FOREX TRADING

U.S. Review

Upbeat, Downbeat or Simply No Rhythm

• Economic news continues to come in mixed, with positive reports on retail sales and the trade deficit being offset by disappointing reports on small business optimism and unemployment claims.
• Revised employment data for states show larger job losses during the recession and cast some doubt on January’s drop in the national unemployment rate.
• Stronger retail sales and declines in imports led to surprising drops in inventories at retailer and wholesalers in January. Inventories rose slightly at manufacturers, however.

Still on Pace for a Modest Economic Recovery

February’s retail sales report was easily the best economic news released this week. Overall sales rose 0.3 percent during February, with strong gains reported across nearly every major category. Sales excluding gasoline, building material and automotive dealers, which is a category that tends to track the personal consumption data, rose 0.9 percent in February, following a 0.6 percent gain in January. The strong back-to-back gains suggest consumer spending will rise at a 2.2 percent pace or better during the first quarter, which is in line with our forecast, published earlier this week.

One complicating factor in the retail sales figures is that retailers have done a really good job at bringing inventories in line with sales and are discounting much less than they did in prior years. As a result, the better numbers reported for January and February may not reflect as much volume as they first appear. The lack of discounting is also apparent in the Consumer Price Index, which has shown larger price gains for core good prices. Prices for core goods are currently up 2.9 percent over the past year, which is their largest gain since the early 1990s.

(more…)

USD Off Lows, Retail Sales Beat Expectations

• USD: Lower, Yellen appointed to the Fed, retail sales post unexpected rise, consumer sentiment dips
• JPY: Lower, BOJ may double QE, threat of intervention
• EUR: Higher, Greek debt fears fade, talk of German/French Greek rescue package, industrial output surged
• GBP: Higher, house prices jump, Conservatives expand lead in the polls
• CAD and AUD: AUD mixed & CAD higher, Canada’s employment growth beats expectations

Overview

The USD traded at a three week low Friday pressured by announcement that President Obama will nominate Janet Yellen as vice chair of the Federal Reserve. Yellen is a policy dove and her appointment will likely mean that the Fed will keep interest rates low for much of 2010. USD was also pressured by improving risk appetite as global equity markets rally. The EUR traded higher supported by diminishing concern about the Greek debt crisis and in reaction to report that Germany and France may be considering a $55bln rescue plan for Greece. GBP traded higher supported by report of a jump in UK house prices. Commodity currencies traded higher supported by stronger equity markets and improving risk sentiment with CAD supported by report of stronger than expected Canadian employment and BOC rate hike speculation. AUD gains were limited by speculation the RBA will pause in April. JPY traded lower pressured by report that the BOJ may double the size of its quantitative ease to ¥20trln and in reaction to increasing threat of BOJ intervention. US economic data was mixed with retail sales reported stronger than expected, Michigan consumer confidence posted a slight drop. Business inventories were unchanged. USD came off its lows as US equities turned lower after the release of today’s data. Focus turns to next weeks Fed policy meeting on March 16th. No Fed policy change is expected. Investors will be looking to see whether the Fed makes any changes in its policy statement in regard to the language of "extended period" for low rates.

(more…)

USD Mixed, Hoenig Says Zero Rates Not Sustainable

• USD: Lower, risk appetite improves as stocks rally, hope for Greek aid
• JPY: Higher, unemployment unexpectedly declines, government call for the BOJ to target inflation/buy JGB’s
• EUR: Lower, supported by short covering ahead of Wednesday’s Greek budget announcement
• GBP: Lower, construction PMI falls, election polls point to a hung parliament
• CAD and AUD: AUD & CAD higher, RBA rate hike, strong retail sales, BOC refers to higher CPI

