Fundamental Report for Week of June 6, 2010

Monday, June 07, 2010

The Euro achieved its pullback mostly on fundamental news.  Germany posted strong YoY data, increasing from 26.1% to 29.6%, however the weak MoM data hurt the overall sentiment of the market who seemed to be looking for a cheap place to buy in the early NY session.  With no other supporting news, the EUR/USD continued to retrace its steps from late last week’s selling.

The Kiwi posted some late Asian session activity with a negative manufacturing report, dipping from 1.3% to .9% in the first quarter, bringing the Kiwi back to recent lows and what appears to be a highly psychological level around .66.

Likewise, the Aussie made enough gains on Job Advertisement news, but similarly sank to recent lows as the market kept a strong grip on the USDs.

Japan withstood a barrage of negative news, but was unable to weaken as the JPY investors seem to be on the fence about its risk correlation.

The USD consumer credit numbers came into positive territory in April, moving from -$5.4B to +$1B.  This is a sign of shifting consumer confidence and evidence that the general population is feeling more positive about the U.S’s economic growth.

Tuesday, June 08, 2010

I don’t even have anything to say here.  The entire market stayed put in its positions, hardly vacillating within the chosen ranges of all the majors.

Negative EUR news, primarily Germany’s declining Trade balance and Industrial Production, dropped the pair to the middle of its range.  Where it hung out and played Pinochle all day…or something like it.

Similarly the GBP found the bottom of its range.  There was a slight dip in Britain’s nationwide consumer confidence, but hardly enough to merit the selloff.  This leads me to believe that the market took seriously the ratings’ agencies comments regarding the weak recovery of the UK economy.  Though Britain maintains their AAA rating, the comments were detrimental to the GBP.

It would seem that the USD gained on overall market malaise as has been par for the course the last couple weeks.

The Loonie strengthened purely on a technical pullback since there was really no news to support a pullback.  Slight rise in Oil, perhaps, but that hasn’t been as CAD moving as it once.  A slow Canadian news week could also be signaling a stall in the USD/CAD overall.

Wednesday, June 09, 2010

It seems the Federal Reserve Chairman Ben Bernanke is sticking to his previous, conservative opinions regarding the strength of the US’s economic recovery.  That, combined with rumors regarding a surprise increase, not the expected decrease, in Chinese exports and the risk-acceptance side of trading rallied briefly.

Though the USD and the JPY experienced selloff against the EUR and the GBP enough to breach recent consolidation areas on the combination of rumor and discussion, those levels couldn’t hold as the market returned to the previously held areas of indecision.

Succumbing to the pressure to raise rates the Reserve Bank of New Zealand did increase their interest rate by 25bp to 2.75%.  The move seems premature, however, and the bank’s comments were reserved as Alan Bollard cited the expectation of rising inflationary pressures as reasoning behind the rate hike.  Rate hikes could be a bit tricky for such an export driven economy, so it will be interesting to see how aggressive they’re willing to get in future rate decisions.  If the RBNZ stays aggressive and keeps an eye on their currency as both a possible carry option as well as their increasing export prices, interest rates will continue to rise and could signal a longer-term turnaround for the NZD.

Additional news for the Kiwi was give some/take some as the Business NZ Performance of Manufacturing Index showed a dip from 58.9 to 54.5.  While staying above the 50 mark, the decline still indicates that the production (therefore jobs) market is pulling back.  On the flip side, Credit Card Spending was up to .4 from -1.7.  In an economy that relies so heavily on tourism, this could be signaling positive Retail Sales are on the way.

Thursday, June 10, 2010

The USD experienced further selling as the market’s appetite for risk increased on rumors of EUR bailouts, and increasing stocks and commodities market results as China, Japan and Australia all showed signs of continued growth.

France and Italy posted, almost exclusively, positive manufacturing and industrial production numbers.  Boosting the Euro to the retracement level of 1.2140 where it stalled, waiting for further evidence of possible recovery.  That doesn’t seem likely considering the Union needs to raise about 2 Trillion Euros ($2.4 trillion) within a three year time frame to refinance their own bailout debt.  (Bloomberg numbers have not been confirmed.)

The CAD continued to strengthen throughout the day, mostly on investor confidence, but also is showing continued signs of stabilization.  Their new housing price index stayed steady at .3% indicating a possible check on inflating prices of large items, but also their International Merchandise Trade (like Trade balance, only specifically measuring manufactured items) stays well into positive territory showing a continued trade surplus even outside of their oil trade.  Though it missed market expectations by 5B it is still good news for a market that was already feeling exuberant about selling USDs.

Friday, June 11, 2010

The market has stabilized quite a bit as sort of a “day after the binge” kind of rest.  Germany’s MoM Wholesale Price index dropped from 1.7% to .3% which may predicate a dip in their next Retail Sales announcement as well, but certainly shows a pressure to lower prices in an environment where that becomes increasingly more difficult to do so.  This stalled the Euro against its significant retracement from Thursday and may be signaling a fresh selloff next week.  Especially since EU’s Industrial Production numbers are due on Monday, their Trade Balance numbers are released on Tuesday and Germany, the EZ’s largest producer, has taken a hit this week with declining Trade Balance and Industrial Production.

Britain also had reasons to stall the GBP as their Producer Price Index (PPI), MoM Manufacturing Production, and Industrial Production all took significant hits in the data.

Weak Advance Retail Sales numbers gave some of those losses back to the Euro and the Pound indicating that American’s are likely saving over spending at this time.  A wise move for the potential consumer, if you ask me, but tough on the Dollar at the time of release.  However the U of M Consumer Sentiment Index did come out at 75.5 slightly higher than market expectations and almost 2 points higher than the previously posted 73.6.

The big news, that may be carrying some hints of change, is that European stocks have had 3 consecutive weeks of gains.  Banks were the biggest winning sector with a rise of 4.8% on news that the Federal Reserve has promised to participate in the EUs recovery and Spain successfully sold 3.9B Euros of a new 2013 note.

China’s 49% increase in exports may have injected some consumer confidence into the marketplace as well, but will be difficult to maintain as it seems anomalous.  They haven’t had exports like that in over six years.

Next Sunday:

• NZD Retail Sales

Next Monday:

• JPY Rate decision
• EUR Industrial Production

Next Tuesday:

• GBP RPI
• GBP CPI
• EUR Trade Balance
• EUR Employment
• USD Import Price Index
• CAD Labour Productivity
• USD Empire State Manufacturing Survey

Next Wednesday:

• GBP Jobless Claims and Unemployment Rate
• EUR EZ CPI
• USD PPI
• USD Industrial Production

Next Thursday:

• GBP Retail Sales
• CAD Wholesale Sales
• USD CPI
• USD Leading Indicators
• USD Philadelphia Fed Manufacturing

Next Friday:

• GBP PPI
• GBP Manufacturing Production (GDP and Employment)
• USD Retail Sales
• USD Business Inventories (GDP)

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