Daily Forex Fundamentals | Written by RBC Financial Group | Jul 15 08 14:11 GMT |
The Bank of Canada met market expectations and kept the overnight rate steady at 3% indicating that "the risks to its base-case projection for inflation as balanced." The statement indicated that surprises since the April Monetary Policy Report have been largely on the side of inflation with the CPI now expected to move above, albeit temporarily, 4%. On the growth side developments have largely been in line with their views expressed in April. There seems to be little concern about the recent deterioration in financial markets with the Bank even indicating that they expect growth to move above potential by "early next year."
The Bank's statement focused on three main areas - "protracted weakness in the U.S. economy; ongoing turbulence in global financial markets; and sharp increases in many commodity prices." While the statement indicated that the first two factors are evolving in line with the Bank's forecasts, the unprecedented rise in commodity prices has raised the upside risks to inflation while keeping Canada's terms of trade improvement intact and supporting income growth. The Bank downgraded forecasts for growth in 2008 to 1.0% from 1.4% but was optimistic that the combination of accommodative monetary policy, the terms of trade boost and a "gradual " recovery in the US economy will see Canada's growth rate rise to above-potential early next year. 2009's growth forecast was forecast at 2.3% (small downward revision from April's 2.4%) with the economy expected to grow 3.3% in 2010.
More importantly, the Bank upped their forecasts for headline inflation and said that the rate will remain higher for longer than in the April forecast. The updated projection said that Canada's headline inflation rate may "rise temporarily above 4 per cent, peaking in the first quarter of 2009" if the energy prices follow pricing in the current forward curves. The core measure however "is projected to remain well contained and broadly in line with earlier expectations, averaging close to 1.5 per cent through the third quarter of this year and then rising to 2 per cent in the second half of 2009." The forecast for the second half of 2009 was revised up from April's 1.8%.
Based on these forecast updates, the Bank now gauges the risks to the "base-case projection for inflation as balanced."
The Bank's upgrade to the inflation forecasts put some meat on the bones of their June statement that the "balance of risks to the Bank's April projection for inflation in Canada has shifted slightly to the upside" with the biggest surprise being that the Bank raised the prospect that the headline inflation rate could rise to 4% in the near term and will remain above target into next year. Despite the somewhat hotter inflation environment, forecasts that the economy will grow at a slower than potential rate this year (and we think that downside risks to the economy mounting given renewed financial market turbulence), suggests that the Bank is likely to hold the policy rate at 3%.
RBC Financial Group
http://www.rbc.com
Read more...
Tuesday, July 15, 2008
Upstream Inflation Hits A 17 Year High, Rate Decisions Growing More Complicated
Daily Forex Fundamentals | Written by DailyFX | Jul 15 08 13:21 GMT |
US Producer Price Index (YoY) (JUN)
(Headline) (Core)
Actual: 9.2% 3.0%
Expected: 8.7% 3.2%
Previous: 7.2% 3.0%
The Federal Reserve's next move is growing less and less clear for the market. Just as fear of another credit and financial market crisis builds, inflation figures are once again taking to new recent record highs. The upstream producer price index figure for June reported the biggest jump in monthly pressures since November and the sixth consesuctive increase. More concerning than the 1.8 percent jump in factory prices from May however was the annual rise (the measure more closely followed by policy makers). From the same month a year ago, headline inflation pressures surged 9.2 percent - the quickest pace since July of 1981.
Looking to the details of the report broad report, the momentum in prices was clearly centered on volatile goods like food and energy. At the comsumer level, the cost of food and energy rose 1.5 percent and 6.0 percent in June respectively. For the endline consumer, this jumpled to 9.0 percent surge in gasoline. However, outside of these already well-known groups, pressures were more controled. Excluding those two specific components, inflation rose a mere 0.2 percent with the annual pace holding at 3.0 pecent for the third consecutive month. Nonetheless, both of these measures are well above the 2.0 percent target and will keep the arguement for a turn to hikes at the central bank's table.
DailyFX
Read more...
US Producer Price Index (YoY) (JUN)
(Headline) (Core)
Actual: 9.2% 3.0%
Expected: 8.7% 3.2%
Previous: 7.2% 3.0%
The Federal Reserve's next move is growing less and less clear for the market. Just as fear of another credit and financial market crisis builds, inflation figures are once again taking to new recent record highs. The upstream producer price index figure for June reported the biggest jump in monthly pressures since November and the sixth consesuctive increase. More concerning than the 1.8 percent jump in factory prices from May however was the annual rise (the measure more closely followed by policy makers). From the same month a year ago, headline inflation pressures surged 9.2 percent - the quickest pace since July of 1981.
Looking to the details of the report broad report, the momentum in prices was clearly centered on volatile goods like food and energy. At the comsumer level, the cost of food and energy rose 1.5 percent and 6.0 percent in June respectively. For the endline consumer, this jumpled to 9.0 percent surge in gasoline. However, outside of these already well-known groups, pressures were more controled. Excluding those two specific components, inflation rose a mere 0.2 percent with the annual pace holding at 3.0 pecent for the third consecutive month. Nonetheless, both of these measures are well above the 2.0 percent target and will keep the arguement for a turn to hikes at the central bank's table.
DailyFX
Read more...
Mid-Day Report: EUR/USD at New Record High, Yen Surges on Risk Aversion
Market Overview | Written by ActionForex.com | Jul 15 08 13:03 GMT |
Read more...
Dollar remains pressured in early US session after a mixed bag of economic data. headline PPI surged much more than expected from 7.2% yoy to 9.2% yoy versus consensus of 8.5% while core PPI was unchanged at 3.0% versus expectation of 3.2%. Retail sales is a disappointment with headline sale growing a mere 0.1% comparing to expectation of 0.5% in Jun. Ex-auto sales rose 0.8% mom, also missed expectation of 1.0%. Though, Empire state manufacturing index is considerably better than expectation and improved to -4.9 in Jul even though it's still negative. The focus in early US session on in the Japanese yen which maintains it's strong momentum today on risk aversion as US stock markets are set to gap lower, following sharp fall in Asian and European markets.
Dollar seems stabilized a bit against Euro, Sterling and Aussie after the sharp sell off earlier today which pushed it to new record low against Euro at 1.6038 and new 25 year low against Aussie at 0.9839. However, the main even risks is on Bernanke's semiannual testimony on monetary policy and the economy before the Senate Banking Committee later in the US morning. markets could hold their breath before Bernanke but it's doubtful if Bernanke still has any more bullets to boost the confidence on dollar. Markets are ready to punish the greenback further if Bernanke doesn't offer anything inspiring.
BoC left rates unchanged at 3.00% as widely expected.
German ZEW economic sentiments deteriorated much more than expected from -52.4 to lowest readings in 16 years at -63.9 in Jul versus expectation of a modest fall to -55. Current situation gauge also dropped sharply by -20.6 points from 37.6 to 17. Eurozone ZEW economic sentiment also dropped sharply from -52.7 to -63.7 with current situation indicator turned negative from 7.9 to -3.3. Surging energy and food driven inflation and high interests rates are dragging down the Eurozone economy. ZEW respondents expect inflation to persist, and that short-term and long-term interest rates will rise.
UK headline CPI surged from 3.3% yoy to 3.8% yoy in Jun, even stronger than expectation of 3.6%, far above BoE's target of 2-3%. Core CPI was up from 1.5% yoy to 1.6%. BoE Governor Mervyn King will have to write another letter of explanation to the government outlining how the bank plans to bring price growth back to target. RPI was also uncomfortably high at 4.6% yoy with RPI-X at 4.8% yoy. The ever rising inflation ties up BoE's hands for any move in policy even though risk of recession continues to rise. Also released from UK today, BRC retail sales dropped -0.4% in Jun. RICS house price balance showed 88% of respondents saw housing declines in June.
As mentioned before both Euro and Sterling are firm in today's European session against dollar but volatility is seen in EUR/GBP cross which spikes to as low as 0.7933
Overnight, BoJ left rates unchanged at 0.5% as widely expected on unanimous 7-0 vote. In an unexpected move, BoJ released the monthly statement together with the announcement. BoJ acknowledged that economic growth is slowing, trimming GDP forecasts from 1.5% to 1.2% yoy. Domestic CGPI forecasts was up sharply from 2.5% yoy to 4.8% yoy while CPI excluding food was also up from 1.1% yoy to 1.8% yoy. The Bank of Japan also noted global financial markets remain unstable and downside risks to the U.S. economy and the world economy remain. The yen is boosted by risk aversion on sharp decline in Asian and European stock markets.
RBA also released minutes of Jul policy meeting today. Even though inflation remains high, RBA decided to left rates unchanged at 7.25% based on signs that domestic economy is cooling. The minutes basically affirmed RBA's believe that prior rate hikes are going to deal with inflation adequately even though risks of inflation expectations are still on the upside. Aussie remains strong, making new 25 year high against dollar at 0.9839.
New Zealand Q2 CPI climbed from 3.8% to 4.0% yoy in Q2 but did little to alter the expectation that RBNZ may cut rates later this year on slowing economy.
EUR/USD Mid-Day Outlook
Daily Pivots: (S1) 1.5842; (P) 1.5906; (R1) 1.5970; More
EUR/USD surges to new record high of today and remains firm in early US session. Outlook remains unchanged. Further rally is still expected as long as 1.5841 support holds. Sustained trading above 1.6000/19 resistance zone will confirm that the medium term up trend has resumed and will target 100% projection of 1.5302 to 1.5908 from 1.5611 at 1.6217 first. On the downside, below 1.5841 will turn intraday outlook neutral first and bring consolidation. But further rally is still expected as long as 1.5611 support holds.
In the bigger picture, medium term consolidation from 1.6019 should have completed at 1.5302 already. Decisive break of 1.6019 record high will confirm that medium term up trend has resumed and bring rise to 61.8% projection of 1.4309 to 1.6019 from 1.5284 at 1.6341 first. Also, rise from 1.1639 is treated as resumption of long term up trend from 0.8223 (00 low) to 1.3668 (04 high) and could still extend to 100% projection of 0.8223 to 1.3668 from 1.1639 at 1.7084. On the downside, beak of 1.5611 is needed to be the signal that a short term top is formed. Otherwise, further rally is still expected even in case of deep pull back.
Economic Indicators Update
| GMT | Ccy | Events | Actual | Consensus | Previous | Revised |
|---|---|---|---|---|---|---|
| 22:45 | NZD | New Zealand CPI Q/Q Q2 | 1.40% | 1.40% | 0.70% | |
| 22:45 | NZD | New Zealand CPI Y/Y Q2 | 4.00% | 3.80% | 0.70% | |
| 23:01 | GBP | U.K. RICS House Price Balance | -88% | -94.00% | -92.90% | |
| 23:01 | GBP | U.K. BRC retail sales Jun | -0.40% | N/A | 1.90% | |
| 01:30 | AUD | RBA Board Meeting Minutes | ||||
| 04:30 | JPY | BOJ rate decision Jul | 0.50% | 0.50% | 0.50% | |
| 06:00 | JPY | BOJ Monthly report | ||||
| 08:30 | GBP | U.K. CPI M/M Jun | 0.70% | 0.40% | 0.50% | |
| 08:30 | GBP | U.K. CPI Y/Y Jun | 3.80% | 3.60% | 3.30% | |
| 08:30 | GBP | U.K. RPI M/M Jun | 0.80% | 0.50% | 0.50% | |
| 08:30 | GBP | U.K. RPI Y/Y Jun | 4.60% | 4.30% | 4.30% | |
| 08:30 | GBP | U.K. RPI - X M/M Jun | 0.80% | 0.40% | 0.70% | |
| 08:30 | GBP | U.K. RPI - X Y/Y Jun | 4.80% | 4.40% | 4.40% | |
| 09:00 | EUR | Germany ZEW Economic Sentiment Jul | -63.7 | -55 | -52.4 | |
| 09:00 | EUR | Eurozone ZEW Economic Sentiment Jul | -63.9 | -56 | -52.7 | |
| 12:30 | USD | U.S. Empire state mfg Jul | -4.9 | -8 | -8.68 | |
| 12:30 | USD | U.S. PPI M/M Jun | 1.80% | 1.30% | 1.40% | |
| 12:30 | USD | U.S. PPI Y/Y Jun | 9.20% | 8.50% | 7.20% | |
| 12:30 | USD | U.S. PPI core M/M Jun | 0.20% | 0.30% | 0.20% | |
| 12:30 | USD | U.S. PPI core Y/Y Jun | 3.00% | 3.20% | 3.00% | |
| 12:30 | USD | U.S. Retail sales M/M Jun | 0.10% | 0.50% | 0.50% | 0.80% |
| 12:30 | USD | U.S. Retail sales less auto M/MJun | 0.80% | 1.00% | 1.20% | |
| 13:00 | CAD | BOC rate decision Jul | 3.00% | 3.00% | 3.00% | |
| 14:00 | USD | U.S. Business inventories May | 0.50% | 0.50% | ||
| 14:00 | USD | Fed Bernanke Semi-annual Monetary Policy Testimony at Senate |
Read more...
