friday’s disappointing headlines, thus boosting demand for higher-yielding assets. It’s the same story, but at a different pace! Last week, Governor Stevens indicated that the Aussi economy will expand at more than three times the pace forecasted in Aug., and signaled he and his policy makers will continue to lead the world in raising borrowing costs. The currency is well supported by commodity prices and expects dealers to remain better buyers on pullbacks (0.9308).
Crude is lower in the O/N session ($78.92 down -36c). Crude prices have remained close to home despite API data yesterday showing that weekly inventories had actually advanced w/w (stocks increased +1.22m barrels to +337.5m). This morning we are waiting for the EIA reports. Earlier this week, tropical storm Ida had dragged prices from their one week lows as she entered the Gulf of Mexico and forced both BP and Chevron to cut production and evacuate some staff for safety reasons. It’s worth noting that the Gulf produces 27% of the domestic US Oil production and 15% of its gas output! Not supporting crude prices was rhetoric from an official from OPEC, who said the group is unlikely to change production levels in Dec. Also a hindrance was the IEA cutting its long-term forecast for global oil demand on the back of this economic crisis sapping consumption in developed economies and the uptick in alternative energy use. Last week the black-stuff prices plummeted after the 26-year high US unemployment rate conjured up fears that future fuel demand will once again weaken. To date, it has not been able to retrace all of its 3% losses from last Friday. The commodity is contained within this $7 trading range for the time being, however, support levels are questionable as demand destruction remains strong and healthy in the US. Even last weeks bullish inventory report has provided little support.
Gold rose to a record in London this morning as the greenback is struggling for a 4th consecutive day, thus boosting demand for the yellow metal as a hedge against further currency depreciation. The holiday shortened week had some speculators booking well earned profits earlier, however, disappointing US fundamentals last week has speculators wanting to buy on pull backs to push commodity higher ($1,117).
The Nikkei closed at 9,804 down -67. The DAX index in Europe was at 5,655 down -13; the FTSE (UK) currently is 5,267 up +1. The early call for the open of key US indices is lower. The US 10-year bonds eased 5bp yesterday (3.44%) and are little changed in the O/N session. Treasuries prices rallied this week so far, despite the market setting itself up to absorb another $81b’s worth of US debt. Dovish comments from the Fed’s Lockhart and Yellen gave way to risk reduction strategies being implemented. Money is being taken off the side-lines and been put to work in the FI asset class. The US treasury will issue $16b 30-year bonds today. One would have expected dealers to cheapen the curve a wee bit more, however, demand is there!
Contrarian long USD positions remain costly. Forget the Japanese housewife, it’s the Brown’s, Smiths, Jones etc who have been piling into a global carry trade, similar to Japans’ lost years, using the USD as a vehicle currency. It will end in tears. Is the Obama’s administration policy one of quiet, steady dollar devaluation? A weaker domestic currency gives way to cheaper exports and the potential for increased employment opportunities. With a 26-year high unemployment rate sitting at 10.2%, itching to go higher (real rate supposedly near 17%), is begging Obama to ‘devalue the way to prosperity’!
The US$ is weaker in the O/N trading session. Currently it is lower against 14 of the 16 most actively traded currencies in a ‘subdued’ trading range.
Fed voting member Janet Yellen and her dovish comments gave little support to her domestic currency yesterday. She stated the obvious when committing the Fed to a tighter monetary mandate ‘at some point’ in the future. She highlighted that US unemployment could stay elevated ‘for years to come’, and that the countries recovery will ‘be gradual and vulnerable’ to shocks. The Fed expects the commercial real estate sector to weigh down this recovery as their prospects are rather ‘worrisome’ to the committee. Despite the equity rally going some ways to rebuild household wealth, ‘strength, durability of expansion are in question’, as prospects for ‘consumer spending remain cloudy’. Not a strong endorsement to wear a train driver’s hat Buffett style.
