USD Loses Safe Haven Bids as Risk Appetite Increases

* The dollar fell versus its rivals on Friday as risk appetite improved on more signs of a global economic recovery. Japan’s April industrial production surged the most in at least six years; Germany’s April retail sales gained for the first time in four months; and US May consumer confidence rose to the highest level since September. The greenback was also pressured by US inflation and funding worries although bond yields fell for a second day following the spike in rates midweek. The Dow rose 97 points to end the month of May at 8500, its third monthly gain. The yen rose after finding support from its 200-day moving average as the deflationary trend in Japan deepened. The euro closed above the 1.40-area resistance at the highest level this year. Sterling also broke important resistance helped by stronger UK house prices and better consumer sentiment. The Canadian dollar rose to the highest level since early October as the CRB index rallied over 13% in May and crude oil closed above $66 for the first time since November.

* The AUD/USD rose for a second week supported by improving risk sentiment, surging commodity prices and significant yield advantages against most key currencies. The CRB index rose the most in 35 years in May led by energy prices. The pair is at the upper trading band in its upward sloping trading channel. There is also resistance from it 200-week moving average. The trend is rising; however, a consolidation would not be surprising or negative for the longer term outlook as the pair is not only at resistance but also overbought.



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Financial and Economic News and Comments

US & Canada

* The Q1 2009 US GDP was upwardly revised to a -5.7% annualized rate from a previously reported -6.1% rate, revised GDP data from the Commerce Department showed, following a -6.3% rate in Q4 2008. The Q1 GDP contracted 2.5% y/y. The largest positive contribution to the revision in the overall GDP was from inventories, with net exports also providing a boost. The GDP price index was revised down slightly to a 2.8% annual rate in Q1 from a previously reported 2.9%. Consumer spending increased at a 1.5% annual rate in Q1, less than previously reported, after a -4.3% annual rate in Q4. Corporate profits rose at a 14.2% annual rate in Q1, the first gain in almost two years. Overall, the figures suggest a US economic recovery is in sight.

* The Reuters/University of Michigan US consumer sentiment final index rose more than expected to 68.7 in May from 65.1 in April, indicating US consumer confidence jumped to the highest level since September. While the current conditions index declined to 67.7 in May from 68.3 in April, the consumer expectations index jumped to 69.4 from 63.1, reflecting optimism for an improving outlook for consumer spending and the overall economy.

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* The Chicago business barometer unexpectedly fell to 34.9 in May from 40.1 in April, indicating business activity in the Chicago area contracted at a faster rate this month, according to data from Kingsbury International, Ltd. and the Institute for Supply Management – Chicago, Inc. However, the decline rate “stabilized as the May reading fell to equal the six month moving average,” the Chicago report showed. The relative weakness in the Chicago PMI, possibly due to early auto production shutdowns in the region, contrasts with most other regional manufacturing surveys showing improvement in May, including New York Fed, Philadelphia Fed, Richmond Fed and Milwaukee data.

* Canada’s current account deficit rose to C$9.1 billion ($8.24 billion) in Q1 2009, the most since records began in 1946, from a revised C$7.8 billion in Q4 2008, Statistics Canada reported. However, the record deficit was less than expected.

Europe

* The eurozone consumer-price inflation rate decelerated more than expected to 0.0% y/y in May, the lowest since records began in 1996, from 0.6% y/y in April, a flash CPI estimate issued by Eurostat showed.

* Germany’s retail sales posted their first gain in four months in April, increasing 0.5% m/m, as forecast, after a 0.4% m/m decline in March, figures from the Federal Statistical Office showed. April retail sales declined 0.8% y/y.

* UK consumer confidence matched an 11-month high in May, with the GfK UK consumer sentiment index holding at -27, the same as in April, GfK NOP reported.

* UK house prices unexpectedly rose a seasonally adjusted 1.2% m/m to £154,016 ($245,701) in May after an upwardly revised 0.3% m/m decline in April, Nationwide Building Society reported. May house prices fell a less-than-expected 11.3% y/y, following April’s 15.0% y/y drop.

* Switzerland’s KOF leading indicator held at -1.86 in May, the same as in April, according to the Konjunkturforschungsstelle Swiss Institute for Business Cycle Research.

Asia-Pacific

* Japan’s consumer prices excluding fresh food declined 0.1% y/y in April, as forecast and the same rate as March, CPI data from the Statistics Bureau showed. Tokyo’s consumer prices excluding fresh food fell a slightly more-than-estimated 0.7% y/y in May, the largest drop in six years and the first decrease since September 2007, following 0.0% y/y in April.

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* The Nomura/JMMA Japanese manufacturing PMI improved to 46.6 in May from 41.4 in April, suggesting the pace of contraction in Japanese manufacturing activity eased for a fourth straight month; however, below the 50 dividing line indicating manufacturing contraction for a 15th consecutive month, Markit Economics reported.

* The Japanese unemployment rate rose to a 5-year high of 5.0% in April, as forecast, from 4.8% in March, data from the Statistics Bureau showed. The job-to-applicant ratio fell to 0.46, the lowest in a decade, from March’s 0.52. Household spending tumbled a more-than-estimated 1.3% y/y in April, the 14th consecutive drop, after a 0.4% y/y decline in March.

* Japan’s industrial production rose a more-than-expected 5.2% m/m in April, the most in at least six years, as the Japanese recession is easing, according to preliminary April IP data from the Ministry of Economy, Trade and Industry, after a 1.6% m/m increase in March. April IP dropped a less-than expected 31.2% y/y.

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* Japanese housing starts dropped for a fifth consecutive month in April, falling a more-than-expected 32.4% y/y, after a 20.7% y/y decrease in March, data from the Ministry of Land, Infrastructure, Transport and Tourism showed. Construction orders fell for a sixth straight month in April, falling 25.9% y/y to ¥562.8 billion ($5.84 billion), following March’s 37.8% y/y plunge.

* Australia’s private sector credit increased a slightly less-than-expected 0.1% m/m in April, the same pace as March, according to data released by the Reserve Bank of Australia. April private sector credit rose a slightly more-than-estimated 4.6% y/y, following March’s 4.9% y/y rise.

FX Strategy Update



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Источник: Hans Nilsson

29.05.2009