Daily FX Forecast
Daily Forex Technicals | Written by FX Dream | Jul 15 08 12:20 GMT |
EUR/USD
Resistance levels: 1.6040/1.6070/1.6100
Support levels: 1.5950/1.5900/1.5850
EUR/USD has reached new record high above 1.6010-20 our up target area earlier today as it was suggested despite worse than expected ZEW Sentiment numbers Now focus will be on US Core Retail Sales numbers at 12:30 GMT The consensus is at 1.0% The uptrend is still intact and if the number comes out at 0.5% or lower, further upmove to 1.6070 may be seen later today and 1.6100 over the next trading sessions First Resistance stands near 1.6040 daily high On downside, if the number comes out at 1.5% or higher, pullback to 1.5940 may be seen after the event and 1.5900 in mid term.
Strategy-neutral
GBP/USD
Resistance levels: 2.0150/2.0200/2.0280
Support levels: 2.0050/2.000/1.9960/1.9900
GBP/USD has risen directly to 2.0150 ( beyond 2.0100 our target ) earlier today as as it was suggested in our previous reports after stronger than expected UK Consumer Price index(y/y) -3.8% The bias remains positive with next targets at 2.0200 and 2.0280 in mid term and 2.0400 in longer term First Resistance comes at 2.0150 daily highs. On downside, stronger than expected fundamental data from USA may cause pullbck down to 2.0050 first minor Support after the event The key one stands at 2.0000
Strategy-neutral.
USD/JPY
Resistance levels: 105.30/106.00/106.70
Support levels: 104.50/103.90/102.80
USD/JPY has fallen further below 105.00 next Support over the last trading sessions as it was suggested No change in our view. The bias remains bearish with first Support at 104.50 Below eases price further to 103.90 on soft data from USA later today and 102.80 in mid term On the upside, first minor Resistance comes at 105.30 , possible on stronger than expected US Retail Sales numbers The key Resistance stands at 106.00
Strategy-neutral.
USD/CHF
Resistance levels: 1.0100/1.0150/1.0250
Support levels: 1.0000/0.9960/0.9900
USD/CHF has fallen heavily towards 1.0000 Support and our next target over the last trading sessions exactly as it was suggested The bias remains bearish and disappointing data from USA may push price lower down to 0.9960 later today and 0.9900 over today and tomorrow First minor Support comes near 1.0000 On the upside, first minor Resistance comes a shy below 1.0100, however, a break above 1.0150 is required to signal reversal towards 1.0250 in longer term
Strategy-neutral.
EUR/JPY
Resistance levels: 168.00/169.00/169.70
Support levels: 167.20/166.80/166.20
The Cross has fallen further to 167.50 lows earlier today ( below 167.80 our down target) as it was suggested The bias remains bearish in mid term fith first target at 167.20 and then 166.80 over the next trading sessions On the upside, a break above 168.50 is required for resuming the uptrend towards 169.70 record highs First Resistance comes near 168.00
Strategy-neutral.
FXDream
Read more...
EUR/USD
Resistance levels: 1.6040/1.6070/1.6100
Support levels: 1.5950/1.5900/1.5850
EUR/USD has reached new record high above 1.6010-20 our up target area earlier today as it was suggested despite worse than expected ZEW Sentiment numbers Now focus will be on US Core Retail Sales numbers at 12:30 GMT The consensus is at 1.0% The uptrend is still intact and if the number comes out at 0.5% or lower, further upmove to 1.6070 may be seen later today and 1.6100 over the next trading sessions First Resistance stands near 1.6040 daily high On downside, if the number comes out at 1.5% or higher, pullback to 1.5940 may be seen after the event and 1.5900 in mid term.
Strategy-neutral
GBP/USD
Resistance levels: 2.0150/2.0200/2.0280
Support levels: 2.0050/2.000/1.9960/1.9900
GBP/USD has risen directly to 2.0150 ( beyond 2.0100 our target ) earlier today as as it was suggested in our previous reports after stronger than expected UK Consumer Price index(y/y) -3.8% The bias remains positive with next targets at 2.0200 and 2.0280 in mid term and 2.0400 in longer term First Resistance comes at 2.0150 daily highs. On downside, stronger than expected fundamental data from USA may cause pullbck down to 2.0050 first minor Support after the event The key one stands at 2.0000
Strategy-neutral.
USD/JPY
Resistance levels: 105.30/106.00/106.70
Support levels: 104.50/103.90/102.80
USD/JPY has fallen further below 105.00 next Support over the last trading sessions as it was suggested No change in our view. The bias remains bearish with first Support at 104.50 Below eases price further to 103.90 on soft data from USA later today and 102.80 in mid term On the upside, first minor Resistance comes at 105.30 , possible on stronger than expected US Retail Sales numbers The key Resistance stands at 106.00
Strategy-neutral.
USD/CHF
Resistance levels: 1.0100/1.0150/1.0250
Support levels: 1.0000/0.9960/0.9900
USD/CHF has fallen heavily towards 1.0000 Support and our next target over the last trading sessions exactly as it was suggested The bias remains bearish and disappointing data from USA may push price lower down to 0.9960 later today and 0.9900 over today and tomorrow First minor Support comes near 1.0000 On the upside, first minor Resistance comes a shy below 1.0100, however, a break above 1.0150 is required to signal reversal towards 1.0250 in longer term
Strategy-neutral.
EUR/JPY
Resistance levels: 168.00/169.00/169.70
Support levels: 167.20/166.80/166.20
The Cross has fallen further to 167.50 lows earlier today ( below 167.80 our down target) as it was suggested The bias remains bearish in mid term fith first target at 167.20 and then 166.80 over the next trading sessions On the upside, a break above 168.50 is required for resuming the uptrend towards 169.70 record highs First Resistance comes near 168.00
Strategy-neutral.
FXDream
Read more...
FOREX-Dlr slides towards record low vs euro, ZEW eyed
Tue Jul 15, 2008 4:19am EDT
* Euro up 0.7 percent, hits 3-mth high at $1.5993, seen
testing record above $1.60
* Dollar seen vulnerable on financial system worries
* German investor morale seen holding near 15-yr low
* Market closely watching Bernanke testimony
(Changes dateline, byline, adds quotes, updates prices)
By Veronica Brown
LONDON, July 15 (Reuters) - The dollar dropped towards a record low versus the euro on Tuesday as an initially positive response to the U.S. government's mortgage bailout plan turned sour, leaving wider concerns about its financial system.
The rescue package, aimed at shoring up confidence in mortgage agencies Freddie Mac and Fannie Mae, was interpreted as underscoring the severity of credit market problems stemming from a hobbled housing market.
That, coupled with the inflationary effects of record high oil prices, was seen heaping further pressure on the buckling U.S. economy.
Late on Sunday the Treasury said it would boost its direct credit lines to the companies that fund nearly half of all U.S. mortgages and buy their shares if necessary, while the Fed opened its direct lending facility to them.
"There's a severe risk that all the stock owners in Fannie Mae and Freddie Mac will lose their money ... and that can become a severe risk for the economy, that all consumption will disappear," Danske Bank senior FX strategist John Hydeskov said.
"We saw it (dollar's relief rally) as a very welcome buy opportunity in euro/dollar. It seems quite inevitable that the pair will reach $1.60 in the near future," he added.
Shares of major U.S. banks also plunged on Monday amid fears about the sector's stability after regulators seized IndyMac Bancorp as withdrawals by panicked depositors led to the third-largest U.S. bank failure.
The euro rose 0.7 percent to $1.5993 -- scoring a three-month high close to the April 22 record of $1.6018, according to Reuters data.
Against a basket of six major currencies .DXY, the dollar was down 0.4 percent at a three-month trough of 71.515.
Tumbling stock markets in Asia and Europe also sent investors towards the safe-haven Japanese yen. The dollar fell 0.8 percent to 105.33 yen, while the euro eased 0.2 percent to 168.43 .
BERNANKE, ZEW EYED
Traders said they were closely watching Fed Chairman Ben Bernanke's testimony before Congress later in the day to see how the latest financial system strains affect his views on monetary policy and the economy.
"Bernanke will try to walk the fine line between the need for price stability (and implicit support for USD) versus aid for financial markets. While he may try to opt for a hawkish line today, we would sell into any USD strength, betting that the Fed will not hike rates before the election," ING said in a note to clients.
But before that in Europe, Germany's ZEW investor morale gauge is due at 0900 GMT with analysts polled by Reuters expecting that sentiment among investors remained near its worst level in more than 15 years this month .
Danske's Hydeskov remained bullish on the euro's chances of gaining traction against the dollar despite expectations for the ZEW to make grim reading.
"The ZEW indicator is definitely on a declining trend, but it's still not matching the bad U.S. data flow and that reinforces our belief in a strong euro/dollar," he said.
Elsewhere, the Australian dollar hit a 25-year high against the U.S. dollar of $0.9811 after minutes of the Reserve Bank of Australia's July meeting showed the central bank remained concerned about inflation, suggesting it will likely keep interest rates at a 12-year high. (Reporting by Veronica Brown; Editing by Malcolm Whittaker)
Read more...
* Euro up 0.7 percent, hits 3-mth high at $1.5993, seen
testing record above $1.60
* Dollar seen vulnerable on financial system worries
* German investor morale seen holding near 15-yr low
* Market closely watching Bernanke testimony
(Changes dateline, byline, adds quotes, updates prices)
By Veronica Brown
LONDON, July 15 (Reuters) - The dollar dropped towards a record low versus the euro on Tuesday as an initially positive response to the U.S. government's mortgage bailout plan turned sour, leaving wider concerns about its financial system.
The rescue package, aimed at shoring up confidence in mortgage agencies Freddie Mac and Fannie Mae, was interpreted as underscoring the severity of credit market problems stemming from a hobbled housing market.
That, coupled with the inflationary effects of record high oil prices, was seen heaping further pressure on the buckling U.S. economy.
Late on Sunday the Treasury said it would boost its direct credit lines to the companies that fund nearly half of all U.S. mortgages and buy their shares if necessary, while the Fed opened its direct lending facility to them.
"There's a severe risk that all the stock owners in Fannie Mae and Freddie Mac will lose their money ... and that can become a severe risk for the economy, that all consumption will disappear," Danske Bank senior FX strategist John Hydeskov said.