The USD$ is currently lower against the EUR +0.35%, GBP +0.18%, CHF +0.35% and JPY +0.00%. The commodity currencies are stronger this morning, CAD +0.35% and AUD +0.22%. At 96c or 1.0417 expect the BOC to be drawing ‘their’ line in the sand. Governor Carney has insisted that they will use a combination of currency intervention, credit and quantitative easing options to influence the loonies’ value. The BOC believes that a strong currency is detrimental to economic growth. In the O/N session, the loonie has appreciated to its strongest level in 2-weeks vs. its southern trading partner on the back of the G20 maintaining their economic stimulus measures. Keeping the status quo is boosting speculators risk appetite for the higher yielding asset classes and commodity based currencies. Last week the Canadian economy managed to pare -43k jobs in Oct. (the market was expecting a gain of +10k) and push the unemployment rate up 2-ticks to an unexpected +8.6%. The data provides much stronger evidence that Canada has some ways to go to exit this recession, but, the data will make it easier for Governor Carney to follow through on his pledge to keep borrowing costs at record lows until June of next year to promote growth unless of course the inflation outlook changes materially. For now the loonie remains in a tight 3cent trading range with dealers continuing to play the support and resistance levels until fundamentally or technically told otherwise or commodity prices start to fall off a cliff!
The AUD near its strongest level in over a year as China, their largest trading partner, said that their industrial production (+16.1%) and retail sales (+16.2) accelerated last month. The currency has also climbed on speculation that the Fed will now have to keep its O/N borrowing costs low for a considerable period of time after Friday’s disappointing headlines, thus boosting demand for higher-yielding assets. It’s the same story, but at a different pace! Last week, Governor Stevens indicated that the Aussi economy will expand at more than three times the pace forecasted in Aug., and signaled he and his policy makers will continue to lead the world in raising borrowing costs. The currency is well supported by commodity prices and expects dealers to remain better buyers on pullbacks (0.9308).
Crude is higher in the O/N session ($79.54 up +49c). Crude prices have remained close to home after ‘Ida’ weakened in the Gulf of Mexico on its way to the US coast, thus reducing the potential of further supply disruptions. Initially, she dragged prices from their one week lows as she entered the Gulf and forced both BP and Chevron to cut production and evacuate some staff for safety reasons. It’s worth noting that the Gulf of Mexico produces 27% of the domestic US Oil production and 15% of its gas output! Earlier in yesterday’s session, prices declined after an official from OPEC said the group is unlikely to change production levels in Dec. Its does not help the commodity that the IEA cut its long-term forecast for global oil demand yesterday on the back of this economic crisis sapping consumption in developed economies and the uptick in alternative energy use. Last week the black-stuff prices plummeted after the 26-year high US unemployment rate conjured up fears that future fuel demand will once again weaken. To date, it has not been able to retrace all of its 3% losses from Friday. The commodity is contained within this $7 trading range for the time being, however, support levels are questionable as demand destruction remains strong and healthy in the US. Even last weeks bullish inventory report has provided little support. Weekly inventory reports appear tomorrow due to the Memorial Day holiday today.
Gold rose to a record in London this morning as the greenback is struggling for a 3rd consecutive day, thus boosting demand for the yellow metal as a hedge against further currency depreciation. The holiday shortened week had some speculators booking well earned profits earlier, however, disappointing US employment numbers along with the RBI purchase of 200 metric tons or $6.7b of the yellow metal from the IMF has speculators wanting to buy on pull backs push commodity higher ($1,115).
The Nikkei closed at 9,871 up +1. The DAX index in Europe was at 5,695 up +82; the FTSE (UK) currently is 5,289 up +60. The early call for the open of key US indices is higher. The US 10-year bonds eased 2bp yesterday (3.47%) and are little changed in the O/N session. Treasuries prices rallied yesterday despite the market setting itself up to absorb another $41b’s worth of US debt this week. Dealers managed to take down $25b 10-year product with another record of indirect bids. Dovish comments from the Fed’s Lockhart and Yellen gave way to risk reduction strategies being implemented. Money is being taken off the side-lines and been put to work in the FI asset class. The US treasury will issue $16b 30-year bonds tomorrow. One would have expected dealers to cheapen the curve a wee bit more, however, demand is there!
