EU Plan Pressures Dollar and Yen

* The dollar and yen dropped on Monday after European policy makers announced an almost $1 trillion loan package to contain the region’s sovereign-debt crisis. The package consists of standby funds and loan guarantees from the European Union and International Monetary Fund that could be tapped by eurozone governments shut out of credit markets. The European Central Bank will also buy bonds and defend the euro; G-7 central banks will establish temporary US dollar swap facility to ease dollar funding strains in Europe. US stocks rose the most in a year; the S&P 500 jumped 48.85 to 1,159.73. The euro pared gains in New York trading. ECB council member Axel Weber said the ECB’s decision to buy government bonds poses “significant” risks, asserting that “it’s now critical to keep these risks as minimal as possible.” Greek interest rates plunged while US rates surged. Sterling rose on the Bank of England’s decision to leave monetary policy and the level of asset purchases unchanged, but pared gains after PM Gordon Brown said he is willing to resign as PM and Labour leader to allow negotiations with the Liberal Democrats to form a government. The Australian and Canadian dollars were boosted by rallying stocks and commodity prices.

* The dollar index plunged but pared its losses after finding support from the lower trading band in the rising trading channel; thus, indicating the dollar is strong and likely to rise further. The strong upward trend in the dollar index is also confirmed by the negative trends for the euro, sterling, Swiss franc and yen. The Canadian and Australian dollars’ trends are flat. Support is in the 82 area and resistance in the 85 area.

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Financial and Economic News and Comments

US & Canada

* The Conference Board US employment trends index increased to 94.7 in April from 93.9 in March, indicating US job prospects rose to the highest level since December 2008, the Conference Board reported. The index advanced 7.1% y/y.
* Canada’s seasonally adjusted housing starts increased a more-than-expected 1.3% m/m to a 201,700 annualized rate in April, the third advance in four months, after a revised 2.3% m/m decline to a 199,200 annualized pace in March, according to figures from Canada Mortgage and Housing Corporation. April housing starts jumped 80.1% y/y, a sixth consecutive year-on-year gain.

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Europe

* The Sentix eurozone investor sentiment index fell to a lower-than-anticipated -6.4 in May from 2.5 in April, showing eurozone investor confidence dropped amid increasing concern over the Greek debt crisis but improved significantly from May 2009’s -34.3 level, according to a Sentix report. The current situation index increased to -4.8 from April’s -7.0. The expectations index dipped to -8.0 in May, the lowest level since April 2009, from 12.5 the prior month.

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* Germany’s seasonally adjusted exports climbed a more-than-expected 10.7% m/m to ?85.6 billion ($109.4 billion) in March, the sixth gain in seven months and the largest since July 1992, after a 5.1% m/m advance in February, figures from the Federal Statistical Office showed. Seasonally adjusted imports grew 11.0% m/m to ?68.4 billion, a fourth straight monthly increase, following February’s upwardly revised 0.3% m/m advance. Exports jumped 23.3% y/y in March; imports rose 18.2% y/y. The trade surplus widened more than expected to ?17.2 billion in March from an upwardly revised ?12.7 billion in February. The current account surplus expanded to ?18.0 billion from February’s upwardly revised ?9.3 billion.

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Asia-Pacific

* The NAB Australian business sentiment index slipped to 13 in April from 16 in March, showing Australia’s business confidence declined for a second consecutive month, according to a survey released by National Australia Bank Ltd. The business conditions index, a measure of hiring, sales and profits, fell to 8 from March’s 13. The employment index decreased to 8 in April from 12 the prior month.

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* Australia’s job advertisements fell 1.2% m/m in April, the first fall since January, after a 1.8% m/m increase in March, according to a report by Australia and New Zealand Banking Group Ltd. Job advertisements rose 14.9% y/y following March’s 8.0% y/y advance, registering a second consecutive year-on-year rise.

Source: Hans Nilsson

10.05.2010