"We saw it (dollar's relief rally) as a very welcome buy opportunity in euro/dollar. It seems quite inevitable that the pair will reach $1.60 in the near future," he added.
Shares of major U.S. banks also plunged on Monday amid fears about the sector's stability after regulators seized IndyMac Bancorp as withdrawals by panicked depositors led to the third-largest U.S. bank failure.
The euro
Against a basket of six major currencies .DXY, the dollar was down 0.4 percent at a three-month trough of 71.515.
Tumbling stock markets in Asia and Europe also sent investors towards the safe-haven Japanese yen. The dollar fell 0.8 percent to 105.33 yen
BERNANKE, ZEW EYED
Traders said they were closely watching Fed Chairman Ben Bernanke's testimony before Congress later in the day to see how the latest financial system strains affect his views on monetary policy and the economy.
"Bernanke will try to walk the fine line between the need for price stability (and implicit support for USD) versus aid for financial markets. While he may try to opt for a hawkish line today, we would sell into any USD strength, betting that the Fed will not hike rates before the election," ING said in a note to clients.
But before that in Europe, Germany's ZEW investor morale gauge is due at 0900 GMT with analysts polled by Reuters expecting that sentiment among investors remained near its worst level in more than 15 years this month .
Danske's Hydeskov remained bullish on the euro's chances of gaining traction against the dollar despite expectations for the ZEW to make grim reading.
"The ZEW indicator is definitely on a declining trend, but it's still not matching the bad U.S. data flow and that reinforces our belief in a strong euro/dollar," he said.
Elsewhere, the Australian dollar hit a 25-year high against the U.S. dollar of $0.9811
Read more...
BoJ Holds & Jpy Gains
Daily Forex Fundamentals | Written by AC-Markets | Jul 15 08 08:11 GMT |
Market Brief
The Usd was broadly weaker in Asian sessions causing traders to brace themselves for a data heavy day as risk aversion moved back into the market. EurUsd after a short retreat, trended upwards from 1.5882 to 1.5954 while AudUsd broke easily thru 0.9737 intraday resistance heading to 0.9772 new highs. UsdJpy slipped to 105.70 as concerns over credit market losses damped risk appetite. As expected, Jpy funded carry trades were also sold off. Worries in credit markets are currently weighing on equity markets with Shanghai's down 3.43% and DAX falling 1.77% at the open (US futures are lower across the board). Precious metals continue to surge forward with gold trading to 973.78 and silver 19.13. And given the current state of uncertainty VIX has climbed to 28.48 and 1month implied Vols have followed.
In a unanimous vote the BoJ held rates at 0.50% as expected. In addition, their half year update revised growth downwards while raising the CPI forecast. Perhaps the key take away, was the unique wording surrounding inflation which stated 'in the case that downside risk to the economy eases, risks to higher fluctuations in the economy and prices may be intensified due to prolonged easy monetary conditions'. This hints that the BoJ is concerned that its loose monetary policy might actually be aiding to inflation and that they therefore, are willing to tighten should CPI move above their comfort zone. We expect that this comment will only benefit Jpy in the short term as markets are still trading on yield differentials and risk appetite.
In New Zealand inflation moves higher than expected, with food and energy by far the largest contributors. Headline inflation printed strong at q/q 1.6% vs. 1.4% exp, y/y 4.0% vs. 3.8% exp. Given these elevated figures it would be difficult for the RBNZ to rationalize a rate cut in July and even puts Sept cuts in jeopardy.
In Australia the RBA minutes released today were mildly dovish. The Key takeaway for the minutes were 'weighing up the various factors, the Board judged that the current stance of monetary policy remained appropriate'. The RBA recognized that the economy was clearly weakening stating 'Consumer spending had slowed significantly and there had been a marked decline in the growth of credit to both households and businesses. Surveys indicated that confidence had fallen further over the past month and asset prices were weakening'.
In the UK markets, we will be watching CPI data which is likely to rise from 3.3% to 3.6% y/y and give the Gbp some support. In addition with signs of acceleration in June PPI the BoE will be gauging second round effects into core. In our view with inflation far from peaking, the MPC should be on hold for the next few months at least.
On the continent, German ZEW will have trades attention. We are expecting another decline to -56.0 from -52.6…getting precariously close to all time recession lows of -62.0. While this index is not very accurate in regards to predicating GDP we don't expect the market to look kindly on the gloomy data.
14.00gmt - Fed's Bernanke Testifies to Senate on Economy
ACM FOREX
Read more...
Market Brief
The Usd was broadly weaker in Asian sessions causing traders to brace themselves for a data heavy day as risk aversion moved back into the market. EurUsd after a short retreat, trended upwards from 1.5882 to 1.5954 while AudUsd broke easily thru 0.9737 intraday resistance heading to 0.9772 new highs. UsdJpy slipped to 105.70 as concerns over credit market losses damped risk appetite. As expected, Jpy funded carry trades were also sold off. Worries in credit markets are currently weighing on equity markets with Shanghai's down 3.43% and DAX falling 1.77% at the open (US futures are lower across the board). Precious metals continue to surge forward with gold trading to 973.78 and silver 19.13. And given the current state of uncertainty VIX has climbed to 28.48 and 1month implied Vols have followed.
In a unanimous vote the BoJ held rates at 0.50% as expected. In addition, their half year update revised growth downwards while raising the CPI forecast. Perhaps the key take away, was the unique wording surrounding inflation which stated 'in the case that downside risk to the economy eases, risks to higher fluctuations in the economy and prices may be intensified due to prolonged easy monetary conditions'. This hints that the BoJ is concerned that its loose monetary policy might actually be aiding to inflation and that they therefore, are willing to tighten should CPI move above their comfort zone. We expect that this comment will only benefit Jpy in the short term as markets are still trading on yield differentials and risk appetite.
In New Zealand inflation moves higher than expected, with food and energy by far the largest contributors. Headline inflation printed strong at q/q 1.6% vs. 1.4% exp, y/y 4.0% vs. 3.8% exp. Given these elevated figures it would be difficult for the RBNZ to rationalize a rate cut in July and even puts Sept cuts in jeopardy.
In Australia the RBA minutes released today were mildly dovish. The Key takeaway for the minutes were 'weighing up the various factors, the Board judged that the current stance of monetary policy remained appropriate'. The RBA recognized that the economy was clearly weakening stating 'Consumer spending had slowed significantly and there had been a marked decline in the growth of credit to both households and businesses. Surveys indicated that confidence had fallen further over the past month and asset prices were weakening'.
In the UK markets, we will be watching CPI data which is likely to rise from 3.3% to 3.6% y/y and give the Gbp some support. In addition with signs of acceleration in June PPI the BoE will be gauging second round effects into core. In our view with inflation far from peaking, the MPC should be on hold for the next few months at least.
On the continent, German ZEW will have trades attention. We are expecting another decline to -56.0 from -52.6…getting precariously close to all time recession lows of -62.0. While this index is not very accurate in regards to predicating GDP we don't expect the market to look kindly on the gloomy data.
14.00gmt - Fed's Bernanke Testifies to Senate on Economy
ACM FOREX
Read more...
Daily Report: Dollar Back Under Pressure in a Busy Day with Focus on Bernanke's Testimony
Market Overview | Written by ActionForex.com | Jul 15 08 07:52 GMT |
Dollar is back under pressure as a busy day starts, falling across the board and making new 25 year low against the Aussie. Markets are clearly concerned with the damage of the credit market losses to the US economy and that was not helped by Treasury/Fed's rescue package to Fannie Mae, Freddie Mac. Furthermore, renewed worry in the financial markets triggered traders to further pare bets on interest rate hike from Fed this year even though inflation is continuing to climb on rising oil and food prices. The odds of a hike from Fed by year end, as implied by interest rate futures, indeed dropped from 100% to 67%. Sentiments in the greenback remains fragile and further volatility is anticipated with a busy day ahead.
UK CPI will take center stage in European session. Headline CPI is expected to accelerate further from 3.6% to 3.8% yoy in Jun. RPI and RPI-C are expected to be unchanged at 4.3% yoy and 4.4% yoy respectively. BoE will likely be on hold at 5.00% for some time for, on the one hand, guarding against worsening inflation outlook, and, on the other hand, on worry of recession in UK. Germany ZEW economic sentiment is expected to drop further to 15 year low of -55 in Jul, confirming the slowdown in the Eurozone economy. However, note the fragile sentiments on the greenback, Euro and Sterling will likely remain firm against dollar even in case of lower than expected readings in today's data. The major movements in European session could be seen in EUR/GBP cross which has been trading sideway for a few months already. Stronger than expected CPI reading in UK and worse than expected German ZEW will likely trigger resumption of correction from 0.8090 high.
A string of important events are scheduled in the US session today. US PPI is expected to accelerate further from 7.2% to 8.5% yoy in Jun, with core PPI up from 3.0% to 3.2%. Empire state survey is expected to be steady at -8 in Jul. Retail sales is expected to show 0.5% mom growth, with ex-auto sales climbing 1.0% mom in Jun. Business inventories is expected to rise 0.5% in May. After all, the reactions to these data could be short-lived as main event of the day will be Bernanke's semiannual testimony on monetary policy and the economy before the Senate Banking Committee at 10 a.m. Washington time. And it remains doubtful if Bernanke still has any more bullets to boost the confidence on dollar.
Bank of Canada will also release rate decision today and is widely expected to be on hold at 3.00%.
Overnight, BoJ left rates unchanged at 0.5% as widely expected on unanimous 7-0 vote. In an unexpected move, BoJ released the monthly statement together with the announcement. BoJ acknowledged that economic growth is slowing, trimming GDP forecasts from 1.5% to 1.2% yoy. Domestic CGPI forecasts was up sharply from 2.5% yoy to 4.8% yoy while CPI excluding food was also up from 1.1% yoy to 1.8% yoy. The Bank of Japan also noted global financial markets remain unstable and downside risks to the U.S. economy and the world economy remain.
RBA also released minutes of Jul policy meeting today. Even though inflation remains high, RBA decided to left rates unchanged at 7.25% based on signs that domestic economy is cooling. The minutes basically affirmed RBA's believe that prior rate hikes are going to deal with inflation adequately even though risks of inflation expectations are still on the upside.
New Zealand Q2 CPI climbed from 3.8% to 4.0% yoy in Q2 but did little to alter the expectation that RBNZ may cut rates later this year on slowing economy.
AUD/USD Daily Outlook
Daily Pivots: (S1) 0.9674; (P) 0.9705; (R1) 0.9747; More
AUD/USD surges further to as high as 0.9788 today and remains firm. Note that break of near term trendline resistance reaffirms underlying strength in AUD/USD and the current rise is expected to extend further to 100% projection of 0.9327 to 0.9667 from 0.9475 at 0.9815 first and then 1.0000 psychological resistance. On the downside, below 0.9705 minor support will indicate an intraday top is in place and bring consolidation. But pull back should be contained well above 0.9475 support and bring rally resumption.
In the bigger picture, the whole rally from 0.8512 is still in progress. Also, note that the break of near term trend line resistance and break out of bearish divergence conditions in daily MACD and RSI are both reaffirming the underlying strength in AUD/USD. Regardless of the structure, such rally is treated as part of the long term up trend from 0.4773 (01 low) and is still expected to extend further to next medium term target of 100% projection of 0.4773 to 0.8008 from 0.6773 at 1.0008 which overlaps with parity. On the downside, break of 0.9475 support is needed to be the first signal that a short term top is formed. Otherwise, recent uptrend is still expected to extend further.
Read more...