Overview

The EUR and GBP made new lows for the year in overseas trade pressured by concern about sovereign debt risk in peripheral European nations and UK debt. Despite ongoing uncertainty about the Greek fiscal outlook there was limited follow through selling of the EUR and the USD traded lower in the US session. Greece is expected to outline its budget plans Wednesday. Anticipation that Greece will announce significant austerity measures sparked a short covering rally in the EUR. If Greece takes credible action to reduce its deficit it will increase the likelihood of EU aid for Greece. GBP continued to underperform. The latest UK election polls point to a hung parliament which generates concern that the UK government may not have the political backing to cut the UK deficit. The AUD traded higher supported by the RBA’s 25bps rate hike. CAD continues to rally in reaction to yesterday’s release of stronger than expected Canadian Q4 GDP and a slightly less dovish bias from the BOC. The BOC elected to hold rate policy unchanged as expected but dropped language in its policy statement that inflation risk is “tilted to the downside.” JPY edged higher supported by better than expected January unemployment and report that Japan’s finance minister calls on the BOJ to consider targeting inflation. USD experienced light short covering ahead of tomorrow’s Greek budget plan announcement. USD downside was limited by hawkish comments from the Feds Hoenig. Hoenig said that zero rates are not sustainable and the Fed must be prepared to hike rates while unemployment rate is still high. Hoenig is seen as a minority voice on the FOMC but his comments helped to limit today’s USD selloff.

Focus turns Thursday’s ECB and BOE policy meetings and Fridays release of US unemployment. The ECB is expected to remain on hold and there is uncertainty about whether the BOE will maintain its current level of asset purchases. US February unemployment is expected to post a modest rise with nonfarm payrolls unchanged from last month. (more…)

Several nations have unfinished housework before investors can make further informed assumptions over future currency direction. That’s the message stemming from the world’s largest and most furiously traded market this morning. Hawkish comments from a Fed messenger boosted the dollar although are likely to cause conflicting rebuttals. The ongoing discussions to get the Greek house looking tidier as keeping euro sellers busy, while Britons are growing more alarmed at who is best cut out to do the nation’s dirty laundry after the summer election. It’s central bank meeting time for the commodity units with investors wondering whether the RBA’s raise in interest rates today concludes its housework, while Canadians are wondering whether the same process is soon to get underway in earnest.

U.S. Dollar – I wonder whether the fact that Philadelphia Fed President Charles Plosser doesn’t get to vote on the FOMC throughout 2010 makes him more provocative than if he did vote. His comments to the Wall Street Journal carried today sound pretty hawkish and argue for a closer end to low interest rates. He says the Fed should back-off its “extended period” positioning and notes, “I don’t like that language. It ties our hands, or people believe that it ties our hands.”

(more…)

USD Lower, Bernanke Says Rates to Stay Low, Stocks Rally

• USD: Lower, new home sales declined by 11.2%, Bernanke says rates to stay low for an extended period
• JPY: Higher, exports rise, safe haven demand as Asian equities decline
• EUR: Higher, EU industrial orders rise,ECB’s Gonzalez-Paramo downplays risk of contagion from Greece
• GBP: Mixed, BOE’s Posen said he expects UK inflation to remain subdued, QE will be expanded if needed
• CAD and AUD: AUD & CAD higher, China tells commercial lenders to restrict lending to local governments

Overview

The USD traded mixed to lower Wednesday with the EUR rebounding supported by report of better than expected EU industrial orders and speculation that Bernanke will signal that US interest rates will remain at zero for some time. The GBP continues to underperform pressured by a dovish statement from the BOE’s Posen. Posen said that the BOE will expand quantitative ease if necessary. Commodity currencies opened lower pressured by weaker Asian equity market trade and report that China took action to curb lending. China’s regulators told its commercial banks to restrict lending to local governments. Commodity currencies turned higher in US trade, tracking a rally in US equities sparked by Bernanke’s testimony. JPY traded higher for the fourth day in a row supported by report of a jump in Japan’s January exports. In his testimony before Congress Fed Chairman Bernanke said the economy still needs help, a sustained recovery remains in question and interest rates will stay low for an “extended period.” Bernanke went on to say the Fed will have to tighten at some point to prevent inflationary conditions but he gave no clue when that point might be. Bernanke’s testimony was seen a bit more dovish than expected as he confirmed the Fed extend period language. Some analysts have suggested that the Fed’s discount rate hike last week would be a prelude to the Fed dropping the extended period language from its next communiqué. This seems less likely after today’s testimony. The Fed’s Bullard said rates may stay near zero for all of 2010 and the USD trades lower as stocks rally. US economic data was weak with new home sales reported down by a record 11.2%. (more…)

