Dollar Declines as Default Risk Eases

* 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.

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Financial and Economic News and Comments

US & Canada

* The Chicago Fed national activity index increased to -0.07 in March from an upwardly revised -0.44 in February, led by increases in production- and employment-related indicators, suggesting the national economy posted below-average growth for a fourth consecutive month but improved from March 2009’s -3.37 level, according to a report from the Federal Reserve Bank of Chicago. The index’s 3-month moving average
increased to -0.18 in March from an upwardly revised -0.31 the prior month, indicating growth in national economic activity, while still below average, showed some improvement, compared with March 2009’s -3.33 level.

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* US initial jobless claims in the week ending April 24 decreased 11,000 to a higher-than-expected 448,000, a one-month low, from the previous week’s upwardly revised 459,000, data from the Labor Department showed. The 4-week moving average increased 1,500 to 462,500. Continuing claims in the week ending April 17 fell 18,000 to 4,645,000 from the preceding week’s upwardly revised 4,663,000. The 4-week moving average of those continuing claims declined 9,000 to 4,639,000. The insured unemployment rate for the week ending April 17 was unchanged at 3.6%.

Europe

* Eurozone M3 slipped 0.1% y/y in March after a revised 0.3% y/y decline in February, the European Central Bank reported. The M3 3-month average showed a 0.1% decline during the January 2010 – March 2010 period, compared with a 0.2% decrease in the December 2009 – February 2010 period.
* The eurozone economic sentiment index rose to a higher-than-expected 100.6 in April from an upwardly revised 97.9 in March, indicating eurozone economic confidence climbed to the highest level in more than two years and exceeded its long-term average, data from the European Commission showed. “However, coming out of a deep recession clearly means that further sustained improvements will be required for economic activity to reach its pre-crisis levels,” the EC said. Consumer confidence increased as forecast to -15 in April from -17 the prior month. Industrial confidence continued its improvement this month, with the industrial confidence measure increasing to -7 from March’s -10. Confidence in the services sector rose to 5 in April, a third consecutive positive reading, from 1 in March. In a separate measure of business confidence released by the EC, the business climate indicator climbed for a 13th straight month in April to 0.23 from an upwardly revised -0.20 in March.

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* Germany’s seasonally adjusted unemployment fell a more-than-anticipated 68,000 to 3.29 million in April, the largest fall since January 2008, after a 31,000 decline in March, figures from the Federal Labor Agency showed, signaling better labor-market prospects amid a strengthening German economy. The seasonally adjusted unemployment rate decreased to 7.8% from March’s 8.0%.

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* UK house prices grew a more-than-expected 1.0% m/m sa in April, the 11th gain in 12 months, to an average of £167,802 ($257,366), after an upwardly revised 1.0% m/m advance in March, according to a report released by Nationwide Building Society. April house prices rose 10.5% y/y nsa, a seventh straight year-on-year rise and the first double-digit number since June 2007, following a 9.0% y/y March gain. House prices remained 10.0% below the October 2007 peak.

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Asia-Pacific

* The Conference Board Australian leading economic index, a measure of future economic activity, was down 0.3% m/m to 113.4 in February, the second decrease in nine months, after a 0.2% m/m decline in January, the Conference Board reported. The February LEI decrease was led by drops in building approvals, the sales to inventories ratio, and rural goods exports. However, the yield spread, money supply, gross operating surplus, and share prices rose. The coincident economic index, measuring current economic activity, slipped 0.2% m/m to 114.9 in February, the first decline since August 2009, after a 0.4% m/m increase in January.

Source: Hans Nilsson

29.04.2010