Euro Falls, Awaiting ECB Clarification

* The dollar and yen rose against most other key currencies on Friday. US April consumer sentiment rose more than expected, in another sign the US recession is abating. The Dow was up 5.90 points to 8,131.33. The USD/JPY fell slightly, still above the 0.99 support. Sterling declined for a second day consolidating earlier gains this week. The Canadian dollar fell as Canada’s consumer-price inflation rose less than expected increasing expectations of more aggressive Bank of Canada policy easing. The Australian dollar was little changed at the 0.72 support. The Swiss franc dropped on weak retail sales and the Swiss National Bank’s announcement it will continue its policy of foreign exchange intervention as long as deflation risk remains.

* The EUR/USD fell to the 1.30 support, following European Central Bank President Trichet’s comments that the ECB may announce unconventional measures at the May policy meeting. “Any ambiguity in our medium-term policy direction would delay the return of sustainable prosperity, because that would undermine confidence, which is the most precious ingredient in the present circumstances,” Trichet said. The ECB is expected to cut its benchmark interest rate 25 basis points to 1.00% and may announce unconventional easing measures to boost economic activity. More aggressive easing may pressure the EUR/USD further in the short run but could bring a eurozone economic recovery forward; consequentially, supporting the pair in the medium term. If the 1.30 support is broken, the EUR/USD may fall to the 1.28 support.



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Financial and Economic News and Comments

US & Canada

* US consumer confidence rose to a 7-month high in April, with the Reuters/University of Michigan consumer sentiment preliminary index rising more than expected to 61.9, the second consecutive increase, from 57.3 in March. The current conditions index increased to 66.6 in April from 63.3 in March. The consumer expectations index advanced to 58.9, the highest since September, from 53.5.

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* In March, Michigan remained the state with the highest unemployment rate, 12.6%, and the states with the next highest rates were Oregon, 12.1%; South Carolina, 11.4%; California, 11.2%; North Carolina, 10.8%; Rhode Island, 10.5%; Nevada, 10.4%; and Indiana, 10.0%, the Labor Department reported.

* Canada’s consumer prices increased a less-than-expected 0.2% m/m in March after a 0.7% m/m advance in February, CPI data from Statistics Canada showed. The consumer-price inflation rate unexpectedly slowed, on declining gasoline and car prices, to 1.2% y/y from February’s 1.4% y/y. The Bank of Canada core CPI increased a more-than-expected 0.3% m/m in March after a 0.5% m/m rise in February. The BOC core CPI rate unexpectedly rose to 2.0% y/y from February’s 1.9% y/y.

Europe

* The eurozone seasonally adjusted trade deficit narrowed more than expected in February to ?4.0 billion ($5.2 billion) from January’s revised ?5.4 billion, according to data from Eurostat. Exports increased a seasonally adjusted 0.5% m/m in February while imports declined 0.8% m/m. Europe’s exports to its major trading partners plunged by the most since records started in 2000. Exports to the US fell 27% y/y; shipments to the UK dropped 29% y/y; and those to China decreased 26% y/y.

* Eurozone construction output declined a seasonally adjusted 1.8% m/m in February after an upwardly revised 1.6% m/m increase in January, according to figures from Eurostat. Construction output fell 11.8% y/y, the 12th consecutive drop, following January’s upwardly revised 9.0% y/y fall.
* Switzerland’s retail sales fell a more-than-expected 3.8% y/y in February after a 1.2% y/y gain in January, data from the Federal Statistical Office showed.

Asia-Pacific

* Japan’s consumer confidence reached a 5-month high in March. The consumer confidence index increased to 28.9 from February’s 26.7, having improved for three months since falling to December’s record-low 26.2, according to data from the Cabinet Office. Consumer willingness to buy durable goods rose to 34.2 in March.

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* In the Bank of Japan quarterly report, the central bank lowered its economic assessment in seven of Japan’s nine regions, saying the regional economy has been “deteriorating significantly” on a spending slump amid the deepening recession. BOJ Governor Masaaki Shirakawa said weak domestic demand will prolong the recession even though exports and production begin to improve.

FX Strategy Update



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Источник: Hans Nilsson

17.04.2009