USD Mixed on Capital-Market Selloffs

* The dollar traded mixed on increased geopolitical risk and sell-offs in the US bond and equity markets on Wednesday. The geopolitical risk rose as North Korea threatened a military response to any attempts to seize its weapons of mass destruction. US bonds and mortgage yields climbed to the highest level since the late 2008 on supply and inflation concerns. Stocks were pressured by the higher yields and an FDIC report that showed the number of “problem” banks in the US climbed to the highest in 15 years. The S&P 500 fell 17.27 to 893.06. The yen declined on the escalating North Korean tensions. Unable to penetrate the 1.40 resistance, the euro dropped as Germany’s harmonized CPI fell in May. Moderate deflation will increase pressure on the European Central Bank to ease its monetary stance, and ECB Governing Council member Erkki Liikanen said policy makers should not set a floor for interest rates. The Australian dollar reached its highest level since October on the improving Australian LEI before reversing gains on the decline in the US asset markets. The Canadian dollar rose to its highest level since October before reversing gains. Most key currencies are overbought and may need more consolidation.

* The GBP/USD rose and temporarily traded above the 1.60 handle on optimism the worst of the financial crisis is over and signs of an improving UK housing sector. Having advanced in a rising trading channel, the GBP/USD reached its highest level since November 5. The pair may need some consolidation as it is extremely overbought and at resistance from the upper trading band. The pair is closely related with risk appetite and pared gains as US stocks fell.



www.cmsfx.com

Financial and Economic News and Comments

US & Canada

* US existing home sales increased 2.9% in April to a better-than-expected 4.68 million annual rate in April, the second gain in three months, from a downwardly revised 4.55 million rate in March, according to data from the National Association of Realtors. Existing home sales declined 3.5% y/y. Sales increased in all major US regions except for the Midwest. Sales improved for both single-family units and condos/co-ops. The median price of an existing home increased to $170,200 in April but fell 15.4% y/y. Inventories of existing homes rose 8.8% at the end of April to 3.97 million available for sale, representing a 10.2-month supply at the current sales rate following March’s 9.6.

www.cmsfx.com

* The FHFA US house price index unexpectedly declined 1.1% m/m in March after a downwardly revised 0.2% m/m increase in February, data from the Federal Housing Finance Agency showed. The average price of a US home decreased 7.1% in Q1 2009, slower than Q4 2008’s record 8.3% drop.

* The number of banks on the FDIC’s “problem” list rose to 305, the highest level since 1994, and the number of loans more than 90 days past due climbed across all major loan categories, according to the Federal Deposit Insurance Corporation.

Europe

* According to Germany’s preliminary May CPI data from the Federal Statistical Office, German consumer prices unexpectedly declined 0.1% m/m in May after 0.0% m/m in April. The consumer-price inflation rate slowed to 0.0% y/y, the lowest on record since 1990, from April’s 0.7% y/y. However, the core CPI, which excludes energy and seasonal food, rose 0.2% m/m and 1.5% y/y in May. When calculated using a harmonized European Union method, the CPI unexpectedly fell 0.2% m/m in May after a 0.1% m/m increase in April. The harmonized CPI unexpectedly declined 0.1% y/y, the first annual decline since harmonized data began in 1996, following April’s 0.8% y/y rise.

www.cmsfx.com

* UK banks approved 27,685 loans for house purchase in April compared with 26,671 loans in March, signaling the UK mortgage market is stabilizing, according to data from the British Bankers Association.

Asia-Pacific

* Japan’s exports fell 39.1% y/y in April, easing the pace of declines after dropping 45.5% y/y in March and a record 49.4% y/y in February, data from the Finance Ministry showed, signaling Japan’s recession is easing. Imports fell 35.8% y/y, following March’s 36.6% y/y drop. The trade surplus narrowed 85.0% y/y to ¥68.954 billion ($725 million) in April.

www.cmsfx.com

* Bank of Japan board members agreed that the BOJ “should continue to conduct monetary policy steadily in line with measures taken so far” including “three areas: reducing the policy interest rate, ensuring stability in financial markets by providing ample liquidity, and facilitating corporate financing,” minutes of the Bank of Japan April 30 meeting published today showed, while a few policy members said additional policy measures weren’t necessary amid signs of a Japanese economic recovery. “A few members said that, although it would take some time for Japan's economy to achieve a full-fledged recovery, it was likely to recover gradually and the rate of decline in prices was likely to moderate gradually, as the current monetary and fiscal measures would gradually produce positive effects, and therefore it was not necessary, at this point, to adopt additional monetary policy measures,” according to the minutes. The economy will contract 3.1% in the year ending March and expand 1.2% next fiscal year, while consumer prices excluding fresh food will slide 1.5% this fiscal year and 1.0% next fiscal year, BOJ policy makers forecast.

* The Westpac–Melbourne Institute Australian leading index advanced 0.3% m/m in March, the first increase in seven months, after a downwardly revised 0.5% m/m decline in February, Westpac Banking Corp. and the Melbourne Institute reported. The index’s growth rate was -5.1% y/y in March, a slight improvement from - 6.0% y/y in February; still, indicating recessionary conditions in Australia.

FX Strategy Update



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

Источник: Hans Nilsson

27.05.2009