Dollar is back under pressure as a busy day starts, falling across the board and making new 25 year low against the Aussie. Markets are clearly concerned with the damage of the credit market losses to the US economy and that was not helped by Treasury/Fed's rescue package to Fannie Mae, Freddie Mac. Furthermore, renewed worry in the financial markets triggered traders to further pare bets on interest rate hike from Fed this year even though inflation is continuing to climb on rising oil and food prices. The odds of a hike from Fed by year end, as implied by interest rate futures, indeed dropped from 100% to 67%. Sentiments in the greenback remains fragile and further volatility is anticipated with a busy day ahead.
UK CPI will take center stage in European session. Headline CPI is expected to accelerate further from 3.6% to 3.8% yoy in Jun. RPI and RPI-C are expected to be unchanged at 4.3% yoy and 4.4% yoy respectively. BoE will likely be on hold at 5.00% for some time for, on the one hand, guarding against worsening inflation outlook, and, on the other hand, on worry of recession in UK. Germany ZEW economic sentiment is expected to drop further to 15 year low of -55 in Jul, confirming the slowdown in the Eurozone economy. However, note the fragile sentiments on the greenback, Euro and Sterling will likely remain firm against dollar even in case of lower than expected readings in today's data. The major movements in European session could be seen in EUR/GBP cross which has been trading sideway for a few months already. Stronger than expected CPI reading in UK and worse than expected German ZEW will likely trigger resumption of correction from 0.8090 high.
A string of important events are scheduled in the US session today. US PPI is expected to accelerate further from 7.2% to 8.5% yoy in Jun, with core PPI up from 3.0% to 3.2%. Empire state survey is expected to be steady at -8 in Jul. Retail sales is expected to show 0.5% mom growth, with ex-auto sales climbing 1.0% mom in Jun. Business inventories is expected to rise 0.5% in May. After all, the reactions to these data could be short-lived as main event of the day will be Bernanke's semiannual testimony on monetary policy and the economy before the Senate Banking Committee at 10 a.m. Washington time. And it remains doubtful if Bernanke still has any more bullets to boost the confidence on dollar.
Bank of Canada will also release rate decision today and is widely expected to be on hold at 3.00%.
Overnight, BoJ left rates unchanged at 0.5% as widely expected on unanimous 7-0 vote. In an unexpected move, BoJ released the monthly statement together with the announcement. BoJ acknowledged that economic growth is slowing, trimming GDP forecasts from 1.5% to 1.2% yoy. Domestic CGPI forecasts was up sharply from 2.5% yoy to 4.8% yoy while CPI excluding food was also up from 1.1% yoy to 1.8% yoy. The Bank of Japan also noted global financial markets remain unstable and downside risks to the U.S. economy and the world economy remain.
RBA also released minutes of Jul policy meeting today. Even though inflation remains high, RBA decided to left rates unchanged at 7.25% based on signs that domestic economy is cooling. The minutes basically affirmed RBA's believe that prior rate hikes are going to deal with inflation adequately even though risks of inflation expectations are still on the upside.
New Zealand Q2 CPI climbed from 3.8% to 4.0% yoy in Q2 but did little to alter the expectation that RBNZ may cut rates later this year on slowing economy.
AUD/USD Daily Outlook
Daily Pivots: (S1) 0.9674; (P) 0.9705; (R1) 0.9747; More
AUD/USD surges further to as high as 0.9788 today and remains firm. Note that break of near term trendline resistance reaffirms underlying strength in AUD/USD and the current rise is expected to extend further to 100% projection of 0.9327 to 0.9667 from 0.9475 at 0.9815 first and then 1.0000 psychological resistance. On the downside, below 0.9705 minor support will indicate an intraday top is in place and bring consolidation. But pull back should be contained well above 0.9475 support and bring rally resumption.
In the bigger picture, the whole rally from 0.8512 is still in progress. Also, note that the break of near term trend line resistance and break out of bearish divergence conditions in daily MACD and RSI are both reaffirming the underlying strength in AUD/USD. Regardless of the structure, such rally is treated as part of the long term up trend from 0.4773 (01 low) and is still expected to extend further to next medium term target of 100% projection of 0.4773 to 0.8008 from 0.6773 at 1.0008 which overlaps with parity. On the downside, break of 0.9475 support is needed to be the first signal that a short term top is formed. Otherwise, recent uptrend is still expected to extend further.
Economic Indicators Update
| GMT | Ccy | Events | Actual | Consensus | Previous | Revised |
|---|---|---|---|---|---|---|
| 22:45 | NZD | New Zealand CPI Q/Q Q2 | 1.40% | 1.40% | 0.70% | |
| 22:45 | NZD | New Zealand CPI Y/Y Q2 | 4.00% | 3.80% | 0.70% | |
| 23:01 | GBP | U.K. RICS House Price Balance | -0.40% | -94.00% | -92.90% | |
| 23:01 | GBP | U.K. BRC retail sales Jun | -88 | N/A | 1.90% | |
| 1:30 | AUD | RBA Board Meeting Minutes | ||||
| 4:30 | JPY | BOJ rate decision Jul | 0.50% | 0.50% | 0.50% | |
| 6:00 | JPY | BOJ Monthly report | ||||
| 8:30 | GBP | U.K. CPI M/M Jun | 0.40% | 0.50% | ||
| 8:30 | GBP | U.K. CPI Y/Y Jun | 3.80% | 3.60% | ||
| 8:30 | GBP | U.K. RPI M/M Jun | 0.50% | 0.50% | ||
| 8:30 | GBP | U.K. RPI Y/Y Jun | 4.30% | 4.30% | ||
| 8:30 | GBP | U.K. RPI - X M/M Jun | 0.40% | 0.70% | ||
| 8:30 | GBP | U.K. RPI - X Y/Y Jun | 4.40% | 4.40% | ||
| 9:00 | EUR | Germany ZEW Economic Sentiment Jul | -55 | -52.4 | ||
| 9:00 | EUR | Eurozone ZEW Economic Sentiment Jul | -56 | -52.7 | ||
| 12:30 | USD | U.S. Empire state mfg Jul | -8 | -8.68 | ||
| 12:30 | USD | U.S. PPI M/M Jun | 1.30% | 1.40% | ||
| 12:30 | USD | U.S. PPI Y/Y Jun | 8.50% | 7.20% | ||
| 12:30 | USD | U.S. PPI core M/M Jun | 0.30% | 0.20% | ||
| 12:30 | USD | U.S. PPI core Y/Y Jun | 3.20% | 3.00% | ||
| 12:30 | USD | U.S. Retail sales M/M Jun | 0.50% | 0.50% | ||
| 12:30 | USD | U.S. Retail sales less auto M/M Jun | 1.00% | 1.20% | ||
| 13:00 | CAD | BOC rate decision Jul | 3.00% | 3.00% | ||
| 14:00 | USD | U.S. Business inventories May | 0.50% | 0.50% | ||
| 14:00 | USD | Fed Bernanke Semi-annual Monetary Policy Testimony at Senate |
Read more...
Forex Technical Analysis
Daily Forex Technicals | Written by DeltaStock Inc. | Jul 15 08 08:39 GMT |
EUR/USD
Current level-1.5952
EUR/USD is in an uptrend from recent bottom at 1.5301, that was the final of the prolonged consolidation since 1.5909 (17 March 2008). Technical indicators are slowly rising and trading is situated above the 50- and 200-Day SMA, currently projected at 1.5609 and 1.5095.
The sharp Friday's advance beyond 1.5909 has denied our idea, that a there is one more swing to come, down to 1.5584, as a third part of the consolidation pattern since 1.5909. Now it is obvious, that the uptrend from 1.5301 has been renewed, heading for a beak above 1.6019, en route to 1.6566. As expected yesterday's consolidation was limited above 1.5827 and after building a reliable bottom at 1.5839, the ascending impulse was renewed, reaching high today at 1.5957. Today we will expect a break above 1.6019, that will clear the way to 1.6216.
Today's strategy: Buy current levels, stop below 1.5923, first target 1.6015, second is TBD later.
Resistance Support
intraday intraweek intraday intraweek
1.5969 1.60+ 1.6019 1.6216
1.5923 1.5881 1.5461 1.50+
USD/JPY
Current level - 105.56
The pair is in a corrective uptrend from the 95.75 short-term bottom. Technical indicators are flat and the upmove is dynamically supported at 104.74. The inner structure of the rise is by all means a corrective one, so from a larger point of view the overall downtrend from 124.14 is not over yet.
Yesterday's consolidation managed to stay below 106.83 and due to the selling pressure at 106.81 the downtrend is renewed, towards 104.98, en route to 103.83. Intraday we expect acceleration of the downtrend towards 103.83.
Today's strategy: Sell current levels for 104.08, stop above 106.05
Resistance Support
intraday intraweek intraday intraweek
106.05 107.91 108.66 109.51
104.98 103.83 102.63 100.00
GBP/USD
Current level- 1.9996
The pair is in a broad consolidation above 1.9338 and below 2.0397. Technical indicators are flat on the higher time-frames and trading is situated between the 50- and 200-day SMA, currently projected at 1.9685 and 1.9982.
There is no chance that the pair is still in the consolidation since 2.0007, so obviously the uptrend for 2.0274 is renewed and today's target is seen at 2.0131. Reliable support comes at 1.9961.
Today's strategy : Buy current levels for 2.0131, stop below 1.9961.
Resistance Support
intraday intraweek intraday intraweek
2.0007 2.0131 2.0274 2.0397
1.9961 1.9791 1.9477 1.9196
DeltaStock Inc. - Online Forex & Securities Broker
www.deltastock.com
Read more...
EUR/USD
Current level-1.5952
EUR/USD is in an uptrend from recent bottom at 1.5301, that was the final of the prolonged consolidation since 1.5909 (17 March 2008). Technical indicators are slowly rising and trading is situated above the 50- and 200-Day SMA, currently projected at 1.5609 and 1.5095.
The sharp Friday's advance beyond 1.5909 has denied our idea, that a there is one more swing to come, down to 1.5584, as a third part of the consolidation pattern since 1.5909. Now it is obvious, that the uptrend from 1.5301 has been renewed, heading for a beak above 1.6019, en route to 1.6566. As expected yesterday's consolidation was limited above 1.5827 and after building a reliable bottom at 1.5839, the ascending impulse was renewed, reaching high today at 1.5957. Today we will expect a break above 1.6019, that will clear the way to 1.6216.
Today's strategy: Buy current levels, stop below 1.5923, first target 1.6015, second is TBD later.
Resistance Support
intraday intraweek intraday intraweek
1.5969 1.60+ 1.6019 1.6216
1.5923 1.5881 1.5461 1.50+
USD/JPY
Current level - 105.56
The pair is in a corrective uptrend from the 95.75 short-term bottom. Technical indicators are flat and the upmove is dynamically supported at 104.74. The inner structure of the rise is by all means a corrective one, so from a larger point of view the overall downtrend from 124.14 is not over yet.
Yesterday's consolidation managed to stay below 106.83 and due to the selling pressure at 106.81 the downtrend is renewed, towards 104.98, en route to 103.83. Intraday we expect acceleration of the downtrend towards 103.83.
Today's strategy: Sell current levels for 104.08, stop above 106.05
Resistance Support
intraday intraweek intraday intraweek
106.05 107.91 108.66 109.51
104.98 103.83 102.63 100.00
GBP/USD
Current level- 1.9996
The pair is in a broad consolidation above 1.9338 and below 2.0397. Technical indicators are flat on the higher time-frames and trading is situated between the 50- and 200-day SMA, currently projected at 1.9685 and 1.9982.
There is no chance that the pair is still in the consolidation since 2.0007, so obviously the uptrend for 2.0274 is renewed and today's target is seen at 2.0131. Reliable support comes at 1.9961.
Today's strategy : Buy current levels for 2.0131, stop below 1.9961.
