Stocks and USD at Important Technical Levels

* The dollar traded mixed on Tuesday, lower versus the yen but higher against the pound. The dollar was supported in early trading as risk aversion returned, but pared gains as US stocks reversed earlier losses and closed higher. CIT said it may need to file for bankruptcy if it can’t repurchase notes maturing next month. The S&P 500 rose 3.45 points to 954.58. US stocks are at important technical resistance and the dollar index is at important support. A penetration of the stock-market resistance will likely indicate further strong equity gains and further dollar devaluation. Unable to break the 94.50-area resistance, the USD/JPY fell. The GBP/USD declined on the record UK June budget deficit. The Australian dollar rose as risk appetite returned in late New York trading. The Reserve Bank of Australia sees scope for further interest-rate cuts if needed. The USD/CAD fell, currently testing the 1.10 support. The Bank of Canada maintained the key interest rate at 0.25% and worried about an appreciating Canadian dollar.

* The EUR/USD fell modestly on Tuesday. Federal Reserve Chairman Ben Bernanke sees tentative signs the US economy is stabilizing while foreseeing “highly accommodative” monetary policy for “an extended period.” However, Bernanke believes that the extraordinary policy measures “can be withdrawn in a smooth and timely manner as needed, thereby avoiding the risk that policy stimulus could lead to a future rise in inflation.” The EUR/USD is likely to test the 1.43 resistance. Better risk sentiment and higher stock prices would likely lead to a penetration of the resistance and further EUR/USD gains.

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Financial and Economic News and Comments

US & Canada

* The Chicago Fed national activity index increased to -1.80 in June from -2.30 in May, indicating some improvement in overall economic activity, the Federal Reserve Bank of Chicago said.

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* The Bank of Canada left the benchmark interest rate unchanged at a record-low 0.25%, as forecast, and said the stronger Canadian dollar is slowing a Canadian economic recovery. Today’s BOC statement read: “Stimulative monetary and fiscal policies, improved financial conditions, firmer commodity prices, and a rebound in business and consumer confidence are spurring domestic demand growth. However, the higher Canadian dollar, as well as ongoing restructuring in key industrial sectors, is significantly moderating the pace of overall growth.” The BOC also reiterated conditional commitment to maintain its current policy rate until the end of Q2 2010.

Europe

* The UK budget deficit swelled to £13.0 billion ($21.4 billion) in June, the most for the month since records started in 1993, from £7.5 billion in June 2008 as tax income declined 5.7% and spending rose 2.8%, the Office for National Statistics reported. Net debt totaled £798.8 billion in June, the highest since the mid-1970s and equivalent to 56.6% of GDP.

* Switzerland’s trade surplus shrank to CHF1.57 billion in June from CHF2.0 billion in May, the Swiss National Bank said. Exports declined 2.6% m/m in June after a 7.6% m/m drop in May, while imports increased 3.8% m/m following May’s 4.9% m/m decrease.

Asia-Pacific

* Bank of Japan members agreed it was appropriate to maintain the benchmark interest rate at 0.10% and the central bank will likely consider ending its three unprecedented credit programs separately, meeting minutes showed. “Since each measure was different in its purpose and framework and in its effects on financial markets and overall financial conditions, the future of the measures should not be examined collectively but individually,” according to the June 15-16 BOJ meeting minutes released in Tokyo today. Some BOJ policy members viewed that if interest rates rise “too fast relative to the pace of economic recovery, this might pose a downside risk to the outlook for the economy.”

* The Reserve Bank of Australia said Australia’s key interest rate at a record-low 3.00% is helping boost economic growth and domestic demand, while still giving the central bank scope to lower interest rates. Minutes of the July 7 RBA meeting released in Sydney today read: “members observed that the early and substantial easing of both monetary and fiscal policy had been effective in supporting demand, which, if anything, had been more resilient than expected. The full effects of policy measures would still be coming through for some time. Members noted that the current inflation outlook afforded scope for some further easing of monetary policy, if that were to be needed to give further support to demand at a later stage. Accordingly, members judged the current stance of monetary policy to be consistent with fostering sustainable growth and low inflation, while leaving adequate flexibility to respond to developments as needed over the period ahead.”

Источник: Hans Nilsson

21.07.2009