Economic Growth Optimism Pressures Greenback

The dollar fell versus most major currencies on Tuesday as global economic contraction concerns eased. Better-than-expected corporate earnings and growth in exports and imports suggest that the US economy continues to expand. Greece found better-than-expected demand for its treasury bills. The US dollar index fell to 83.50, about 5% off its June high. The lower dollar eases deflationary pressures and supports global stocks. The S&P 500 surged 16.59 to 1,095.34, gaining for six consecutive trading days. Intel reported its best quarter ever. The yen was little changed. Japan’s May industrial production increased modestly and June consumer confidence firmed. Sterling advanced after higher-than-expected UK inflation. The Australian and Canadian dollars rose as equity and commodity prices surged.

The EUR/USD rose as Greece sold ?1.625 billion of 26-week treasury bills at 4.65%, lower than the 5.0% EU emergency loans. The auction was 3.6 times oversubscribed. The pair weakened earlier as Portugal’s credit rating was cut two notches to A1 by Moody’s, on growing debt burden and weak economic growth prospects. The EUR/USD broke its downtrend and formed an inverted head-and-shoulder; thus, pointing to higher prices. We closed out our short EUR/USD position with a 19 handle profit.



Financial and Economic News and Comments

US & Canada
The US trade deficit in goods and services unexpectedly widened to $42.3 billion in May, the highest level since November 2008, from a $40.3 billion shortfall in April, according to data from the Commerce Department. Imports, rising faster than exports, rose 2.9% m/m to $194.5 billion in May, while exports increased 2.4% m/m to $152.3 billion; both were at their highest levels since 2008.


The US NFIB small business optimism index declined to 89.0 in June from 92.2 in May that was the highest level since September 2008, suggesting US small business optimism fell to the lowest level in three months, data from the National Federation of Independent Business showed. The sales expectations measure decreased to -5 in June from 5 the prior month.

The US government’s monthly budget statement showed -$68.4 billion in June, the 21st straight deficit, compared with -$135.9 billion in May and -$94.3 billion in June 2009, according to a report released by the Treasury Department.

Canada’s trade deficit expanded to C$503 million ($488 million) in May, a third consecutive monthly shortfall and the largest in eight months, from a revised C$330 million deficit (vs. originally reported C$175 million surplus) in April, figures from Statistics Canada showed. Imports, outpacing growth in exports, rose 5.7% m/m to C$35.0 billion in May. Exports increased 5.2% m/m to C$34.5 billion.

Europe
The ZEW German economic expectations index fell to a lower-than-expected 21.2 in July from 28.7 in June, indicating German investor sentiment slumped for a third consecutive month to the lowest level since April 2009, according to a report released by the ZEW Centre for European Economic Research. The current economic situation index unexpectedly rose to 14.6 from June’s -7.9, showing the current economic situation in Germany improved considerably this month to the first positive level since July 2008. Meanwhile, the ZEW eurozone economic expectations index decreased to a lower-than-anticipated 10.7 in July from 18.8 in June, but the current economic situation index improved to -26.5 from June’s -40.8.



German wholesale prices unexpectedly slipped 0.2% m/m in June, the first decline in eight months, after a 0.3% m/m increase in May, data from the Federal Statistical Office showed. Wholesale prices rose 5.1% y/y, a seventh straight year-on-year rise, following May’s 6.2% y/y gain.

The UK consumer-price inflation rate decelerated as forecast to 3.2% y/y in June from 3.4% y/y in May; however, having exceeded the government’s 3.0% upper limit for four consecutive months, according CPI data from the Office for National Statistics. Core CPI accelerated to 3.1% y/y, the highest since records began in 1997, from May’s 2.9% y/y. June CPI and RPI increased 0.1% m/m and 0.2% m/m, respectively. The retailprice inflation rate slowed to 5.0% y/y in June from 5.1% y/y in May. Excluding mortgage interest payments, the RPI rate also slowed to 5.0% y/y from May’s 5.1% y/y.

UK house prices rose a higher-than-expected 11.0% y/y nsa in May, a seventh straight year-on-year rise, after a 10.1% y/y advance in April, data from the Department of Communities and Local Government showed. House prices grew 0.7% m/m sa, a third consecutive month-on-month gain, following April’s 0.4% m/m increase.

Asia-Pacific
Japan’s seasonally adjusted industrial production was up 0.1% m/m in May (vs. preliminarily reported -0.1% m/m), the 14th gain in 15 months, after a 1.3% m/m increase in April, final May IP data from the Ministry of Economy, Trade and Industry showed, with the IP index increasing to 96.1 from April’s 96.0. May IP rose 20.4% y/y nsa (vs. preliminarily reported +20.2% y/y nsa), a sixth successive year-on-year rise, following a 25.9% y/y April advance. Capacity utilization grew 0.8% m/m to 91.3 in May after remaining unchanged m/m at 90.6 in April.


The Japanese consumer confidence index excluding one-person households unexpectedly increased to 43.5 in June from 42.8 in May, suggesting Japan’s household confidence climbed for a sixth straight month to the highest level since September 2007, according to data from the Cabinet Office. A number below 50 means pessimists outnumber optimists. Including one-person households, the consumer confidence index advanced to 43.6 in June from 42.7 the prior month.

The NAB Australian business confidence index slipped to 4 in June from 5 in May, indicating Australia’s business sentiment declined for a fourth consecutive month, a survey released by National Australia Bank Ltd. showed. The business conditions index, a measure of hiring, sales and profits, increased to 8 from May’s 6. The employment index edged down to 6 in June from 7 a month earlier.

Источник: Hans Nilsson

13.07.2010