Resistance Support
intraday intraweek intraday intraweek
2.0007 2.0131 2.0274 2.0397
1.9961 1.9791 1.9477 1.9196
DeltaStock Inc. - Online Forex & Securities Broker
www.deltastock.com
Read more...
Major Market Mover: Tough Day For The U.S.
Daily Forex Fundamentals | Written by Crown Forex | Jul 15 08 07:38 GMT |
The U.S. economy is preparing today to pump a very huge amount of a class A fundamentals in the market, a journey that will start with retail sales and CPI data, and will pass by manufacturing figures, and will end with Mr. Bernanke testimony on the economy and monetary policy.
The start will be with the U.S. retails sales, which is expected to show an incline of 0.4% for the month of June, after an increase of 1% in May due to increasing spending resulted from the tax rebates distributed on the U.S. consumers. Retails sales excluding Autos is expected to increase by 1% following 1.2% in May.
The retail sales numbers are extremely important at this time, as fears from the effect of the financial turmoil on the economy, while everyone almost think that the economy escaped recession, renewed fears now may just push the economy and the dollar of the edge.
At the very same time, the Department of Commerce will announce their pro-ducer price index for the month of June, with expectations that the economy will witness more inflation risks, with soaring food and energy prices, even core prices are expected to inch higher. PPI probably rose 1.4% for the monthly reading, and rose 8.7% from a year ago, whi9le core prices are expected to increase 0.3% for June, and 3.2% from a year ago compared to 3.00% in the previous month.
Inflation and growth, the same old economic equation is trying to balance itself, but the way we see it going, that the balance is not there, and more divergence in both values are created, between less spending and decreasing confidence, along with more financial troubles and housing slump, and skyrocketing food and energy prices driving inflation world wide higher and higher, the only answer we have is a phase of Stagflation.
In another report on manufacturing, the empire state manufacturing index is ex-pected to fall by 8 in July, after falling 8.7 in June, highlighting that the manufacturing sector is far from recovery, and economy might be far from growth.
And as a closure for the day, a new testimony from the Fed's chairman Mr. Ben Bernanke on the economy and feds policy will be eagerly waited, after what happened last week in his first testimony, when he quoted that 'financial turmoil is ongoing' no one blames market traders if the took the greenback down, as we can see dear reader, even policy makers are not able to bail the economy out, neither its own fundamentals with all the spices they tried to cover it with.
Today will be an important day for the world's largest economy, and for traders those had their hopes high at a certain point about the dollar, and might just get disappointed again, and this time, they will not have any mercy regarding the dollar and the U.S. stocks, so we have to be careful, and watch out from every single piece of information to lighten our way.
Crown Forex
Read more...
The U.S. economy is preparing today to pump a very huge amount of a class A fundamentals in the market, a journey that will start with retail sales and CPI data, and will pass by manufacturing figures, and will end with Mr. Bernanke testimony on the economy and monetary policy.
The start will be with the U.S. retails sales, which is expected to show an incline of 0.4% for the month of June, after an increase of 1% in May due to increasing spending resulted from the tax rebates distributed on the U.S. consumers. Retails sales excluding Autos is expected to increase by 1% following 1.2% in May.
The retail sales numbers are extremely important at this time, as fears from the effect of the financial turmoil on the economy, while everyone almost think that the economy escaped recession, renewed fears now may just push the economy and the dollar of the edge.
At the very same time, the Department of Commerce will announce their pro-ducer price index for the month of June, with expectations that the economy will witness more inflation risks, with soaring food and energy prices, even core prices are expected to inch higher. PPI probably rose 1.4% for the monthly reading, and rose 8.7% from a year ago, whi9le core prices are expected to increase 0.3% for June, and 3.2% from a year ago compared to 3.00% in the previous month.
Inflation and growth, the same old economic equation is trying to balance itself, but the way we see it going, that the balance is not there, and more divergence in both values are created, between less spending and decreasing confidence, along with more financial troubles and housing slump, and skyrocketing food and energy prices driving inflation world wide higher and higher, the only answer we have is a phase of Stagflation.
In another report on manufacturing, the empire state manufacturing index is ex-pected to fall by 8 in July, after falling 8.7 in June, highlighting that the manufacturing sector is far from recovery, and economy might be far from growth.
And as a closure for the day, a new testimony from the Fed's chairman Mr. Ben Bernanke on the economy and feds policy will be eagerly waited, after what happened last week in his first testimony, when he quoted that 'financial turmoil is ongoing' no one blames market traders if the took the greenback down, as we can see dear reader, even policy makers are not able to bail the economy out, neither its own fundamentals with all the spices they tried to cover it with.
Today will be an important day for the world's largest economy, and for traders those had their hopes high at a certain point about the dollar, and might just get disappointed again, and this time, they will not have any mercy regarding the dollar and the U.S. stocks, so we have to be careful, and watch out from every single piece of information to lighten our way.
Crown Forex
Read more...
Fitch Cuts Outlook on India's Debt on Budget Concerns
By [bn:PRSN=1] Kartik Goyal []
July 15 (Bloomberg) -- India's credit outlook was cut to negative from stable by Fitch Ratings, which said rising subsidies, interest payments and wages may weaken the government's finances.
Fitch affirmed its BBB- rating on India's long-term local- currency debt, the lowest investment grade, six notches below China and Japan and one level below Egypt, Morocco and Namibia. The ratings company also kept its ranking on the nation's foreign-currency debt at BBB- with a stable outlook, according to a statement today.
``The revision to the local currency outlook is based on a considerable deterioration in the central government's fiscal position, combined with a notable increase in government debt issuance to finance subsidies not captured in the budget,'' said James McCormack, Fitch's head of Asia sovereign ratings.
The government's budget deficit in the current fiscal year may widen to 4.5 percent of gross domestic product from 2.8 percent in the previous 12 months due to higher interest costs and salaries and rising subsidies, the ratings company said.
To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net.
Read more...
July 15 (Bloomberg) -- India's credit outlook was cut to negative from stable by Fitch Ratings, which said rising subsidies, interest payments and wages may weaken the government's finances.
Fitch affirmed its BBB- rating on India's long-term local- currency debt, the lowest investment grade, six notches below China and Japan and one level below Egypt, Morocco and Namibia. The ratings company also kept its ranking on the nation's foreign-currency debt at BBB- with a stable outlook, according to a statement today.
``The revision to the local currency outlook is based on a considerable deterioration in the central government's fiscal position, combined with a notable increase in government debt issuance to finance subsidies not captured in the budget,'' said James McCormack, Fitch's head of Asia sovereign ratings.
The government's budget deficit in the current fiscal year may widen to 4.5 percent of gross domestic product from 2.8 percent in the previous 12 months due to higher interest costs and salaries and rising subsidies, the ratings company said.
To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net.
Read more...
Daily Financial Market Outlook
Daily Forex Fundamentals | Written by Lloyds TSB | Jul 15 08 07:08 GMT |
Read more...
Overview & economic commentary
The British Retail Consortium earlier this morning reported a 0.4% drop in annual like-for-like sales in June. This was down from a 1.9% rise in May and suggests we could see some decline in sales from last month's official 3.5% surge. Consumer prices are due at 9.30 and are forecast to have extended their uptrend in June. We have pencilled in a rise to 3.6% from 3.3% in May, but stronger than forecast PPI data yesterday suggest that an even loftier CPI number can't be ruled out. BoE governor King, in the margin of the Bank's annual report yesterday, warned that CPI will stay above 3.0% 'until well into next year'. This scenario does not in our view lend itself to a reduction in base rates. In the euro zone, the German ZEW survey is forecast to have dropped, possibly sharply, in July as survey respondents take into account weak German industry data, the inflation backdrop and the sell-off in equity markets.
We forecast a drop to -57.0. Producer prices and retail sales are due in the US, but it will be Fed chairman Bernanke's testimony on the economy that will take centre stage this afternoon as markets wonder whether the Fed believes the economy is on track to recover in the second half of the year. The unemployment rate was forecast back in April to peak at 5.7% this year, but unless the stronger gdp growth profile for Q2 is sustained in Q3 and Q4 and oil prices fall, the risk is that unemployment could peak closer to 6.0%. This could lead markets to completely abandon speculation of a first rate hike this year, a view we have held for quite a while.
Currency commentary
Volatile markets are expected today as participants prepare to digest a deluge of economic data and mull over Fed chairman Bernanke's testimony. Sterling had a good session yesterday, supported by stronger PPI data and could again draw some strength from CPI data this morning. Sterling took weak housing data from the RICS and a disappointing retail sales survey from the BRC in its stride o/n, with £/$ hovering above 1.9950 and €/£ steady around 0.7975. A UK CPI number stronger than the 3.6% consensus could bolster sterling momentum ahead of US retail sales and PPI. US retail sales are forecast to be positive for June and a stronger outcome, supported by the tax rebate, could briefly help the dollar to rally. €/$ in particular could be a mover depending on the German ZEW data at 10am. A rise to 1.60 is still on the cards after yesterday's close above 1.59. The A$ continues to be well bid this morning after Asian stocks shadowed US markets higher. The rate decision in Canada may impact C$ crosses at 2pm.
Major data and events today
- UK BRC retail sales monitor (Jun) (00:01)
- UK RICS house price survey (00:01)
May -92.2
Jun (actual) -88.0 - UK Consumer prices index (nsa)
Ma y +0.6% Y-O-Y +3.3%
Jun (f'cast) +0.4% Y-O-Y +3.6%
Median +0.4% Range +0.1%+0.6% - UK Retail prices index (nsa)
Ma y +0.5% Y-O-Y +4.3%
Jun (f'cast) +0.3% Y-O-Y +4.1%
Median +0.5% Range +0.2%:+0.7% - UK RPI ex-mortgage interest payments (nsa)
Ma y +0.7% Y-O-Y +4.4%
Jun (f'cast) +0.4% Y-O-Y +4.4%
Median +0.4% Range +0.1%:+0.6% - German ZEW survey (10:00)
Jun -52.4
Jul (f'cast) -57.0
Median -55.0 Range -64.0:-48.0 - US Producer prices (sa, prov) (13:30)
May +1.4% Y-O-Y +7.2%
Jun (f'cast) +1.4% Y-O-Y +8.6%
Median +1.3% Range +0.5%:+2.4% - US PPI, core (sa, prov) (13:30)
May +0.2% Y-O-Y +3.0%
Jun (f'cast) +0.3% Y-O-Y +3.2%
Median +0.3% Range +0.1%:+0.4% - US Retail sales (advance) (13:30)
May +1.0% Y-O-Y +3.0%
Jun (f'cast) +0.4% Y-O-Y +3.9%
Median +0.3% Range -0.4%:+1.1% - US Retail sales, ex-autos (13:30)
May +1.2% Y-O-Y +6.1%
Jun (f'cast) +0.4% Y-O-Y +5.5%
Median +0.9% Range zero:+1.6% - US Empire manuf. survey (13:30)
Jun -8.7%
Jul (f'cast) -7.5%
Median -7.3% Range -15.0%:-0.1% - US Business inventories (15:00)
Apr +0.5%
May (f'cast) +0.5%
Median +0.5% Range +0.3%:+0.6% - Canada interest rate decision (14:00)
Current: 3.00%
Forecast: 3.00% - US Fed Chairman Bernanke gives semi-annual Monetary Policy testimony to Congress (15:00)
Chart: UK data this morning may show a rise in annual CPI to about 3.6%. We expect a rise above 4.0% this summer
Lloyds TSB Bank
http://www.lloydstsbfinancialmarkets.com
Read more...
Thailand, Philippines May Raise Rates on Inflation
By Shamim Adam and Michael J. Munoz
July 15 (Bloomberg) -- Thailand and the Philippines are expected to raise interest rates this week, following other Asian countries in signaling their commitment to stem inflation that's sparked protests and threatened political stability.
