Yen’s Decline Continues

* The dollar traded mostly higher on Thursday. US final Q4 2008 GDP contracted 6.3% q/q and continuing jobless claims jumped to a new all-time high of 5.56 million. The GDP was revised down less than expected and claims are lagging at economic recoveries, so the reports had limited impact on the trade. US stocks rallied again; the Dow Jones Industrial Average increased 2.3% to a 6-week high of 7,925. The USD rose against the European currencies despite higher equity prices, possibly signaling the dollar is starting to benefit from an earlier recovery than other economies. The last few months the greenback traded inversely to the direction of equities and risk sentiment. The euro declined after German consumer confidence fell for the first time in seven months. Sterling declined as UK retail sales posted the largest month-on-month drop since June, adding to evidence the UK recession is deepening. The Australian and Canadian dollars, supported by better risk appetite, however, were unable to push through technical levels. The commodity currencies have been trading in a narrow range the last four days; the USD/CAD is testing the 1.22-area support and the AUD/USD is testing the 0.70-area resistance. If these levels are broken, the Australian and Canadian dollars will continue their recent rallies.

* The USD/JPY rose as risk appetite increased and Japanese investors looked for higher returns abroad. After breaking its uptrend on the Fed’s quantitative easing announcement, the pair later recovered most of its losses and looks likely to test resistance. The USD/JPY is just below the resistance in the 99-area. If this is broken, the ascent will continue.

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Financial and Economic News and Comments

US & Canada

* US Q4 2008 GDP was revised down to a -6.3% annual rate, the worst performance since 1982, from a previously reported -6.2% rate, data from the Commerce Department showed. The GDP declined 0.8% y/y. The largest drags on Q4 GDP were personal consumption, which declined at a 4.3% annual rate, and business investment in equipment and software, which dropped at a 28.1% rate. The largest positive contributor was government spending, which increased at a 1.3% rate. The GDP price index was unrevised to a 0.5% annual rate. Corporate profits fell 16.5% q/q, the largest drop since 1953. Corporate profits plunged 21.5% y/y.

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* US initial jobless claims in the week ending March 21 rose a more-than-expected 8,000 to 652,000, topping 600,000 for an eighth consecutive time, following the prior week’s downwardly revised 644,000, data from the Labor Department showed. Continuing claims jumped a more-than-expected 122,000 to 5.56 million in the week ending March 14, from the prior week’s downwardly revised 5.44 million.

Europe

* Germany’s consumer confidence declined for the first time in seven months, with the GfK German consumer climate indicator for April declining to 2.4 from March’s downwardly revised 2.5, GfK Group reported. Economic expectations declined to -32.8 in March from -27.9 in February, while income expectations decreased minimally to -11.4 from February’s -11.0.

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# UK retail sales fell a much more-than-forecast 1.9% m/m in February, the largest decline since June, following an upwardly revised 0.8% m/m increase in January, according to the Office for National Statistics. Retail sales increased a less-than-expected 0.4% y/y, the least since September 1995, following January’s upwardly revised 3.8% y/y gain.

# UK business investment declined 1.5% q/q in Q4 2008, according to final data from the Office for National Statistics, revised from a previously reported 3.9% q/q decrease. Business investment fell 4.5% y/y, revised from a previously reported 7.7% y/y drop.

Asia-Pacific

* The Conference Board Australian leading economic indicators decreased for a fifth month in January, declining 0.6% to 111.2 points, following December’s downwardly revised 1.1% decrease, the Conference Board reported. The LEI indicates further deterioration in the Australian economy.

* Amid Japan’s deepening recession, corporate service prices fell for a fifth month in February, falling a slightly more-than-expected 2.6% y/y, the steepest decline in seven years, following January’s downwardly revised 2.4% y/y decrease, data from the Bank of Japan showed.

FX Strategy Update

Источник: Hans Nilsson

26.03.2009