USD Is at Crossroad, Awaiting G-8 and BRIC Meetings

* The dollar rose on Friday ahead of the G-8 meeting this weekend and the BRIC meeting on June 16. BRIC countries will possibly discuss an alternative global reserve currency. US consumer sentiment rose for a fourth straight month in June, but the consumer expectations index, a leading indicator, fell. Eurozone industrial production dropped more than expected. The S&P 500 rose 1.32 points to 946.21. The yen fell as Japanese Finance Minister Kaoru Yosano said his government is confident about the outlook for US treasuries. US yields fell for a second day. The euro declined today, having formed a top for the last few days but remained in a clearly defined uptrend. Sterling fell after being unable to penetrate its potential double top. The USD/CAD rose, testing resistance from its downtrend as crude oil dropped after failing to rise above the important $73/barrel resistance. After failing to penetrate the 0.82 resistance, the Australian dollar was lower and possibly forming a double top.

* Overall, the European and commodity currencies remained in uptrend. They are currently overbought; thus, further consolidation would not be a surprise. As shown in the US dollar index below, there is a large headand- shoulder formation. However, the steep downtrend has been broken following the successful test of the 78-area support. A forceful declaration that the US prefers a strong dollar at the G-8 meeting could rally the USD, while strong calls for an alternative global reserve currency at the BRIC meeting could reinforce the dollar decline.

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Financial and Economic News and Comments

US & Canada

* US import prices rose for a third consecutive month in May, rising a slightly more-than-expected 1.3% m/m, the most since July 2008, after a downwardly revised 1.1% m/m increase in April, data from the Labor Department showed. The May increase was primarily contributed by an 8.3% m/m rise in petroleum prices. Excluding petroleum, import prices increased 0.2% m/m and fell 5.8% y/y, the largest decline since records began in 1985. Export prices advanced 0.6% m/m in May after a 0.4% m/m increase in April. Import prices dropped 17.6% y/y in May; export prices fell 6.5% y/y.

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* US consumer confidence climbed for a fourth consecutive month in June and to the highest level since September 2008, with the Reuters/University of Michigan consumer sentiment preliminary index increasing to 69.0 from May’s 68.7. The current conditions index rose to 74.5 in June, the highest since September, from 67.7 in May, while the consumer expectations index declined to 65.4 from May’s 69.4.

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Europe

* Eurozone industrial production decreased a more-than-expected 1.9% m/m in April after an upwardly revised 1.4% m/m decline in March, according to data from Eurostat. Industrial production dropped a more-thanexpected 21.6% y/y, the most since records began in 1986, following March’s upwardly revised 19.3% y/y fall. The deepening IP decline reinforces a still weak eurozone economic outlook.

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* Germany’s wholesale prices increased 0.1% m/m in May, as forecast and the same rate as in April, data from the Federal Statistical Office showed. Wholesale prices fell 8.9% y/y, following April’s 8.1% y/y decline.

Asia-Pacific

* Japan’s industrial production was revised upward to a 5.9% m/m increase in April, from a preliminarily reported 5.2% m/m increase, final April IP data from the Ministry of Economy, Trade and Industry showed, following a 1.6% m/m advance in March. April IP fell 30.7% y/y. The index for capacity utilization was also revised upward to a 10.2% m/m gain to stand at 67.2 in April, after a 0.8% m/m increase in March. April capacity utilization dropped 35.5% y/y. The month-on-month gains signal the Japanese recession is easing.

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* The Japanese consumer confidence index excluding one-person households rose for a fifth consecutive month in May, rising more than anticipated to 35.7, indicating Japan’s household confidence climbed to a 14- month high, from April’s 32.4, data from the Cabinet Office showed.

Источник: Hans Nilsson

12.06.2009