USD Mixed, PPI Jumps and Jobless Claims Rise

• USD: Lower, jobless claims rise, PPI higher than expected, Philly Fed improves, LEI rose less than expected
• JPY: Higher, BOJ holds monetary policy steady, no expansion of QE, Yuan revaluation speculation
• EUR: Lower, rumors of SNB intervention in EUR/CHF cross, stocks higher, Italian debt troubles
• GBP: Lower, worse than expected public-sector borrowing in January, mortgage approvals decline
• CAD and AUD: AUD & CAD higher, IMF gold sales, Canadian CPI nears BOC target, CRB rebounds

Overview

USD opened near a nine-month high Thursday supported by a number of factors which include Wednesday’s report that the FOMC had considered a 25bps discount rate hike in January, in reaction to stronger than expected US economic data, and by fresh sovereign debt concern with the focus shifting to Italian debt troubles. Wednesday the US reported strong housing and industrial production data. These reports encourage speculation that the US recovery is gaining momentum and fuel speculation of an earlier Fed rate hike. The EUR was pressured by a Dow Jones report that says derivative contracts used by Italian municipalities could magnify debt imbalances over time. European sovereign debt concern continues to pressure the EUR and GBP. GBP traded lower pressured by report that the UK posted its first January budget deficit on record. The commodity currencies opened lower pressured by report that the IMF looks to sell 191.3 tons of gold. News of the IMF gold sales sparked selling of commodities. The AUD downside was limited by hawkish comments from the RBA’s Lowe and rising Australian consumer confidence. CAD turned higher in reaction to report that Canada’s CPI rose sharply in January with the annual inflation rate approaching the BOC’s 2% target. JPY traded higher supported by a drop in risk appetite and in reaction to the BOJ’s decision to hold monetary policy steady and not expand quantitative ease. The BOJ has been under pressure from the Japanese government to take additional measures to combat deflation. JPY was also supported by speculation that China may allow the Yuan to appreciate by as much as 5% next month. Yuan appreciation could help China slow the pace of its recovery. Today’s US economic data was mixed with initial jobless claims posting an unexpected rise. PPI came in higher than expected. The PPI report suggests that inflationary pressures are rising in the US. Rising inflation could encourage more Fed rate hike speculation. The Philly Fed survey came in slightly higher than expected and leading indicators came in below expectation. The employment component of the Philly Fed showed improvement and stocks edged higher. USD turned lower after the release of today’s US economic reports as US equity markets trade higher. (more…)

U.S. Review

So Much Growth, Yet So Few Jobs

• Seldom have the interdependencies of markets been so obvious to practitioners and yet so opaque to policymakers. Struggles in the labor market have been evolving for years, in both expansions and recessions, and yet policymakers romanticize about the past and leave the American worker ill prepared for the future.
• Meanwhile, the gains in business investment are accumulating, suggesting both a change in the way we produce goods and services as well as the continued pressures for global competitiveness.

Triangulation Does not Work in Economics

Sequential attempts to deal with particular problems in our economy have not solved any problems since the recession began. Instead, we have simply pushed the economic pressures in the economy, as if it were a child’s balloon, to another part of the balloon. Almost four years ago we published an article on the domestic implications of a global labor market (Business Economics, July 2006). Three themes were paramount and we can see them repeated today. First, prior labor market benchmarks are outmoded by the emergence of a global labor market. Second, the U.S. labor market has become an increasingly dual labor market where service and goods workers face increasingly different economic forces and that the workers in each sector find it increasingly difficult to move between sectors. This has given rise to significantly different unemployment rates for workers across sectors and with varied educational backgrounds. Finally, participation rates for all workers and especially for teenagers are heavily influenced by changing household preferences as well as regulations such as the minimum wage.

