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Euro Finds Support After US Housing Data
The euro steadied versus the dollar on Tuesday even after Germany indicated that aid to Greece will not be discussed at this week's European Union meeting in Brussels.
With Greece in limbo despite measures designed to get its spiraling debt under control, the euro has struggled to fight back from February's notable losses against the dollar.
The euro was under pressure in early dealing, but pared its losses after another round of lackluster data on the US housing market.
Existing home sales saw a modest decrease in the month of February, according to a report released by the National Association of Realtors on Tuesday, with modest gains in the Northeast and Midwest offset by softer sales in the South and West.
The report showed that existing home sales edged down by 0.6 percent to a seasonally adjusted annual rate of 5.02 million units in February from a 5.05 million unit rate in January
Across the Atlantic, European consumer confidence was more or less unchanged in March, a flash estimate from the European Commission showed.
"March's eurozone consumer confidence figures confirm that consumer sentiment remains weak by historical standards and that a household spending recovery some way off," said Ben May, European economist at Capital Economics. "With wage growth slowing and tighter fiscal policy on the way, prospects do not look much better for the remainder of the year," he added.
The euro slipped to 1.3480 versus the dollar in early dealing, coming close to a 9-month low of 1.3434 set earlier in March.
Versus the yen, the euro was steady after losing ground in the previous few sessions. The euro was stuck near 122, having touched a yearly low near 120 back in February.
Meanwhile, the euro leveled off near .90 versus the sterling, having seen choppy movement over the past few days.
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U.K. Recovery Stronger Than Estimated
The British economy emerged from recession in the fourth quarter more strongly than initially estimated. The outlook for the economy is fundamentally weak and the prospect of a sluggish and fragile recovery remains.
The economy expanded 0.4% sequentially in the fourth quarter, better than the previous estimate of 0.3%, according to the latest report from the Office for National Statistics. On February 26, the statistical office had first revised fourth quarter growth to 0.3% from 0.1%. Economists had expected the ONS to confirm the 0.3% growth figure today.
The fourth quarter growth follows six quarters of contraction, which made it the longest recession since records began in 1955. Gross domestic product dropped 0.3% in the third quarter and 0.7% in the second quarter.
There are good reasons not to get too excited, said Jonathan Loynes, Capital Economics' chief European economist. The economy is operating a long way below its potential or trend level.
David Kern, chief economist at the British Chambers of Commerce, also shared the same view. He said, "It is clear that the UK recovery is still frail, vulnerable, and businesses are facing serious pressures." A double-dip recession is still a potential threat that must be avoided at all costs. Given the dangers still facing the economy, policy must remain expansionary, he added.
The household saving ratio was 7% in the latest quarter, compared with 8.4% in the previous quarter. Real household disposable income fell 1%, following a 0.6% increase in third quarter.
Further falls in the savings ratio will be needed if spending is not to decline, ING Bank NV's Mark Cliffe said. The decline in the saving ratio reflected higher borrowing as the housing market staged a modest rebound. However, households may have to scale back their purchases of assets as banks are likely to be less willing to lend and consumers less willing to borrow than in previous cycles.
On the production side, construction output was down 0.9% sequentially, compared with the 1.8% increase in the previous quarter. Output of production industries was unrevised at 0.4% after recording a 1% fall in the third quarter with manufacturing output growing 0.8%. Output in the service industries also remained unrevised at 0.5%. Agricultural output dipped 1.5%.
On an annual basis, economic contraction for the fourth quarter was lowered to 3.1% from 3.3%. GDP in volume terms fell 4.9% for 2009 as a whole, the largest fall on record, compared with a rise of 0.5% in 2008. Overall output declined by 6.2% during this recession.
ONS data showed a 0.4% sequential rise in household expenditure. Spending remained 2.1% lower than the fourth quarter of 2008. Government spending moved up 1% taking the annual growth to 2.2%. Meanwhile, gross fixed capital formation recorded a 2.7% quarterly fall and plunged 14% annually. Inventories continued to decline, down 2.6 billion pounds on the quarter.
According to Capital Economics' Loynes, the further upward revision to growth came primarily from an even bigger positive contribution from inventories. It is very unlikely that this component will have such a positive effect in the quarters ahead, the economist said.
Again, with income set to be squeezed further by high inflation and rising taxes this year, spending will possibly remain under pressure. Capital Economics forecast the U.K. economy to grow by just around 1% in 2010.
Last week, the Chancellor of the Exchequer Alistair Darling in his 2010 budget statement said the economy is expected to grow 3% to 3.5% in 2011, in line with the Bank of England estimate. The government maintained its growth estimate at 1%-1.5% for 2010.
ONS data also showed that the trade deficit in real terms increased to 8.3 billion pounds in the fourth quarter of 2009. Exports of goods and services rose 3.8% whilst imports were up 4.7%. The improvement in global demand conditions as well as a fall in pound had only a limited impact on the external sector, noted Loynes.
In a separate communique, the ONS revealed the current account balance recorded a deficit of 1.7 billion pounds in the fourth quarter. This compares with a revised deficit of 5.9 billion pounds in the third quarter. Economists had forecast a 5.1 billion pounds deficit for the final quarter. In 2009, the current account was in deficit by 18.4 billion pounds, compared with a deficit of 22 billion pounds in 2008.
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Dollar Drifts Lower As Fitch Maintains Greece Rating
The dollar was slightly weaker versus other majors Tuesday morning after ratings agency Fitch said Europe's aid deal for Greece was a net positive for the debt-ridden nation.
The Dow continued its push toward 11,000 on Monday, but stocks appear poised for a lackluster start to today's session.
Traders were looking ahead to the day's economic news from the US.
The S&P/Case-Shiller home price index for January will be released by 9.00 a.m. ET. Economists expect the index, which tracks monthly changes in the value of residential real estate in 20 metropolitan regions across the U.S., to decline 0.6% year-over-year, following the 3.1 % decline in the previous month.
At 10.00 a.m. ET, the Conference Board will release the readings of the Consumer Confidence Index for March. Economists expected the index to increase to 51.0 from 46.0 reported for the previous month.
Yesterday, official data showed that consumer spending rose in February, signaling that shoppers are becoming less shy about making purchases.
The dollar eased to 1.3520 versus the euro, more than two cents from a 10-month peak of 1.3267 set last week.
Despite saying last week's deal between the European Union and IMF to backstop Greek debt was positive, Fitch will keep its negative outlook on Greece's BBB+ debt rating.
"The (EU) statement was positive for Greece's credit profile by enhancing its near-term financing options and flexibility as well as reaffirming the support of euro area member states for economic and fiscal reform in Greece," Fitch said in a statement.
"Nonetheless, the rating outlook remains negative because of continued uncertainty over the medium-term economic and fiscal adjustment, as well as the continuing lack of clarity over the fiscal financing strategy."
Germany's import prices rose at a faster annual pace in February led by higher energy prices, the Federal Statistical Office said Tuesday.
Import prices rose 2.6% year-on-year in February, faster than the 1.4% rise in January. Prices increased for a second straight month after a 1% decline in December. Economists were looking for an increase of 2% for February.
The buck also drifted lower versus the sterling, hitting 1.5070 after testing a 9-month high of 1.4782 last week.
U.K. house prices rose sharply in March, reversing February's surprise dip, a report from Nationwide Building Society showed on Tuesday.
At the same time, the dollar remained stuck in neutral versus the yen, hovering near last week's 2-month high of 92.94.
An index measuring industrial production in Japan was down a seasonally adjusted 0.9 percent in February compared to the previous month, the Ministry of Economy, Trade and Industry said on Tuesday.
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US Weekly Jobless Claims Show Another Modest Decrease
First-time claims for unemployment benefits showed another modest decrease in the week ended March 27th, according to a report released by the Labor Department on Thursday, with jobless claims falling to their lowest level since early February.
The report showed that initial jobless claims fell to 439,000 from the previous week's revised figure of 445,000. Economists had been expecting claims to edge down to 440,000 from the 442,000 originally reported for the previous week.
