Sterling Falls on UK Budget

* The dollar fell against the euro and yen on Wednesday. The Japanese currency gained as the Dow fell 83 points to 7,887. Sterling declined after the Treasury said it will sell a record amount of gilts this year to revive the UK economy. The Swiss franc was little changed against the greenback and euro. The aussie declined versus the USD after a government report showed Australia’s annual consumer-price inflation rate decelerated to the lowest level in 18 months.

* The GBP/USD fell after the UK’s budget forecast the deepest contraction in modern times and deflation before a modest recovery in 2010. After breaking its downtrend, the GBP/USD is building a long-term bottom. Today the pair broke the 1.45 handle, currently testing the 1.44 support. If the support is broken, the pair will likely fall to the 1.42-area support. However, we believe it will trade in the 1.44-1.50 area.

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Financial and Economic News and Comments

US & Canada

* US home prices unexpectedly advanced 0.7% m/m in February after a downwardly revised 1.0% m/m gain in January, according to the Federal Housing Finance Agency. Home prices decreased 6.5% y/y in February, the second-smallest decline in six months.

* Canada’s leading economic indicators index fell for a seventh straight month in March, falling a more-thanexpected 1.3% m/m, after February’s downwardly revised 1.4% m/m decrease, data from Statistics Canada showed. Nine of the 10 index components fell in March, including a 10.3% m/m drop in factory new orders, a 4.3% m/m fall in the housing component and a 2.3% m/m decline in stock prices. The only component showing a gain was the M1 money supply.

Europe

* The eurozone budget deficit widened to 69.3% of GDP in 2008 from a downwardly revised 66.0% in the previous year, Eurostat reported.

* The UK’s deficit swelled to £90 billion ($117 billion), the largest since World War II, in the fiscal year through March, the Office for National Statistics said. Jobless claims rose 73,700 in March to 1.46 million, the highest since 1997, following February’s downwardly revised increase of 136,600. The claimant count rate rose to 4.5% in March from 4.3% in February. The UK unemployment rate based on International Labor Organization standards rose to 6.7%, matching forecast and the highest since October 1997, in the three month through February, from 6.5 % in the previous period. In the three months through February, wage growth including bonuses decelerated to 0.1%, the lowest since records began in 1991, from a downwardly revised 1.7%, while wage growth excluding bonuses slowed to 3.2%, the least since records started in 2001, from 3.5%.

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* Chancellor of the Exchequer Alistair Darling, in his annual budget statement, raised tax on British highest earners to 50% to contain a swelling budget deficit. Darling predicted that the UK economy will grow 1.25% in 2010 after an approximately 3.5% contraction in 2009; however, the International Monetary Fund expected the economy to remain in the recession, forecasting a contraction of 0.4% next year after 4.1% in 2009.

Asia-Pacific

* Japan’s trade deficit widened less than expected in March to a seasonally adjusted trade deficit of ¥97.1 billion from February’s revised ¥71.7 billion, according to data from the Ministry of Finance. Imports fell 36.7% y/y and exports dropped 45.6% y/y. The non-seasonally adjusted trade balance posted a ¥10.9 billion surplus, following February’s ¥82.1 billion surplus.

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* Australia’s consumer-price inflation rate was at 2.5% y/y in Q1 2009, less-than-expected and the weakest pace in 18 months, decelerating from 3.7% y/y in Q4 2008, data from the Australian Bureau of Statistics showed. The Q1 2009 CPI increased 0.1% q/q after Q4 2008’s 0.3% q/q decline. The trimmed mean, the Reserve Bank of Australia’s preferred measure of inflation, increased slightly more than expected at 3.9% y/y, below Q4’s 4.2% y/y. The weighted median rose more than expected at 4.4% y/y, slowing from Q4’s 4.5% y/y.

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* Australia’s DEWR skilled job vacancies declined 8.9% m/m in April after a downwardly revised 10.9% m/m drop in March, the Department of Education, Employment and Workplace Relations said.

Источник: Hans Nilsson

22.04.2009