Waiting for G-20 Meeting

* The dollar was little changed on Wednesday before the G-20 meeting of global leaders in London and the European Central Bank’s interest-rate decision on Thursday. Market expectations are fairly low for the G-20 meeting, but a failure could increase risk aversion and spark selloffs in the equity market. However, we believe the international leaders will announce plans to combat the global recession and introduce proposals for new global financial regulations to satisfy low market expectations. US economic data were mixed today. ADP predicts record job losses for March and so does our leading employment indicator. However, the labor market always lags the recovery and the ISM manufacturing report showed a positive side with new orders rising strongly. This is more important as the ISM manufacturing index is a leading economic indicator. US construction spending and pending home sales were better than expected. Signs of a US economic recovery supported stocks and the Dow rose 153 points to 7762. The yen fell after the Tankan report showed Japanese business confidence fell to a record low, but pared losses as support held. Sterling rose as the UK manufacturing PMI showed signs of an improving outlook for the UK manufacturing sector. The Canadian dollar fell as crude oil prices dropped after a report of higher-than-expected petroleum inventories. The AUD/USD advanced to the 0.70-area resistance supported by improving building approvals and firming manufacturing PMI.

* The EUR/USD fell modestly ahead of the ECB’s interest-rate decision. The pair was pressured by higher eurozone unemployment, falling German retail sales and contracting eurozone manufacturing. The ECB is expected to cut interest rates 50 basis points, its refinance rate by 25 and lengthen the maturity of ECB refinancing operations to up to twelve months. The ECB may also announce plans to buy private sector bonds. More aggressive easing may pressure the pair in the short run but could bring a eurozone economic recovery forward, which should support the EUR/USD. There are important support in the 1.30-area and important resistance in the 1.37. If these technical levels are not broken, the EUR/USD will be range-bound.



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Financial and Economic News and Comments

US & Canada

* US private-sector payrolls declined a more-than-expected 742,000 in March, the most since records began in 2001, following a revised steeper decline of 706,000 in February, according to the ADP employment report. Friday’s official employment report by the Labor Department may show overall job losses approximately 680,000 with the unemployment rate rising to a 25-year high of 8.5%.

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* The US ISM manufacturing index increased more than expected to 36.3 in March from 35.8 in February, indicating continued contraction in the US manufacturing sector but at a slower pace, data by the Institute for Supply Management showed. The new orders index improved to 41.2 in March, the highest since August 2008, from 33.1 in February. The production index ticked upward to 36.4 from 36.3 and the employment index increased to 28.1 from 26.1. The inventories index decreased to 32.2 from 37.0 and the supplier deliveries index declined to 43.6 from 46.7. The prices paid index increased to 31.0 from 29.0.

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* US pending home sales increased a more-than-expected 2.1% m/m in February after a 7.7% m/m decline in January, signaling sales activity may pick up in coming months and the US housing slump may be near a bottom, data by the National Association of Realtors showed. Pending home sales declined 1.4% y/y.

* US construction spending fell for a fifth consecutive month in February, declining a less-than-expected 0.9% m/m at a seasonally adjusted annual rate of $967.52 billion, following January’s downwardly revised 3.5% m/m decrease, according to data by the Commerce Department. February construction spending fell 10.0% y/y. Residential construction spending in February decreased 4.1% m/m to $282.6 billion after January’s downwardly revised 3.5% m/m decline. February residential construction spending plunged 29.2% y/y. However, non-residential construction spending increased 0.5% m/m in February and federal government construction spending rose 0.8% m/m.

Europe

* The eurozone manufacturing PMI was at 33.9 in March, final data by Markit Economics showed, following 33.5 in February, indicating contraction in the eurozone manufacturing industry.

* The eurozone unemployment rate rose more than expected in February to 8.5%, the highest reading since May 2006, from an upwardly revised 8.3% in January, data by Eurostat showed.

* The German PMI was at 32.4 in March, up from 32.1 in February, still indicating contraction in the German manufacturing sector, Markit Economics reported.

* Germany’s retail sales unexpectedly declined 0.2% m/m in February after falling 0.9% m/m in January, the Federal Statistical Office reported. February retail sales fell a more-than-expected 5.3% y/y.

* The UK manufacturing PMI rose more than expected to 39.1 in March, the highest level since October, from 34.9 in February, still indicating contraction for an 11th month in the UK manufacturing sector, according to the Chartered Institute of Purchasing and Supply and Markit Economics.

* Switzerland’s SVME PMI was at 32.6 in March, the same level as in February, indicating continued contraction in the Swiss manufacturing sector, the Swiss Association of Purchasing and Materials Management reported.

Asia-Pacific

* Japan’s business climate continued its decline in Q1 2009, according to the Bank of Japan’s Tankan survey. The large manufacturers index fell more than expected in Q1 2009 to -58, its lowest level, from -24 in Q4 2008. The large manufacturers outlook dropped slightly less than expected to -51, still far below Q4’s -36. The nonmanufacturing index declined more than expected to -31 from -9. The non-manufacturing outlook decreased more than expected to -30 from -14. The Tankan all industries capex index, measuring capital expenditures by all Japanese industries except the financial industry, showed large manufacturers and non-manufacturers plan to cut business investment by 6.6%.

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* Australia’s seasonally-adjusted retail sales in February declined a more-than-expected 2.0% m/m, the largest monthly drop in the last 12 months, after an upwardly revised 0.5% m/m increase in January, according to the Australian Bureau of Statistics.

* Australia building approvals in February rose a more-than-estimated 7.8% m/m, the first increase since June 2008, following January’s downwardly revised 4.0% m/m decline, data by the Australian Bureau of Statistics showed. Building approvals fell a less-than-expected 25.5% y/y after January’s 33.5% y/y drop.

FX Strategy Update



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Источник: Hans Nilsson

01.04.2009