Thailand's central bank will raise the benchmark interest rate for the first time in two years tomorrow, according to the 19 economists surveyed by Bloomberg News. The Philippines will follow suit, all 20 of the economists in a separate survey said.
``Asian central banks are shifting towards a more hawkish bias,'' said Vishnu Varathan, an economist at Forecast Singapore Pte. Those deemed not to be tackling inflation risk losing investor confidence, he said. ``We can expect higher interest rates in the weeks and months ahead.''
Surging oil and food costs are forcing central banks from Vietnam to Pakistan to raise borrowing costs and tame inflation, even at the cost of stifling growth, at a time when a U.S. slowdown is hurting demand for Asian exports. Thai stocks and bonds have fallen this year as investors flee emerging markets.
Thailand's SET Index has dropped 18 percent since Jan. 1, and the Philippine Stock Exchange Index is down 33 percent, the fourth-worst performer in Asia. Philippine bonds have lost 6.8 percent, the most among 10 Asian markets tracked by an HSBC Holdings Plc index. The returns on Thai bonds have fallen 1.6 percent, the fourth-worst in the gauge.
Fishermen in Japan, labor unions in Sri Lanka, truck drivers in India and students in Indonesia have held protests on surging fuel and food costs. Inflation in the region is expected to reach a decade-high this year, the Asian Development Bank said in April.
Indonesia, India
Indonesia raised its benchmark rate for a third straight month in July, and India boosted borrowing costs twice in June. In Vietnam, the central bank raised its base rate to 14 percent last month, the highest in Asia.
The Bank of Thailand, which has held the policy rate at 3.25 percent since August, last raised it in June 2006. The central bank may raise the one-day bond repurchase rate to 3.5 percent tomorrow, according to 16 of 19 economists surveyed by Bloomberg News. The remaining three expect a half-a-percentage- point increase.
Thai consumer prices gained 8.9 percent last month, the fastest in a decade. The Finance Ministry in June raised its inflation forecast for this year to 7.2 percent from an earlier prediction of 4.5 percent, and said inflation is ``a major threat to growth.''
Political Turmoil
Higher rates in Thailand would come at a time when consumer confidence is at the lowest level this year amid intensifying anti-government protests. Prime Minister Samak Sundaravej's ruling People Power Party faces legal challenges that may force it to disband, and the five-month old government has been the target of street protests since May 25.
``The hike probably will worsen the economic situation, but high and persistent inflation is worse,'' said Dwyfor Evans, a strategist at State Street Global Markets in Hong Kong. ``Allowing political volatility to overrule policy credibility sends a very poor signal to investors and they should avoid this at all costs.''
A quarter-point increase by the Bank of Thailand would be insufficient and wouldn't stem a decline in the currency, said Tim Condon, chief Asia economist at ING Groep NV in Singapore. The Thai baht is the worst-performing currency in Asia this year.
``I don't think a 25 basis-point rate hike is going to assuage the baht selling pressure,'' Condon said. ``To get inflation back under control, it will really require a tightening of policies. Much higher interest rates is what it will need.''
Baht, Peso
Thailand's baht rose 0.6 percent to 33.47 per dollar as of 11:17 a.m. in Bangkok, according to Bloomberg data. The Philippine peso advanced to as high as 45.08 per dollar in Manila today, according to Tullett Prebon Plc.
Bangko Sentral ng Pilipinas raised its key interest rate in June for the first time in more than two years. Deputy Governor Diwa Guinigundo said last week the bank's ``bias is towards tightening.''
The central bank will increase rate it pays banks for overnight deposits by a quarter percentage point to 5.5 percent, according to 16 of 20 economists surveyed. Four expect a 50 basis-point gain.
Bangko Sentral is considering increasing its 2008 inflation forecast for a second time after lifting the estimate last month to a range of 7 percent to 9 percent. Consumer prices rose 11.4 percent in June from a year earlier, the most in 14 years.
``While some key food sectors like rice seem to have stabilized, the risks that broad commodity prices, especially energy prices, would stay stubbornly high have increased,'' said Simon Wong, an economist at Standard Chartered Bank in Hong Kong. ``We now expect more aggressive tightening.''
The following tables show economists' estimates for Thai and Philippine interest rates:
Thailand Benchmark Interest Rate
------------------------------------------------------
July Aug. Oct. End of
Firm 16 27 8 2008
------------------------------------------------------
Median 3.50% 3.75% 4.00% 4.00%
% Estimates at Median 84% 100% 83% 67%
High 3.75% 3.75% 4.00% 4.25%
Low 3.50% 3.75% 3.75% 3.75%
Number of Estimates 19 7 6 6
------------------------------------------------------
Action Economics 3.50% -- -- --
ATR-Kim Eng Capital 3.50% 3.75% 4.00% 4.00%
Brown Brothers Harriman 3.50% 3.75% 4.00% 4.00%
Capital Economics Ltd. 3.50% -- -- --
Capital Nomura Securities 3.50% 3.75% 3.75% 3.75%
Citi 3.75% -- -- --
Credit Suisse 3.50% -- -- --
HSBC 3.50% 3.75% 4.00% 4.00%
Ideaglobal 3.50% 3.75% -- --
ING Groep NV 3.50% -- -- --
JP Morgan Chase 3.50% -- -- --
Lehman Brothers 3.75% -- -- --
Moody's Economy.com 3.50% 3.75% 4.00% 4.25%
Morgan Stanley 3.50% -- -- --
SCB Securities 3.50% -- -- --
Standard Chartered Bank 3.50% -- -- --
Tisco Securities 3.50% 3.75% 4.00% 4.00%
UBS 3.75% -- -- --
UOB Group 3.50% -- -- --
------------------------------------------------------
Philippines Overnight Borrowing Rate
-------------------------------------------
Policy Meeting July Aug. Oct.
Dates 17 28 9
-------------------------------------------
Median 5.50% 5.75% 6.00%
% forecasts at Median 80% 69% 55%
High 5.75% 6.25% 6.25%
Low 5.50% 5.50% 5.50%
Number of Estimates 20 13 11
-------------------------------------------
Action Economics 5.50% 5.75% 6.00%
ANZ Banking Group 5.50% 5.75% 5.75%
ATR-Kim Eng Capital 5.50% 5.75% 5.75%
BDO Unibank 5.50% 5.75% 6.00%
[bn:PRSN=1] Brown Brothers Harrima [] 5.50% 5.75% 6.00%
Capital Economics 5.50% -- --
CIMB-GK Research 5.50% 5.75% --
Citi 5.75% -- --
Credit Suisse 5.50% -- --
DBS Group 5.50% 5.75% 6.00%
Forecast Singapore 5.75% -- --
Fortis Bank 5.50% 5.75% 6.00%
HSBC 5.50% 5.75% 6.00%
Ideaglobal 5.50% 5.50% 5.75%
ING Groep NV 5.50% -- --
Lehman Brothers 5.50% -- --
Moody's Economy.com 5.50% 5.50% 5.50%
Standard Chartered 5.75% 6.00% 6.25%
Thomson IFR 5.75% 6.25% --
UBS 5.50% -- --
-------------------------------------------
To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net
Read more...
Today's Market Outlook
Daily Forex Technicals | Written by Windsor Brokers Ltd | Jul 15 08 07:44 GMT |
Read more...
EURUSD
Has retreated to a potential corrective higher low at 1.5841 Monday before rebounding to maintain bullish posture off 1.5800/05. Further rise sets focus at 1.5972 Monday's high ahead of 1.6020 records high. A relapse back below 1.5800/05 and 1.5755/50 support zone however completes a suspected 5-wave structure from 1.5611, 07 July low.
Res: 1.5949, 1.5972, 1.6002, 1.6020
Sup: 1.5876, 1.5841, 1.5723, 1.5803
GBPUSD
Retreated to a low of 1.9814 Monday before returning to strength, extending current up move from 1.9649, 07 July low. Headway now above 1.9975, 02 July high, firms 2.0008, 01 July, and 2.0029, 21 Apr, resistance zone next as faint 60-hr/10-day MA bull crossover beckons. Losing 1.9814 low however marks a top instead.
Res: 2.0008, 2.0029, 2.0050, 2.0068
Sup: 1.9915, 1.9875, 1.9852, 1.9814
USDJPY
Undergone Monday's recovery for a potential lower top at 106.81, retracing 107.66/105.66, 3-legged swings. Upper rejection of 10-day MA at 106.60 possibly sets up downside return with break of 105.66 exposing risk towards 105.23/104.99 lows, 01 Jul/30 June. Above 106.81 and 107.30, 11 July high, zone however breaks sequence of lower highs to hint renewed strength
Res: 106.48, 106.66, 107.81, 107.01
Sup: 105.66, 105.45, 105.23, 104.99
USDCHF
Rejected Monday's push above 10-day MA to pullback sharply from 1.0251 high. Downside risk is set back at 1.0112 swing low, 03 July, approximately 50% of .9630/1.0625 up leg, with break extending bear phase off 1.0625 top, 08 May, to open 0.9997, 22 April, approximately 61.8% retrace. Regaining Monday's high however averts and firms next upswing instead.
Res: 1.0175, 1.0205, 1.0225, 1.0251
Sup: 1.0112, 1.0094, 1.0040, 1.0023
Windsor Brokers Ltd
http://www.windsorbrokers.biz
Read more...
Bank of France Confidence Index Slips to Lowest in Five Years
By Helene Fouquet
July 15 (Bloomberg) -- The Bank of France said its index of manufacturing confidence fell to the lowest in five years in June and reiterated that the economy will growth at the slowest pace in almost two years in the second quarter.
The confidence index for the month of June declined to 95, the lowest since July 2003, from a revised 96 in May, the Paris- based central bank said today in a statement. The bank reiterated its previous forecast of a 0.2 percent expansion in the three months through June, the slowest since the third quarter of 2006.
``Industrial activity remained stable,'' the central bank said. ``Growth carried over for 2008 at the end of the second quarter is expected to stand at 1.3 percent.''
Finance Minister Christine Lagarde said that French economic growth would be on the lower end of the government's current forecast. The economy will expand at least 1.7 percent this year, at the bottom of the government's predicted range of 1.7 percent to 2 percent.
``We'll be on the lower end of the scale because our economy is undergoing external shocks such as a massive increase of oil prices,'' Lagarde said on Europe1 radio today.
France is feeling the pinch from a U.S.-led slowdown in global growth. In March, Prime Minister Francois Fillon reduced his growth forecast for 2008 to between 1.7 percent and 2 percent from ``close to 2 percent.''
To contact the reporter on this story: Helene Fouquet in Paris at hfouquet1@bloomberg.ne.
Read more...
July 15 (Bloomberg) -- The Bank of France said its index of manufacturing confidence fell to the lowest in five years in June and reiterated that the economy will growth at the slowest pace in almost two years in the second quarter.
The confidence index for the month of June declined to 95, the lowest since July 2003, from a revised 96 in May, the Paris- based central bank said today in a statement. The bank reiterated its previous forecast of a 0.2 percent expansion in the three months through June, the slowest since the third quarter of 2006.
``Industrial activity remained stable,'' the central bank said. ``Growth carried over for 2008 at the end of the second quarter is expected to stand at 1.3 percent.''
Finance Minister Christine Lagarde said that French economic growth would be on the lower end of the government's current forecast. The economy will expand at least 1.7 percent this year, at the bottom of the government's predicted range of 1.7 percent to 2 percent.
``We'll be on the lower end of the scale because our economy is undergoing external shocks such as a massive increase of oil prices,'' Lagarde said on Europe1 radio today.
