Euro Approaching Major Support

* The dollar traded mixed on Wednesday. European debt deflation fears eased on a successful Portuguese bond auction and budget-cut promises by Spain and the UK. US trade and budget deficits widened more than expected. The S&P 500 rose 15.88 to 1,171.67. The yen fell as risk appetite and equity prices rose. Sterling reversed yesterday’s gains. The Bank of England said UK inflation would come in below its 2% inflation target and warned that UK fiscal tightening would dampen economic growth. BOE Governor Mervyn King said he did not rule out further quantitative easing and warned that the financial crisis was far from over. He also welcomed the new government’s plan to accelerated budget cuts. The Australian dollar fell for a second day. The Canadian dollar advanced as commodity and oil prices rose.

* The EUR/USD fell for a second day. The European Central Bank said it would sterilize bond purchases. The pair is again moving closer to its 14-month low. Strong support is in the 1.25 area. If this is broken, the EUR/USD may fall to the 1.20 area. There is resistance from the downtrend in the 1.29 area. A break of this downtrend would improve the EUR/USD outlook.

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Financial and Economic News and Comments

US & Canada

* The US trade deficit in goods and services widened to $40.4 billion in March, the highest level in more than a year and roughly in line with forecast, from a revised $39.4 billion shortfall in February, figures from the Commerce Department showed. Imports increased 3.1% m/m to $188.3 billion in March, led by a $2.76 billion rise in crude oil purchases and increasing demand for foreign-made automobiles. Exports grew 3.2% m/m to $147.9 billion, with widespread gains led by petroleum products.

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* Canada’s trade surplus unexpectedly narrowed to C$254 million ($249 million) in March from a downwardly revised $1.2 billion in February, according to figures from Statistics Canada. Imports grew 2.0% m/m to C$33.3 billion in March, led by a 10.4% m/m rise in industrial goods and materials, the largest since January 1992. Exports declined 0.7% m/m to C$33.5 billion as a result of falling prices for energy products.

* Canadian new housing prices grew as forecast 0.3% m/m in March after a 0.1% m/m increase in February, continuing monthly gains since July 2009, a separate report from Statistics Canada showed. March new housing prices rose 1.6% y/y, a third consecutive year-on-year rise, following a 0.9% y/y February advance.

Europe

* Eurozone seasonally adjusted GDP was up a marginally more-than-expected 0.2% q/q in Q1 2010 after unchanged q/q in Q4 2009, flash Q1 GDP estimates from Eurostat showed. The Q1 GDP rose 0.5% y/y, following Q4’s 2.2% y/y contraction.

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* Eurozone seasonally adjusted industrial production grew 1.3% m/m in March, a 10th straight month-on-month gain, after a downwardly revised 0.7% m/m increase in February, Eurostat reported. March IP rose 6.9% y/y wda, a third consecutive year-on-year rise, following a downwardly revised 3.9% y/y February advance.

* Germany’s seasonally adjusted GDP unexpectedly grew 0.2% q/q in Q1 2010, a fourth consecutive quarterly gain, after upwardly revised 0.2% q/q growth in Q4 2009, according to preliminary Q1 GDP data from the Federal Statistical Office. The Q1 GDP rose 1.6% y/y wda and 1.7% y/y nsa, following Q4’s revised contraction of 2.2% y/y wda and 1.5% y/y nsa.

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* UK jobless claims fell a more-than-expected 27,100 to 1.52 million in April after a revised 32,700 drop in March, data from the Office for National Statistics showed. The claimant count rate declined to 4.7% in April from 4.8% the prior month. Unemployment based on International Labour Organization methods rose 53,000 to 2.51 million in the three months through March, the highest level since 1994, and the ILO UK unemployment rate held at 8.0%. Average weekly earnings including bonuses rose 4.0% y/y in the three months through March, the most since June 2008, and average weekly pay excluding bonuses increased 1.9% y/y.

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Asia-Pacific

* Australia’s home-loan approvals fell a more-than-expected 3.4% m/m to 48,260 in March, a sixth consecutive month-on-month fall, after a revised 2.0% m/m decline in February, figures from the Australian Bureau of Statistics showed. The total value of loans decreased 1.4% m/m to A$20.2 billion ($18.0 billion) in March. The value of lending for owner occupied housing fell 3.4% m/m to A$13.5 billion in March, but the value of lending for investment housing increased 3.0% m/m to A$6.6 billion.

* Japan’s economic expansion seems sustainable despite prolonged deflation. The Japanese leading economic indicators index, a measure of future economic activity, rose to 102.8 in March, a 13th straight monthly gain, from 98.4 in February, according to preliminary March LEI data from the Cabinet Office. The coincident index, measuring present economic activity, advanced to 101.1, a 12th successive monthly rise and the highest since July 2008, from February’s 100.0, registering the longest streak of gains since 1997.

Source: Hans Nilsson

12.05.2010