Monday, August 23, 2010

Germany’s positive Purchasing Manager Index (PMI) for Services couldn’t save the Euro as the other PMI reports out of the EuroZone showed a strong decrease.  In times, like these, when deflationary pressures are high the market reacted to the decrease as an overall sign that growth for the area is slowing down more than hoped.

U.S. equities dropped to a five-week low, bringing risk aversion into the equation and dropping the Euro even further during the NY trading session.

The Cable and the Loonie also saw strength to the USD side of the majors on risk aversion, but not enough to force either of them to pick a direction and go.

The Aussie and the Kiwi seem to have lost some strength on political risk as the Australian election is re-tallying its result.  The lack of a clear majority in their Parliament has equated to some fear induced selling and will most likely remain that way until there are clear results.

Tuesday, August 24, 2010

Germany posted some positive news in the form of Gross Domestic Product (GDP) which increased by 2.4% as well as growth in both the Capital and Construction Investment numbers.  Germany’s news wasn’t enough to float the Euro, however market turns attention away from the economic calendar to focus on a bigger issue facing the European Union.  Greece’s banks posted terrible second quarter earnings and have run out of lenders.  Greek banks now rely mainly on the strapped and limited European Central Bank for money supply.  Spain and Portugal aren’t as dire, but are still in a similar situation as their own growth is stifled by low employment and inflationary pressures.

The Euro, Cable and Loonie took the brunt of the sentiment shift led by overall risk aversion.

The Yen also wears the battle scars of the market’s fear as it plummets to 84 against the USD.  Last time the Yen was this strong was in April and May of 1995.  1995!!! With very few intervention options available to Japan at the moment it is possible it could continue to strengthen.

Early New York session brought some relief to the beleaguered Euro and Yen with the U.S. posting dismal housing numbers.  With the home buying tax credit expired, home sales dropped by 1.54M in July.  That is significant because the consumers’ willingness to spend (on both big and small ticket items alike) is essential as the last leg out of a recession.  With the U.S. appearing to be unable to deliver that last push the currency sold off for a short time before risk aversion settled back in.

With the Japanese left somewhat helpless to weaken their currency and the U.S. somewhat helpless to keep the reputation of theirs it seems risk aversion may well be in place for the remainder of August.

Wednesday, August 25, 2010

Markets seem to be eyeing an oversold equities market as a good buying opportunity as U.S. stocks gain today in early N.Y. trading.  That goes far toward negating worries over Ireland’s downgrade by the S&P over the course of yesterday’s Asian session that looked to drive more risk aversion into the market place.

The EuroZone had its own reason to celebrate in Germany’s IFO report which increased by .5 margin but beat the market expectations by over a full point.  Germany has posted an almost 11 point gain on its IFO since the January signaling that although growth is slow, the EZ’s best chance for recovery is still growing.  The Euro didn’t really move on the news, however it did seem to stall any further selloff.

It was a no-news day for the GBP, but it still managed to nudge near the highs of yesterday’s momentary fear based USD selloff on more bad home sales news out of the U.S. (new Home sales dipped from 330K in June to 276K).

Thursday, August 26, 2010

A slow news day kept most of the majors near the consolidation areas started after yesterday’s cool down.

The one exception is the Swissie which strengthened well past the long held 1.0375 level established in July.  The CHF had good reason to strengthen on its own merit with strong employment levels (3.968M in 2Q) but also as a an alternate safe have to the USD as the U.S. posted further job losses and continuing claims in August.

Bigger news than that, however, is considering what Japan will do about its poor muscle-bound Yen.  Prime Minister Kan is putting a lot of pressure on the Bank of Japan (BoJ) to stimulate growth in the form of their own stimulus package proposed by the ruling party.  The options are unclear for the BoJ right now, but all eyes are on the Pacific Island as they haggle their next steps with the Bank and their constituency (remember there is an election coming soon for the PM spot).`

Friday, August 27, 2010

The Euro failed to surge after incredibly positive German Retail Sales numbers (an increase of 6.8%) indicating that the market may be holding out on a direction until many of the bigger issues facing the market are addressed.  How slow is “slow growth” in the U.S.?  What will the BoJ do to weaken its currency?  How long will the ECB really extended its quantitative easing program to aid Greece, Spain and Portugal?

Similarly, the Pound posted good preliminary GDP numbers (up by .1% in QoQ data) as well as positive exports (an increase of 2.8%).  Even private consumption is up by .8%.  Yet the Sterling fell from yesterday’s highs, retracing to the top of the previous consolidation area at 1.5480.  That retracement may be deceptively creating bullish sentiment for the pair now that the price has been driven back to affordable levels.  If the positive news out of Britain can find some positive news out of the U.S. then it may be time to buy this pair all over again.

Is there positive news out of the U.S.?  Personal consumption rose from 1.6% to 2%.  GDP Index rose by .1% and Annualized GDP was .2% better than expected.  Arguably, yes, but next week’s equities market is likely to lead the way in terms of overall market sentiment.

The “wait and see” sentiment in regard to Fed Chairman Ben Bernanke’s next steps as well as Prime Minister Kan’s promise of “bold” action is likely to hold throughout the NY Session today.  More reason for the market to wait:  Bernanke and Trichet are meeting today in Wyoming to discuss their QE plans for their respective countries.  With the two countries having such varying results there should be a lot to discuss and a lot more to consider before investors move forward today.

Market seemed to focus on a very positive outlook from Bernanke’s Jackson’s Hole report citing the better than expected growth rate for the U.S., the oversold conditions of the equities markets as well as the willingness by the Federal Reserve to do everything it can to continue this last leg of recovery.  The USD selloff proved his words to be effective for closing traders.

Monday, August 16, 2010

The U.S. Dollar and the Japanese Yen increased in late Euro Session to early NY session on what seems to be simple risk aversion as U.S. Treasuries rally (on yield decreases) and Gold climbs.

From the economic calendar there is little to report.

The Euro Zone posted a decrease in their MoM Consumer Price Index (CPI) (by -.3%) yet an increase in the YoY data (up by .3%).  The mixed data seemed to turn the market’s attention to other indicators for cues.  Mainly, weak Gross Domestic Product (GDP) out of Japan, nudging China into the place of second largest economy in the world, and slower consumer spending in three major economies, Europe, Britain and the U.S.

On a bright note, the industrial signposts are starting out positive with the Empire State Manufacturing Survey out of the U.S. posting an increase by 2.02 points.  While it’s not a stellar number it is still an increase in the first of many similar reports to come.

Tuesday, August 17, 2010

The Euro got a boost, extending yesterday’s pullback, with positive current account (similar to Trade Balance) numbers (going from -16.7B in May to 1B in June).  Germany also posted a large increase (29.7 points) in the ZEW Survey (measuring investor/analyst sentiment for the next 6months) lending some confidence to the market about the Euro’s stability even in the midst of an overall slowdown.