France is feeling the pinch from a U.S.-led slowdown in global growth. In March, Prime Minister Francois Fillon reduced his growth forecast for 2008 to between 1.7 percent and 2 percent from ``close to 2 percent.''
To contact the reporter on this story: Helene Fouquet in Paris at hfouquet1@bloomberg.ne.
Read more...
South Korea May Use Price Controls to Cool Inflation
By Seyoon Kim
July 15 (Bloomberg) -- South Korea's government indicated it may implement price controls to cool decade-high inflation, a day after the central bank warned wage demands could ignite a ``vicious cycle'' of spiraling prices.
Government ministries should ``restore'' departments that are in charge of controlling prices and devise ways to stabilize costs of products under their responsibility, Vice Finance Minister Kim Dong Soo said at the start of the first of a new weekly meeting of ministries to discuss fighting inflation.
``In order to minimize the effect on ordinary people's lives, we need to take micro-economic measures'' as well as macro measures such as monetary and liquidity controls to damp inflation, Kim said. If rising prices boost ``inflationary expectations, that can push up wages and add a significant burden on the economy,'' he said.
President Lee Myung Bak's administration said in March it would monitor the prices of 52 products including rice, pork, milk and shampoo. In the past month the government has turned its focus from sustaining growth to fighting inflation that has sent confidence among consumers to a seven-year low.
``There will be a limit to what the government can do in terms of prices,'' said Kwon Young Sun, an economist at Lehman Brothers Holdings Inc. in Hong Kong, citing the risk that price controls could distort the market mechanism. ``Still, it's signaling constantly it's focused on stabilizing inflation.''
Bank of Korea Deputy Governor Kim Byung Hwa yesterday said wage demands could ignite a ``vicious cycle'' of spiraling prices.
Inflationary Expectations
``Policy makers want to prevent any inflationary expectations from spreading, even though I don't see a sign of those yet,'' said Lee Sang Jae, an economist at Hyundai Securities Co. in Seoul. ``If those expectations materialize, it could cause a spiral where people demand more wages because of rising prices and that pushes up consumer prices further.''
Record fuel costs and a weaker won drove consumer prices up 5.5 percent in June from a year earlier. In response, policy makers stepped up efforts to stem a drop in the South Korean won that has fanned price pressures by increasing the cost of imported goods including oil.
The won declined 0.2 percent to 1,006.30 per dollar as of 1:11 p.m. in Seoul. The currency last week advanced 4.8 percent as the finance ministry and central bank said they would use the nation's $258 billion of foreign reserves to support the won. For the year it is down 7 percent against the dollar.
Import Prices
South Korea's import prices rose 49 percent in June from a year earlier, the most in more than 10 years, the central bank said today. That's hurting the terms of trade, a measure of export prices relative to import prices, and squeezing corporate profit and household income.
The Bank of Korea kept interest rates unchanged at the highest level in seven years at 5 percent last week, adding it expects inflation to accelerate and economic growth to slow.
To contact the reporter on this story: Seyoon Kim in Seoul at skim7@bloomberg.net
Read more...
Bernanke Foiled as Fannie-Freddie Rescue Thwarts Forecasts
By Craig Torres and Steve Matthews
July 15 (Bloomberg) -- For Federal Reserve Chairman Ben S. Bernanke, events keep getting in the way.
The chairman is seeing his efforts at using forecasts to map an anti-inflation strategy shoved aside by the need to contain immediate damage to the economy, Fed watchers say. Bernanke today delivers his semiannual testimony on the economy to Congress, where he will release the projections officials discussed at their June 24-25 meeting.
``Things are out of his control,'' said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina.
Silvia, who used to work as chief economist of the Senate Banking Committee, where Bernanke testifies today, predicted that lawmakers' questions will mostly focus on how the financial crisis that has now engulfed Fannie Mae and Freddie Mac will ``affect the downside for the economy.''
Traders, who last month foresaw an interest-rate increase as soon as August, now anticipate the Fed will hold off until October, with the chance of a move by year-end dropping to 67 percent from 100 percent, futures contracts show.
The hearing is scheduled for 10 a.m. in Washington.
Bernanke last month said that the risks of a ``substantial downturn'' had diminished, and committed to ``strongly resist'' any jump in inflation expectations. The remarks spurred traders to bet the Federal Open Market Committee would raise its benchmark rate by year-end.
Stocks Slide
Risks to that outlook have risen after the Standard and Poor's Financials Index dropped 17 percent and Fannie Mae and Freddie Mac, the largest sources of U.S. home financing, lost more than half their value since the June FOMC meeting.
The U.S. Treasury and Fed were forced to assemble a rescue plan for Fannie and Freddie July 13 in an effort to stem a collapse of confidence in the firms. Two days earlier, the Federal Deposit Insurance Corp. took over IndyMac Bancorp Inc. as the California lender collapsed under soaring losses.
``The Fed's messages, complicated by the interaction between the real economy and financial system, have been confusing,'' said Mark Spindel, who runs the Washington-based hedge fund Potomac River Capital LLC and used to manage a $15 billion portfolio at the World Bank's International Finance Corp. ``They were hoping financial turbulence would have subsided. It hasn't at all.''
Paulson, Cox
Bernanke's economic outlook may also be overshadowed by the crisis today because Senator Christopher Dodd, who chairs the banking committee, said it will be ``brief.'' That's to accommodate a separate hearing with Bernanke, Treasury Secretary Henry Paulson, and Securities and Exchange Commission Chairman Christopher Cox on financial markets.
Bernanke has pushed the FOMC to tie policy to an intermediate forecast. Under his guidance, Fed governors and district-bank presidents since October have published their projections four times a year, up from twice previously. The estimates are now for the coming three years, instead of two.
The strategy has been tested over the past year as bouts of financial turbulence clouded the economic outlook, forcing officials to alter their messages.
Policy makers on Aug. 7 kept their benchmark lending rate unchanged at 5.25 percent, and cited inflation as the ``predominant policy concern.'' Ten days later, a surge in funding costs prompted them to reverse course and lower the charge for direct loans to banks.
Changing Tack
Two months later, the FOMC said that growth and inflation risks ``roughly balance'' each other, before abandoning that assessment to lower rates again in December and execute an emergency reduction in January.
In June, Bernanke began highlighting a rising risk of inflation, presaging the June 24-25 FOMC meeting, where officials halted their series of seven rate cuts since September.
Consumer prices probably climbed 4.5 percent in June from a year earlier, close to the fastest pace since 1991, economists project a Labor Department report will show on July 16. Inflation has been stoked by soaring costs of fuel and food, with crude oil prices reaching a record $147.27 a barrel on July 11.
The Fed chairman's challenge today is to explain how the Fed will manage inflation risks without signaling that policy makers are preparing to raise rates, economists said.
``Financial developments have planted a few extra land mines'' for Bernanke, said Tom Gallagher, managing director in Washington for ISI Group, a money management and research firm. ``He will not want to unsettle markets, but he can't appear'' soft on inflation, Gallagher said.
Stock Slump
Fannie Mae has fallen 61 percent in the past month, and Freddie Mac has lost 69 percent. The declines in the companies that own or guarantee about half of the $12 trillion in U.S. home loans outstanding threaten to increase mortgage rates, deepening the worst housing recession in 25 years.
Paulson proposed two days ago legislation giving the Treasury the power to make unlimited purchases of equity in the firms, and to increase their credit lines. In the interim, the Fed agreed to let Fannie Mae and Freddie Mac borrow directly from the central bank.
``The Fed's message that substantial downside risks have diminished now just seems completely ill-timed,'' said Brian Sack, senior economist at Macroeconomic Advisers LLC. ``It is hard to see them tightening anytime this year.''
To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net; Steve Matthews in Atlanta at smatthews@bloomberg.net.
Read more...
Forex Technical Analytics
Daily Forex Technicals | Written by FOREX Ltd | Jul 15 08 07:41 GMT |
Read more...
CHF
The pre-planned short positions from the key resistance range have been realized with overlap of minimal assumed target. OsMA trend indicator having generally marked the close activity parity of both parties as well as the feature of oversold factor near channel line '2' gives grounds to presume a possibility of rate correction period within the version of ascending trading channel. Hence and to reduce trading risks we assume a possibility of pair return to resistance range 1.0180/1.0200, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term sells on condition of formation of topping signals the targets will be 1.0120/40, 1.0090/1.0100 and/or further breakout variant up to 1.0020/40, 0.9980/1.0000. An alternative for buyers will be above 1.0240 with the targets 1.0280/1.0300, 1.0320/40
GBP
The pre-planned buyers' positions from the key supports have been realized with attainment of main assumed targets. OsMA trend indicator having marked the features of overbought factor without confirmative strengthening of bearish counteraction gives grounds to preserve buyers' planning priorities for today. Hence and to reduce trading risks we assume a possibility of pair return to supports 1.9880/1.9900, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term buyers' positions on condition of formation of topping signals the targets will be 1.9950/70, 2.0000/20 and/or further breakout variant up to 2.0060/80, 2.0120/40, 2.0180/2.0200. An alternative for sells will be below 1.9840 with the targets 1.9780/1.9800, 1.9720/40, 1.9680/1.9700.
JPY
The pre-planned short positions from the key resistance range have been realized with attainment of main assumed targets. OsMA trend indicator having marked the activity fall of both parties with some advantage of bullish party gives grounds to presume pair return to the range of 106.20/40, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term sells on condition of formation of topping signals the targets will be 105.60/80 and/or further breakout variant up to 105.00/20, 104.60/80. An alternative for buyers will be above 107.00 with the targets 107.40/60, 107.80/108.00.
EUR
The pre-planned buyers' positions from the key supports have been realized with attainment of minimal assumed target. OsMA trend indicator having marked the activity fall of both parties is not a confirmative feature for a choice of planning priorities for today. Hence because of chosen strategy based on presumption about possible range movement of the rate we assume a possibility of pair return to channel line '1' to support range 1.5850/70, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term buyers' positions on condition of formation of topping signals the targets will be 1.5920/40, 1.5980/1.6000 and/or further breakout variant above 1.6020 with the targets 1.6060/80, 1.6100/20. As before an alternative for sells will be below 1.5800 with the targets 1.5740/60, 1.5700/20.
FOREX Ltd
www.forexltd.co.uk
Read more...
Retail Sales in U.S. Probably Rose as Americans Spent Rebates
By Shobhana Chandra
July 15 (Bloomberg) -- Retail sales in the U.S. probably rose in June as Americans spent tax rebates and record gasoline prices boosted receipts at service stations, economists said before a government report today.
Purchases increased 0.4 percent after a 1 percent gain the prior month, according to the median estimate of 81 economists surveyed by Bloomberg News. A separate report may show food and fuel pushed up wholesale prices.
Consumers flocked to discounters including Wal-Mart Stores Inc. and Costco Wholesale Corp. to stretch the buying power of the government's stimulus checks as home values fell, fuel prices surged and firings mounted. Federal Reserve Chairman Ben S. Bernanke, facing a pickup in inflation and slower growth, is also scheduled to testify before Congress today.
``The stimulus payments will boost spending again, as they did in May,'' said Brian Bethune, an economist at Global Insight Inc. in Lexington, Massachusetts. ``The worry for the future is that sales will fall back, in line with increasingly gloomy fundamentals.''
The Commerce Department's retail sales report is due at 8:30 a.m. in Washington. Forecasts ranged from a drop of 0.4 percent to a gain of 1.5 percent.
Also at 8:30 a.m., Labor Department figures may show prices paid to producers climbed 1.4 percent last month, matching May's gain, according to the survey median. Wholesale costs in the 12 months through June probably rose by the most since 1981.
Other reports today are forecast to show that inventories climbed in May and manufacturing in New York contracted this month for the fifth time since February.
