FOREX TRADING

USD Higher, EUR and GBP Pressured by Credit Warnings

• USD: Higher, risk aversion re-emerges on European debt worries
• JPY: Higher, supported by a return of risk aversion, leading index rose more than expected
• EUR: Lower, concern about Greek debt troubles, ECB’s Stark says debt places strains on monetary policy
• GBP: Lower, Moody’s and Fitch warnings on banks and debt, weak housing data, trade deficit widened
• CAD and AUD: AUD & CAD higher, Australia’s job ads strong, tracking equities, gains versus Europe

Overview

USD traded higher Tuesday supported by a return of risk aversion sparked by the re-emergence of concern about European and UK debt. Fresh worries over European debt were triggered by statements from Moody’s and Fitch ratings agencies. The EUR traded lower ahead of today’s meeting with Greek Prime Minister Papandreou and President Obama. Bloomberg reports that this meeting is unlikely to produce any significant offer of US aid for Greece. Papandreou says that Greece needs EU and US help to prevent speculative selling of Greek bonds and that borrowing at high rates will not be sustainable. GBP was pressured by a Moody’s warning that it may cut UK bank ratings as bailout support is withdrawn and in reaction to Fitch concern about UK deficit. GBP was also pressured by disappointing UK housing and trade data and election polls which suggest that the UK is headed for a hung parliament. Commodity currencies continued to outperform despite a sharp decline in the price of crude and a spike in risk aversion as equity markets traded lower. AUD downside was limited by strong jobs ads report and a rebound in US equities. JPY traded higher supported by today’s return of risk aversion. There were no major US economic reports released in today’s trade. The NFIB small business optimism index lost 1.3 points in February and Manpower says that hiring plans are in a holding pattern as a net 5% of employers said they expect to hire new workers in Q2. Focus turns to this week’s release of US jobless claims, retail sales and consumer sentiment.

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USD Mixed as Stocks Weaken

• USD: Mixed, better than expected nfp, consumer credit rises, specs on the IMM halve USD long positions
• JPY: Lower, Nikkei rallies 2.9%, BOJ ease speculation
• EUR: Lower, Sarkozy says EU will help Greece, investor sentiment improves
• GBP: Mixed, BOE policy and UK election uncertainty
• CHF: Higher, Swiss unemployment rate improves, retail sales strong
• CAD and AUD: AUD & CAD higher, tracking improving risk sentiment, Canadian housing starts rise 6.1%

Overview

USD starts the week mixed to lower pressured by a modest improvement in risk sentiment. The improvement in risk sentiment is attributed to Friday’s release of better than expected US unemployment and stronger consumer credit, a statement from French President Sarkozy that the EU is ready to help Greece and in reaction to a Financial Times report which suggests that China is ready to shift its currency policy and break its USD peg. US January consumer credit rose for the first time in over a year and posted its largest increase since July 2008. The Nikkei surged 2.9% adding to the improvement in risk sentiment but European equities and US equities struggled which limited the downside for the USD. European economic data was generally positive with EU investor sentiment improving and Swiss unemployment and retail sales coming in better than expected. There was no major UK economic released today and GBP consolidated recent gains. Commodity currencies traded higher supported by the improvement in risk sentiment with the AUD trading at a six-month high. AUD was also supported by M&A news that Royal Dutch Shell and Petro China are bidding for Australia’s Arrow Energy. CAD traded higher in reaction strong Canadian housing starts report and BOC rate hike speculation .There was limited reaction to an NABE report which says that business economists see a Fed rate hike within the next six months. CFTC commitment of traders for the IMM shows that speculators cut USD speculative long positions in halve last week. The CFTC report suggests that speculative sentiment towards the USD is turning less positive. There were no major US economic reports released in today’s trade. Focus turns to this week’s release of US jobless claims retail sales and consumer sentiment.

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USD Higher, Jobless Claims Fall, Pending Home Sales Tank

• USD: Higher, jobless claims fall, productivity revised higher, pending home sales tank, stocks erase gains
• JPY: Lower, BOJ’s Noda rejects government pressure to buy JGB bonds and expand QE
• EUR: Lower, Greek budget euphoria fades, ECB holds rates policy study, exit plan continues, weak Q4 GDP
• GBP: Mixed, BOE holds interest rates and asset purchases unchanged, house prices decline
• CAD and AUD: AUD & CAD lower, Australian trade deficit widens, Canadian building permits fall

