Past Events:
• USD Empire State Manufacturing Index, out at 22.9 versus expected 21.1, prior 24.9
• USD Industrial Production Rate m/m, out at 0.1% versus expected 0.1%, prior 0.9% (revised)
• USD Capacity Utilization Rate, out at 72.7% versus expected 72.7%, prior 72.5% (revised)
• USD TIC Long Term Purchases, out at $19.1b versus expected $50.3b, prior $63.3 b
Upcoming Events:
• USD Fed Rate Decision, today (1815 GMT)
• USD Building Permits, today (1330 GMT)
• GBP Unemployment Data, Tuesday (1030 GMT)
• EUR German ZEW Economic Sentiment, today (1100 GMT)
• JPY Rate Decision, Tuesday (tentative)
Market Commentary:
The US National Capital Long Term Purchases report was published yesterday. This indicator represents the difference between foreign investments in the US and US investments abroad and demonstrates foreign confidence in the US economy. Figures showed that Net foreign purchases of long-term securities slowed markedly in January according to the Treasury Department. Total holdings of equities, notes and bonds increased a net $19.1 billion in January. This is down from $63.3 billion in the previous month. The figure had leaped to $126 billion two months ago, but was then cut to half.
The Dollar closed down significantly against the GBP in the wake of this news. It started the day trading at 1.5774 against the Pound but slid to 1.5044 at the close of the day. It also dropped against the Euro, although not as significantly, opening trading at 1.3762 before going on to close at 1.3758.
Elsewhere in the US manufacturing in the New York region expanded in March for an eighth straight month, indicating factories are sustaining production and lifting the U.S. economy. The index plunged in December but has since recovered. The report showed orders, sales and employment increased in March, a sign that manufacturing gains may last for months and help spur the rest of the economy. The Empire State index is of interest to investors and economists primarily because it is seen as an early indicator of what the Institute for Supply Management’s March national factory survey due out in two weeks may show. In February, the ISM manufacturing index inched lower to 56.5 but continued to point to solid growth in the factory sector.
Industrial production unexpectedly rose in February, due in part to gains in demand for computers and semiconductors that signal the pickup in U.S. business investment is being sustained. Production climbed 0.1%, the eighth consecutive increase, as utility use and mining increased according to figures from the Federal Reserve. Capacity utilization or the proportion of plants in use, climbed to 72.7% from 72.5%. The gauge averaged 80% over the past two decades and suggests inflation will remain low. The amount of spare capacity is among reasons analysts anticipate Fed policy makers will reiterate a pledge to keep interest rates low. The US Federal Reserve is expected to hold interest rates near zero when they are announced later today.
Before the Fed Rate is announced the Building Permits and Housing Starts figures for the month of February are due to be announced. The housing sector had a big contribution to the downturn in the global economy and is now showing signs of a slight recovery. Building permits dropped to 620K in January, they are expected to be down to 619K; housing starts are expected to drop from 590K to 570K.
After weeks of crisis European finance ministers have reached an agreement on how to help Greece in its battle to control its finances. So far few details have been revealed, except that they have ruled out any loan guarantees. They say the rescue package would be available if Greece asked for assistance to finance its huge deficit. So far, Greece which is struggling to deal with a 300bn Euro ($419bn; £259bn) debt has not requested help. Greece needs to raise about 20bn Euros ($27bn) on bond markets to refinance debt maturing in April and May. Its deficit is more than four times higher than Euro Zone rules allow. Austerity measures aimed at reducing it have provoked public anger and the crisis has also severely undermined the Euro.
Later today the German ZEW Economic Sentiment will be released. This survey is highly regarded as a good economic indicator. In recent months it has continually fallen, hurting the Euro each time. A further drop from the current level of 45.1 to 43.3 points is expected this time.
In the Asian market the Yen gained against 15 of its 16 major counterparts for the third day in a row. The Yen rose on the back of fears that a concrete aid package for Greece would not be announced. The Yen closed trading at 123.63 against the Euro, up from 124.66 at the start of trading. It gained 0.2% against the Dollar, closing at 90.41. Overnight tonight the central bank of Japan is expected to announce its overnight call rate. Analysts are predicting that it will remain at its current record low range of zero to 0.25%.
Written by Finexo.com