Bernanke Testimony
Bernanke, who cut interest rates this year at the most aggressive pace in two decades, will testify before the Senate today as part of the central bank's semi-annual report on the economy.
The retail report may also show Americans are shunning big- ticket purchases. Sales excluding automobiles increased 1 percent in June, according to the survey median. Cars and light trucks sold in June at a 13.6 million annual pace, the weakest since 1993, according to industry data issued earlier this month.
Gasoline service-station receipts probably jumped. Regular unleaded fuel prices topped $4 a gallon for the first time in June and have continued climbing this month, according to AAA.
Rising energy costs erode households' purchasing power and add to the risk that companies will try to raise prices, triggering a broader pickup in inflation.
Growth Forecasts
The twin concerns may prompt Fed policy makers to keep interest rates unchanged this year, a Bloomberg survey last week showed. Economic growth will slow to a 0.5 percent annual rate in the fourth quarter, the weakest pace in six years, and consumer spending will post the smallest gain since 1991, according to the economists surveyed.
The government distributed $86.1 billion in stimulus checks through July 4, out of a total plan of about $110 billion. Rebate-linked promotions boosted sales at retail stores open at least a year to a better-than-forecast 4.3 percent gain in June, according to the International Council of Shopping Centers.
Wal-Mart's same-store sales jumped 5.8 percent, the most in four years. The Bentonville, Arkansas-based company's U.S. discount stores and its Sam's Club membership warehouses drew additional customers who spent more on average per visit than in prior months.
``We continue to see a shift in the overall mix toward fuel, food and consumables, as our members manage through the current environment,'' Doug McMillon, Sam's Club president and chief executive officer, said in a statement on July 10.
Bloomberg Survey
================================================================
PPI Core Retail Retail
PPI Sales ex-autos
MOM% MOM% MOM% MOM%
================================================================
Date of Release 07/15 07/15 07/15 07/15
Observation Period June June June June
----------------------------------------------------------------
Median 1.4% 0.3% 0.4% 1.0%
Average 1.3% 0.3% 0.4% 1.0%
High Forecast 2.9% 0.5% 1.5% 1.8%
Low Forecast 0.5% 0.1% -0.4% 0.4%
Number of Participants 77 74 81 75
Previous 1.4% 0.2% 1.0% 1.2%
----------------------------------------------------------------
4CAST Ltd. 1.8% 0.3% 0.8% 1.6%
Action Economics 1.5% 0.2% 1.0% 1.5%
AIG Investments 1.5% 0.5% 0.9% 1.5%
Aletti Gestielle SGR 1.1% 0.3% 0.3% 0.8%
Allianz Dresdner Economic --- --- 0.5% ---
Argus Research Corp. 0.5% 0.4% 0.4% 0.6%
Banc of America Securitie 0.9% 0.2% 0.6% 0.8%
Bank of Tokyo- Mitsubishi 1.4% 0.3% 0.4% 0.8%
Bantleon Bank AG 1.5% --- 0.4% 0.9%
Barclays Capital 1.5% 0.3% 0.6% 1.3%
BBVA 0.9% 0.3% 0.2% 0.7%
BMO Capital Markets 1.4% 0.4% 0.8% 1.1%
BNP Paribas 1.5% 0.3% 0.6% 1.0%
Briefing.com 1.3% 0.3% 0.5% 1.0%
Calyon 1.3% 0.2% 0.4% 1.0%
CFC Group --- --- 0.3% 0.8%
CIBC World Markets 1.7% 0.3% 0.3% 1.1%
Citi 1.0% 0.2% 0.5% 1.2%
ClearView Economics 0.8% 0.3% 0.5% 0.9%
Commerzbank AG 1.6% 0.3% 0.7% 1.2%
Credit Suisse 1.1% 0.2% 0.5% 1.2%
Daiwa Securities America 0.8% 0.2% 0.6% 0.7%
Danske Bank 1.1% 0.2% 0.4% 1.1%
DekaBank 1.3% 0.3% 0.3% 0.8%
Desjardins Group 1.0% 0.2% 0.7% 1.2%
Deutsche Bank Securities 1.5% 0.3% 0.3% 0.7%
Deutsche Postbank AG 1.0% 0.3% 0.3% 0.9%
Dresdner Kleinwort 1.3% 0.2% 0.3% 1.0%
DZ Bank 1.4% 0.3% 0.3% 0.7%
First Trust Advisors 1.8% 0.3% 0.1% 0.9%
Fortis 0.7% 0.3% 0.2% ---
FTN Financial 1.0% 0.2% 0.9% 1.5%
GCI Capital 1.3% 0.3% 0.5% 0.9%
Global Insight Inc. 1.8% 0.3% 0.8% 1.5%
Goldman, Sachs & Co. 1.1% 0.3% 0.1% 0.6%
H&R Block Financial Advis 1.2% 0.3% 0.3% 0.8%
Helaba 1.2% 0.3% 0.2% 0.7%
High Frequency Economics 1.4% 0.3% 0.5% 1.5%
Horizon Investments 1.1% 0.3% 0.8% 1.3%
HSBC Markets 1.3% 0.1% 0.0% 0.9%
IDEAglobal 1.5% 0.3% 0.3% 1.0%
Informa Global Markets 1.1% 0.3% 0.1% 0.5%
ING Financial Markets 1.4% 0.2% 0.0% 1.2%
Insight Economics 1.4% 0.2% 0.4% 1.0%
Intesa-SanPaulo 1.5% 0.3% 1.0% 0.4%
J.P. Morgan Chase 1.4% 0.3% 0.1% 0.9%
Janney Montgomery Scott L 2.1% 0.4% 0.7% 1.3%
JPMorgan Private Client 1.4% 0.3% 0.6% 1.0%
Landesbank Berlin 1.2% 0.3% -0.1% 0.5%
Lehman Brothers 1.3% 0.3% 0.6% 1.1%
Lloyds TSB 1.4% 0.3% 0.4% 0.4%
Maria Fiorini Ramirez Inc 1.4% 0.3% 0.3% 1.1%
Merk Investments 1.5% 0.4% 0.7% 1.0%
Merrill Lynch 2.9% 0.3% 1.1% 1.6%
Moody's Economy.com 1.4% 0.3% 0.2% 0.8%
Morgan Stanley & Co. 1.6% 0.2% 0.4% 0.9%
National Bank Financial 1.3% 0.3% 1.0% 1.2%
National City Corporation 0.7% 0.2% 0.2% 0.8%
Natixis 1.6% 0.3% 0.7% 1.0%
Newedge 1.4% 0.3% 0.8% 1.0%
Nomura Securities Intl. 0.8% 0.1% 0.3% 0.7%
Nord/LB 1.4% 0.3% 0.0% 0.6%
Okasan Securities --- --- 0.4% ---
PNC Bank 1.5% 0.3% 0.5% 0.9%
RBS Greenwich Capital 1.3% --- 0.3% ---
Ried, Thunberg & Co. 1.6% 0.3% 0.3% 1.2%
Schneider Trading Associa 1.6% 0.2% 0.0% 0.6%
Scotia Capital 1.6% 0.4% 0.9% 1.5%
Societe Generale 1.4% 0.2% 0.2% 0.9%
Standard Chartered 1.3% 0.3% 0.4% 0.9%
Stone & McCarthy Research 0.6% 0.3% 1.5% 1.8%
TD Securities --- --- 0.2% 0.8%
Thomson Financial/IFR 1.6% 0.2% 0.6% 1.1%
UBS Securities LLC 1.5% 0.2% 0.2% 0.9%
Unicredit MIB 1.0% 0.2% 0.5% ---
University of Maryland 1.0% 0.2% -0.4% 0.4%
Wachovia Corp. 1.0% 0.1% 0.1% 1.1%
Wells Fargo & Co. 1.3% --- 1.0% ---
WestLB AG 1.0% 0.2% 0.6% 1.0%
Westpac Banking Co. 1.8% 0.2% 0.1% 0.6%
Wrightson Associates 1.6% 0.3% 0.3% 1.2%
================================================================
To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net
Read more...
Brazil, Chile, Peru: Latin America Bond, Currency Preview
By Jamie McGee
July 15 (Bloomberg) -- The following events and economic reports may influence trading in Latin American local bonds and currencies today. Bond yields and exchange rates are from a previous session.
Brazil: Retail sales increased by 9.9 percent in May, compared to 8.7 percent growth in April, according to the median estimate of 25 economists in a Bloomberg survey.
The government is scheduled to release the data at 8 a.m. New York time.
The real rose 0.4 percent to 1.5948 per dollar.
The yield on the country's zero-coupon bonds due January 2010 rose 3 basis points, or 0.03 percentage point, to 15.13 percent, according to Bloomberg pricing.
Chile: The central bank can't afford to risk losing credibility by not acting against inflation, bank President Jose De Gregorio told lawmakers in Santiago.
``The loss of credibility, which happens when the right decisions are not taken at the right time, only leads to higher costs for controlling inflation,'' De Gregorio said before the Chamber of Deputies economics committee in Santiago. ``Containing inflation isn't free, but postponing that containment is even more expensive.''
The peso rose 1.07 percent to 496.71 per dollar.
The yield for a basket of five year peso bonds in inflation-linked currency units, called the unidades de fomento, rose 5 basis points or 0.05 percentage point, to 2.95 according to the Bloomberg composite prices.
Peru: The economy expanded by 8 percent for the year ending in May, compared to 13.3 percent growth in the 12 months through April, according to the median estimate of 9 economists in a Bloomberg survey. The central bank is slated to release the data at 11:30 a.m. New York time.
The sol rose 0.32 percent to 2.8235 per U.S. dollar.
The yield on the nation's 8.6 percent sol-denominated bonds due in August 2017 was unchanged at 7.63 percent according to Citigroup Inc.'s unit in Peru.
To contact the reporter on this story: Jamie McGee in New York at jmcgee8@bloomberg.net
Read more...
July 15 (Bloomberg) -- The following events and economic reports may influence trading in Latin American local bonds and currencies today. Bond yields and exchange rates are from a previous session.
Brazil: Retail sales increased by 9.9 percent in May, compared to 8.7 percent growth in April, according to the median estimate of 25 economists in a Bloomberg survey.
The government is scheduled to release the data at 8 a.m. New York time.
The real rose 0.4 percent to 1.5948 per dollar.
The yield on the country's zero-coupon bonds due January 2010 rose 3 basis points, or 0.03 percentage point, to 15.13 percent, according to Bloomberg pricing.
Chile: The central bank can't afford to risk losing credibility by not acting against inflation, bank President Jose De Gregorio told lawmakers in Santiago.
``The loss of credibility, which happens when the right decisions are not taken at the right time, only leads to higher costs for controlling inflation,'' De Gregorio said before the Chamber of Deputies economics committee in Santiago. ``Containing inflation isn't free, but postponing that containment is even more expensive.''
The peso rose 1.07 percent to 496.71 per dollar.
The yield for a basket of five year peso bonds in inflation-linked currency units, called the unidades de fomento, rose 5 basis points or 0.05 percentage point, to 2.95 according to the Bloomberg composite prices.
Peru: The economy expanded by 8 percent for the year ending in May, compared to 13.3 percent growth in the 12 months through April, according to the median estimate of 9 economists in a Bloomberg survey. The central bank is slated to release the data at 11:30 a.m. New York time.
The sol rose 0.32 percent to 2.8235 per U.S. dollar.
The yield on the nation's 8.6 percent sol-denominated bonds due in August 2017 was unchanged at 7.63 percent according to Citigroup Inc.'s unit in Peru.
To contact the reporter on this story: Jamie McGee in New York at jmcgee8@bloomberg.net
Read more...
Subscribe to:
Posts (Atom)
Posts
