Apr
27
2007
Daily Forex Analysis
USD
It has been a slow news day for the USD yesterday as the only significant piece of information was the Jobless Claims. Usually the figure is bluntly ignored but this week it might provide a delicate hint for the upcoming results of the Nonfarm Payrolls release due on next Friday. The Jobless Claims came in at 321K, which indicates that the NFP release will probably come around the 100K-120K and not close to last month’s 180K levels.
The most important figure that is expected to be released today is the much anticipated US Gross Domestic Product at 13:30 GMT. The GDP is expected to come in at 1.9% which indicates that traders are predicting a slowdown in US growth after last month’s 2.5% figure release. There seems to be a certain amount of unexplained optimism in the air regarding the Greenback’s behavior recently. We can see that negative news is flowing in yet the USD is growing slightly stronger in the local scale. We could see that the EUR/USD was a bit shy of breaking the all time high and even the GBP/USD came back to the 1.9900 levels. That means that traders are feeling that there is no more room for the ongoing USD weakening rally, and are clearly signaling that it is time for a change. If the news that is expected next week leaded by the NFP release will not be very weak or come inline with expectations, we might see the very much expected reversal in the USD behavior.
EUR
The European market is constantly showing that it is robust, stable, and steadily growing. It had continued to do so yesterday when the German Consumer Confidence came out higher then expected at 5.5, and the UK Nationwide House Prices jumped to 0.9% from 0.6%. Despite the High performance we did not see a new record high for the EUR/USD, and the GBP grew weaker against the USD.
The Euro-Zone Current Account is expected to be released today at 9:00 GMT with a very low forecast of 1.0B after a figure of 2.7B last month. Following will be the release of the Euro-Zone Retail PMI, and the German Retail PMI also at 9:00 GMT, as both are expected to show better figures than last month. It remains to be seen whether we will see a new all time high for the EUR, and it will probably be determined more by US data, than Euro-Zone data.
JPY
It has been a night full of news for the JPY, as several important figures were released from the Japanese economy. The first was the Tokyo CPI which came higher than expected at 0.3%. The Manufacturing PMI was released almost inline with expectations at 52.3. A bit later the picture was a bit darker for the JPY as industrial production fell sharply from 0.7% to -0.6%. Following was the Retail Sales which also dropped to -0.7% with an expectation 0.3%. The mixture of positive and negative figures caused the JPY to react in an untypical calm behavior and no massive price shifts have been seen.
Today we will see the release of the BOJ Rate Decision, and anything except leaving the rate unchanged will be a complete surprise. It will be interesting to see the BOJ Outlook Report and get a clearer picture as to what we should look forward to regarding the growth of the Japanese economy.
No further major news is expected to come from the Japanese market for a while now, and it looks like the movement of the JPY will be submitted to USD behavior on top of the carry trades supported by the ongoing weakening trend.
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Forex Blog
Apr
26
2007
Daily Forex Analysis
USD
At the moment one of the most important questions in the Forex market is what can stop the USD from weakening, after underperforming home sales that rose 2.6% 858k units while market expectations were of 888k units. The figure still suggest further price declines. Indeed, the sales for Q1 this year were the lowest since Q3 of 2000 and will maintain the pessimism in the US market. Durable Goods Orders provided a degree of relief with a rise of +3.4% in March. Forecasts had been for just +2.4%.Finally the Fed’s Beige Book reported moderate level of growth from the end of February to mid April. The report noted the tight labor market, it summarizes exactly what has been apparent in the economic stats coming out of the States over the first 4 months this year and currently, with reduced investment, there seems little hope of any significant rise in growth.Despite the fact that the U.S. data wasn’t negative, it certainly wasn’t positive either and the market was characterized by tight trading ranges. Today, the market might see the EUR push higher through the Dec 2004 high while expecting key numbers from Europe being the German GFK Consumer Confidence survey, the French Business Confidence indicator, and the UK Nationwide house price index possibly providing a lift for the GBP also.Overall, the Fed has no reason to alter interest rates which leaves the GDP as the next major event risk. In the meantime, the lack of any data indicates that we could see more sideways price action in the EURUSD and USDJPY over the next 24 hours.
EUR
We are very close to an all time high for the EUR against the USD. On the one hand, this situation may help the US economy but on the other hand, in case that the USD will continue to decline, it can create a negative impact on international confidence in US financial assets. As the GBP is above 2$, the UK’s office for national statistics said that the UK’s gross domestic product rose by 0.7% in January - March period, and the EUR is not far away from its all time high. The EUR/USD was at a record high in December 2004 of 1.3666. If the market will get closer to that level, the target will become 1.3800.As it seems like, the European central bank is going to raise interest rates one more time, but the main concern for the ECB will remain inflation pressures and wages in particular. For the moment the Euro zone economy is doing significantly better than people thought and certainly well enough to tolerate a 4% refinancing rate in the Euro zone.The ZEW survey of analyst sentiment and the Belgium survey of business confidence, German business confidence also improved, driving the IFO survey up to 108.6 from 107.7. According to the IFO, robust global growth and strong domestic orders have offset any concerns about high oil prices, a strong Euro or the prospect of further interest rate hikes.
JPY
Japan’s trade surplus jumped to a record in March from a year earlier, beating economists’ expectations, and exports which account for 50% of the nations economy, jumped an all time high. The JPY has been moving in lockstep with the Dow as traders sell the JPY to fund their stock purchases. We expect Japanese data to prevail as the primary driver of JPY fluctuations today as 8 pieces of key economic data due for release as follows; Things begin at 23:30 GMT with reports on employment, inflation and domestic spending. Both the jobless rate and national and Tokyo consumer price indices will be overlooked since monetary policy has shifted to hikes despite the lack of support both of these numbers have supplied. Also, household spending is integral to future rate hikes, since it is considered to be disconnected with wage growth and sustainable inflation. 20 min later, industrial production and retail sales are released. Afterwards the BoJ rate decision - and more importantly their semi annual economic outlook report - will control the fate of the markets.
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