Dollar Gains as Credit Spreads Widen

* The dollar rose against most major currencies on Monday as demand for dollar liquidity increased. The 3- month Libor closed above 0.5% for the first time since July 2009 and credit spreads widened. US existinghome sales climbed more than anticipated in April with buyers motivated by an expiring government tax credit. Rising housing inventories increased concern over the sustainability of the housing recovery. The S&P 500 fell 14.04 to 1,073.65. The yen declined for a second day. Japan’s all industry activity decreased for the fourth time in five months. Japan’s economy is “picking up steadily,” the Cabinet Office said, leaving its assessment unchanged for a second month and asserting that global economic recovery and stimulus measures will continue to support the recovery. Sterling was unable to rise above the 1.45 resistance although a report indicated that the new UK government plans to cut $9 billion from the UK budget deficit. The Australian dollar was unable to hold on to earlier gains on strong auto sales. The Canadian dollar fell. The Canadian market was closed for Victoria Day.

* The EUR/USD fell for the first day in four after Spanish regulators seized a small bank. The move increased deflationary pressures. The pair is in a strong downtrend. We expect a test of last week’s low. Important support is in the 1.20 area and minor resistance in the 1.25-1.26 area.

www.cmsfx.com

Financial and Economic News and Comments

US & Canada

* US existing-home sales rose a more-than-expected 7.6% m/m to a seasonally adjusted 5.77 million annual rate in April after an upwardly revised 7.0% m/m gain to a 5.36 million annual pace in March, figures from the National Association of Realtors showed. April existing home sales climbed 22.8% y/y. The April sales rise was led by a 7.4% m/m increase in single-family home sales to a 5.05 million annual rate and a 9.1% m/m advance in existing condominium and co-op sales to a 720,000 million annual pace. Regionally, existing-home sales gained 21.1% m/m in the Northeast, 9.9% m/m in the Midwest and 8.6% m/m in the South, but declined 6.2% m/m in the West. The median existing-home price rose 4.0% y/y in April, the largest gain since May 2006, to $173,100. The existing-home inventory climbed 11.5% m/m to 4.04 million available for sale, the highest level since July 2009. That represented an 8.4-month supply at the current sales pace, up from March’s 8.1-month supply.

www.cmsfx.com

* The Chicago Fed national activity index increased to 0.29 in April from an upwardly revised 0.13 in March, led by continued increases in production- and employment-related indicators, suggesting the national economy posted above-average growth for the third time in four months and reached the highest level since December 2006, compared with April 2009’s -2.12 level, according to a report released by the Federal Reserve Bank of Chicago. The index’s 3-month moving average increased to -0.03 in April from an upwardly revised -0.09 the prior month, indicating growth in national economic activity, while still slightly below trend, reached the highest level since February 2007 and improved from April 2009’s -2.65 level.

www.cmsfx.com

Europe

* “The U.K. and U.S. economies are at low risk of turning Japanese in the sense of having recurrent recessions through macroeconomic policy mistakes,” Bank of England policy maker Adam Posen said at the London School of Economics, noting that “we all share some risks and problems in common with Japan circa 1995” and deflation “cannot be ruled out.”

Asia-Pacific

* Japan’s all industry activity index fell 0.8% m/m to 93.8 in March after a 2.3% m/m decrease in February, indicating overall production by all sectors of the Japanese economy declined for the fourth time in five months, according to data from the Ministry of Economy, Trade and Industry. The index, however, rose 4.7% y/y, the third consecutive year-on-year rise, following February’s 4.1% y/y advance.

www.cmsfx.com

* Australia’s seasonally adjusted new motor vehicle sales rose 8.4% m/m to 90,935 in April, the first rise in four months, after a revised 2.8% m/m decline in March, the Australian Bureau of Statistics reported. New motor vehicle sales jumped 28.7% y/y, following March’s upwardly revised 19.6% y/y gain.

Источник: Hans Nilsson

24.05.2010