With the modest decrease, jobless claims extended a recent downward trend after seeing a brief rebound in mid-February. The drop pulled jobless claims down to their lowest level since a matching number in the week ended February 6th.
The Labor Department also said that the less volatile four-week moving average edged down to 447,250 from the previous week's revised average of 454,000. With the drop, the four-week moving average fell to its lowest level since September of 2008.
Additionally, the report showed that continuing claims, a reading on the number of people receiving ongoing unemployment help, fell to 4.662 million in the week ended March 20th from the preceding week's revised level of 4.668 million.
The decrease dragged continuing claims down to their lowest level since coming in at 4.589 million in December of 2008.
At the same time, the report also showed that those receiving emergency unemployment compensation increased by about 267 thousand in the week ended March 13th, although those receiving extended benefits edged down by about 3 thousand for the week.
Peter Boockvar, equity strategist for Miller Tabak, said, "The best conclusion from the data remains the same and that is businesses have dramatically tempered the rate of firing but still seem reluctant to aggressively add to their payrolls."
Employment data is likely to remain in focus on Friday, with the Labor Department due to release its monthly employment report, despite the Good Friday holiday. Economists expect the report to show that employment increased by about 190,000 jobs in March.
Payroll processor Automatic Data Processing, Inc. (ADP) released a report on Wednesday showing an unexpected drop in private sector employment in the month of March, although the drop still marked the smallest since employment began falling in February of 2008.
The report showed that non-farm private employment fell by 23,000 jobs in March following a revised decrease of 24,000 jobs in February. The loss of jobs surprised economists, who had expected an increase of about 40,000 jobs compared to loss of 20,000 jobs originally reported for the previous month.
However, ADP noted that its data for February was not restrained by the effects of inclement weather, and subsequently the data for March did not include a weather-related rebound. The company also noted that its March data does not include any federal hiring for the 2010 Census.
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Greece Looking To Bypass IMF Involvement In Deficit Crisis - Reports
The Greek government wants to amend the EU aid deal to avert severe fiscal measures the International Monetary Fund may recommend, the Market News International reported.
At the end of March, Eurozone leaders had reached an agreement to help Greece, with the participation of the IMF if the country fails to meet its funding needs.
Greek Prime Minister George Papandreou reportedly wants to alter the plan to bypass an IMF contribution. He fears that the measures the IMF would probably advocate, may cause social and political unrest.
Elsewhere on Tuesday, the Financial Times reported that Germany is at odds with other Eurozone countries over the rate of interest to be charged on the aid to the debt-ridden Greece if Athens calls on the emergency loans package.
According to the report, most Eurozone nations are prepared to offer loans at 4%-4.5%, but Germany says Athens should pay 6%-6.5%.
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New 50% Tax Rate For U.K. High Earners Comes Into Force
U.K.'s top earners will be forced pay more tax as the rise in the tax rate to 50% from 45% takes effect from today. The new rate will affect 300,000 people in the country, who earn above GBP 150,000 per annum. The increase in the tax rate was intended to boost the country's public finances.
Most business groups responded against the move. The Institute of Directors said the proposal is superficially attractive, but it is foolish when dug deeper. The think tank argued that this policy will not help people by bringing in more tax revenue from high-income people. Nor can it be justified by reference to considerations of fairness.
"Increasing the top rate of income tax to 50% will raise little or no money, but it will send out a very bad message - both domestically and overseas," the IoD said.
Listing out the reasons why the policy should be abandoned, the IoD said one cannot compute the effect of a tax rise simply by applying the increase in the rate to the income that is currently subject to U.K. taxation. Moreover, it is very difficult to predict the effects of rate changes, mainly because of uncertainty about the effects on incomes, and also partly because of uncertainty about the future distribution of incomes.
Subject to these uncertainties, the IoD concluded that the revenue-maximising rate on incomes over GBP 150,000 might well be the current 40% rate, rather than the proposed 50%.
With the new tax rate in force, it is feared that companies may shift their operations to more business-friendly nations, which may hurt the U.K.'s government revenue.
Other changes coming into force today include a rise in child tax credits and an increase in the tax-free allowance that can be put in to individual savings accounts.
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Franc Shows Mixed Trading Against Majors
The franc showed mixed trading versus other major currencies during early North American session on Monday. The franc rose to a multi-day high against the pound, eased from a 6-day high against the yen and a 10-day high against the dollar and recovered from near a 4-week low versus the euro.
Against the Japanese currency, the Swiss franc eased slightly from a 6-day high of 88.37 hit at 7:05 am ET. Currently, the franc-yen pair is worth 88.25, compared to 87.42 hit at last week's close.
The franc rose to a 5-day high of 1.6281 versus the pound at 8:45 am ET, compared to 1.6396 hit at last week's close. As of now, the franc is quoted at 1.6301 against the pound.
The franc that rose to a 10-day high of 1.0553 against the dollar around 1:00 am ET eased thereafter. The franc is now trading at 1.0590 against the dollar. This level may be compared last week's close of 1.0661.
The franc, which slipped to near a 4-week low of 1.4468 against the 16-nation currency at 2:25 am ET reversed its direction shortly thereafter. Currently, the franc is trading at 1.439 versus the euro, compared to previous week's close of 1.4388.
In the upcoming hours, the U.S. monthly budget statement for March has been slated for release.
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IMF Boosts Lending Capacity To $550 Billion
The International Monetary Fund took a major step on Monday towards a more than ten-fold increase in the size of its primary credit facility to $550 billion and also reformed the fund's standing credit arrangement into a more flexible and effective tool of crisis management.
It responds to the call by the leaders of the G20 nations to increase the financing available to the fund, by expanding the IMF's New Arrangements to Borrow or NAB, which currently stands at about $50 billion.
The NAB is supplementary to the IMF's quota-based resources and is only called upon to forestall or cope with an impairment of the international monetary system.
Thirteen new countries, including the likes of China, India, Russia and Brazil, will now contribute to the lender's NAB, in addition to the 26 predominantly developed nations.
"The expansion and enlargement of the NAB borrowing arrangements provides a very strong multilateral foundation for the fund's efforts in crisis prevention and resolution, as an essential back-stop to the fund's quota resources," said IMF managing director Dominique Strauss-Kahn.
"This will help ensure that the fund has access to adequate resources to help members that are vulnerable to financial crises."
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Philly Fed Index Indicates 8th Straight Month Of Growth In April
Thursday morning, the Federal Reserve Bank of Philadelphia released its report on regional manufacturing activity in the month of April, showing that the expansion in the manufacturing sector is continuing for the eighth consecutive month.
The Philly Fed said its index of activity in the manufacturing sector rose to 20.2 in April from 18.9 in March, with a positive reading indicating growth in the sector. With the increase, the index came in slightly above economist estimates for a reading of 20.0.
A faster pace of new orders growth contributed to the improvement in the sector, as the new orders index rose to 13.9 in April from 9.3 in March.
On the other hand, the shipments index slipped to 5.6 in April from 13.6 in the previous month, although it remained positive.
The report also showed a notable increase by the inventories increase, which rose to a positive 2.0 in April from a negative 11.0 in March, indicating a turnaround in inventories. The inventories index has now recorded positive readings in two of the last three months.
The Philly Fed also said that firms' responses continue to suggest that labor market conditions are improving, although the number of employees index slipped to 7.3 in April from 8.3 in March.
With regard to inflation, the report showed that the prices paid index rose to 42.7 in April from 38.6 in March, while the prices received index edged up to a positive 1.0 in April from a negative 0.4 in the previous month.
Looking ahead, the future general activity index fell to 44.2 in April from 52.0 in March, but it remained positive for the sixteenth consecutive month.
"Bottom line," said Peter Boockvar, equity strategist for Miller Tabak, "manufacturing remains the key source of strength in this recovery and today's data confirms that."
Earlier in the day, a report released by the New York Federal Reserve showed that conditions for New York State manufacturers improved at a rapid pace in April, with the regional index of activity in the sector rising by much more than economists had expected.
