Daily Financial Market Outlook

Daily Forex Fundamentals | Written by Lloyds TSB | Feb 26 09 08:33 GMT |

Overview & economic commentary A heavy calendar for key speeches, events and data releases today. US President Obama publishes his first budget proposal, which is anticipated to prepare the way for a sharp drop in the fiscal deficit from around $1,300bn currently to $533bn by 2013 through a combination of upper-level income tax increases, revenues from the sale of emission permits and cuts in spending on the Iraq war. He is also likely to outline his plans for healthcare reform and tackling climate change. In addition, BoE Governor King and members Tucker, Haldane and Bailey testify at the Treasury Committee Hearing on the Banking Crisis. It is possible that these speakers will give more information on measures such as quantitative easing in advance of the MPC policy meeting next Thursday. Likewise, President Trichet's speech at 13:00 will also attract interest. Economic data include German unemployment figures and EU-16 consumer & industrial confidence figures this morning - both sets of data are likely to worsen. In the US this afternoon, initial jobless claims, durable goods and new home sales provide focus. Outcomes are likely to add to deepening concerns about US jobs, manufacturing and the depressed housing market. This week's announcement that S&P/Case-Shiller composite house price index fell by a record 18.55% in December has exacerbated fears that the US Treasury's treatment of toxic mortgage assets is not tackling the problem and that more has to be done. Also today, the UK DMO auctions £2.75bn of 4% gilts due 2022 and the US Treasury auctions $22bn of 7yr notes. Currency commentary Yen weakness carried o/n after weekly data from the Japanese MoF showed foreign investors sold Y2.1trn worth of securities. $/Y cleared 97.50 and now looks set to test 98.0, especially if equities can stabilise. S&P futures are currently up 4.0. £/Y settled back below 138.90. BoE governor King tops the agenda today and his comments to the TSC could move sterling and gilts as markets look for comments about QE, state guarantees for the banks, and clues ahead of next week's MPC meeting. £/$ slipped below 1.42 o/n and does not appear in a position to draw some strength from a bank led bounce in equities on the back of the RBS results. US weekly claims and durable goods orders are out later today and may impact the dollar. The US equity market could also bounce after the US treasury announced that stress test for the banks will be concluded by the end of March and banks will have 6 months to tap new private/public funds. EM currencies in Asia and E. Europe are under pressure despite the rally in stocks. Major data and events today UK Nationwide house prices (07:00) Jan -1.3% Y-O-Y -16.6% Feb (actual) -1.8% Y-O-Y -17.6% German unemployment (sa, rate) (08.55) Jan +56K Rate 7.8% Feb (f'cast) +50K Rate 7.9% Median +60K Rate +30K:+80K EU-16 money supply, M3 (sa) (09:00) Dec Y-O-Y +7.3% Jan (f'cast) Y-O-Y +7.0% Median +6.9% Range +6.0%:+7.3% EU-16 consumer confidence (10:00) Jan -31 Feb (f'cast) -33 Median -31 Range -33:-29 EU-16 industrial confidence (10:00) Jan -34 Feb (f'cast) -36 Median -34 Range -36:-30 US Initial claims (w/e 21/2) (13:30) Previous 627K Forecast 620K Median 630K Range 600K:670K US Durable goods orders (13:30) Dec -2.6% Y-O-Y -19.7% Jan (f'cast) -4.0% Y-O-Y -20.8% Median -2.5% Range -4.5%:+4.6% US New home sales (15:00) Dec 0.331mn Jan f'cast) 0.350mn Median 0.325mn Range 0.291m:0.362m Japanese labour market, prices, industrial output, retail sales data (23:30/23:50) UK DMO to auction £2.75bn of 4% gilts due 2022 (10:30) BoE members King, Tucker, Haldane and Bailey testify to the Treasury Committee on the banking crisis (10:30) ECB President Trichet speaks in Dublin (13:00) ECB member Nowotny speaks in Vienna (17:00) US Treasury to auction $22bn of 7yr notes (18:00) US President Obama releases his first budget proposal Chart of the day: Will EU-16 confidence indicators for February dip further below historic levels? 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