Dollar and Yen Fall as Risk Sentiment Improves

* The dollar and yen fell against their counterparts on Wednesday as risk sentiment improved. The US economy contracted a more-than-expected 6.1% q/q in Q1 2009, but investors focused on a rise in private consumption for the first time since Q2 2008 and a sharp decline in private inventories. Falling inventories hurt the economy in the short run, but when inventories have reached their optimal levels, companies need to increase production to meet demand. The Federal Reserve, refraining from new stimulus announcements, said the pace of contraction appears to be slowing. The yen fell as the Dow rose 169 points to close 8,186. Sterling rose on comments by UK Chancellor Darling that he expects a UK economic recovery by the end of the year. The Australian and Canadian dollars rose on optimism of a global economic recovery and higher commodity prices.

* The EUR/USD rose as eurozone economic sentiment rose for the first time since May 2007. The resistance from the short-term trend was penetrated today, indicating a bullish outlook. There are resistance in the 1.35 area and support in the 1.30.



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Financial and Economic News and Comments

US & Canada

* The US economy contracted a larger-than-expected 6.1% q/q in Q1 2009 despite rising consumer spending as businesses cut spending and inventories, the Commerce Department’s advance GDP data showed. GDP contracted 2.6% y/y. Personal consumption contributed surprisingly strong 1.50 percentage points to Q1 GDP growth after deducting 2.99 in Q4 2008. Net export, the only other positive contribution to GDP growth, contributed 1.99 percentage points to Q1 growth following a small decline in the previous quarter. Gross investment excluding private stock piles contracted 6.04 percentage points to Q1 growth following a 3.36 deduction in Q4. Government expenditure reduced growth by 0.81 percentage points in Q1 following a small contribution in the previous quarter. Meanwhile, business reduced inventories by $103.7 billion in Q1, reducing growth by 2.79 percentage points. The GDP price index increased at a 2.9% annual rate in Q1 and rose 2.1% y/y.

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* The Federal Open Market Committee kept policy unchanged at Wednesday’s policy meeting and noted that “although the economic outlook has improved modestly since the March meeting, partly reflecting some easing of financial market conditions, economic activity is likely to remain weak for a time.” The FOMC said it would “evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets.” Yields on Treasury bonds broke the important 3.0% resistance on the announcement and the yield on the 10-year Treasury rose to 3.10%.

Europe

* The eurozone economic sentiment indicator rose more than expected to 67.2 in April from a record-low 64.7 in March, marking the first rise since May 2007, led by improvements in consumer and industrial confidence, according to data from the European Commission. The consumer confidence indicator rose to -31.3 in April from -33.7 in March, while the industrial sentiment reading rose to -35.0 from -37.8.

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* The KOF leading indicator for Switzerland fell to -1.86 in April, the lowest level since records began in 1991, from February’s upwardly revised -1.65, indicating a weakening outlook for the Swiss economy, according to Konjunkturforschungsstelle Swiss Institute for Business Cycle Research.

Asia-Pacific

* The Reserve Bank of New Zealand cut its key interest rate 50 basis points to 2.50%, as forecast. The central bank plans to continue to lower the official cash rate into the coming quarter and keep it low through 2010, RBNZ Governor Alan Bollard said.

FX Strategy Update



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Источник: Hans Nilsson

29.04.2009