The New York Fed said its general business conditions index jumped to 31.9 in April from 22.9 in March, with a positive reading indicating growth in the manufacturing sector. Economists had been expecting a much more modest increase to a reading of 24.0.
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S&P Lowers 2010 Italy Growth Forecast
Standard & Poor's lowered its 2010 growth forecast for Italy on Tuesday citing feeble demand, weak capital spending and export prospects.
The rating agency cut the growth forecast to 0.5% from a previous 0.7%, reports said. Looking ahead, S&P forecast the economy to grow 1% next year, which is half of what is seen for the Eurozone as a whole.
Feeble consumer demand on the back of falling earnings, anemic capital spending because of damaged corporate profitability and export prospects penalized by weak competitiveness are holding the economy in check, the rating agency was quoted as saying in a report that made no reference to ratings. S&P expects any return to growth in 2010 to be modest.
The Italian economy contracted 0.3% sequentially in the fourth quarter following the 0.5% growth in the third quarter, when the economy ended five quarters of negative GDP. The statistical office is due to release the preliminary estimate of first quarter GDP on May 12.
Interim forecast from the European Commission showed 0.4% growth for the Italian economy in the first three months of this year. The Paris-based Organisation for Economic Co-operation and Development said in an interim assessment recently that the economy likely grew 1.2% in the first three months of the year. The economy is forecast to expand 0.5% in the second quarter.
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German FinMin: Expects To Get Greek Aid Bill Passed By May 19
Germany's Finance Minister Wolfgang Schaeuble said on Monday that the German parliament is expected to approve a bill on financial aid for Greece before May 19, when the debt-ridden country holds next debt auction.
After a meeting with parliamentary leaders, the minister said German lawmakers have signaled their basic willingness to get the bill approved to defend the stability of the euro.
He said the bill will be presented before the parliament only when Greece concludes its talks with the European Commission, the European Central Bank and the International Monetary Fund. Schaeuble expects Athens to reach in a conclusion this weekend.
Eurozone members have pledged to provide up to EUR 30 billion loan for Greece, of which Germany's contribution would be EUR 8.4 billion, the largest. Meanwhile, France pledged to provide EUR 6.3 billion from its 2010 fiscal budget. IMF's contribution is expected to be between EUR 10 billion to EUR 15 billion.
Elsewhere, German Chancellor Angela Merkel said her country is ready to provide financial assistance to Greece, if Athens takes "tough measures" for next several years to cut budget deficit.
On Sunday, Greek Finance Minister George Papaconstantinou said his country is soon expected to conclude negotiations with the IMF.
IMF Managing Director Dominique Strauss-Kahn said the Fund, the European partners, and everyone involved in the financing effort recognizes the need for speed to activate the rescue package and talks will be ended in time to meet Greece's needs.
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Japan's Labor Cash Earnings Post First Rise In 22 Months
The average monthly total cash earnings per regular employee in Japan rose 0.8% year-over-year to JPY 275,637 in March, data from the Ministry of Health, Labor and Welfare showed Friday. That was the first annual increase in twenty-two months. In February, earnings fell by a revised 0.6%.
Overtime pay growth accelerated to 11.7% from February's 8.1% as overtime work increased in factories.
Adjusted for inflation, the average total earnings grew 2.1% year-on-year following an increase of 0.6% in February. Earnings grew for the third successive month.
On a quarterly basis, the downturn in wage eased in the first quarter. Total cash earnings in the first quarter fell just 0.1% annually, compared to the 4.1% drop in the final quarter of 2009.
BNP Paribas economist Azusa Kato said the slowdown in quarterly wage fall was due to the narrowed negative margin on scheduled earnings and rebound of non-scheduled earnings to positive growth. "Consumption is picking up due to more than just fiscal stimulus, as household sentiment is improving because the worst seems to be over for both employment employee wages," the economist said.
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Asia-Pacific Nations Should Employ Capital Controls
Asia-Pacific nations should employ capital controls to moderate short-term capital inflows that created asset bubbles and inflationary pressures in the region's developing countries, a UN agency said Thursday.
The United Nations Economic and Social Commission for Asia and the Pacific, or ESCAP, also urged governments to increase their social spending to consolidate the region's stronger-than-anticipated economic rebound.
"Governments must embrace this opportunity to secure the gains of the economic rebound by investing in social programs that directly benefit people hardest hit by the crisis," Noeleen Heyzer, UN Under-Secretary-General and ****utive Secretary of the ESCAP said.
The Economic and Social Survey of Asia and the Pacific 2010, an annual publication of ESCAP, points out that while monetary tightening may be necessary to rein in inflationary pressures, policy makers must be cautious about withdrawing fiscal stimulus packages, as an early exit would disrupt the fledgling recovery process.
According to the Survey, even at the height of this crisis, Asia and the Pacific was still the fastest growing region in the world, supported mostly by fiscal stimulus packages adopted by the region's biggest economies. The Survey finds that the outlook for 2010 has improved significantly, with Asia-Pacific region's developing economies forecast to grow by 7%, led by China 9.5%, and India 8.3%.
The Survey states that the governments have to re-balance the region with greater regional consumption through increased intra-regional trade, accelerating the development of an Asia-Pacific consumer market.
The Survey also recommends that Asia and the Pacific increase efforts to create a more integrated and sustained regional market, benefiting both national economies and a larger consumer class.
Increased social spending directly supports income security for households by providing food security, education and access to health care, reducing the need by poorer families to maintain precautionary savings to protect against adversity. These families will then able to contribute more to local economies and invest more in their own development, the survey stated.
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Moderate And Uneven Recovery Taking Shape Across Europe: IMF
Europe is bracing for a moderate and uneven recovery, supported by the rebound in global trade and policy stimulus, the International Monetary Fund said Tuesday.
Growth in the region is expected to pick up during 2010-11, but the traditional drivers of recovery are likely to be weaker than usual, the Washington-based global lender said in its latest regional economic outlook for Europe.
However, in the near term, growth will continue to benefit from exports, fiscal support and an upswing in inventories. Improvements in investor and consumer confidence should raise domestic demand.
Nevertheless, with unemployment expected to increase, and with lingering difficulties in the banking sector likely to restrain credit supply, consumption and investment will remain lackluster, IMF added.
Confirming its earlier prediction, the IMF said the Eurozone economy would grow 1% this year and 1.5% in 2011. Risks to this outlook is broadly balanced, it added.
Further, the Fund said emerging Europe will face a key challenge of attracting and harnessing healthy capital inflows to restore economic growth.
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Dollar Strengthens To Near 1-1/2-year High Against Euro
In early European deals on Friday, the U.S. dollar registered strong gains against other major currencies as traders seek refuge in safe-haven currencies on the back of a decline in stock markets on debt crisis in Europe. The dollar rose to near a 1-1/2-year high against the euro, near 1-year high against the franc and more than a 1-year high against the pound.
On the flip side, the dollar pared recent gains against the yen due to across the board rallying of the Japanese currency.
In the upcoming hours, traders will be focusing on economic reports such as the U.S. advance retail sales, capacity utilization, industrial production reports- all for April, University of Michigan's preliminary consumer confidence index for May and the business inventories for March.
Friday in early European deals, the U.S. dollar inched higher against the euro. The dollar rose to near a 1-1/2- year high of 1.2434 against the euro at 5:55 am ET, from a low of 1.2577 hit at 3:00 am ET. On the upside, the dollar may target around the 1.233 level. At present, the greenback is trading at 1.244 against the euro, compared to yesterday's close of 1.2534.
Rising from a low of 1.1155 hit at 1:35 am ET, the dollar rose to near a 1-year high of 1.1268 against the franc at 5:55 am ET. The dollar-franc pair, which was worth 1.1179 at yesterday's close, is now worth 1.1244. On the upside, 1.197 is seen as the target level for the US currency.
The dollar rose to more than a 1-year high of 1.4507 against the pound at 6:00 am ET. As of now, the dollar is trading at 1.4507, compared to yesterday's close of 1.4612. If the dollar gains further, it may target the 1.400 level.
