Will EUR/USD’s Newfound Strength Last?

* The dollar traded lower for a third consecutive day on Thursday as global recovery optimism returned on better-than-expected Asian economic data. Chinese May exports rose the most in 6 years; Japanese Q1 2010 GDP growth was revised higher; and Australian employment grew more than expected. The dollar index’ decline for a third straight day supported the S&P 500 index, which surged 31.15 to 1,086.84. The yen was up modestly. Japan’s corporate goods prices increased 0.4% y/y, the first year-on-year gain since December 2008. Sterling rallied, approaching the 1.48 resistance. The Bank of England maintained its benchmark interest rate at 0.50% and kept its bond-purchase program in place, as expected. The Canadian and Australian dollars jumped and broke their short-term downtrends on the improved global economic outlook.

* The oversold EUR/USD rose for a third consecutive day. The European Central Bank will extend its offerings of unlimited cash and keep buying government bonds for now as it tries to ease tensions in money markets and fight the European debt crisis, ECB President Jean-Claude Trichet said. He asserted that the ECB’s 1.00% interest rate is “appropriate” and bond purchases and other non-conventional policy measures are temporary and “fully consistent” with the central bank’s sole mandate of price stability. Bond spreads between the troubled southern European countries and Germany narrowed on a successful Spanish bond sale. The EUR/USD is trying to make a bottom after falling about 20% since its December high. Resistance is in the 1.22 area and support in the 1.18 area. If the 1.22-area resistance is broken, an attempt to break the 1.26-area resistance may occur. Unless the long-term downtrend is broken, the pair’s strength will likely be temporary.

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Financial and Economic News and Comments

US & Canada

* The US trade deficit in goods and services widened to $40.3 billion in April, the largest since December 2008 but a bit smaller than the consensus expected, from a revised $40.0 billion shortfall in March, according to data from the Commerce Department. Exports fell 0.7% m/m to $148.8 billion in April; imports declined 0.4% m/m to $189.1 billion.

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* US initial jobless claims in the week ending June 5 declined 3,000 to a higher-than-expected 456,000 from the previous week’s upwardly revised 459,000, a report from the Labor Department showed. The 4-week moving average increased 2,500 to 463,000. Continuing claims in the week ending May 29 dropped 255,000 to 4,462,000, the lowest level since December 2008, from the preceding week’s upwardly revised 4,717,000. The 4-week moving average of those continuing claims fell 49,250 to 4,617,500. The insured unemployment rate for the week ending May 29 declined to 3.5% from the prior week’s upwardly revised 3.7%.

* Canada’s trade balance improved to a lower-than-expected C$175 million ($170 million) surplus in April from a downwardly revised C$236 million deficit (vs. a previously reported C$254 million surplus) in March, according to figures from Statistics Canada. Imports fell 2.2% m/m to C$32.8 billion in April, the first fall in three months, as import prices decreased 2.4% m/m while volumes increased 0.2% m/m. Exports fell 1.0% m/m to C$32.9 billion in April, a second consecutive monthly fall. Export prices declined 1.4% m/m while volumes grew 0.4% m/m.

* Canadian new housing prices rose as forecast 0.3% m/m in April after rising at the same pace in March, continuing monthly gains since July 2009, a separate report from Statistics Canada showed. April new housing prices grew 2.5% y/y, a fourth consecutive year-on-year advance, following a 1.6% y/y March increase.

Europe

* Germany’s consumer prices increased an unrevised 0.1% m/m in May, the third advance in four months, after a 0.1% m/m decline in April, according to final May CPI data from the Federal Statistical Office. The consumerprice inflation rate rose to 1.2% y/y, a seventh successive year-on-year rise and the fastest since November 2008, from April’s 1.0% y/y. The harmonised index of consumer prices, calculated for European purposes, also increased an unrevised 0.1% m/m in May after a 0.1% m/m decline the prior month. The HICP rate quickened to 1.2% y/y from April’s 1.0% y/y.

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Asia-Pacific

* China’s exports jumped a more-than-anticipated 48.5% y/y in May, the most in six years, to $131.76 billion, the largest value since September 2008, data from the Customs Bureau showed. Imports grew 48.3% y/y to $112.23 billion. The $19.53 billion trade surplus was the largest in seven months.

* Japan’s GDP expanded more than expected at a 5.0% q/q annualized rate in Q1 2010 (vs. preliminarily reported +4.9% q/q ar) after rising at an upwardly revised 4.6% q/q annualized pace in Q4 2009, according to final Q1 GDP data from the Cabinet Office. The Q1 GDP rose an unrevised 1.2% q/q, a fourth straight quarterly expansion, after an upwardly revised 1.1% q/q Q4 increase. The Q1 GDP grew 4.6% y/y, following a 1.1% y/y Q4 contraction. The GDP deflator declined 2.8% y/y in Q1 (vs. preliminarily reported -3.0% y/y).

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* Australia’s seasonally adjusted employment rose a more-than-expected 26,900 to 11,056,700 in May, a third consecutive monthly rise, after an upwardly revised 35,300 advance in April, figures from the Australian Bureau of Statistics showed. The unemployment rate declined to 5.2% from April’s 5.4%. Full-time employment grew 36,400 to 7,779,700 in May, a ninth straight monthly gain. Part-time employment declined 9,400 to 3,277,000. The participation rate slipped to 65.1% in May from 65.2% the prior month.

Источник: Hans Nilsson

10.06.2010