As a result, stronger real GDP growth has not translated into commensurate employment gains. Nonfarm employment fell during the fourth quarter and is expected to average 60,000 for the first half of this year. In its Economic Report of the President, the Obama Administration estimates job gains on average of 95,000 for this year with the unemployment rate at 9.8 percent at the end of this year. We find this employment outlook refreshingly realistic. Businesses are still concerned about the staying power of the recovery and are also uncertain as to what the outcome of the health care legislation will be. Cap and trade is also out there as well as the likelihood of higher income and wealth taxation. (more…)

USD Higher, Chinese Rate Hike Sparks Risk Aversion

• USD: Higher, China hikes reserve rates, stocks and commodities decline
• JPY: Lower, Nikkei closes higher before the China rate announcement
• EUR: Lower, doubt about the Greek rescue, EU growth slows
• GBP: Lower, downside limited by gains in cross to EUR
• CAD and AUD: AUD & CAD lower, pressured by spike in risk aversion, China rate hike

Overview

USD traded at a seven-month high Friday supported by a spike in risk aversion sparked by news that China’s central bank raised its reserve ratio by 0.5% and in reaction to doubt about a Greek rescue. The Chinese reserve ratio hike was a surprise and the second rate hike from China this year. Tightening of monetary policy in China sparked selling of equity and commodity markets and generates fear about the global recovery. There are conflicting reports from Europe about whether or not there will be a rescue package for Greece with the latest report that German Chancellor Merkel has rejected a call for Germany to fund the Greek rescue package. Other EU sources indicate that it is unlikely that the EU will add additional measures to support Greece at this time. The EUR was also pressured by report of slowing growth as EU industrial output falls more than expected and Q4 GDP posted a small rise. GBP traded lower but remains range bound with downside limited by gains in cross to the EUR. CHF traded lower pressured by rumors of SNB intervention. Commodity currencies traded lower pressured by a spike in risk aversion and concern that the Chinese rate hike will hurt the global recovery. US economic data was mixed with retail sales slightly stronger than expected and Michigan consume sentiment came in slightly lower than expected. Business inventories posted an unexpected drop. (more…)

Potential Eurozone Assistance for Greece Gives Risk a Boost

Forex News and Events:

Markets were very busy yesterday pricing in speculation and conjecture. The day started with rumors that ECB’s Trichet had left a meeting of central bankers prematurely to head to Brussels to address the Greek situation. Then, later in the day, a German official was cited in say that the Eurozone governments have decided to ‘take significant steps’ to support Greece. This buzz sent traders scrambling out of their safe haven hiding spots. The EURUSD traded up from 1.3700 to nearly 1.3840, while AUDJPY climbed to 0.8800. The rapid move also caught the markets that were considerably short EUR off guard, and the ensuing short squeeze gave the move a frantic feel. Later and through today, German officials are continuing to adamantly deny that any decision on aid for Greece has been made. The Maastricht treaty is vague in this unexplored area, but it seemingly forbids guaranteed loans from the ECB or member states (assuming “liabilities of other member states”) and discrediting today’s WSJ article. However, support could come directly from unguaranteed loans from member states. Hence, the constant mention of Germany. It’s really just a gut feeling the current rhetoric was aimed to relieve pressure and buy time (halting “contagion” speculation). We do believe some sort of stability or bailout program is imminent, but in this rushed, manic fashion. Overshadowed by the gossiping (potential teleconference between EZ ministers this afternoon) UK released Industrial production data and Inflation reports. The Industrial production climbed to m/m 0.5% vs. 0.2% exp, while the inflation forecast on the two year time horizon was revised slightly down. For tomorrow, markets are expecting the Riksbank to leave interest rates on hold at 0.25% this month and also look for the central bank to upgrade its forecasts for employment, growth and inflation. For now, policymakers continue to affirm that they will raise rates in the Autumn of 2010, citing uncertainties to the Swedish economic recovery as the basis for their cautious approach. Nevertheless, if the fundamental rebound in Nordic economy is faster than expected, markets could start bringing forward their timeline for the first hike to July. (more…)

