FOREX TRADING

The dollar declined versus its rivals on Thursday while equity and commodity prices rose on optimism that the EU and IMF are moving toward agreement on a large aid package for Greece. The S&P 500 climbed 15.42 to 1,206.78 on better-than-expected earnings reports. The yen was little changed. The euro gained modestly as fears eased over the fiscal problems of Greece and other countries on the eurozone periphery. Vassilis Papadimitriou, a spokesman for Greek Prime Minister George Papandreou, said Greece is negotiating for a loan worth €120 billion through 2012. Sterling advanced on rising UK home prices. The Australian dollar inched higher. The Australian LEI declined for a second month, reducing risks of an imminent interest-rate hike by the Reserve Bank of Australia. The Canadian dollar was up slightly. Bank of Canada Governor Mark Carney said the BOC’s removal of its conditional commitment to keep rates unchanged at a very low level represents a tightening of monetary policy. He said: ‘Going forward, nothing is pre-ordained. The extent and timing of any additional withdrawal of monetary stimulus will depend on the outlook for economic activity and inflation.’

After breaking its steep uptrend two weeks ago, the dollar index rose 9 out of the last 11 trading days but fell today on easing sovereign default risk. The index is again testing the 82-area resistance. If this is broken, the index will likely surge. However, consolidation between 81 and 82 is possible after strong recent gains.

(more…)

U.S. Review

Economic Recovery Continues, but is it Enough?

• Economic indicators this week suggested continued economic growth. Factory orders, the Institute for Supply Management manufacturing index and employment all suggest continued progress.
• Yet the pace of the recovery still presents several fundamental challenges. First, construction spending is disappointing and for a society that has put so much emphasis on housing, there is a disconnect between aspirations and reality. Second, the pace of growth will not likely solve the budget shortfalls in many states or at the national level.

Economic Recovery Continues, but is it Enough?

Three important economic indicators this week suggested continued economic growth. Factory orders, the Institute for Supply Management Index and employment all suggested continued progress on the economic front. Factory orders increased 0.6 percent in February and the gain reported for January was revised higher. Factory orders have gained in 10 of the past 11 months and are now more than a third of the way back to where they were at their peak in July 2008. Specifically, new orders for non-defense capital goods ex-aircraft are up nine percent (annualized) over the last three months, consistent with our expectations for 8 percent or more gains in real equipment & software spending for this year.

(more…)

Initial jobless claims for the week ending 01/09 will be released on Thursday January 14th at 8:30 AM ET and are expected at 437k. Initial jobs claims rose 1k during the week ending January 2nd to 434k, a reading of 447k was expected. The jobless claims report is important because last Friday’s report of an unexpected 85k decline in nonfarm payroll raises concern that the improvement in the labor market may have stalled. In addition, Fed policy is closely tied to the outlook for jobs with the Fed indicating that rate hikes are unlikely until jobs creation becomes sustainable. The jobs outlook will be key to the timing of the Feds rate hike cycle. Jobless claims have been trending lower and are at their lowest level in 16 months. The four-month moving average of jobless claims fell to the lowest level since mid-September. Despite the positive trend in jobless claims the US labor market remains weak. The Labor Department reported that job openings in US dropped by 50% in the last two years. In June 2007 there were 4.7mln job openings in the US and in November the number had fallen to 2.4mln. According to the Labor Department the number of job seekers outnumbers the available jobs in the US by 6 to 1. The jobless claims data and Labor Department report indicate that layoffs are slowing in the US but there is no sign of any significant pickup in hiring. The lack of jobs creation will have significant implications for the strength of the US recovery because it will limit consumer demand and may encourage the government to take additional steps to boost jobs growth. These steps could include a new jobs stimulus plan which could lead to increased pressures on the US budget deficit. According to the White House the stimulus plan has saved 2mln jobs. Most economists believe that a jobless claims decline below 400k would signal that jobs are being created in the US (more…)