Overview

The USD traded higher Thursday supported by ongoing concern about the Greek fiscal outlook and in reaction to mixed US economic data. USD extended its early rally after the release of an unexpected decline in pending home sales. Equity markets gave back all the morning’s early gains after the release of the pending home sales data. The pending home sales report appeared to inject more risk aversion into the trade. The ECB elected to hold rate policy unchanged as expected. In the press conference following the ECB policy decision ECB President Trichet said that the recovery is on track and will remain uneven, current ECB rates are appropriate, and inflation expectations remain anchored. Trichet went on to say that adverse weather could impact first quarter growth. The ECB expects EU 2010 GDP growth of 0.4% to 1.2%. The ECB expects EU 2010 CPI at 0.8% to 1.6%. Trichet said that the ECB welcomes Greece’s fiscal plan and signaled that the ECB would continue with the current gradual pace of withdrawal of liquidity. Trichet also said that it is not appropriate for the IMF to aid Greece. This comment sparked selling of the EUR and generates concern that Greece could be left out in the cold if the EU fails to agree to aid for Greece. EU officials will discuss the need for Greek aid Friday. GBP traded mixed initially supported by the BOE’s decision to hold interest rates and asset purchases unchanged. GBP turned lower in reaction report of a decline in UK house prices. Commodity currencies were mixed with a CAD continuing to outperform. AUD traded lower pressured by concern about the global growth outlook and in reaction to report that the Australian trade deficit widened in January. JPY traded a three month high versus the USD supported by a decline in risk appetite as Asian equity markets decline. JPY was also supported by comments from the BOJ Noda rejecting Japanese government calls for the BOJ who purchase more JGB’s. JPY turned lower after the release of better than expected US jobless claims and productivity data. Jobless claims posted a larger than expected decline, productivity rose more than expected and unit labor costs declined by more than expected. USD edged higher after the release of these reports. Pending home sales posted a sharp decline and factory orders rose more than expected. USD traded to the highs for the day after the report of the pending home sales drop and erasing of early US equity market gains.

Focus turns to Friday’s release of US February unemployment and nonfarm payrolls. The trade expects a modest uptick in the US unemployment rate and a fairly sharp drop and nonfarm payrolls partly because of bad weather and snow storms that blanketed much of the US during February. (more…)

USD Lower, Service PMI Expands at Best Pace in Two Years

• USD: Lower, ADP employment as expected, services PMI beat expectations, stocks rally
• JPY: Higher, Japan’s finance minister says the government and BOJ will combat deflation
• EUR: Higher, Greece announces extra austerity measures, retail sales and PMI weaken
• GBP: Higher, stronger than expected consumer confidence & PMI, uncertainty about the Prudential AIG deal
• CAD and AUD: AUD & CAD higher, Australian GDP strong, commodity prices rally

Overview

The USD traded mixed in reaction to report that Greece has decided to take extra austerity measures to reduce its budget deficit. Greece plans to cut its deficit by a total of €4.8bln. The new Greek budget plan generates hope that the Greek fiscal crisis will be contained and that Greece will not default on its debt. EUR initially rallied in reaction to the Greek budget news but investors remain cautious and EUR gains were limited. Investors want to see if the Greek budget plans lead to EU solidarity and a plan to aid Greece. Greek officials said they will go to the IMF if the EU fails to give support. EUR upside was also limited by report of weaker than expected EU retail sales and services PMI. GBP traded higher for the first time in six days supported by report of improving consumer confidence and stronger services PMI. Commodity currencies were mixed with the AUD underperforming despite report of strong Australian Q4 GDP. CAD continues to outperform. JPY traded at its highest level since last December versus the USD supported by mixed risk sentiment and a statement from Japan’s finance minister that Japan is taking efforts to defeat deflation. US jobs data was encouraging. Challenging Gray said that February job cuts were at their lowest levels since February 2006. ADP employment declined by the smallest since last February. ADP says jobs growth may return next month for the first time in two years. ADP says the service and manufacturing sector added jobs last month. February non-manufacturing PMI came in stronger than expected posting its fastest growth in two years. US equity markets rallied to the day’s highs after the release of the non-manufacturing PMI and the USD traded lower. The USD traded to a new low for the day in reaction to an IMF statement the Greek budget plan is very strong.

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 declining by 50k. (more…)

USD Higher, UK Debt Woes, Uncertainty about Greek Aid

• USD: Higher, China’s manufacturing growth slows, denial of imminent Greek bailout, UK debt jitters
• JPY: Lower, government pressure on the BOJ to buy government debt to combat deflation
• EUR: Lower, pressured by spillover from collapse of the GBP, uncertainty about Greek aid
• GBP: Lower, concern about UK government debt, mortgage approvals at eight month low
• CHF: Lower, Greek bailout rumors, UK debt worries overshadow strong Swiss PMI
• CAD and AUD: AUD & CAD higher, strong Australian housing data, strong Canadian GDP