The dollar pared its recent gains against the Japanese currency. Moving down from a high of 93.10 against the yen hit at 2:40 am ET, the dollar fell to a 3-day low of 92.27 at 5:40 am ET. If the dollar weakens further, it may target around the 88.00 level. Currently, the dollar is trading at 92.37 against the yen.
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Although, the outlook for the US Dollar index remained bullish last week instead it is expected from dollar that it will attract the investors in this week's Forex session. This is because the investors loose their confidence on the currency pair of USDGBP. This comes as the favor to the dollar for the next Forex opening session said by the market experts.
In the recent week it is seen that the economic data is playing mess with the euro and it is assumed that it will remain in loss in the opening market of the coming week. Where as GBP may be on rimple in the next week's opening because of the CPI data and April retail sales since there is a pressure of equities high correlation continues on GBP and there is neither an opening path for the GBP from the grab of Sterling which is the bullish currency of this week.
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Markets Are Really Out Of Control, German FinMin Tells FT
Financial markets are really out of control and there is an urgent need for effective regulation, German Finance Minister Wolfgang Schauble said in an interview to the Financial Times newspaper.
"I'm convinced the markets are really out of control," Schauble said in the interview published on Thursday. "That is why we need really effective regulation, in the sense of creating a properly functioning market mechanism."
Markets would not function properly if the risks and rewards are "completely unbalanced", the minister said. He also pointed out the need for transparency and standardization of products. "We need transparency for all market participants," he said.
Further, Schauble said over-the counter transactions must be regulated and attention must be paid to the ratio of financial transactions to the real exchange of goods and services. "They bear no relationship to each other," the minister said.
"We need new financial instruments to cope with the huge financial tasks that we face," Schauble said. "But, forgive my saying so, minimum profits of 25 per cent are simply unimaginable in the real economy. It isn't healthy."
According to the German finance minister, it is "very likely" that there would be no agreement on the adoption of a global financial transaction tax at the G20 summit in Canada in June. However, efforts would be made to see if such a tax can be implemented at a European level, he told the daily.
Late Tuesday, Germany's financial regulator BaFin banned short selling of debt securities by euro zone countries as well as shares of 10 large German financial institutions and insurance companies. Regulator also banned naked short-selling of Credit Default Swaps. The move took markets by surprise.
Germany has "a role as a locomotive", Schauble said, yet it will keep trying to reduce deficit and boost employment. Eurozone members with largest budget and trade deficits need more fundamental structural reforms to make themselves more competitive, he said. "Spain, for example, must solve its labor market problem."
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Global Recovery Seen Gathering Pace
The global economic recovery is building steam led by strong growth in Asia although considerable risks remain, the Organization for Economic Cooperation and Development says. Its latest economic outlook report projected gross domestic product across OECD countries to rise by 2.7% this year and by 2.8% in 2011. In its last forecast in November, the OECD region was forecast to rise by 1.9% in 2010. The global economy is predicted to grow 4.6% this year.
In the U.S., activity is projected to rise by 3.2% this year and by a further 3.2% in 2011. Euro area growth is forecast at 1.2% this year and 1.8% next while, in Japan, GDP is expected to expand by 3% in 2010 and by 2% in 2011. The U.S. unemployment rate is expected to average 9.7% in 2010 before falling to 8.9% in 2011. The eurozone unemployment rate is forecast to average 10.1% both this year and the next.
"This is a crucial time for the world economy," said OECD secretary-general Angel Gurria. "Coordinated international efforts prevented the recession from becoming more severe but we continue to face huge challenges. Many OECD countries need to reconcile support to a still fragile recovery with the need to move to a more sustainable fiscal path."
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Trichet Concerned About Bad Fiscal Policy, Not Weak Euro
The financial stability of the euro area amid bad fiscal policy in certain member countries is the key issue the currency bloc is currently facing and not the value of the euro, the European Central Bank President Jean-Claude Trichet said Monday.
"The euro is a very credible currency which keeps its value," Trichet said, according to the text of an interview with French daily Le Monde, which was published on the ECB website. "The issue is that of financial stability within the euro area on account of bad fiscal policy in certain countries, in particular Greece."
"It is imperative that this be corrected," the policy maker said, adding that fiscal policies in large countries such as Germany, France and Italy were also not exceptions. He blamed fiscally challenged economies for terribly neglecting close multilateral surveillance, which was fundamental according to the stability and growth pact.
When asked about the prevailing nervousness in financial markets, despite a massive rescue plan, Trichet said investors would take some time to regain confidence and sentiment would be restored gradually. "The measures are so significant in terms of both their nature and their scale that there is no doubt that they will have a positive effect on the markets," he said.
The ECB chief said the mechanism to stabilize markets is taking place properly. He noted that the speed at which parliamentary decisions were taken in countries facing fiscal problems was "remarkable". Trichet ruled out Eurozone debt restructuring programme saying that it is substantially low compared to that of the U.S., Japan and the U.K.
The policy maker also denied any Anglo-Saxon conspiracy against the euro. "I simply believe that some international investors struggle to understand Europe and its decision-making mechanisms," he said. "They have difficulty in gauging the historical size of the European construction and in anticipating the capacity of Europeans to take decisions that are just as important as those taken a few days ago."
Further, he called for the establishment of the equivalent of a fiscal union in the euro area in terms of monitoring and supervising the implementation of policies on public finances. He expressed confidence that a quantum leap would be possible if Europe exploit everything the treaties, seen as the starting point of the fiscal union, permit and greatly improve the secondary legislation from Brussels.
Regarding the euro, Trichet said it is a credible currency which inspires confidence, the most important ingredient for the consolidation of Europe's economic recovery. Since its introduction eleven and a half years ago, average annual inflation has been below but close to 2%, in line with the ECB's definition of price stability. The euro's capacity to maintain its value is absolutely essential for the confidence of investors both inside and outside the euro area, he asserted.
With regard to economy, Trichet said recent data suggest economic growth in the second quarter would be slightly higher than expected. However, he urged caution as the region's future growth depends on the ECB policy makers' ability to strengthen confidence as quickly as possible.
Trichet repeated that the ECB is completely independent of governments and pressure groups of any kind. He reaffirmed that the interventions were aimed to enable certain markets to function more normally and that all the liquidity injected through these interventions will be absorbed.
Also on Monday, speaking at the 38th economic conference of Austria's central bank, Trichet said the ECB is not printing money. He reiterated the bank's commitment to preserve its primary objective of maintaining price stability.
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Japan Current Account Surplus Widens In April
Japan's current account surplus increased in April from the previous year mainly due to a larger surplus in the trade gap, an official report showed on Tuesday. Separate data released today showed that during May, bank lending in Japan recorded the sharpest annual fall in nearly five years.
The Ministry of Finance said the current account surplus surged 88% year-on-year to JPY 1.24 trillion from JPY 660.6 billion in the previous year. The surplus, however, came in slightly below economists' expectations for a JPY 1.30 trillion surplus and was well below March's surplus of JPY 2.53 trillion.
A trade surplus of JPY 859.1 billion was recorded in April compared to the JPY 167.1 billion surplus a year ago. This was driven by growth in exports outpacing that of imports. Exports surged 42.7% annually to JPY 5.58 trillion, while imports grew 26.1% to JPY 4.72 trillion.
The surplus in the goods & services account stood at JPY 433.6 billion, in contrast to the JPY 260.9 billion deficit in the previous year. At the same time, the deficit in the current transfers account narrowed slightly to JPY 137.6 billion from JPY 138.4 billion in the previous year.
The income account surplus decreased to JPY 946 billion in April from JPY 1.06 trillion a year ago. The deficit in the services account was broadly unchanged at JPY 425.5 billion.
Meanwhile, the surplus in the capital & financial account decreased to JPY 49.3 billion from JPY 275.8 billion in the previous year. The financial account surplus shrank to JPY 72.8 billion from JPY 293.4 billion a year ago. This was largely due to other investment deficit rising to JPY 6.38 trillion from JPY 2.57 trillion last year.
