FX Overnight Briefing

Daily Forex Fundamentals | Written by Jyske Bank | Jul 24 08 04:09 GMT |

Financial News - US & Far East U.S. equities rose for 2nd day Reserve Bank of New Zealand cuts rates for first time in 5 years Oil price down to USD 124 Japan exports fall for first time in nearly 5 years Today's Main Events SEK Producer Price Index & Unemployment Rate DEM IFO Business Climate GBP Retail Sales USD Initial Jobless Claims & Existing Home Sales American Time Zone: U.S. equities rose for a 2nd day U.S. stocks rose for a second day as oil retreated, lawmakers moved closer to shoring up the mortgage industry and earnings reports from AT&T Inc., Pfizer Inc. and Yahoo! Inc. eased concern that the profit slump will worsen. AT&T, the carrier for Apple Inc.'s iPhone, sent telephone stocks to the steepest gain in five years after adding more wireless customers than analysts predicted. The USD 4-a-barrel drop in oil boosted 28 out of 29 retail companies in the Standard & Poor's 500 Index. Fannie Mae and Freddie Mac jumped more than 10 % each after lawmakers reached a deal to bail out the largest providers of money for U.S. home loans. USD higher The dollar increased to a four-week high just below 108 against the yen and strengthened to 1.5680 versus the euro as a U.S. government rescue of Fannie Mae and Freddie Mac moved closer to congressional passage and crude oil prices fell. The currency gained as signs of stability in the financial industry fuelled bets that the Federal Reserve will raise interest rates in September. Oil below USD 125 Crude oil futures fell below USD 125 a barrel for the first time in six weeks after a U.S. government report showed that fuel stockpiles increased as consumption tumbled to the lowest in more than a year. Far East Time Zone: Reserve Bank of New Zealand cuts rates for first time in 5 years New Zealand's central bank cut interest rates for the first time in five years on Thursday, and said further reductions were likely to counter an economy seen in recession, sending the currency sharply lower. The market had been split ahead of the decision, which came as recent data suggested the economy is likely in recession but also suffers surging inflation. The Reserve Bank of New Zealand (RBNZ) cut its cash rate by a quarter percentage point to 8 %, after being on hold for a year, saying the downturn in activity would gradually dampen rampant inflation pressures. New Zealand's attractive interest rates have been among the highest in countries of the Organisation for Economic Co-operation and Development (OECD). Central bank Governor Alan Bollard said the rate cut would help ease tight credit conditions caused by deterioration in the international financial market, and a further reduction in the official cash rate (OCR) was likely. NZD/USD traded between 0.7510 and 0.7417. Oil price down to USD 124 Oil prices fell to a seven-week low below USD 125 a barrel on Thursday amid a view U.S. energy demand has reached a tipping point, sending investors back into Asian stocks for the fourth consecutive day. A retreat in oil prices and signs of improved confidence in the U.S. financial sector pushed the dollar to a one-month high against the yen. Adding to a sense of short-term relief, U.S. President George W. Bush dropped a threat to veto a housing-bailout bill that would extend a lifeline to the embattled mortgage lenders Fannie Mae and Freddie Mac. The drop in oil and the potential housing rescue together, have stopped cold a popular trade in which dealers would simultaneously bet against the financial sector and put their money in the energy sector. The unwinding of this trade has accelerated the upward momentum in equities. However, uncertainty loomed as to whether economics were supporting the global stock market rally, particularly after data showed Japanese exports fell for the first time in five years. Oil prices have now fallen more than USD 23 a barrel from their all-time peak above USD 147 on July 11, marking the biggest decline in dollar terms in the market's history. In percent terms the 15 % tumble is the steepest pull-back since early 2007 U.S. light crude for September delivery fell 46 cents to a seven-week low of USD 123.98 a barrel at 0113 GMT after tumbling by more than USD 4 a barrel on Wednesday, its sixth day of losses over the past seven sessions. London Brent crude fell 58 cents to trade at USD 124.71 a barrel at the same time Japan exports fall for first time in nearly 5 years Japan's exports unexpectedly fell in June for the first time in nearly five years, trade data showed on Thursday, in a sign that U.S. economic troubles ensuing from a mortgage market debacle are dampening demand in China and other emerging economies. The data further reinforced prevalent market views that the Bank of Japan will keep interest rates on hold at least for the rest of this year on economic uncertainties at home and abroad. Exports fell 1.7 % in June from a year earlier, against economists' median forecast for a 3.8 % rise and a turnaround from a 3.7 % increase in May. Financial markets did not react much to the trade data. Markets are on the lookout for what Atsushi Mizuno, among the most hawkish members of the BOJ board, will say in a speech to business leaders in Aomori, northern Japan, on Thursday. He is expected to hold a news conference later. The trade surplus for June fell a larger-thanexpected 88.9 % from a year earlier to 138.6 billion yen (USD 1.28 billion), against a consensus forecast for a 503.0 billion yen surplus. Jyske Markets - FX Research http://www.jyskebank.dk/finansnyt The analysis is based on information which Jyske Bank finds reliable, but Jyske Bank does not assume any responsibility for the correctness of the material nor for transactions made on the basis of the information or the estimates of the analysis. The estimates and recommendation of the analysis may be changed without notice. The analysis is for personal use of Jyske Bank's customers and may not be copied.