JPY and USD Gain as Investors Take Profits

* The dollar rose on Monday as international stocks and commodity prices fell sharply. The greenback was also supported by Russian Finance Minister Alexei Kudrin’s comments that the dollar is in “good shape” and it’s “too early to speak of an alternative” to the dollar. The G-8 finance ministers signaled they will start planning exit strategies when sustainable growth returns. The New York Fed manufacturing index dropped more than expected in June. The S&P 500 fell 22.49 points to 923.72. The yen gained against all major currencies and benefited even more than the greenback from increased risk aversion. Sterling fell as the Confederation of British Industry said it does not see any UK economic recovery until 2010 and the Bank of England may need to expand its money-printing plan to underpin the recovery. The Australian and Canadian dollars fell on declining commodity prices.

* The EUR/USD fell as eurozone employment fell the most since records started in 1995 and the European Central Bank warned the financial crisis is not over yet. “There is no room for complacency because the risks for financial stability remain high,” ECB Vice President Lucas Papademos said. After forming a head-andshoulder top, the pair tentatively broke the support at the neckline today. This implies further losses, possibly to the 1.35 support. We are long since 1.3149 and will play out the stop.



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Financial and Economic News and Comments

US & Canada

* The NAHB/Wells Fargo US builder confidence index unexpectedly declined to 15 in June from 16 in May, indicating homebuilders remained cautious about the fragile US housing market, according to data from the National Association of Home Builders/Wells Fargo. The current single-family home sales index held stead at 14 in June for a second month. The buyer traffic index remained at 13 for a third consecutive month. The sales expectations index declined to 26, the first drop since February, from 27.

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* The NY Fed manufacturing index declined more than expected to -9.4 in June from -4.6 in May, indicating New York manufacturing contracted at a faster pace, data from the Federal Reserve Bank of New York showed. However, factory executives in the New York Fed’s district turned more optimistic about the future; the manufacturing outlook index advanced to 47.8, the highest level since July 2007, from 43.8. The new orders index increased to -8.2 from -9.0. The employment index improved to -21.8 from -23.9. The prices paid index rose to -5.8 from -11.4.

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* Net long-term TIC flows were $11.2 billion in April compared with a downwardly revised 55.4 billion in March, while total net TIC flows were -$53.2 billion after March’s upwardly revised $25.0 billion, the Treasury said.

* Canada’s manufacturing shipments were down a less-than-expected 0.1% m/m to C$41 billion ($36.2 billion) in April after a downwardly revised 3.1% m/m decline in March, figures from Statistics Canada showed. New motor vehicle sales were essentially unchanged at 121,290 units in April, following a downwardly revised 5.5% m/m gain in March, according to a separate report from Statistics Canada.

Europe

* Eurozone employment in Q1 2009 declined 0.8% q/q, the largest drop since records began in 1995, after a downwardly revised 0.4% q/q decline in Q4 2008, according to data from Eurostat. Employment posted the first annual drop on record in Q1, contracting 1.2% y/y, after remaining stable in Q4.

* Switzerland’s producer and import prices weakened for a tenth consecutive month in May, unexpectedly declining 0.3% m/m, after April’s 0.2% m/m slide, data from the Swiss Federal Statistical Office showed. Producer and import prices fell a record 5.0% y/y, following April’s 3.6% y/y decline.

Asia-Pacific

* Foreign direct investment in China fell for an eighth consecutive month in May, falling 17.8% y/y to $6.38 billion, after April’s 22.5% y/y drop, the Commerce Ministry said.

FX Strategy Update



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Source: Hans Nilsson

15.06.2009