Separately, the Bank of Japan announced that bank lending was down 2.1% year-on-year in May, marking its sharpest decline since August 2005. Standing now at JPY 396.12 trillion, it follows a revised 1.9% contraction in April.
Including trusts, bank lending was down 2% to JPY 458.75 trillion following the 1.8% decline in the previous month. By themselves, lending from trusts was down 1.3% annually in May to JPY 62.6 trillion.
The central bank also revealed that M2 money supply climbed 3.1% annually to JPY 777.2 trillion in May, slightly higher than forecasts for a 2.8% increase following the 2.9% gain in April. The M3 money stock was up 2.3% to JPY 775.1 trillion, exceeding expectations for a 2.1% increase following the 2.2% gain in the previous month. The L money stock climbed 2% annually to JPY 1.46 trillion.
Japan's new Prime Minister Naoto Kan is naming his cabinet today and he is due to be formally sworn in by Emperor Akihito. Deputy Finance Minister Yoshihiko Noda has been named as the new Finance Minister, a post left vacant by Kan. Noda is thought to favor spending cuts and fiscal consolidation to rein in Japan's large public debt level, which is the highest in the industrialized world.
Kan was elected prime minister by lawmakers on Friday, two days after the resignation of Yukio Hatoyama. The former prime minister stepped down over a broken election pledge to move a controversial U.S. military base out of the island of Okinawa.
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Existing Home Sales Show Unexpected Drop But Remain At Elevated Levels
Existing home sales showed an unexpected decrease in the month of May, according to a report released by the National Association of Realtors on Tuesday, with higher sales in the West and the South more than offset by a notable drop in sales in the Northeast.
The report showed that existing home sales fell 2.2 percent to an annual rate of 5.66 million units in May from an upwardly revised 5.79 million unit rate in April. Economists had expected sales to rise to a 6.10 million unit rate from the 5.77 million unit rate originally reported for the previous month.
While existing home sales fell on a monthly basis, NAR said that sales remain at elevated levels amid buyer response to the tax credit, characterized by stabilizing home prices and historically low mortgage interest rates.
NAR noted that existing home sales in May are still up 19.2 compared to the 4.75 million unit rate reported for the same month a year ago.
Lawrence Yun, NAR chief economist, said, "We are witnessing the ongoing effects of the home buyer tax credit, which we'll also see in June real estate closings."
"However, approximately 180,000 home buyers who signed a contract in good faith to receive the tax credit may not be able to finalize by the end of June due to delays in the mortgage process, particularly for short sales." he added.
Yun noted that many potential sales are also being delayed by an interruption in the National Flood Insurance Program, particularly in Florida and Louisiana
Subsequently, NAR said its supports Senate amendments to extend the home buyer tax credit closing deadline through September 30 and to renew the flood insurance program.
As mentioned above, the unexpected drop in existing home sales was largely due to a 18.3 percent drop in sales in the Northeast.
Existing home sales in the West and the South increased by 4.9 percent and 0.5 percent, respectively, while sales in the Midwest were unchanged.
The report also showed that the national median existing-home price was $179,600 in May, up 2.7 percent compared to the same month last year. Distressed homes slipped to 31 percent of sales in May compared with 33 percent in April, NAR added.
NAR President Vicki Cox Golder said, "With distressed sales at roughly the same level as a year ago, the gain in home prices is a hopeful sign that the market is in a good position to stand on its own without further government stimulus."
"Very affordable mortgage interest rates and stabilizing home prices are encouraging home buyers who were on the sidelines during most of the boom and bust cycle," she added.
Additionally, NAR said that total housing inventories fell 3.4 percent to 3.89 million existing homes available for sale at the end of May. This represents 8.3 months of supply at the current sales pace, compared with 8.4 months of supply in April.
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Eurozone Leading Index Drops First Time In 14 Months: Conference Board
The leading economic index for the euro area declined in May for the first time in more than a year, the Conference Board said Monday.
The index fell 0.5% in May to 109.7, following a 0.8% increase in April. At the same time, the Conference Board Coincident Economic Index, a measure of current economic activity, increased 0.1% in May after falling 0.2% in April. This was the sixth increase for the last seven months, the group said.
Negative contributions to the leading index, that came from stock prices, Markit manufacturing purchasing managers index and the economic sentiment index, were high enough to offset the continued large positive contribution from yield spread, the think tank pointed out. "The first fall of the LEI for the Euro Area in fourteen months suggests that the rebound in economic growth may have peaked during the second quarter, said Jean-Claude Manini, senior economist at the the Conference Board.
"However, it is too soon to say that the recent improvement in the economy will subside strongly in the near term," Manini said. "Employment may suffer from a wait-and-see attitude during the second half of 2010, but the effects of deficit reduction measures will be primarily felt in 2011."
The group noted that despite the decrease, the leading index for the Euro area is still 14.9% higher than its March trough. European sovereign debt crisis along with fiscal consolidation plans had weighed on Eurozone economic sentiment in May. The LEI aggregates eight economic indicators that measure activity in the Euroarea as a whole.
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Greenback And Yen Strengthens On Weak Asian Stocks
The US dollar and the Japanese yen gained ground against their major opponents on Tuesday morning in Asia as a decline in most Asian stocks prompted traders to seek safe-haven currencies.
The yen and the dollar are viewed as safe haven currencies and they often rally when the stock markets slide and conversely lose ground when the stock market's appetite for risk is more robust.
Asian stock markets declined on renewed concerns over the global economic recovery. As of 9:50 pm ET, Japan's benchmark Nikkei 225 stock index dropped 1.46 percent, South Korea's Kospi declined 1.2 percent, Australia's S&P/ASX 200 was down 0.30 percent, New Zealand's NZSE-50 fell 0.39 percent and Taiwan's weighted average fell 0.16 percent.
The yen advanced to a 5-day high of 131.92 against the pound and 109.18 against the euro by 8:45 pm ET and the next likely resistance levels are seen at 131.20 and 109.10, respectively. The Japanese currency is currently quoted at 109.50 against the euro and 132.44 versus the pound.
The yen also climbed to a 5-day high of 72.76 against the Australian dollar, 81.92 against the Canadian dollar and 59.76 against the NZ dollar at this time and if the domestic unit strengthens further, likely resistance levels are seen at 71.90, 81.60 and 59.50, respectively. The yen is currently quoted at 59.9 against the kiwi, 82.20 versus the loonie and 73.14 against the aussie.
The Reserve Bank of Australia is set to conclude its monetary policy meeting today and then announce its decision on interest rates at 12:30 am ET. Analysts are expecting the bank to keep rates on hold at the current level of 4.50 percent.
The Japanese yen rose to a 4-day high of 87.43 against the US dollar and 82.03 against the Swiss franc around 8:45 pm ET. The yen is presently worth 87.55 against the greenback and 82.33 versus the Swiss franc with 87.0 and 81.80, respectively seen as the next likely target levels.
The greenback rose to a 5-day high of 1.2482 against the euro and 1.5084 against the pound before reversing its direction around 8:55 pm ET. If the greenback strengthens further, likely resistance levels are seen at 1.2240 against the euro and 1.4860 against the pound.
The US currency reversed its course after edging higher to 1.0669 against the Swiss franc at this time. The greenback-franc pair is presently quoted at 1.0640.
Looking ahead, Japan will provide preliminary May numbers for its leading and coincident indexes at 1:00 am ET. The leading index is expected to come in at 98.9, down from 101.7 in April. The coincident is forecast to show a score of 101.2, down barely from 101.3 in the previous month.
Switzerland is set to release its consumer price index for June at 3:15 am ET. The CPI is expected to rise 0.9% on year, while a 0.1 percent decline is expected on the month.
Canadian building permits for May and the US ISM non-manufacturing composite index for June are expected in the New York session.
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Canadian Dollar Weakens Against Greenback And Yen
During early European deals on Wednesday, the Canadian dollar edged down against its US and Japanese counterparts despite a rise in oil price.
