May 16: economic background
Wednesday, May 16, 2012 - 06:00
http://img837.imageshack.us/img837/3...tanaylysis.png
http://i1068.photobucket.com/albums/...allove/222.jpg
As many have feared, Greece political parties (New Democracy, PASOK, Democratic Left and SYRIZA) failed to form coalition government. Today Greek leaders will try to reach consensus on an interim government which will schedule new elections (around June10).
French President Francois Hollande and German Chancellor Angela Merkel promised yesterday to pool efforts to promote economic growth in the region, although they are known for differences in views on how to overcome the European crisis (Merkel insists on austerity, while Hollande – on growth). Merkel seemed to tone down the austerity rhetoric that made her extremely unpopular these days. Moreover, leaders of the euro zone's two largest economies expressed their wish for Greece to stay in the single currency union.
Risk aversion remains strong. EUR/USD tested the levels below $1.2700, commodity currencies opened in red. Yen weakened on poor machinery orders data. Asian stocks slumped by 2.3% (MSCI Asia Pacific Index). Kiwi is sold after disappointing dairy auction (important industry for New Zealand).
To watch today:
• Great Britain: A lot of important news for pound will be released. Claimant count payrolls in April may rise by 4.9K compared with 3.6K rise in March. The Governor of the Bank of England Mervyn King in his speech is expected to signal that interest rates will not rise from their record low until late 2013 at the earliest, as the UK's growth disappoints. The key inflation report may leave the door open to the possibility of more QE, either explicitly or by forecasting that inflation will probably fall below the 2% target within 2-3 years without a change in policy. According to analysts at Citi, such a forecast could prepare the ground for the MPC to resume QE (bond purchases) in coming months if activity data and the European monetary union crisis worsen, or if the inflation worries diminish.
• U.S.: The release of the important housing market data is scheduled on Wednesday. According to forecasts, annualized number of building permits may post 0.73M in April after 0.75M in March. Number of housing starts is expected to have increased from 0.65M in March to 0.69M last month. Industrial production in April may have grown by 0.6% after remaining unchanged in March. FOMC Meeting Minutes probably won’t be a game changer, though the Fed’s Chairman Ben Bernanke said that day that he’s prepared to “do more” to boost the economic recovery and underlined that inflation remains close to target.
• Euro zone: The speech of ECB President Draghi will be scrutinized by the investors, aiming to forecast the euro zone’s future. Germany holds a 10-year bond auction.
Have a profitable trading day with FBS!
If you have any questions to our analysts, you’re welcome to ask them in comments to this article!
Comment here http://www.fbs.com/analytics/2012-05...mic-background