Overview

The USD traded higher Monday supported by a collapse in the GBP, weaker than expected PMI data from China and a denial from German Chancellor Merkel of report of an imminent Greek bailout. GBP was pressured by UK election polls and concern about UK government debt. China’s February PMI declined to 52, a reading of 55.4 was expected. This report suggests that manufacturing activity is slowing in China. There are numerous reports of a possible new Greek bailout plan which according to the WSJ is estimated at 30bln. According to these reports the bailout plan will require Greece to raise taxes and implement spending cuts. German Chancellor Merkel denies that there is an imminent Greek bailout plan and EUR traded lower. Stronger than expected manufacturing PMI data from the EU, UK and Switzerland were overshadowed by the UK debt jitters. Commodity currencies traded higher with the CAD supported by reported stronger than expected Canadian GDP and AUD supported by report of strong new home sales and Q4 company profits. JPY traded lower pressured by report that the Japanese government wants the BOJ to consider directly purchasing government debt and in reaction to firmer equity market trade. US economic data was mixed with personal income rising less than expected and consumption coming in higher than expected. ISM Index came in slightly weaker than expected and construction spending was in line with expectations. US equity markets extended early gains after the release of today’s data today’s data which added support to the commodity currencies but had limited impact on European currencies.

Focus turns this week’s central bank policy meetings in Australia and Canada on Tuesday and the UK and EU on Thursday and Friday’s release of US February unemployment. The BOC is expected to maintain steady rate policy, the RBA is expected to hike rates 25 bps, 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…)

USD Lower, GDP Revised Higher, Existing Homes Sale Drop

• USD: Lower, pressured by a recovery in global equity markets, Q4 GDP revised up, existing home sales drop
• JPY: Higher, factory output expands and retail sales jump, Yuan revaluation speculation
• EUR: Higher, inflation falls, gains in cross to GBP, short covering
• GBP: Lower, UK Q4 revised up, Q4 government spending higher than expected
• CAD and AUD: AUD & CAD higher, strong Australian credit demand, Canada’s C/A deficit narrows

Overview

The USD traded lower Friday pressured by a modest improvement in risk sentiment as equity markets rally in reaction to report of an upward revision in UK and US Q4 GDP, stronger industrial production and retail sales in Japan and strong private sector credit demand from Australia. USD was also pressured by Yuan revaluation speculation. Yuan forwards traded higher in reaction to a newspaper report that the Chinese government is assessing the potential impact of currency gains. US economic data was mixed with Q4 GDP revised higher, Chicago PMI came in higher than expected and Michigan sentiment was revised slightly lower. Existing home sales posted an unexpected sharp decline. Existing home sales are at a seven month low. USD remained on the defensive despite mixed US economic data as US equity markets trade both sides of settlement.

Focus turns to next week’s central bank policy meetings in Australia and Canada on Tuesday and the UK and EU on Thursday and Friday’s release of US February unemployment. The BOC is expected to maintain steady rate policy, the RBA is expected to hike rates 25 bps, 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…)

USD Higher, Jobs Claims Rise, Durable Goods Strong

• USD: Higher, concern about Greek debt troubles and weaker US jobs data fuels risk aversion
• JPY: Higher, supported by safe haven demand and gains in cross trade
• EUR: Lower, S & P may downgrade the Greek debt rating, Greek rescue may be at risk
• GBP: Lower, UK Q4 business investment dropped sharply
• CAD and AUD: AUD & CAD lower, pressured by a spike in risk aversion, RBA rate hike speculation ignored

Overview

The USD traded higher and the JPY surged supported by a spike in risk aversion sparked by report of a sharp rise in US jobless claims and fresh concern about the Greek debt crisis. Wednesday the US reported that January new home sales fell to a record low. The decline in home sales follows Tuesday’s release of a sharp drop in US consumer confidence consumer confidence. These reports and today’s jobs claims report generate concern about the outlook for the US recovery. A report in the UK telegraph that the Greek rescue plan may be in jeopardy because of comments made by the Greek Deputy PM about Germany’s Nazi war atrocities coupled with increased risk of a downgrade of the Greek debt rating sent European currencies lower. The JPY traded at a one-year high versus the EUR. GBP traded at a nine month low versus the USD pressured by concern about UK debt and report a sharp drop in UK Q4 businesses investment. Commodity currencies traded lower pressured by a spike in risk aversion sparked by weaker equity market trade. AUD weakened despite RBA rate hike speculation. RBA watcher McCrann says there’s nothing standing in the way of a 25bps rate hike next Tuesday. US economic data was mixed with jobless claims posting a sharp rise. Jobless claims are at their highest level since last November. Durable goods came in almost 3 times as strong as expected. The jump in durable gods reflects a sharp increase in civilian aircraft orders. USD extended its gains and the JPY traded at a new high for the day after the release of the unexpected spike in US jobless claims. Fed Chairman Bernanke suggested that weather may be impacting the jobs report but his comments had limited impact and stocks traded sharply lower in reaction to jobless claims report. (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…)