Meanwhile, the loonie pared some of its Asian session gains against the euro and the aussie.
Oil prices climbed today as traders look to weekly crude supply data for signs of recovering U.S. demand.
U.S. crude for August advanced as much as 40 cents to $72.38 a barrel on Wednesday and was up 15 cents at $72.13 at 1:38 am ET, after touching $71.09 on Tuesday, its lowest intra-day price since June 8, and peaking at $73.86. ICE Brent for August rose 16 cents to $71.61.
The American Petroleum Institute will publish weekly inventory data at 4:30 pm ET today, followed by government statistics from the Energy Information Administration (EIA) on Thursday at 11 am ET. Both reports come a day later than usual because of the independence day holiday on July 5.
Most Asian and European stocks plunged today as weak U.S. data renewed concerns about the strength of the global economic recovery
Activity in the U.S. service sector expanded for the sixth consecutive month in June, according to a report released yesterday by the Institute for Supply Management, although the pace of growth in the sector slowed by much more than economists had anticipated.
The ISM said its index of activity in the service sector fell to 53.8 in June from 55.4 in May, but a reading above 50 indicates continued growth in the sector. Economists had expected the index to show a much more modest decrease to a reading of 55.0.
In Asia, Japan's Nikkei 225 index fell 0.6%, Hong Kong's Hang Seng slipped 1.2%, South Korea's Kospi declined 0.55%, Taiwan's main index plunged 0.2%.
Australia's S&P 200 index and the All Ordinaries index slipped 0.5% each.
In Europe, Germany's DAX fell 0.6% in early deals, France's CAC 40 index plunged 1.2% and U.K.'s FTSE 10 index lost 0.9%.
The Canadian dollar slipped against the US currency in early European deals on Wednesday. At present, the loonie is worth 1.0580 against the greenback, compared to yesterday's close of 1.0544. The near term support for the Canadian dollar is seen around the 1.068 level.
During early European deals on Wednesday, the Canadian dollar declined against the Japanese yen. The loonie-yen pair is currently worth 82.43, down from yesterday's closing value of 83.02. If the loonie weakens further, it may likely target the 82.0 level.
During early European deals on Wednesday, the Canadian dollar pared the gains it made in Asian deals against the currencies of Europe and Australia. As of now, the loonie is worth 1.3304 per euro and 0.8962 against the aussie, compared to early highs of 1.3279 and 0.8942, respectively. The next downside target level for the loonie is seen at 0.901 against the aussie and 1.337 against the euro. The euro-loonie pair closed trading at 1.3310 and the aussie-loonie pair at 0.9006 on Tuesday.
Looking ahead, the Euro-zone final first quarter GDP and the German factory orders for May are expected in the upcoming hours.
Canada's Ivey PMI for June is slated for release at 10:00 am ET.
There are no significant economic reports scheduled for release from the U.S. today.
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U.S. Trade Balance Shows Biggest Deficit Since November 2008
U.S. Trade Balance Shows Biggest Deficit Since November 2008
Imports in the month of May rose at a slightly faster pace than exports, according to a report released by the Commerce Department on Tuesday, with the report subsequently showing an unexpected increase in the size of the U.S. trade deficit.
The Commerce Department said that the trade deficit widened to $42.3 billion in May from $40.3 billion in April. The wider trade deficit came as a surprise to economists, who had expected the trade deficit to narrow to $39.4 billion.
With the unexpected increase, the size of the trade deficit reached its highest level since coming in at $43.8 billion in November of 2008.
Peter Boockvar, equity strategist at Miller Tabak, said, "The higher than expected trade figure may cut Q2 GDP estimates by up to 0.3 of a percentage point."
"With the U.S. economy becoming less dependent on the U.S. consumer, we must make things the rest of the world wants and improving and growing our export sector is a vital component of the future economic health of our country," he added.
The wider deficit reflected a notable increase in the value of imports, which rose by 2.9 percent to $194.5 billion in May from $189.0 billion in April. The increase lifted the value of imports to the highest level since October of 2008.
Nonetheless, the jump in the value of imports was partly offset by a 2.4 percent increase in the value of exports, which rose to $152.3 billion in May from $148.7 billion in May. Exports rose to their highest level since September of 2008.
The report also showed that the goods deficit widened to $54.5 billion in May from $52.5 billion in April, while the services surplus was virtually unchanged at $12.2 billion.
Additionally, the Commerce Department said that the politically-sensitive trade deficit with China widened to $22.3 billion in May from $19.3 billion in April.
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No Let Up In Sight As Dollar Falls Further
The dollar continued to decline Thursday morning as improving growth prospects in Asia and Europe made counterparts in those regions more attractive.
At the same time, a recent string of troubling economic data from the US has fueled concerns that the domestic recovery is petering out.
Yesterday's disappointing retail sales report confirmed that consumers are anxious amid lingering problems in the labor and housing markets.
JP Morgan Chase has joined the growing line of companies to have reported better than expected earnings results this week, propping up stock futures and generating risk appetite.
Higher-yielding currencies like the euro tend to benefit from increased capacity for risk.
The dollar dropped to a fresh 2-month low versus the euro, extending its big July losses. The buck slipped to 1.2825, moving a full ten cents from June's 4-year high of 1.1805.
The eurozone economy is likely to grow at a "moderate and uneven" pace while inflationary pressures in the 16-nation bloc remain contained, the European Central Bank says.
In its latest monthly bulletin, the ECB said the risks to the euro area's economic outlook are "broadly balanced, in an environment of high uncertainty."
There was no relief for the dollar against the sterling. The buck fell to 1.5363, its lowest since late April.
Against the yen, the dollar pulled back to 87.84. Late in June, the dollar hit a 2010 low of 86.95.
The Bank of Japan has sharply revised up its fiscal 2010 growth forecast for the country's economy, citing the acceleration of growth in emerging economies.
A plethora of key economic data will keep traders on their toes throughout Thursday's session.
At 8:30 am ET, the Labor Department will release its weekly jobless claims report, with economists forecasting a modest drop in claims to 450,000 in the recent reporting week from the 454,000 for the previous week.
The Labor Department is also due to release its producer price index for June at 8:30 am ET. The recent dip in oil prices is expected to act as a drag on the headline number, with economists expecting a 0.1% drop in the producer price index. At the same time, the core producer price index is likely to show 0.1% growth.
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IMF, Afghanistan Agree On US$125 Mln Economic Programme
The International Monetary Fund on Tuesday said it reached in an agreement with Afghanistan on a new three-year economic program that could be supported by US$125 million financial aid.
"The main goals of the program are to move Afghanistan towards financial sustainability, ensure that the money spent is well used, and build capacity for policy implementation," said Masood Ahmed, IMF Director of the Middle East and Central Asia Department said. The program will complement the broader development agenda that bilateral and multilateral partners will be supporting and will include a package of technical assistance from the IMF, he added.
Enrique Gelbard, IMF mission chief for Afghanistan said despite serious constraints, Afghanistan has been making progress under its economic program. Growth has been strong, inflation has been controlled, and tax collection has grown significantly since 2009.
He noted that Afghanistan government is committed to consolidating these achievements under its new program, which contains policies to keep inflation low, strengthen banking supervision and regulation, achieve sustained increases in fiscal revenues, ensure transparency in the mining sector, and improve efficiency in the budget process and public spending while protecting the poor.
The agreement reached with the Afghanistan authorities is subject to approval by IMF management and the Executive Board. Consideration of the program by the Executive Board is expected in late August.
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China And Singapore Announce Bilateral Currency Swap Deal
The People's Bank of China and the Monetary Authority of Singapore on Friday agreed to a bilateral currency swap arrangement.
The swap arrangement will provide Chinese Yuan liquidity of up to CNY 150 billion and Singapore dollar liquidity of up to S$30 billion. The agreement has a maturity of three years and can be extended by agreement between the two sides.
The agreement intended to promote trade and direct investment for economic development between two nations, was announced at the 7th Joint Council for Bilateral Cooperation Meeting held in Beijing. "The bilateral currency swap arrangement is a key pillar of co-operation between the PBoC and the MAS to strengthen regional economic resilience and financial stability," MAS said in a statement.