The GBP didn’t fare so well, however with today’s Euro-Session news with a decrease in Consumer and Retail prices it looks like the U.K. will face its own threat of deflation unless there can be a natural supply and demand shift in the next month or two.  (See last week’s Fundamental report for more information regarding deflation.)  Deflation concerns aren’t enough for a major pullback to the Sterling just yet, however, so there is still room to move to the GBP side of this week’s trading – especially if the market’s overall fear can simmer for a day or two.

Speaking of deflation, last week the U.S. saw some relief on that front in the form of higher Consumer Price Index (CPI) numbers and this week there is an additional boost from the Producer Price Index (PPI) report with an increase from 2.8% to 4.2% in the YoY data and an rise from -.5% to .2% in the MoM report.  The decrease in deflationary pressures on the Fed coupled with increased Industrial Production (up to 1% from .1%) have eased concerns, for the moment, regarding the global economic slowdown just enough to pick up some volume and sell off some USD.

Wednesday, August 18, 2010

The Euro toyed with the 1.29 level through the Euro/NY overlap after seeing some pullback during yesterday’s Asian session with early NY session sentiment giving it a boost above that level.  With no market moving news on the calendar to continue that momentum, price merely simmered, possibly waiting for more PPI news out of the EZ.

The Cable, however, received a quite a turn around in sentiment after yesterday’s selloff which seemed to telegraph the market’s negative expectations ahead of the Bank of England’s Wednesday meeting.  The BoE has a majority vote to keep quantitative easing at 200B pounds, the lone dissenter being Andrew Sentence once again. Encouraged by a lack of policy shift the Pound rose back above Monday’s levels and looks like there will be good reason to keep price above those levels with the threat of further stimulus having passed.

The Canadian Dollar also saw strength during the early NY session a rally in the U.S. index futures signaled a possible extension of yesterday’s gains.  Strong U.S. signals strong trading for Canada.  That seems to be enough for today as there isn’t much else to drive the Loonie either on the economic calendar or in Oil.

Thursday, August 19, 2010

Even an Asian session Euro selloff couldn’t nudge the Euro out of its range as the market continues to express confusion over market data.  Germany posted its own mixed news with a decrease, by .1%, in Producer Prices in the MoM report and a significant increase, 2%, in the YoY report.  The news merely moved the Euro back to the top of its range at 1.29.

The Pound, also range-bound, experienced similar price action based on its convoluted Money Supply issue, with preliminary numbers showing a MoM increase of .4% and the YoY numbers expressing a .7% decrease.  Bad US news aids the GBP, however and it is able to stay near the highs of the consolidation area with little movement.

Not often talked about here, the Swissie came out strong on their own Trade Balance news which came in very strong with an increase of 1.12B accompanied by huge rallies in both exports and imports (-6.4% to 20.6% and -9.9% to 36.1% respectively).  With the next key level at 1.02 the USD/CHF could be headed to parity soon after.

The U.S. has posted some devastating job loss numbers (500K) for August.  The sigh of relief over curbed deflation may soon turn into a sigh of exasperation if the American consumer cannot buy at the current, increased prices.

All major economies will rely heavily on consumerism for the next leg of the recovery and if jobs and retail sales don’t at least stay steady we could see risk aversion run high.

By late New York session, all non-USD currencies gave back their gains in favor of mid-August, late week, end of the day, profit taking blahs.  Unless there are more cues to take from the Equities market short term close outs, I expect that Friday will be quiet after this kind of action.

Friday, August 20, 2010

Well, so much for an undecided market that would quiet down on the last trading day of the week!  Late Euro session saw a quick shift in overall sentiment from plain old “blah” to fear as the U.S. Dollar strengthened across the board.

Germany’s council member to the European Central Bank (ECB), Axel Weber, recommended that the quantitative easing (QE) for banks stay in place until first quarter 2011.  This has sparked some fear driven trading because the market has hoped to loosen QE measures simply as a sign of confidence in the recovery.  The idea that banks, European in this case but certainly isn’t limited to Europe, may need additional time with QE funds fuels the fear that the global recovery isn’t going so well.

QE is merely the idea of figuratively “printing money” or creating money supply through additional Treasury instruments, or sometimes just the creative use of existing Treasury instruments.  The idea is to give lenders capital to lend – or invest – to keep them solvent as well as to ensure that the banks, in turn, will actually lend out the money to people and businesses who need it.

I really expected some correctional moves after last week’s volatile Non-Farm Payroll (NFP) report.  However, most pairs merely consolidated near last Monday/Tuesday resistance levels.

The Euro and Pound did weaken, mildly, on a strong equities market that is gaining strength on assumptions that a weak jobs report will be cause for another round of stimulus.

This big winner on this assumption, however, is the weakening Japanese Yen as it retraced deeply on the presumption that further infusions from the U.S. are in order.

Tuesday, August 10, 2010

The Euro, Pound, Kiwi and Loonie all lost traction against the Greenback in the early part of the NY Session.  Since there wasn’t much in the way of the economic calendar to create the pullback it seems to be due, in most part, to highly overbought conditions on these currencies.

However, the Federal Open Market Committee’s (FOMC) announcement to try and regain some footing in economic growth by purchasing long-term Treasury instruments came as a big surprise to investors.  The market responded with a very quick, highly emotional USD selloff across the board.

The Federal Reserve’s goal is to meet the recent economic slowdown with a stop-gap measure on interest payments – similar to a consumer’s effort to pay down principal debt in order to create more room in the household budget sooner, rather than later.

The additional liquidity to the USD is likely to be short lived, however.  We will need to see a rise in treasury rates in order to sustain any kind of financial benefit from this perfunctory measure, but with more signs of growth around the corner (remember those manufacturing signposts I talked about last week) that may not be entirely out of the question.

Wednesday, August 11, 2010

I couldn’t think of a better way to explain it so I’m quoting directly from the Dow Jones Newswires:  “European stocks fell sharply Wednesday after the Federal Reserve’s cautious comments on the U.S. economy, weak Chinese data and a cut by the Bank of England in its economic growth forecast, which also sent sterling tumbling and U.K. government bonds jumping.”

As shown by the USD and JPY buying frenzy, this overall time of uncertainty is creating a risk-averse market reaction.  In all of the major pairs, except the USD/JPY, the USD has come out strong.  Highly overbought conditions in the Euro and the Sterling has made them take the hardest hit in the non-USD selloff.

The overall view seems to be that the Fed’s move on Tuesday and the slowdown in growth for the major economies is proof that we’re not out of the woods yet and a double-dip recession is still a good possibility.

Thursday, August 12, 2010

More bad U.S. jobs news (484K lost) slowly pushed the USD to the wayside in the NY session as the USD bulls took their money and went home.