Waiting For The ECs Assessment Of Greeces Deficit Cutting Plan

News and Events:

Just a day after the RBA mentioned China shift in policy as a rational for holding rates, Fitch Rating warned that banks in China faced the greatest ‘bubble risk’ of any Asian country. This temporarily took the wind out of the risk-on tone, pushing the EURUSD down to 1.3946. However, markets were able to rally as Europe opened and traders prepared for an event and data filled day. Gold then broke its trend line resistance at $1122, pulling EUR along for the ride. Just a day after the RBA stunned the market by keeping rates unchanged, Australian trade deficit widened to A$2.25bn vs. -A$2.5bn exp in December from A$1.7bn in November, illustrating a strong recovery in both imports and exports. We still believe the RBA will hike in March and AUD should be well supported near term (AUDUSD powered to 0.8920, as commodities and risk also rallied). In Europe, the highlight will be the release of the EC assessment of Greece’s deficit-cutting plan. Part of today’s rebound in risk correlated trades might be from the easing concerns over Greece and just the fact that something is being done. As a testament, Greek sovereign 5y CDS spreads have tightened slightly. The press conference is expected to mention two items: 1. the analysis and endorsement of the Greek public finance cutting strategy and 2. explanation of the EC monitoring plan. In the long run, we believe the EC will eventually need to step in with some kind of funding program, but most probably it will not mention it in this report. For today, the risk is that the report and comments will not go far enough to ease the markets concern, causing the EUR to suffer. We prefer to play the short side of the EURUSD. The Norges Bank is expected to keep rates on hold at 1.75% at this meeting, after raising rates at the previous two consecutive meetings (the last on 16 Dec). After the surprise hike of 25bps the last time around that caught many analysts wrong-footed, there is certainly a possibility that the consensus may have underestimated the Norwegian economy once more. Recent retail sales figures have been strong at 1.1% MoM, and PMI data for January at 50.1 was also indicative of further improvement in the economy. Nevertheless, we would align ourselves with the majority in believing rates will be kept on hold this month; consistent with the prediction offered by the Norges Bank Deputy Governor in December that he expected rates to be at 1.75% in March, and also compatible with the rationale that the Executive Board will want to see the contents of the next Monetary Policy Report published on 24 March, before deciding on further tightening. In the US, ADP reports will help solidify expectations for Friday critical NFP. We have seen an adjustment lower in recent days, with the current consensus standing now at -30k. Should ADP fall in line and not repeat one of its spectacular deviations, this will put NFP around 25k which should be very USD positive (more…)

USD Lower, Pending Home Sales Up 1%, Stocks Rally

• USD: Lower, pending home sales rise less than expected but post improvement year-over-year
• JPY: Higher, supported by gains in cross trade to AUD, Kamei calls for the Post Bank to diversify
• EUR: Higher, Greek debt default spreads narrow, PPI rises, German retail spending improves
• GBP: Mixed, UK election polls suggest possibility of a hung parliament, debt fears limit gains
• CAD and AUD: AUD lower & CAD higher RBA leaves rate policy unchanged, CAD tracks risk sentiment

Overview

USD traded mixed Tuesday with the main focus on the RBA’s decision to leave rate policy unchanged. A 25 bps hike was widely expected from the RBA and the AUD traded sharply lower in reaction to the RBA’s decision to hold rate policy steady at 3.75%. The RBA cited recent tightening of monetary policy in China as one of the key factors for the decision to hold rates steady. The RBA left the door open for future rate hikes if the Australian economy continues to improve. European currencies were mixed with the EUR supported by report of an unexpected rise in EU producer prices and in reaction to a narrowing of Greek default spreads. The Greek prime minister said that Greece will do everything necessary to end its fiscal crisis. CHF is supported by report of better than expected Swiss consumer sentiment. GDP continues to underperform pressured by uncertainty about the UK budget deficit outlook as the latest UK polls indicate a possibility of a hung parliament. A hung Parliament in the UK would make it much more difficult for the UK to address its budget deficit. GBP downside was limited by report of improvement in UK construction PMI and speculation that the BOE will signal a pause in its asset purchase program at Thursday’s BOE policy meeting. JPY traded mixed supported by sharp gains in cross to the AUD. JPY gains were limited by improving risk sentiment sparked by the RBA’s rate decision and firmer equity market trade. US economic data was mixed with pending home sales reported to have risen by less than expected, pending home sales rose in all districts during the summer. The pending home sales report suggests that US housing market continues to stabilize.