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Yen Tumbles To Fresh Multi-week Lows Against Some Majors
Tuesday during early European deals, the yen plummeted to fresh multi-week lows against the currencies of Australia, New Zealand and Europe as a rise in European stocks reduced demand for the safe-haven Japanese currency.
Meanwhile, the yen plunged to a 12-day low against the Canadian dollar.
European stocks soared in early deals on strong results from UBS and Deutsche Bank. Germany's DAX rose 0.3% in early deals, France's CAC 40 index climbed 0.75% and U.K.'s FTSE 10 index gained 0.6%.
However, Tokyo stocks ended almost flat today as the market awaited a series of earnings reports from Japanese companies this week.
After drifting in and out of negative territory, the 225-issue Nikkei Stock Average finished 6.81 points, or 0.07 percent, lower from Monday at 9,496.85.
Swiss banking giant UBS AG reversed to a profit in its second quarter, helped by excellent performance of its Investment Bank business. The segment also benefited by a gain on its own debt. At the same time, the company noted that withdrawals from its wealth management business slowed.
UBS said that it made a profit of CHF 2.005 billion or US$1.911 billion compared to a loss of CHF 1.402 billion in the year-ago period, although it trailed the previous quarter's profit of CHF 2.202 billion.
German financial services firm Deutsche Bank reported a higher profit for the second quarter, helped by a sharp decline in provision for credit losses and strong revenue growth in its Global Transaction Banking and Asset Management businesses.
Net income attributable to Deutsche Bank shareholders was EUR 1.16 billion, or about US$1.51 billion, compared with EUR 1.09 billion in the prior-year quarter. Earnings per share were EUR 1.75 versus EUR 1.64 a year earlier.
An encouraging German GfK consumer confidence report released today also lifted investors sentiment.
German consumer climate is set to improve in August, as employment prospects brightened, results of a key survey showed. The consumer confidence index logged 3.9 for August, up from a revised 3.6 in July, a monthly survey from GfK Group showed. That was in contrast to an expected fall to 3.5.
The yen declined against the Australian dollar during early European session on Tuesday. As of now, the yen is trading near a 5-week low of 79.11 against the aussie, compared to 78.46 hit late New York Monday. On the downside, 80.9 is seen as the next target level for the Japanese currency.
During early European deals on Tuesday, the yen slipped against the New Zealand dollar. The kiwi-yen pair that closed yesterday's trading at 63.79 is now worth 64.25. This set the lowest level for the yen since June 23. If the yen weakens further, it may likely target the 65.4 level.
The yen plunged against the Canadian dollar in early European deals on Tuesday. As of now, the yen is trading at a 12-day low of 84.96 against the loonie and the next downside target level for the yen is seen at 86.5. At yesterday's close, the loonie-yen pair was quoted at 84.22.
At 4:35 am ET Tuesday, the yen slumped to near an 8-week low of 113.73 against the euro. At present, the yen is worth 113.65 against the euro with 114.2 seen as the next downside target level. The euro-yen pair closed yesterday's trading at 112.90.
The yen declined against the currencies of US and UK during early European deals on Tuesday. Currently, the yen is worth 135.20 against the pound and 87.40 against the dollar, compared to yesterday's close of 134.59 and 86.88, respectively. If the yen drops further, it may likely target 87.7 against the dollar and 135.6 against the pound.
Looking ahead, the U.S. consumer confidence for July and the S&P/Case-Shiller home price index for May have been slated for release in the New York morning.
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Pound Jumps To New Multi-month High Against US Dollar
U.K.'s sterling surged up to 1.5619 against the US dollar by 1:35 am ET Wednesday, its highest level since February 18 and a further rally may push the pair to stay around the 1.5820 resistance level. The cable is presently quoted at 1.5614.
The pound also edged slightly higher to 137.21 against the yen and challenged yesterday's new multi-week high of 1.6552 against the Swiss franc at this time. The pound is presently quoted at 1.6549 against the alpine unit and 137.12 against the Japanese currency.
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he Australian dollar that closed Monday's North American session at 1.9168 against the European currency touched a 4-day low of 1.9466 at 4:50 am ET Tuesday. The next downside target level for the Aussie is seen around 1.962.
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Japanese Auto Sales Growth Eases In July
Japan automobile sales grew at a pace of 15% year-on-year in July to 333,403 units, the Japan Automobile Dealers Association said Monday. In June, sales showed an annual growth of 20.6%. Sale of cars, trucks and buses excluding minicars in July totaled 333,403 units.
Toyota sold 161,444 units, up 19.1% from the prior year. Sales of Honda Motor increased 14.5% to 50,448 units. Nissan recorded only 2.3% increase in sales, now at 50,719. However, overall auto sales are expected ease in the months ahead as the government incentives to boost sales expire at the end of September.
Japan Automobile Manufacturers Association on July 30 said auto production increased 25.9% in June. Domestic sales climbed 17.4% to 448,831 vehicles. Overall auto production in the first half of 2010 surged 45.8%.
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ISM Manufacturing Index Indicates Continued Growth In July
Manufacturing activity in the month of July expanded at a slower pace than in the previous month, the Institute for Supply Management revealed in a report on Monday, although the index of activity in the sector fell by less than economists had expected.
The ISM said its manufacturing index fell to a reading of 55.5 in July from 56.2 in June, with a reading above 50 indicating continued growth in the sector. Economists had expected the index to show a more notable decrease to a reading of 54.2.
Norbert J. Ore, chair of the ISM Manufacturing Business Survey Committee, said, "July marks 12 consecutive months of growth in manufacturing, and indications are that demand is still quite strong in 10 of 18 industries."
The slowdown in the pace of growth in the manufacturing sector reflected a deceleration in new orders and production, with the new orders index slipping to 53.5 in July from 58.5 in June and the production index falling to 57.0 from 61.4.
On the other hand, the employment index edged up to 58.6 in July from 57.8 in June, indicating a modest acceleration in the pace of employment growth in the sector. The index indicated the eighth consecutive month of growth in manufacturing employment.
The report also showed a turnaround for inventories, with the inventories index jumping to 50.2 in July from 45.8 in June. With the increase, the index rose above 50 for the first time since March.
With regard to inflation, the ISM said that the prices index edged up to 57.5 in July from 57.0 in June, pointing to the thirteenth consecutive month of price growth.
Paul Dales, U.S. economist at Capital Economics, said that the smaller than expected decrease by the headline manufacturing index is "consistent with a further modest easing in economic activity rather than newfound economic malaise."
"Admittedly, in just three months the index has dropped by 5 points, signaling a sharp slowdown in growth," Dales added. "But the key point is that it is falling from a very high level. Even after July's dip, it is still consistent with annualized GDP growth of around 4%."
On Wednesday, the ISM is scheduled to release a separate report on activity in the service sector, with the index of activity in the sector expected to edge down to 53.0 in July from 53.8 in June.
News are provided by InstaForex.
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Euro Drops As Chinese Data Raises Red Flags
The euro pulled back sharply on Tuesday as signs that China's robust economy is cooling off caused a return to risk aversion.
Stocks were lower around the global today ahead of the latest interest rate announcement from the Federal Reserve.
Appetite for risk had been helping the euro rally until this week, when anxiety about the pace of the global economic recovery took hold.
The euro slipped to 1.3073 versus the dollar, down from last week's 3-month peak of 1.3333.
Versus the yen, the euro dropped to a 10-day low of Y112.27.
The single currency also tailed off versus the sterling, dropping to 0.8310 from a 10-day high of 0.8362.
The Conference Board leading economic index for the U.K. rose 0.5% in June from May, following the 0.2% increase in the previous month, the Conference Board said on Tuesday.
This marks the 15th straight month in which the leading index has risen.
Elsewhere, data showed China's July imports grew at the slowest pace since November, missing economists' forecasts.