The Euro, Pound and Loonie all made small gains on the USD weakness, bringing prices to relatively small pullback levels across the board.

In light of recent growth slowdowns for major economies across the board have begun a real doom and gloom outlook for global recovery.

The technical pullback away from the USD trend-side lines the market up nicely for some risk aversion type trading to the USD and JPY side next week.

Friday, August 13, 2010

The Euro posted preliminary Gross Domestic Product numbers for Germany indicating and increase in production, (from .2% to 2.2%).  This strong of an increase helped contribute to the EZ’s positive trade balance, moving from -3.4B to 2.4B.  This shows strong growth and further growth opportunity for the European Union, even though it didn’t translate into Euro strength today.

The Pound and the Loonie are suffering from lack of news syndrome as they both consolidate at yesterday’s levels.

U.S. Dollar gets a confidence boost today from an increase in the Consumer Price Index (CPI).  At first glance it may not make sense that a currency would strengthen from higher consumer prices, especially with so many employment losses reported yesterday.  In this case, however, an increase in prices gives some confidence to the market as a marker for decreased deflation risk.  Deflation is simply a drop in consumer prices due to a drop in money or credit supply.  The reason that is such a scary subject to some is that, prolonged over time, it could mean to more job losses.  People stop earning, they stop buying, the stores stop selling so they do more firing.  The cycle goes on.  So, in this case an increase in prices is a bit of delay off of the first half of the year’s strong hiring and acts as a natural check and balance to the inflation/deflation cycle.

Now you couple that with the news that U.S. Retail Sales have actually increased in July you get good news for the USD.

All eyes turn to the Japanese as they threaten, once again, to intervene on behalf of their ever-strengthening currency.  This could be a difficult for Japan at this point without some kind of loosening among other major economies, but that doesn’t mean that they won’t try manipulating the perception of the market with tough talk and at least the perfunctory filing of paperwork and legal action.  Even if it stagnates there it could be enough to hold off further JPY buying for the time it takes for a second recovery stage to take hold.

Monday, August 2, 2010

The currency market is, again, led by the global equities markets as European and American stocks rally driving more USD selling and gave a boost to the flagging Euro and the uncertain Pound.  Manufacturing numbers for Britain, Europe and the U.S. seem to be aiding a market looking to invest.

Euro broke the 1.31 mark on positive German and EZ news with the Purchasing Manager Index (PMI) for Manufacturing stayed steady at 61.2 for Germany and actually made a .2 gain for the EuroZone.  While France and Italy don’t really drive the Euro news on their own, they saw slight gains in their own Manufacturing PMI numbers which helped to propel the Euro past recent resistance.

Similarly the Cable climbed on the news from its neighboring economy while posting a better than expected Manufacturing PMI of its own.

The U.S. posted its own surprise in Manufacturing PMI with an unexpected 55.5, well above the 54.2 market prediction and definitely still within the range of expansion (above 50).

These PMI numbers may be indicating inherent strength for these economies and may serve to quell the fears of the marketplace after July’s indicators of overall slowdown.

Tuesday, August 3, 2010

A drop in Construction PMI for Britain (from 58.4 to 54.1) didn’t faze the Pound as 1.5960 and stalled.

The Euro made a similar move above 1.32.  Both currencies seem to be benefiting from an overall “it’s not as bad as we thought it might be by this time” kind of sentiment as the market is abuzz with news that despite the slowdown in growth in China, the U.S. and the EuroZone we may still have avoided a double dip recession.

It helps, too, that the U.S. is posting some lousy numbers and without the market fully behind the USD as the safe haven currency to use in troubled times it is taking its turn being battered around by poor Personal Income and Personal Spending numbers (a decrease by .4% and .2% respectively).  A bright spot for the USD is a slit increase in Factory Orders however it remains to be seen if this will contribute to a turnaround in employment numbers for June.

All major economies have done what they can in terms of interest rates and stimulus it is quite plain that the next leg of recovery is going to have to come from consumer spending and it seems, in the U.S. at least, that the general populace is still nursing old wounds as debt decreases along with spending.   In response to the weak dollar (without a strong Treasury instrument) rumors are circulating that the U.S. may consider a change in fiscal policy.  This could mean that one more round of bad Consumer Price Index (CPI) numbers (used to measure inflation) could be the last strike for policy makers and an interest rate increase may be considered once and for all.

Wednesday, August 04, 2010

Dips in both Services PMI for Germany and the EZ may be indicating some employment problems are yet to be released.  Coupled with the pullback in EZ Retail Sales and the news today hit a 1-2 punch to the marketplace bring the Euro and its sister currency the GBP back down below the highs hit yesterday.

Not entirely an innocent bystander, the Cable did post a declining Services PMI of their own (from 54.4 to 53.1).  It is possible that the PMI numbers released earlier in the week are holding more weight now that they’re paired with today’s numbers.

The market seems a little skittish overall, especially before the U.S. Non Farm Payroll report scheduled for release on Friday.  Positive ADP and ISM Non-Manufacturing numbers negate, somewhat, the negative manufacturing reports released in late July.  This only serves to confuse the market and muddy the waters for a clear expectation for NFP.

The Kiwi is struggling again and posted some bad employment news.  An increasing unemployment rate (from 6 to 6.8%) and a decreasing Employment Change (from 1% to -.3%) brought the NZD/USD below the key resistance level of .73 which ties the hands of the Reserve Bank of New Zealand a bit as they’ve been prompted by many factors to be the next in line to raise interest rates.  The push and pull could keep the Kiwi range bound for August.

Thursday, August 05, 2010

Not much to say about today’s trading except that the market seems to be playing everything very safe and isn’t really tipping its hand in either direction.  Generally speaking, the market will begin to price in its expectations 12-24 hours prior to important news announcements.  The fact that the market has merely triangulated prior to the U.S. NFP release indicates that it is struggling with the mixed bag of news that precedes the actual announcement itself.

On the side of weak NFP numbers one can cite the drop off of census workers and some weak showings in a handful of manufacturing reports.  On the positive side, for the first time in 3 months not all of those reports showed slow down.  There are also good indicators for job growth in the service sector with the reports released yesterday.  This confusion is highly represented by today’s whipsaw action in the majors.

Friday, August 06, 2010

The big news today is NFP.  The 150K census jobs lost carried the weight of the report and subdued any bright spots in the report (like increased jobs in Service and Construction and a stabilized Unemployment Rate) bringing the total jobs lost in July to 131K.  Yikes.  The market responded with a big USD selloff and JPY buyout.

The worst of this news is that the drop in yield on the U.S. 2yr Note to .5% will actually make selling the USD more appealing – if sellers can actually find buyers, that is.

There is hope with such a strong earnings season having the potential to create jobs, but the timeline for that becomes fuzzy as businesses will typically wait for 2-3 good earnings seasons to ramp up hiring.  Whether or not there will even be 2 in a row remains to be seen.

