JPY and USD Gain on Increased Risk Aversion

* The dollar rose against most major currencies but fell versus the yen on Friday on mixed economic data. Both eurozone and German GDPs contracted the most on record in Q1 2009, while US industrial production fell the least since October and consumer confidence rose to its highest level since September. Risk sentiment remained the driver of the currency market with risk aversion pressuring stocks and risk-sensitive currencies. The S&P 500 fell 10.19 to 882.88. For the week, the USD rose against its rivals except the yen as risk sentiment deteriorated and stocks consolidated previous weeks’ gains. The yen was supported by the fall in equity prices and better-than-expected Japanese economic data. The Australian and Canadian dollars were pressured by risk aversion and falling commodity prices.

* The EUR/USD fell on worse-than-expected eurozone and German GDP data. After failing to break the 1.37- area resistance earlier in the week, the pair looks set to test the support from the 200-day moving average in the 1.34 area. If the S&P 500 breaks the 870-area support, the EUR/USD will likely break the 1.34 support. We are raising our stops for the EUR/USD and GBP/USD to lock in profits.


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Financial and Economic News and Comments

US & Canada

* US consumer prices were unchanged m/m in April, as forecast, after a 0.1% m/m dip in March, according to CPI data from the Labor Department. The CPI fell 0.7% y/y, the largest 12-month fall since June 1955, following March’s 0.4% y/y decline. Energy prices, which fell 2.4% m/m, accounted for most of the downward pressure on the overall CPI. Food prices declined 0.2% m/m. The core CPI, which excludes food and energy, rose a more-than-expected 0.3% m/m in April, the largest rise since June 2008, following March’s 0.2% m/m increase. The largest contributions to the core CPI came from rents and tobacco. The core CPI rate rose to 1.9% y/y from March’s 1.8% y/y. Real average hourly earnings increased 0.1% m/m in April and rose 4.3% y/y, helping support consumer demand even though job losses continue. Overall, April CPI figures indicate there are no signs of serious inflation. Deflation remains a problem. Moderate inflation would alleviate the serious debt deflation problem as it could reduce debt in real terms.

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* US industrial production declined 0.5% m/m in April, as our forecast, after a downwardly revised 1.7% m/m decrease in March, IP data from the Federal Reserve showed. April IP fell 12.5% y/y. Capacity utilization declined less than expected in April to 69.1%, a historical low since records started in 1967, following March’s upwardly revised 69.4%. Manufacturing production was down 0.3% m/m in April after a 2.1% m/m decline in March. April manufacturing production dropped 14.3% y/y. Manufacturing capacity utilization declined to 65.7% from March’s 65.8%.

* The Reuters/University of Michigan consumer sentiment preliminary index rose more than expected to 67.9 in May from 65.1 in April, indicating US consumer confidence climbed to its highest level since September 2008, Reuters and University of Michigan reported. The expectations index, predicting the direction of consumer spending, advanced to 69.0 in May, its highest reading since October 2007, from 63.1 in April, while the current conditions index declined to 66.2 from 68.3.

* New York manufacturing conditions worsened only modestly, the Federal Reserve Bank of New York said. The NY Fed manufacturing index climbed more than expected to -4.55 in May, its highest level since August 2008, from -14.65 in April.

* Canada’s manufacturing shipments unexpectedly fell 2.7% m/m in March to C$41.4 billion, the lowest level since May 1999, after a 2.2% m/m increase in February, according to Statistics Canada.

Europe

* The eurozone Q1 2009 GDP shrank a more-than-expected 2.5% q/q, the largest contraction since records began in 1995, after 1.6% q/q decline, according to advance GDP data from Eurostat. The GDP contracted 4.6% y/y, the biggest contraction on record, following Q4 2008’s 1.5% y/y decrease.

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* Eurozone CPI held steady at 0.4% m/m and 0.6% y/y in April, as expected, while the core CPI accelerated more than expected to 1.8% y/y from March’s downwardly revised 1.4% y/y, according to final April CPI data from Eurostat.

* Germany’s GDP contracted a more-than-expected 3.8% q/q in Q1 2009, the largest decline since records started in 1970, preliminary Q1 GDP data from the Federal Statistical Office showed, following Q4 2008’s downwardly revised 2.2% q/q drop. The Q1 GDP contracted 6.9% y/y wda and 6.7% y/y nsa.

* Switzerland’s retail sales increased 1.2% y/y in March after a 3.8% y/y decline in February, led by a 16.0% y/y gain in electronics sales, the Swiss Federal Statistical Office said. However, the adjusted retail sales, taking the number of shopping days into account, fell 6.6% y/y in March.

Asia-Pacific

* Japan’s domestic corporate goods price index unexpected fell 0.4% m/m in April for the eighth consecutive decline after March’s downwardly revised 0.3% m/m slide, data from the Bank of Japan showed. The April DCGPI fell 3.8% y/y, the steepest fall since June 1987, following March’s downwardly revised 2.5% y/y decrease.

* Japan’s machinery orders declined a less-than-expected 1.3% m/m in March after a downwardly revised 0.6% m/m increase in February, according to data from the Cabinet Office. Machine orders fell 22.2% y/y, easing the pace of declines from February’s 30.1% y/y drop.

FX Strategy Update



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

Источник: Hans Nilsson

15.05.2009