And property prices in 70 major Chinese cities climbed 10.3 percent from a year earlier in July, the slowest pace for six months
This afternoon, the US monetary policy makers are widely expected to keep the nation's key interest rate near zero percent and signal concerns about deflation and downside risks to economic growth.
News are provided by InstaForex.
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Dollar Steady Friday Morning Ahead Of Data Deluge
The dollar was mixed Friday morning in New York ahead of a slew of economic data related to inflation and the mindset of the US consumer.
Risk aversion and slumping stocks have helped the dollar find its footing against most majors this week, but the buck hit a 15-year low against the yen on Wednesday and has failed to improve much since.
The Labor Department will table the consumer price index for July at 8.30 a.m. ET. Economists expect that inflation rose 0.2% for July following the 0.1% decline in the previous month, while core inflation, excluding food and energy, is expected to be 0.1% following a 0.2% rate in June.
At the same time, the Commerce Department will release its report on retail sales for July. Economists expect that retail sales rose 0.5% for the month following 0.5% decline in the previous month.
At 9.55 a.m. ET, the preliminary report of the Reuters/University of Michigan's consumer sentiment survey for August will be released. Economists expect the consumer sentiment index to increase to 70 from July's 67.80.
The buck was steady near 1.2800 versus the euro, having rebounded nicely this week after touching a 3-month low of 1.3333 last Friday.
Eurozone gross domestic product grew at a faster pace of 1% sequentially in the second quarter, following a 0.2% rise in the first quarter, flash estimates published by Eurostat showed Friday.
The dollar also held its ground versus the sterling, staying near 1.5600. A week ago, the buck was at a 6-month low of 1.5998.
The buck remained stuck in the mud versus the yen, as the Japanese currency remains the preferred safe haven option. The pair was at Y85.73, near the dollar's 15-year low of 84.71.
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EU Commission Proposes New Rules For Financial Conglomerates
The European Commission on Monday proposed to amend existing rules on the supervision of financial conglomerates as part of making the financial system resilient against future crisis.
"Drawing lessons from the financial crisis, the Commission proposes to equip national financial supervisors with new powers to better oversee the conglomerates' parent entities, such as holding companies," the Commission said in a statement.
The changed rules will allow supervisors to apply banking supervision, insurance supervision and supplementary supervision at the same time, thereby remedying to unintended loopholes identified in the context of the financial crisis, the Commission said. In this way, supervisors would be getting better information at an earlier stage of a trouble and allows them to be better equipped to intervene.
The proposal will be passed to member states and the European Parliament for consideration. Financial conglomerates are financial groups that are usually active in more than one country and operate in both the insurance and banking businesses.
News are provided by InstaForex.
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Ifo: World Economic Climate Clouded In Q3
The world economic climate looks slightly clouded in the third quarter of 2010, latest survey results from the Ifo Institute for Economic Research showed Wednesday.
The think tank said its world economic climate indicator fell to 103.2 in the third quarter from 104.1 in the second quarter. It suggests that the recovery of world economic activity will continue at a slower pace in the second half of the year, the Munich-based Ifo said.
The world economic climate indicator fell in North America and in Asia, but rose in Western Europe. In North America, the assessments of the current economic situation were more favorable than in the previous survey and expectations for the coming six months were less optimistic. In Asia, the favorable economic situation has improved further, but the optimism for the next half year has declined somewhat.
In Western Europe, the assessments of the current economic situation have improved more clearly than the worldwide average. Since the six-month economic outlook has not clouded so strongly, the climate indicator as a whole rose marginally, the think tank said.
Although the surveyed experts have given better assessments of the current economic situation than in the first half of 2010, the economic expectations for the coming six months have been revised downwards. The corresponding indicator declined to 112.3 from 126.3.
In contrast to the previous surveys, the euro was assessed as slightly undervalued against the U.S. dollar. Overall, in the coming six months, after adjustments have occurred, the experts foresee largely stable exchange rates for the four major world currencies, the euro, the U.S. dollar, the Japanese yen and the British pound, Ifo said.
News are provided by InstaForex.
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Beaten Down Euro Rises After Gory Look At US Housing
The euro was taking yet another beating on Tuesday, but snapped back after the release of data suggesting the US housing market is in even worse shape than the most pessimistic economists have feared.
Before finding its footing, the euro dropped to its lowest since 2001 versus the yen, and extended its steep recent losses versus the dollar.
Stocks continued to sell off, and commodity prices fell further on renewed risk aversion.
A mixed bag of economic data from Europe failed to generate any confidence that the region is on a path toward a sustainable recovery.
Euro zone industrial new orders rose by 2.5% month-on-month in June, slower than the revised 4.1% growth in the prior month, the European Union's statistical agency Eurostat said on Tuesday.
The German economy logged its biggest expansion since its 1991 reunification' in the second quarter. The economy grew by a seasonally adjusted 2.2% sequentially in the second quarter.
The euro dropped to a 7-week low of $1.2586 in early dealing versus the dollar, but stormed back to $1.2715 after industry data showed a record drop in US existing home sales.
The National Association of Realtors said existing home sales fell by 27.2 percent to an annual rate of 3.83 million units in July from a downwardly revised 5.26 million unit rate in June.
The euro fell to a more than 8-year low of Y105.41 versus the yen, then improved to Y106.45. At the same time, the US dollar fell to its lowest since 1995 versus the yen, which has become the preferred safe haven option.
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Dollar Rally Stalls After BoJ Disappoints
The dollar struggled for direction Monday morning as traders contined to digest Friday's remarks from Federal Reserve Chairman Ben Bernanke, who said the US economic recovery is on track.
Still, this week's deluge of data is likely to confirm that the economy is slowing down. In addition to the government's monthly jobs report, traders will be treated to data on the pending homes sales, manufacturing, and consumer confidence.
US personal spending is estimated to have risen by 0.3% in July, helped by a small bounce in core retail sales and solid auto sales. At the same time, economists estimate a 0.2% increase in personal income.
The dollar came under pressure versus the yen in early dealing, giving back most of its rebound from the previous session. The buck slipped to 84.60, moving back towards a recent 15-year low of 83.63.
The Bank of Japan announced an expansion to its low-interest lending program after an extraordinary policy board meeting on Monday. At the same time, the bank also maintained its key interest rate at near-zero.
The buck firmed a bit versus the euro, improving to $1.2700 from $1.2765. At the same time, the dollar remained stuck in the mud near $1.5550 against the sterling.
The British Chambers of Commerce hiked U.K.'s 2010 GDP growth forecast to 1.7% from the earlier 1.3%. Similarly for 2011, the Chamber upped its forecast to 2.2% from the 2% predicted in June.
Eurozone economic confidence rose in August to 101.8 from 101.1 in July, a monthly survey from the European Commission showed Monday. The economic sentiment index remained above its long-term average and expected reading of 101.6.
News are provided by InstaForex.
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Dollar Stuck Near 1995 Lows Against Yen
The dollar continued to hover around a 15-year low versus the yen but eked out gains versus the euro Tuesday morning in New York, as traders returned to their desks following the Labor Day weekend.
Stocks rose on Friday after better-than-expected jobs data, but momentum has not carried over into this week. Stocks are down around the world this morning amid renewed fears about the European banking system.
The dollar was again testing its worst levels since 1995 versus the yen, slipping to 83.80 in very early dealing. Two weeks ago, the dollar hit a 15-year low of 83.58.
The Bank of Japan maintained its key interest rate at near-zero at the end of its two-day policy meeting on Tuesday. It also promised to take more policy actions if judged necessary to kick start the deflation-ravaged economy.
Still, the markets have considered the BoJ's recent moves far too tepid to either bolster the economy or stop the yen from rising further.
Germany's factory orders declined 2.2% in July from the prior month, the Federal Ministry of Economics and Technology said on Tuesday. Economists were expecting factory orders to rise 0.5%.
The dollar rose to 1.2750 versus the euro, up a penny from Monday morning. The pair has been unable to sustain any direction for the past month.
The buck bounced back and forth near 1.5360 versus the sterling, having edged higher over the past few weeks.
News are provided by InstaForex.