The only currency not to gain on the USD selloff was the Canadian Dollar.  Not only were Canadians hit with their own terrible jobs news, an increase in unemployment to 8% and an additional 9300 jobs lost (when the market expected an increase of 10K), but the economic links to the U.S. has hurt them.  As America’s largest trading partner they’re hard hit when the USD tanks.  They were hard hit today – from both sides.

Next Monday:

• AUD  ANZ Job Ads
• EUR  Germany Trade Balance
• NZD  Credit Card Spending

Next Tuesday:

• USD  Wholesale Inventories
• USD  Rate Decision

Next Wednesday:

• GBP  Unemployment Rate
• NZD  Performance of Mfg Index

Next Thursday:

• EUR  Industrial Production
• USD  Import Price Index
• NZD  Retail Sales

Next Friday:

• EUR  Germany’s GDP
• EUR  EZ Trade Balance
• USD  CPI
• USD  Retail Sales

Monday, July 26, 2010

The slow news day coupled with a luke warm response to last week’s Euro-bank stress tests has added up to  a fairly quiet foreign exchange market.

The Euro was able to pop up to previous resistance at 1.30 indicating a glimmer of hope by the market makers that the gist of the stress tests will be enough to bring about overall confidence, but stalled there on a sort of re-evaluation phase of the market.

The United States and Euro-Zone have seemed to have barely missed the worst case scenario of a double dip recession that was predicted.  However, with growth estimates of 4.7% being missed (current growth estimates are between 3.25% and 3.5%) neither is really out of the woods yet.

That kind of ambiguity, combined with China’s slowing growth, could go a long way toward further stalling the market.

That stall has been a part of every major pair today, even showing signs of confusion in the risk pairs, specifically the EURJPY and GBPJPY, as the market seems unsure of itself right now.

Tuesday, July 27, 2010

Not a whole lot to move the market today as far economic reports are concerned.

The Euro popped up past the 1.3 mark in late Euro/early NY hours as the overlap showed evidence in both the U.S. and European bond market that confidence has been restored after last week’s stress tests proved solvency for European banks.

The only other report I was watching, as 1 of 6 reports that act as a precursor to US Gross Domestic Product (GDP) was the Richmond Fed Manufacturing Survey for July which fell from 23 to 16.  This marks the 3^rd month in a row this survey has been in decline.

While there isn’t a whole lot of news to go on in terms of identifying the next wave of confidence or fear it seems to be the calm before the storm as the focus remains on increased confidence while we face decreased growth in the major players in the global economy.

Wednesday, July 28, 2010

The market it hinting at a turnaround by showing some JPY strength on a poor showing in the equities market today.

The GBP/JPY and the EUR/JPY both saw dips as the market’s appetite for risk took a hit on bad USD Durable Goods news.  A report like that doesn’t do a lot in and of itself, but it can be a seen as a red flag for GDP and employment – the effects can even stretch as far as wholesale and retail sales.  So having the surprise to the downside (the market expected a climb to .9% and instead saw a dip to -.1%) can be a larger warning sign to the market as a whole.

The Kiwi saw some good movement, though not in its own favor, on poor Trade Balance news as it plummeted a whopping $538 Million in June.  Terrible news for such an export driven economy and at a terrible time for the currency as the pressure to increase rates stays in place for New Zealand.

Thursday, July 29, 2010

A dip in Germany’s unemployment rate and a bump to the Euro-Zone’s confidence numbers (Economic, Services and Industrial were all in agreement) helped the Euro pop up to 1.31 today where it stalled during the NY Session as US stocks are in decline for the 3^rd day in a row.

The GBP seemed aided by the good news of its sister economy and experienced a slight increase as well. However equities news quelled any excitement for the USD selloff kept even the commodity currencies range-bound throughout the NY Session.

The JPY was the exception as a loss of risk appetite caused the Yen to strengthened handily against the US dollar.

Overall the tide seems to be turning as risk aversion sets in on overall growth slowdown and concerns that there may not be enough good news to fuel the next leg of recovery around the world.  Friday’s US GDP and next week’s NFP is likely to be more cause for concern.  I’ll be watching for USD and JPY buying opportunities.

Friday, July 30, 2010

Germany’s poor Retail Sales number (from 3% in May to -.9% in June) brought the Euro back to 1.3 very, very quickly.  However the news hasn’t done more damage due to the fact that the YoY data has stayed quite strong and actually increased from -2.4% t 3.1%.  Retail Sales is a bigger deal during times of recovery than at any other time because it is the biggest indicator the market has that confidence and available means are available to spur further growth.

The CAD showed a very slight increase of .1% in their GDP numbers, but still missed market estimates by the same amount.

With no news to drive it, the GBP stays stable near yesterday’s consolidation area.  However it is likely that next week’s PMI numbers could help the Cable pick a direction once and for all.  The numbers have stayed fairly steady in the expansionary range of the mid to high 50s. If they can hold there through this difficult mid-year point then it could be indicating a strong GBP through the end of the quarter at least.

The US is taking its lumps with a poor GDP showing this month (from 2.7% to 2.4% and worse than expected by .1%).  Interestingly, the QoQ numbers stayed strong with an increase of .7% over the quarter.  That’s indicative of the strong early months where production and employment grew and could be an additional indicator that recent numbers are merely a normal pullback.  While PMI’s and Manufacturing Indexes aren’t looking strong for July, a turnaround in August and September numbers could fuel the next positive wave for growth and recovery.  If there isn’t enough production by the fall, we could see further fleeing from USD as a safe-haven and look to our commodity currencies for more opportunity.

The Chicago Purchasing Managers’ Index (PMI) broke the 60 mark with a whopping 62.3, well above the expansionary benchmark of 50.  The NAPM-Milwaukee report also broke the 60 barrier reaching from June’s 59 to July’s 66.  Maybe July’s GDP won’t be as bad, stabilization in production numbers would go a long way toward increasing confidence in the recovery again.

Next Monday:

• NZD  ANZ Commodity Price
• EUR Germany’s Manufacturing PMI
• GBP Manufacturing PMI
• USD ISM Manufacturing PMI

Next Tuesday:

• GBP Construction PMI
• EUR EZ PPI
• USD Personal Income
• USD Personal Spending
• USD Factory Orders

Next Wednesday:

• EUR Germany’s Services PMI
• GBP Services PMI
• EUR EZ Retail Sales
• NZD Employment

Next Thursday:

• EUR Germany Factory Orders
• GBP BoE Rate Decision
• EUR ECB Rate Decision
• USD Employment

Next Friday:

• GBP Industrial Production
• GBP PPI
• EUR Germany’s Industrial Production
• CAD Employment
• USD NFP
• CAD Ivey PMI
• USD Consumer Credit

Monday, July 12, 2010:

Slow news day left nothing more than a pullback against the USD as the market awaits some news that gives them the thumbs up to trade again.