Focus turns to Wednesday’s release of ADP employment report, central bank policy meetings in Europe Thursday and Friday’s US January unemployment report. The ECB is expected to remain on hold and continue to outline exit strategies and the BOE is expected to remain on hold as well with the possibility of announcing a pause in its asset purchase program. USD headline unemployment is expected to post a 0.1% rise to 10.1% and nonfarm may turn slightly positive. (more…)

USD Higher, Jobs and Durable Goods Data Disappoints

• USD: Higher, jobless claims declined less than expected, durable goods rise less than expected
• JPY: Mixed, pressured by improving risk appetite, retail sales declined more than expected
• EUR: Lower, Greek fiscal concern, rumors of Greek bailout denied, business confidence at a 10 month high
• GBP: Mixed, Chancellor Darling says UK plans to halve its deficit over the next four years
• CAD and AUD: AUD & CAD higher, Australia may speed up spending cuts, hawkish RBNZ

Overview

USD, JPY and EUR traded lower with GBP and commodity currencies trading higher Thursday. The decline in USD and JPY is attributed to improving risk sentiment sparked by President Obama’s proposal in the State of the Union address to reduce taxes on businesses to boost growth and in reaction to the FOMC January statement which says the US economy is in recovery. The FOMC also indicated that it plans to begin withdrawal of extraordinary stimulus measures. EUR was pressured by concern about sovereign debt risk in Greece as the Greek EU ten year bond spread is at its widest level since Greece adopted the EUR in 2001 and China’s central bank says the nation should not buy Greece’s debt. GBP continued to outperform and rallied to a five month high versus the EUR supported by comments from UK Chancellor Darling that the UK has the most aggressive deficit reduction plan amongst the industrialized nations. Commodity currencies traded higher tracking improving risk appetite, firmer equity market trade and in reaction to hawkish comments from the RBNZ. RBNZ governor says that the central bank will begin to withdraw stimulus mid-year. US economic data was mixed. Jobless claims declined by less than expected and durable goods posted a smaller than expected rise. These reports may generate concern about the strength of the US recovery and raise questions about the FOMC’s optimism about the US economic recovery. USD edged higher after the release of these reports as equity markets traded lower. The trade awaits news on Fed Chairman Bernanke’s nomination and focus turns to Friday’s release of US advanced Q4 GDP. (more…)

U.S. Review

The Fourth Quarter Ended on a Weak Note

• We raised our estimate of fourth quarter real GDP growth to a 5.6 percent pace based on recent data on business inventories and international trade.
• December economic data continue to come in below expectations. Retail sales declined 0.2 percent and sales excluding motor vehicles fell 0.3 percent.
• The Fed’s Beige Book and the National Federation of Independent Business survey showed conditions continuing to deteriorate across much of the country.
• Consumer prices rose 0.1 percent in December.

Caution Remains the Buzz Word

Businesses and consumers remain exceptionally cautious and will not likely be phased by a blowout real GDP number for the fourth quarter. We have recently raised our estimate for fourth quarter real GDP growth to a 5.6 percent annual rate. A substantial slowdown in the rate of inventory liquidations will account for the overwhelming majority of that gain. Final demand remains exceptionally weak and, while the worst of the layoffs appear to have passed, there is little sign hiring is set to pick up. Three major reports, the National Federation of Independent Businesses (NFIB) Small Business Optimism Index, the BLS Job Openings and Labor Turnover (JOLTS) report, and the Fed’s Beige Book reiterated this point this past week.

