Weekly overview and analysis. - May 04 2009 - May 10 2009
USD
USD fell against most currencies last week as global stocks rose on optimism that the world economy free fall is bottoming and global economy may return to growth in 2nd half of the year, reducing demand for the dollar as safe haven. Perception on US economy begin improving last week as most figures indicates that the government's fiscal stimulus and rate cuts stipulated the region's economy, while ISM said its index of non-manufacturing businesses rose to 43.7, the highest level since October. Germany manufacturing orders unexpectedly rose for the 1st time in 7 months in March and manufacturing in China increased for the first time in 9 month, adding to evidence that the world's manufacturing sector is improving as orders increased on stronger demand. The euro remained strong against the dollar last week despite ECB policy makers lowered its benchmark rate by 0.25% to 1%, align with economists forecast, and announced that the central bank will buy $80.5Billion in covered bonds to bolster the region's economy.
The dollar was further weakened by reports that showed US job markets decline at the slower pace in April, indicating that the region's economy is recovering amid stabilizing job market. Labor Department report showed the nation lost 539,000 jobs last month, less than estimated, but unemployment rate rose 0.4% to the highest level since 1990. The dollar should recover versus the euro on profit taking this week after past weeks retreat, and stocks may slightly retreat on selling pressure, while non-banking sector may expect weaker earnings on declining consumer spending. Monitor this week's US economic releases - US Bernanke speaks on stress tests, US Trade balance, IBD/TIPP economic optimism, ABC Consumer confidence, US Advance retail sales, US Retail sales less autos, US Import price index, US Business inventories, US PPIs, US Initial jobless claims, US CPIs, US Empire manufacturing, US Net Long-term TIC Flows, US Industrial production and University of Michigan consumer confidence -, cross currencies important economic releases, Fed/Treasury or other central banks' member statements/comments, US indexes movement, news related to major corporate and any measures/plans intended to bolster the region's economy.
JPY
JPY fell against most currencies last Friday as stocks around the world rose as economic figures indicates that global economy is stabilizing and may return to growth in 2nd quarter this year, boosting carry trade demand. In the US, economic data indicates manufacturing sector, services industries, housing markets and job market is improving as governments' stimulus package and other measures are taking effect. All date showed manufacturing sectors slump is stabilizing and services industries are expanding, while government and private companies is hiring on prospect the US economy will return to growth in 2nd quarter and investors speculates consumer spending will increase as job markets improved and as housing price advance. The yen further weaken on speculation that ECB plan to buy $80.5 billion in covered bonds will bolster the region's economy, offsets concerns Fed stress test revealed some banks including Bank of America, Citigroup and Wells Fargo needs to raise capital.
Job market in the US are showing signs of stabilizing as government and private companies increase hiring on expectation that economy will recover in 2nd half of the year. The yen should strengthen against most currencies this week as stocks will retreat on selling pressure. Monitor this week's Japan economic releases – Japan Coincident index, Japan Leading index, Japan Trade balance, Japan Current account total, Japan Adjusted current account, Japan M3, Japan Nationwide Department store sales, Japan Eco watchers survey, Japan Machine tool orders, Tokyo Department sales, Japan Domestic goods price index and Japan Machine orders -, cross currencies important economic releases, central banks' member's statements/comments, US indexes movement, commodities performance, news related to major corporate and governments' measure/plan to bolster the economy.
EUR
EUR strengthened against most currencies last week as stocks around the world rose on optimism global economy will recover at 2nd half of this year, reducing appeal of the dollar as safe haven. European Union cut its forecast for the euro-area economy to show a contraction at 4%, twice as deep as it projected 3 months ago but said that the country's economy is no longer in free fall. Economic figures indicates manufacturing and services sector in Euro-region is improving as governments' fiscal stimulus and measures is taking effect on the economy, while confidence among businesses and consumers in the region is improving, spurring speculation that the region's economy will rebound in 2nd half of the year. Despite government measures to encourage spending, last week's economic data showed that European retail sales dropped by the most on record in March as households curbed spending and Spain's industrial production shrank by 25%, suggesting that recovery in the region may take time as spending remains slow as unemployment rises.
ECB slash its benchmark rate bu 0.25% to 1% and announced a plan to buy up to $80.5 billion in covered bonds to bolster the region's economy, spurring speculation the government plan will succeed in boosting the region's economy, while reports showed job market in US is stabilizing as government and private companies speed up pace of hiring on expectation the country's economy will return to growth in 2nd half of the year. The euro will retreat this week as recent gains is excessive and too fast to sustain and stocks may retreat on selling pressure as non-banking sector is still showing weakness on earnings. Monitor this week's Eur-zone economic releases – France Industrial production, France Manufacturing production, Italy Industrial production, Germany CPIs, Germany Wholesale price index, BOF Business sentiment, France CPIs, France Current account, Euro-zone Industrial production, Publication of ECB monthly report, Germany GDP, France GDP, France NFP, Italy GDP, Euro-zone GDP, Euro-zone CPI and Italy CPI -, cross currencies important economic releases, central banks' member's statements/comments, news related to major corporate, US indexes movement and speculation on any additional measures by European countries or its officials from the region.
Crude oil
Crude oil rose last week as advancing equities around the world spurred speculation that global economy will recovery in the 2nd half of the year, bolstering risk appetite and boosted optimism that fuel demand will increase as economy recovers. Home prices in the US are rebounding as demand are slowly picking up. US Energy Department released a report which showed a smaller than expected increase in stockpiles, crude oil inventories increased by 600,000 barrels last week, compare to analysts forecast of 2.55Million barrels, the report also showed refineries operated at 85.3% of their maximum capacity last week, an increase of 2.6% from the previous week, while daily fuel demand is down 7.9% from a year earlier in the four weeks ended May 1.
Oil prices remained strong last week as the dollar decline, increasing appeal of commodities as inflation hedge and economic data showed job market in US is stabilizing as government and private companies increase hiring on optimism the region's economy will rebound in 2nd half of the year. Oil prices are likely to retreat by $3-$4 this week on selling pressure as investors exit positions on profi taking after last week's gains. Monitor this week's US economic releases, central banks' member's statements/comments, news related to major corporate, US indexes movement, USD movement, geopolitical risk, major corporate fiscal results, stimulus to bolster the economy and storage report.
Loh Chang Yuen,
Junior Strategist
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