The Euro was lifted to new highs on Sunday’s positive outlook for the week, but quickly returned to last week’s levels at 1.2620 and then lower through the NY session.  It seems that the Euro Zone’s efforts to put the onus for financial recovery first on the banks may stymie the Euro’s growth for the medium-term as stress tests will take time and the outcome is uncertain.  Long term it could pay off for the stretched Union since the more that the banks can pay for their own debt and damage the fewer state funds will be required to insure solvency.

The Cable left its weakened a tad on news that Britain’s Gross Domestic Product (GDP) numbers came in steady at .3%  in their MoM data but dipped a tad in the YoY report, from .2% to -.2%.

Without much else on the calendar, the market remains in a holding pattern.  Though it seems likely that some USD strengthening is in order after last week’s selloff.

Tuesday, July 13, 2010:

The market seemed to ignore Portugal’s downgrade by Moody and ignore bad jobs reports and focus on the strong equities markets and the strong T-bills auction in Greece bringing a lot of quick and emotional strength to the Euro during early NY Session.

The Pound, the Kiwi and the Yen all strengthened on that bit of positive news as well, though none nearly as strong as the Euro.

The British Pound did have some reason of its own to experience some strength in that their Consumer Price Index (CPI) fell again this month from .2% to .1%.  With all eyes on inflation and inflation control, this natural check to inflation has relieved the Bank of England (BoE) of some of the pressure to raise interest rates too soon.

The biggest note to self in today’s reaction to news is that the JPY didn’t follow the usual pattern of weakening on increased risk appetite.  Instead it has strengthened.  This decoupling could mean the end of the carry trade for a long, long, long time.  It could also mean big, big trouble for the Japanese economy which relies on a weakened currency to propel their export driven currency and is quickly running out of intervention options.  Not a good combination for Japan.

Recent New Zealand reports of an increase of both Credit Card Sales and Visitor Arrivals has predictably led to an increase in their Retail Sales boosting May’s numbers from -.3% to .4%.  Good news for the Kiwi as it stands to gain a lot of attention and money from a global marketplace that is looking to diversify into commodity currencies.

Wednesday, July 14, 2010

More good news for the GBP today as their employment numbers have been reported to show that not as many jobs were lost in June as in May.   While it seems to be the kind of news that is merely “less bad” it is still movement in the right direction and being coupled with yesterday’s decrease in CPI numbers may give Britons some breathing room and move to further inject market confidence into foreign exchange.

The Euro stays somewhat steady after a quick rise above resistance during the early NY session. Buying sentiment seems to be waning as directional movements are getting smaller and losing momentum.  The market has a lot of good news/bad news to weigh out of the EZ and it seems to be moving very cautiously into the wounded, but healing currency.

The US has reported some positive advance numbers for Retail Sales as well as a decrease in the Import Price Index, MoM from -.6% to -1.3%, YoY from 8.6% to 4.5%, which should go a long way toward negating the poor Trade Balance numbers that came out Tuesday.  The US is doing more importing than exporting right now – bad news for the long haul – but if they’re going to do it, it is better for manufacturing expenses and CPI that the import prices have decreased.

What is problematic for the USD, however, is the Fed’s outlook for long-term interest rates remaining near the zero mark as risks to recovery have remained intact, despite positive GDP and Employment in the first half of the year.  This shift in outlook is definitely discouraging as the mid-year was the goal for the Fed to begin backing out of stimulus injections and looking for growth measures.

The JPY got whipped around today as Japan’s budget plan has been called into question by the IMF as being too vague.  Interestingly Prime Minister Kan first proposed a sales tax increase over any budget cuts.  While that proposal did get shut down in parliament it does show a reluctant on the administrations part to rein in spending on a grander scale.  This could mean longer term hardship for the Japanese economy whose gross debt is already 215% of their GDP.

Thursday, July 15, 2010

Risk appetite stays strong as US and equities earnings are beating estimates and European treasury instruments are selling well.

The Euro strengthened further on another surprise treasury auction, this time out of Spain.  To have two of the worst hit economies in the EU do so well has gone a long way toward keeping the market’s big buck in play.  The Pound, Kiwi and Yen seemed to ride the Euro’s coattails throughout the NY session as well.

It seems that BP’s small progress on the oil spill created a bit of a bump in the GBP as well, providing more buying momentum that just risk acceptance.

The Kiwi also had its own inherent reason to strengthen as New Zealand saw a decline in Consumer Price Index (CPI), QoQ from .4% to .3% and YoY from 2% to 1.8%.  Good news for such a Retail driven economy.

The USD had mixed new.  On the positive side the Producer prices have pulled back making manufacturing more affordable, on the negative side a couple precursors to GDP health have continued the pullback from last month.  The Empire State Manufacturing Survey, the Philadelphia Fed Manufacturing Survey and the Industrial Production numbers all lost points in most recent reports.

Also…still an interesting note that the JPY strengthened on increased risk appetite once again.  Not its usual course of action when the market is feeling positive.

Friday, July 16, 2010

Big surprise in today’s news was a larger pullback in the EU’s trade balance than expected.  A pullback from 1.6B to .8B was expected in May however numbers plummeted to -3B.  This comes as a big surprise since it has been assumed that a weak Euro that makes their exports more affordable worldwide would help keep a better, albeit not ideal, balance in place.  The Euro experienced a very sharp selloff in response to the news.

Adding further fuel to the fire is a small rise in the US’s CPI, putting some inflationary pressure back on the USD.  Also of note out of the US is the Senate’s approval of financial reform. Shakeups in general tend to decrease risk appetite and that seems to be the case today as well as the USD makes abrupt gains on the news.

Interestingly, the Yen continues to strengthen as well.

The Loonie saw a slight rise in their Leading Indicators moving from .9% to 1% in June.  This number has hovered near 1% all year so that’s not a real reason to buy the CAD.  However, should we see an increase in Retail and Wholesale Sales it is likely that the three positive elements could point to good GDP for Canada.

Late NY Session the USD and JPY had one more buying rally as nose-diving equities and consumer confidence fueled market concerns about economic recovery.

Next Monday:

• AUD Reserve Bank News

Next Tuesday:

• EUR Germany’s Producer Prices
• CAD BoC Rate Decision
• NZD Visitor Arrivals

Next Wednesday:

• NZD Credit Card Spending
• GBP BoE Minutes
• CAD Wholesale Sales

Next Thursday:

• EUR Germany’s Services PMI
• GBP Retail Sales
• CAD Retail Sales
• USD Employment

Next Friday:

• GBP GDP
• CAD CPI

Monday, June 28, 2010

With no real surprises coming out of the G20 meeting, where there was a lot of focus on debt reduction and overall budget reduction, there’s not a whole lot to report on a slow news day.