The NFIB Small Business Optimism Index fell 0.3 points to 88.0 in December. Plans to hire increased modestly but remain in negative territory, rising to -2 percent from -3 percent. In addition, fewer businesses said they were able to raise prices and fewer planned to boost inventories. The one positive aspect of the report is the number of firms stating they planned to boost capital spending rose slightly, climbing 2 points to 18 percent.

The lack of any clear sign that hiring is picking up is particularly discouraging following last Friday’s weak employment report. Job openings in the November JOLTS report fell back to their series low of 1.8 percent. The number of hires and number of total separations both increased in November but total separations still outnumber hires, indicating employment declined on a net basis. There has been a slight improvement in hiring over the past five months. The number of people hired each month peaked in July 2006 and fell by 1.7 million by June of 2009. Hiring has since increased by 257,000 per month.

Total separations, which include quits, layoffs and retirements, rose in November but have generally been trending lower. The combination of fewer hires and fewer separations means that businesses are reducing their workforces more through quits and retirements today than by layoffs. The data also provided the missing link as to why the drop in weekly first-time unemployment claims has not translated into a net increase in nonfarm payrolls.
The Fed’s Beige Book also noted weaker economic conditions and relatively few districts had anything positive to say about the employment outlook. Most districts said layoffs continued but most also noted there has been some reduction in the number and size of cutbacks and that more firms are opting for hiring freezes or reducing hours instead of making large-scale cuts.

The other major disappointment this week was November’s retail sales report, which showed a 0.3 percent drop for December. Earlier reports had indicated that chain store sales were up for the month, so expectations for the Commerce Department’s retail sales figures were high. The Commerce Department sales figures are adjusted for both seasonal and holiday day changes and this year’s earlier Thanksgiving means that more holiday shopping took place in November and sales were thus pulled forward. On a net basis, holiday sales still show modest gains from last year.

(more…)

Inflationary Levels Subdued Over the Short Term, Rising on the Long Term

The cost of living in the U.S continues to rise on the long term whereas the yearly Consumer Price Index reported today about the month of December showed rising inflationary levels on the long term while on the short term it is still below the Fed’s target rate.

The Commerce Department report, Consumer Price index inclined in the month of December by 0.1% compared with the previous rise of 0.4% while markets were expecting 0.2%, while on the yearly scale the index rose by 2.7% compared with the previous 1.8% and the expected 2.8%.

As for the Core CPI; which excludes food and energy prices, the index rose during the same month by 0.1% compared with the previous flat reading and the expected 0.1%, while on the yearly scale the Core CPI dipped slightly to 1.7% which came in below the previous and the expected 1.8%.

(more…)

USD Gains Versus EUR, JPY Rallies on Weak US Retail Sales

• USD: Mixed, jobless claims up, retail sales down, business inventories rise
• JPY: Higher, tracking risk sentiment, machinery orders fall sharply
• EUR: Lower, Trichet calls for strong USD, EU Greek bond spreads continue to widen
• GBP: Higher, Moody’s expressed confidence UK will tackle its deficit, BOE may pause its bond buy program
• CAD and AUD: AUD & CAD higher, Australia’s employment report beats expectations

Overview

USD traded mixed Thursday with the main focus on report of improving Australian employment growth and Fed policy outlook. AUD traded higher supported by report of better than expected Australian employment growth. Australia’s employment report helped to boost demand for Asian equities and risk appetite. Growth led currencies continue to outperform. The Fed’s Dudley said that short-term interest rates in the US may rise in six months or may not rise for as long as two more years depending on the strength of the recovery and employment outlook. The ECB left rate policy unchanged as expected and the EUR traded lower pressured by ongoing concern about sovereign debt risk in Greece. In the press conference following ECB policy meeting ECB President Trichet said current rates are appropriate, price developments are expected to be subdued, data suggest improvement in economic activity, EU economy to grow at a moderate pace in 2010, unemployment expected to rise somewhat further, risk to inflation outlook broadly balanced and the ECB will keep phasing out unneeded policy measures. (more…)