Past Events:
• USD Core Durable Goods Orders m/m out at 2.8%, versus expected 0.7%, prior 1.7%
• USD Durable Goods Orders m/m out at -1.3%, versus expected 0.2%, prior 1.1%
• USD New Home Sales out at 411K, versus expected 326K, prior 324K
• EUR German Ifo Business Climate out at 101.6, versus expected 98.8, prior 98.2 (revised)
• EUR Industrial New Orders m/m out at 1.5%, versus expected 0.9%, prior -1.6% (revised)
• GBP Prelim GDP q/q out at 0.2%, versus expected 0.4%, prior 0.4% (revised)
• CAD Core CPI m/m out at -0.2%, versus expected 0.1%, prior 0.7%
• CAD CPI m/m out at 0.0%, versus expected 0.2%, prior 0.4%
• CAD Core Retail sales m/m out at -0.1%, versus expected 0.7%, versus 2.0% (revised)
• CAD Retail sales m/m out at 0.5%, versus expected 0.9%, prior 0.9%
• AUD Import Prices q/q out at 0.3%, versus expected -1.4%, prior -4.3%
Upcoming Events:
• EUR ECB President Trichet Speaks (1730GMT)
• AUD PPI q/q (tomorrow 0230GMT)
Market Commentary:
“Europe and the members of the euro zone, are committed to a common currency and will defend it at any cost,” Greece’s Finance Minister George Papaconstantinou told reporters yesterday in Washington, following his meeting with the International Monetary Fund and World Bank. According to the Greek Prime Minister, Europe’s response to the Greek fiscal crisis shows that the bloc will do whatever is necessary to protect its unilateral currency.
Greece is currently negotiating the terms of a bailout worth as much as €45 billion this year as investors continue to doubt that that the tiny Mediterranean nation can finance itself after its budget deficit totaled 13.6% of gross domestic product last year. With Greece facing €8.5 billion of bonds maturing May 19, finance ministers are seeking a swift resolution of the talks.
Last Thursday, the Euro plunged to a new one year low of $1.32574 after a EuroStat report that Greece’s budget deficit was larger than previously thought. Greece called for activation of the joint EU-IMF €45 billion ($60 billion) bailout fund this year in an unprecedented test of the Euro’s stability and European political cohesion. The appeal for help from the European Union and International Monetary Fund follows a rapid rise in borrowing costs to what Greek Prime Minister George Papandreou called unsustainable levels that would ruin all efforts to cut the budget deficit that is more than four times the EU limit. Greece’s request of the bailout fund comes one day after the yield on the country’s benchmark two-year note topped 11%, approaching that of Pakistan, and Moody’s Investors Service lowered Greece’s creditworthiness by one notch to A3, saying it was considering further cuts.
On Friday, the single currency managed to rally against the US Dollar, as German business confidence rose more than expected to hit a two year high in April. The Germany Ifo Climate, a survey based on 7,000 executives, jumped from a revised 98.2 to 101.6 (the market had expected 98.2) as the global economic recovery boosted export demand and warmer weather allowed workers back onto construction sites. The Euro’s 12% drop in the past five months has made German exports more competitive outside the currency bloc and as a result, German manufacturing is expanding at a record pace. Moreover the arrival of spring weather has significantly boosted building activity and consumer spending.
Following the release of the better than expected report, the euro rose to trade at $1.3335 (at 11 a.m. in Frankfurt), up from 1.3230 that morning. Unfortunately, the Euro was unable to fully recover from Thursday’s detrimental losses and fell for a second week in a row to close at $1.33837, up 0.88% from the day’s opening price but down 0.78% from the week’s opening price.
In the Asian trading session this morning, the EUR/USD gained some ground as the pair hit a high of 1.33961. Analysts, predict that Euro will continue to fluctuate this week as investors await a solid plan on a financial lifeline for debt-stricken Greece. Later today, the European Central Bank president, Jean-Claude Trichet will speak (1730GMT).
Across the Channel, the U.K economy grew half as much as expected in the first quarter of this year, highlighting that Britain still continues to struggle with its recovery. Britain’s Prelim GDP report showed a 0.2% increase from the last quarter of 2009, when a 0.4% expansion pushed Britain out of the recession. The pound tumbled 0.4% to $1.5318 following the report, from $1.5397. The British currency managed to recovery against its U.S counterpart, to close the week at $1.53749, up 0.05% from the day’s opening price. The EUR/USD closed at 0.87027, down 0.82% from the day’s opening price of 0.86318.
The US dollar advanced for the first time in three weeks against the Japanese Yen on evidence of a global economic recovery including a surge in the U.S. housing market before next week’s Federal Reserve policy meeting. After hitting a high of 94.306, the USD/JPY closed the week at 93.957.
On Friday, the US Census Bureau reported that New-Home sales jumped 27% in March, the most since April 1963. A soon-to-expire tax break combined with low mortgage rates and favorable weather sent new home sales flying past market expectations 326K, to hit 411K. However, the department of Commerce reported on Friday, that the demand for U.S.-made durable goods dropped for the first time in four months as orders for new aircraft plunged 67%. Orders for durable goods fell 1.3% in March to a seasonally adjusted $176.7 billion after a 1.1% gain in February. However, excluding transportation goods, the core rate showed a rise of 2.8% to $136.5 billion in March, the fastest increase since the recession began in December 2007.
Across the border, the Canadian dollar posted its biggest five-day gain in three weeks as the central bank signaled that a rate hike could possibly happen as soon as June 1st. Last week the Loonie hit its strongest price against the USD in 22 months, gaining beyond parity as investors speculated the Bank of Canada will raise rates before the U.S. Federal Reserve does. On April 20th, the Bank of Canada announced that the time for holding its benchmark interest rate at a record low 0.25% in order to spur growth “is passing” as the country’s economy rebounds from a global recession. According to Blake Jespersen, director of foreign exchange in Toronto at Bank of Montreal, the nation’s fourth-largest lender an announcement such as this one “really sets the market up for probably five consecutive hikes from the Bank of Canada, which should keep the Canadian dollar on a firm footing for quite some time.”
On Friday, Statistic Canada announced that the country’s annual inflation rate unexpectedly slowed in March to 1.4% from 1.6% the previous month, as clothing and mortgage interest expenses declined while gasoline costs rose. The Core rate, which excludes the eight most volatile items, slipped to 1.7% from 2.1%.
On a positive note, Canadian retail sales had increased for their third straight month, rising by 0.5% to C$36 billion ($35.9 billion). Consumer spending helped pull the country out of a recession last year and the BOC said this week consumers will remain one of the biggest sources of economic growth through 2012. Excluding car and parts dealers, the so called Core retail sales slipped 0.1% in February, Statistics Canada said. While the CAD hit a low of $1.00626, the currency managed to recover from its losses to close blow the parity line at $0.9989.
Written by Finexo.com