Germany’s Consumer Price Index stayed fairly steady.  Giving the Euro a bit of boost, especially against the US Dollar, but that didn’t hold long as end of London session seemed to just take their toys and go home.

Personal Income in the US stayed flat at .4% while Personal Spending had a minor .2% increase indicating that US consumers are still playing it safe and will likely be paying off debt or increasing their savings with the regulated summer spending.  Smart move for the consumer but it could weigh heavy on the USD.

My USD concern is in the sharp decline in the Dallas Fed Manufacturing report moving from 2.9% to -4%.  While it is not unexpected (I’ve been talking about time for a pullback in the last few reports) it is still the 4^th of the 6 reports I watch to predict Gross Domestic Product (GDP) to dump so July’s GDP (and by extension employment) numbers will likely be poor.

Majors and risk pairs alike stayed steady through NY session, giving no indication of true market preference.

Tuesday, June 29, 2010

European session’s slumping equities and China’s severe change in outlook on growth made way for heavy USD and JPY buying reestablishing the risk relationship with the JPY that has been missing.

NY session’s apathy neither continued the FX selloff nor created a significant pullback, which leads me to believe that the pause is more indicative of a hold out for US jobs news and the rest of the week may be slow as a result.

While Canada’s Industrial Product Price Index (PPI)  stabilized at .3%, their Raw Materials Price Index plummeted to -7.2% from 1.7%.  Since this is the price Canada pays for the goods it needs to make product with this should go a long way toward stabilizing their currency as long as the PPI report for next month follows suit.  The idea being that if producers are paying less to produce, then consumers are paying less to consume – a natural check toward any inflationary pressures, at least in the short term.  This should have been good news for the pair, but it responded to the overall risk aversion in place before NY session began more than its own economic data.

The British Pound had the least reaction to the USD buying frenzy and merely pulled back to old consolidation levels near 1.50.  This could be signaling an overall confidence in the U.K.’s economic outlook as their GDP and Total Business Investment numbers are expected to stabilize in Wednesday’s report.

Wednesday, June 30, 2010

Good news out of the European Central Banks as their 3 month loans expired and new loans were issued at 131.9B Euros, almost 70B fewer than expected.  The market sold USD on the news as it seemed to celebrate unforeseen strength in the battered Euro Zone economy.

The Euro made some quick gains on the news, however the NY session pulled it back to Tuesday’s levels on what seems to be nothing more than profit taking.  There is another bright spot for the European Union in Germany’s “not as bad as before” employment numbers, but it failed to keep any momentum behind the EUR throughout the NY Session.

The Loonie weakened after its poor GDP showing dipping back down to 0% after last month’s steady .6%.  With Canada’s dip in Wholesale and Retail Sales the GDP can hardly be a surprise, but the market reacted to the news with confidence resulting in a very quick selloff of the CAD.

A little off the radar, but important to me is the small decline in the Chicago Purchasing Managers’ Index (PMI) from 59.7 from 59.1.  Like the other purchasing reports this decline is a telegraphed punch to the gut for American GDP next month and should not be ignored.  Even though this is the first month of the year for this report to go backward it is still #5 of 6 similar reports now to see a decrease.

Thursday, July 01, 2010

The Kiwi stayed weak against the US dollar as the ANZ Commodity Price report fell from 2.5% to -1.2%.  This decline is bad news for the New Zealand economy which relies quite heavily on their exports and could be a precursor for bad news to come in their GDP, Producer Price Index (PPI), and by extension Consumer Price Index (CPI).

The moment of truth for the US recovery approaches with the coming of Friday’s Non-Farm Payroll (NFP) report and the preliminary numbers are not looking good.  Initial Jobless Claims and Continuing Claims both skyrocketed in June.

While the USD saw a strong pullback on wavering confidence in the global economic recovery, a similar move in the JPY leads me to believe that those moves were merely the market getting out of their old sell positions in preparation for the actually report.  A typical, buy the rumor, sell the news scenario.

Friday, July 02, 2010

With little news in the releases or in the headlines, the foreign exchange market merely consolidated during the Asian and Euro sessions after Thursday’s NY moves. The Euro seems the most primed to gain on an expected poor showing in the US jobs market as they have also experienced a bit of a rebound in their equities market which may make the Euro a smart buy for investors looking to sell their USD.

The GBP continues to struggle near recent highs and the Construction PMI numbers didn’t help with a very slight decrease from 58.5 to 58.4.  But the numbers have stayed above the growth benchmark, 50, since March which may be an indication of longer term stabilization.  But for now the money makers seem content to hold onto their trades until the US NFP announcement.

Disappointing US payroll data failed to nudge the market as investors struggled between risk aversion and pure, economic USD selling.  The dropoff in government census hiring was expected however the market was looking toward a 110K job gain in the private sector to make up the difference.   US companies were only able to produce 83K new jobs.

Next Monday:

• GBP Services PMI

Next Tuesday:

• USD ISM Non-Manufacturing Composite

Next Wednesday:

• EUR Germany’s Factory Orders
• CAD Ivey PMI

Next Thursday:

• EUR Germany’s Trade Balance
• GBP Industrial Production
• GBP Manufacturing Production
• GBP BoE Rate Decision
• EUR ECB Rate Decision
• USD Consumer Credit
• NZD Credit Card Spending

Next Friday:

• EUR Germany’s CPI
• CAD Employment Numbers

Monday, June 14, 2010

The market continued trading in the direction of last week’s closing momentum, but since there hasn’t been any catastrophic news the gains seem to be mostly on an increase in risk appetite.

I was watching the NZD/USD for a reaction to a predictably declining Retail Sales number as predicated by their declining Visitor Arrivals and Credit Card spending.  But the Kiwi held its ground, even climbed on what seemed to be a larger market willingness to invest in the recently raised interest rate on the New Zealand Dollar.  With no news to sustain it, however, the USD recovered a bit of the loss sustained and merely brought the pair back to consolidation.

The EUR/USD nudged back up to the middle of its previous consolidation area, giving me reason to believe it has reset the game as far as overall opinion and momentum.  The EU’s MoM Industrial production was cut in half, moving from 1.6% in March to .8% in April.  Interestingly last week’s anomalous divergence with the YoY data has occurred here, as well, showing an almost two point increase, from 7.7% to 9.5%.  What that divergence signals, I’m not sure, but it may mean that revisions are coming.

The GBP flirted with recent highs again.  Without any supporting news out of Britain it could merely risk on the increased risk appetite, however Tuesday’s Retail Price Index (RPI) and Consumer Price Index (CPI) numbers, could be market moving enough to move it outside of the range it has found today.  The market is expecting a decline in both which be bad news in the short term (as the market is looking for a reason to consider and interest rate hike), but good news in the long term as declining prices would help the already strapped British consumer to buy with cash and not on credit.

