US Pressure on Automakers Spurs Haven Demand

* The dollar rose against its rivals except the yen on Monday as stocks fell the most in three weeks and risk appetite declined. The Obama administration gave ultimatums to General Motors Corp. and Chrysler LLC to restructure their operations, possibly including a bankruptcy filing, or be denied further government aid. Global stocks fell on concerns over the financial and auto industries. The Dow fell 254 points to 7,522. The yen gained versus all major currencies as risk aversion increased. The euro dropped as eurozone economic confidence plunged to the lowest level since records started in 1985. Sterling fell for a fourth day on increased worries on the financial sector. The Australian dollar declined as risk appetite and commodity prices fell.

* The USD/CAD rose on increased risk aversion and plunging oil prices. The pair broke the short-term downtrend today. Canada’s GDP for January is expected to contract 0.7% m/m. That would be a 6th consecutive monthly decline and may induce the Bank of Canada to revive the economy by using unconventional measures. Since late-October, the USD/CAD has tested the important 1.30-area resistance four times. If stock-market consolidation continues, a fifth test of the 1.30-area resistance will be possible. There are minor resistance in the 1.28 area and support in the 1.22.


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Financial and Economic News and Comments

US & Canada

* Texas’ factory activity continued to contract in March with outlook turning up slightly, the Federal Reserve Bank of Dallas said. The Dallas Fed business activity index showed widespread downbeat sentiment in March, standing at -49.0, following February’s -57.3. Measures for production, capacity utilization, new orders and shipments increased in March but remained negative; production rose to -22.3 from -36.1, capacity utilization was up to -25.5 from -37.2, new orders moved up to -30.1 from -41.2, and shipments ticked upward to -27.2 from -38.1. Downward prices pressures continued in March. Manufacturing outlook improved slightly, with the outlook index increasing to -33.0 from February’s -47.4.

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* The Obama administration, trying to save the US banking system and the auto industry, warned that General Motors Corp. and Chrysler LLC have one last chance to restructure and that some banks will need more government aid. The decision to ask GM chairman and chief executive Rick Wagoner to resign underscored the administration’s hands-on role in the companies it is bailing out, a level of government involvement in business not seen since the Great Depression.

Europe

* The eurozone economic confidence index declined to 64.6 in March, indicating eurozone economic confidence dropping to the lowest level since records began in 1985, from 65.3 in February, the European Commission said. Indexes for industry, services and consumer sentiment all posted record lows.

* Eurozone retail sales contracted for a 10th month in March, according to the Bloomberg eurozone PMI. The index was at 44.1 following February’s revised 42.3.

* UK house prices declined at the slowest rate in 10 months in March, falling 0.6% m/m to £156,100 ($224,000), after a 0.8% m/m decline in February, Hometrack Ltd. reported. House prices dropped 10.3% y/y, following February’s 10.0% y/y decrease.

* UK mortgage approvals rose to 38,000 in February, the highest since May, from 32,000 in January, the Bank of England said.

Asia-Pacific

* Japan’s industrial production fell 9.4% m/m in February, according to preliminary data by the Ministry of Economy, Trade and Industry, after a record 10.2% m/m drop in January. Industrial production plunged 38.4% y/y, following January’s 31.0% y/y drop. Inventories decreased 4.2% m/m in February, the largest decline since records started in 1953.

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* Australia’s new home sales increased for a second straight month in February, rising 3.9% m/m, after January’s upwardly revised 8.6% m/m gain, the Housing Industry Association said.

FX Strategy Update



©2004-2008 Globicus International, Inc. and Capital Market Services, L.L.C.

Source: Hans Nilsson

30.03.2009