The USD/CAD is stuck, ranging and consolidating.  With no news to push it along until tomorrow afternoon it is likely to stay range bound at least until then if not longer since their Leading Indicators report doesn’t come out until Friday.

Late day news that Greece’s credit rating was drastically cut to non-investment grade by Moody’s may be tipping the market back into some risk aversion into Asian session and later Euro-session considering they’re the second investment house to downgrade the floundering nation.

Tuesday, June 15, 2010

Non-Resident bond holdings gave a short term lift to the Kiwi, but not enough to create any real volume as it quickly retraced and sat around twiddling its thumbs all day.

The EU actually posted some not-as-bad news with a rise in Italy’s Trade balance from -1342 to -829, but for a report that isn’t really all that market moving it seems that the Euro was simply gaining on one more reach in the market’s risk appetite.  Later it was hit with a dismal 1.8B Trade balance showing a decrease by 2.7B over March’s numbers.

The GBP experienced a quick rise in value as the market tried to priced in a decrease in costs of goods as represented by the decrease in the RPI and CPI.  It seems the market wound up being disappointed overall, however as there had been pre-announcement talk of how an increase in both numbers would indicate that inflationary pressure on the British economy might preempt a rise in interest rates.  But that sentiment seemed to die quickly with an actual decrease in the MoM (from .6% to .2%) and YoY (3.7% to 3.4%) CPI data as well as a decrease in the MoM (1% to .4%) and YoY (5.3% and 5.1%) RPI data.

The CAD continues to consolidate as well, even with some bad news coming from their Labour Productivity and Manufactuting Shipments, indicating a possible pullback in their Employment and Production numbers.

The risk pairs, particularly the EUR/JPY and GBP/JPY, continued to consolidate as well as they relationship with the JPY has yet to be flushed out since the Hatoyama resigned.

Wednesday, June 16, 2010

During the Asian/European Session overlap Russia announced that it is considering adding the Aussie and the Loonie to its reserves for the first time ever.  While they’re still deliberating over the AUD (expressing concern over liquidity), they have confirmed that they will buy CAD, however they haven’t begun doing so quite yet.   There may be an opportunity to buy the rumor on this soon.

Italy’s news was stable in all announcements lending confidence to the market place and allowing it to stabilize near the same supply/demand zones as Tuesday for the tail end of the European session and through most of the NY session.  Late day USD news and renewed fears on Spain’s outlook did drive the EUR/USD back a tad, however before Asian session buying sentiment picked up again on the overall vote of confidence with stable numbers and discussion of big money’s (primarily the International Monetary Fund (IMF) and the U.S.) willingness to extend a loan to the battered Spanish.

Similarly, the GBP experienced the same dip, then climb experience on what seemed to be overall market enthusiasm.  However, Britons have reason to feel wishy-washy on mixed news considering that retails sales are slowing while jobs are improving possibly indicating that consumers prefer savings (or debt payment) over new purchases.  Good news for the citizens of Great Britain, but it muddies the waters for the economy on the whole.  Did they really think it was the consumers’ jobs to fix this mess?  Perhaps, but market stabilizing spending cannot be sustained long-term.

Late US Session brought a slight surprise with an increase in Production Prices and a decrease in Housing Starts and Building Permits.  This could be the pullback that is due for the recent climb in U.S. economic data.  The bright spot was the increase in Industrial Production (up to 1.2% from.8%) and Capacity Utilization (up to 74.7% from 73.70%) indicating that the U.S. is still producing and therefore growing.  Slow and steady will win this race.  This good news was able to infuse some confidence back into the market and provide a USD selloff.

Thursday, June 17, 2010

Though the line of credit to Spain rumors were denied, the Spanish bond auctions were a surprise success (selling $4.3B of debt) that infused enthusiasm into the buy side of the EUR/USD, nudging it off of recent support and to slightly higher highs back to around the 1.24 mark.  My issue with this recent rise in confidence in Spain, and by extension the Euro, is that Spain’s treasury debt comes due in July…to the tune of a near 25 BILLION Euros.  Without some line of credit or rescue plan it could get hit very soon and very hard.

The Cable rebounded on a surprise increase in Retail Sales (MoM increase of .3%, YoY .4%) but struggles near its new favorite resistance level, 1.4830.

The United States may be seeing signs of relief from an inflationary standpoint with a decrease in their Consumer Price Index.  That news couldn’t really help the USD over the large dip in the Philadelphia Fed Manufacturing Survey, plummeting from 21.4 to 8.  It has been clear that the climbing GDP and jobs numbers were due for a pullback, especially after some large jumps – and this may just be evidence of that pause.  However, a jittery market may assign more meaning and the largest economy in the world pulling back could trigger fear-based trading once again.

Friday, June 18, 2010

Mixed signals on Italy and Germany’s Industrial Orders and Producer Prices has kept the Euro ranging on the week’s last trading day with a slight end of day/week whipsaw at support levels.  The rally for the Euro seems to be over as big decisions look primed to be made over the weekend regarding bailouts and bond holdings so we may experience some “when in doubt stay out” kind of sentiment early next week while the market cleans up the edges of its decision making.

Correlating with the Euro once again, the GBP’s good news/bad news situation created similar pricing into the GBP/USD.  Big news facing the GBP next week will be BP’s own $20B rescue fund – if those numbers affect the British oil industry as a whole, the London market may see a hit early next week as it assesses the financial damage.

The USD stayed tight as the equities market toyed around within its range and sent no clear message to the market makers about direction or intention.  Part of this action is due to expirations on derivatives, and part of it is seems to be a certain calm relating to a contained European debt crisis.

The only major that seemed to move on anything was the Loonie on a late NY session release that showed stabilized Leading Indicators (at .9%) and increase in international Securities Transactions, from -.0.616B to 12.38B.  That will be the number to watch once Russia institutes it’s CAD buying strategy.

Next Sunday:

NZD Visitor Arrivals

Next Monday:

Nada

Next Tuesday:

NZD Credit Card Spending

CHF Trade Balance – I don’t normally watch this, but I want to keep an eye on it for the next few months since the SNB has announced it will curtail its FX purchasing habits that were meant to counter deflationary pressure on the CHF.

CAD CPI

USD Richmond Fed Manufacturing Survey

Next Wednesday:

EUR German Consumer Confidence

EUR Germany Services and Mfg PMI

GBP BoE Minutes

CAD Retail Sales

USD FOMC Rate Decision

NZD GDP

Next Thursday:

USD Durable Goods Orders

NZD Trade Balance

Next Friday:

USD GDP

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)

Monday, May 31, 2010

Low volume created quiet conditions for most of the day as the USD recovered a bit from last week’s selloff.

The Loonie was the market’s biggest winner, however as it pulled back to its old support and resistance zone between 1.05 and 1.04 based on positive numbers throughout its new releases.  While their rise in the Industrial Product Price Index (PPI) (from -.4% to .3%) and the increase in Raw Materials (from .8% to 1.7%) may spell out increased pressures on consumers for now it is the Gross Domestic Product (GDP) and the Quarterly GDP numbers that have garnered much of the CAD buying attention.  Rightfully so, since positive GDP for a country generally garners positive jobs as well.

The USD/JPY stayed tight as the political scene in Japan overshadowed any economic news as Japanese Prime Minister Hatoyama faces pressure to quit amidst concerns that he is not doing enough to curb their own debt crisis.  Political crisis equals political risk and could send the JPY and the USD climbing again soon.

The EUR gave back some of its gains as news stayed neutral for the continent with a good news/bad news see-saw throughout the Euro session.

Tuesday, June 01, 2010

More good news/bad news throughout the Euro session kept the EUR/USD range bound.  Germany’s increase in Manufacturing PMI = good news, Euro Zone’s higher unemployment = bad news.  Germany losing 23,000 fewer jobs this month = good news, decline in Germany’s YoY Retail Sales = bad news.  With no clear outlook for stabilization the market continues to show indecision on the world’s largest traded currency pair.

The Cable is flirting with an uptrend based on a better than expected Manufacturing PMI (market expected 57.8, UK delivered 58).  This is possible indication of stabilization for Britain but will need to see supporting releases, primarily GDP and positive employment, to quell a jittery marketplace.

The most interesting thing for the USD is the retracement of the Dallas Fed Manufacturing Activity.  Not market moving in itself, but its severe decline, from 21.1% down to 2.9% may be telegraphing a dip in jobs for next month’s jobs report.

The Loonie saw further gains on the Bank of Canada’s decision to raise interest rates from .25% to .5%.  Being the first of the Big 7 to do so and coupled with a slight rise in Oil prices and their GDP, a tightening policy seems wise to curb any further inflation as well as signaling economic confidence to investors and consumers alike.

Wednesday, June 02, 2010

Big news today is the official resignation of the Hatoyama, the former Prime Minister of Japan.  Surprisingly the JPY weakened, rather than strengthened on this political risk, which may be signaling a decoupling from risk sentiment, at least in the short term.

The Kiwi is range bound by a decrease in ANZ Commodity Prices, dipping from 4.9% down to 2.5%.  This may mean good news in terms of leading to a decrease in Producer’s Prices (and if Producers are paying less, that will lead to more affordable goods for consumers), however it may negatively affect their Trade Balance as their exports become cheaper.  New Zealand is also facing some political pressure to increase their rates.  Now that their sister economy, Australia, has put a moratorium on interest rate hikes and the BoC has already resumed those reigns the market’s eyes are turned to New Zealand to see if they will entertain an interest rate hike to counteract increasing consumer prices.  Though I don’t expect New Zealand to act until there is proof from China that it will not tighten its monetary policy in the wake of their own declining production numbers and inflationary pressure.

The CAD continued making gains, presumably on further increases in Oil.

With tightening consolidation areas on so many of the pairs the market, in general, seems to be stalling in anticipation of the US job’s report on Friday.

Thursday, June 03, 2010

Germany’s, as well as the EuroZone, Purchasing Manager Index (PMI) for Services bumped up to 54.8 from 53.7 and 56.2 from 56.  It’s not a major announcement, but I like to watch all sectors of the PMI to see if it is showing signs of growth at all.  This can be important for both GDP and Employment numbers down the line.  That small positive sign wasn’t enough to counter negative numbers from France and Italy however and merely served to stall the pair’s selling activity.  Honestly, even if Italy and France had posted positive numbers the EZ would still be hard pressed to overcome market fear from their debt crisis.

The British Pound also saw positive growth in Services PMI moving from 55.3 to 55.4.  Though the positive news wasn’t enough to fully boost the Cable it did keep the USD/GBP above the psychological 1.42 level and could be telegraphing an overall shift in sentiment toward the GBP over the EUR for a longer term decoupling of the two economies.

The United States signaled more positive signs of growth with an increase in April’s factory orders by a mere .1% bump.  The market was expecting a .4% jump, however, so the good news didn’t lead to much USD buying over the course of the day.  Leave the majors fairly silent, and waiting for the real jobs numbers on Friday.

Friday should be fairly volatile as we not only will have U.S. Employment numbers, but a meeting between Trichet and Xuren (China’s Finance Minister), along with other G-20 participants.  It will be interesting to see if China continues to deny a willingness to reassess their Euro debt holdings.  If their wording is at all ambiguous, we could see a new swelling of risk aversion in the marketplace.  I’m VERY interested to see what that next wave of fear does with the Japanese Yen.  Will it prove to have decoupled from risk perception altogether?  With their own political problems in trying to find a new Prime Minister (possibly their Finance Minister Naoto Kan), their economy may start to behave like any other and rely on its own fundamentals as a driving force.  At least until the global economy stabilizes and the carry trade is everyone’s favorite.

Friday, June 04, 2010

The Euro’s steady MoM GDP numbers weren’t enough to keep it stabilized against the USD as the market keeps its eye on the larger issues facing the EuroZone, specifically their debt crisis.

Though the United States’ employment report fell short of market expectations the 431K increase still drove investors into the USD as the currency strengthened in every major pair, except against the JPY.  With Average Earnings and Average Weekly Hours increasing and the Unemployment Rate decreasing the USD seems to be showing strong, consistent signs of recovery and growth.  It is important to remember, however, that some of the recent employment numbers have been temporarily increased due to the U.S. census hirings, so it may be time for a pullback in some of that growth by the time July/August numbers come out.  But overall, the USD has more reasons to stay strong through the course of the year than any other currency at the moment.

Canada also saw additional jobs in May, increasing employment by 24.7K and keeping their unemployment rate steady at 8.1%.  Though May showed a significant difference from April’s 108.7K positive job growth is positive job growth and Canada is bound to see in an increase in economics simply based on their trading relationship with the US, so it is likely that it will stabilize against non-USD currencies fairly well.

Canada also reported positive Ivey PMI numbers for the 6^th month in a row.  This bode well, for their own employment outlook and should go a long way toward strengthening their economy.

Next Monday:

• EUR Germany’s Factory Orders (GDP)
• NZD Manpower Survey (Employment)

Next Tuesday:

• EUR Germany’s Trade Balance
• EUR Germany’s Industrial Production (GDP and Employment)
• BRC Shop Price Index (CPI and Retail Sales)

Next Wednesday:

• USD Wholesale Inventories
• USD Fed’s Beige Book
• NZD Rate Decision
• NZD Business Performance of Manufacturing Index
• NZD Credit Card Spending

Next Thursday:

• EUR Germany’s CPI
• GBP Rate Decision
• EUR Rate Decision

Next Friday:

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