Euro at New Record - 1.50 or Bust?
After a dropping for most of the Asian session, EURUSD staged a vicious one-way rally that took the pair to record highs by early European trade.
USD largest single day loss in over a year
The US dollar posted its largest single-day loss in over a year, as speculation for future US Federal Reserve interest rate cut doomed the greenback to further drops. Outlook has grown increasingly dim for the downtrodden US currency, as both speculative and sovereign traders show very little interest in holding dollars. Continued speculation that key oil producing countries may drop the dollar as their primary reserve currency has clearly hurt the USD, while increasingly pessimistic forecasts for US economic growth and interest rates has likewise hurt confidence in the dollar.
Table of forecasts for New Zealand’s official cash rate
Following is a table of forecasts for New Zealand’s official cash rate at the four remaining reviews this year.
2007 July Sept. Oct. Dec. --------------------------------------------- Median 8.25% 8.25% 8.25% 8.25% --------------------------------------------- ANZ National 8.25% 8.25% 8.25% 8.25% ASB Bank 8.25% 8.25% 8.25% 8.25% Barclays 8.0% 8.0% 8.0% 8.0% BNZ 8.25% 8.25% 8.25% 8.25% Citigroup 8.25% 8.25% 8.25% 8.25% Deutsche 8.25% 8.25% 8.25% 8.25% First NZ 8.25% 8.25% 8.25% 8.25% Goldman Sachs 8.0% 8.0% 8.0% 8.0% HSBC 8.25% 8.25% 8.25% 8.25% ICAP 8.25% 8.25% 8.25% 8.25% JPMorgan 8.25% 8.25% 8.25% 8.25% Macquarie 8.25% 8.25% 8.25% 8.25% RBC 8.25% 8.25% 8.25% 8.25% TD 8.0% 8.0% 8.0% 8.0% UBS 8.0% 8.0% 8.0% 8.0% Westpac 8.25% 8.5% 8.5% 8.5% ==============================================
Nonfarm Employment Change
Measures the number of new jobs created in the previous month, excluding the farming industry. A rising trend has a positive effect on the nation’s currency. The number of new jobs being created is one of the most important indicators of the economy’s health because consumer spending, which is highly correlated with labor conditions, makes up a large portion of GDP. This report is the first of the month that relates to labor conditions, making it susceptible to big surprises.
Currencies Hit Multi Decade Highs After Strong Non-Farm Payrolls
Rising oil prices and strong US job growth sent carry trades to fresh highs today. With the labor market sparing the US economy from a major downturn, the market is hungry for risk and yield. Selling in the Japanese Yen has been so strong that the currency hit a new record low against the Euro, a 20 year low against the high yielding New Zealand dollar, a 16 year low against the Australian dollar and a 14 year low against the British pound. In other words, the Yen crosses hit decade if not multi decade highs. The move in oil prices has also pushed the Canadian dollar to a new 30 year high.
AUD Interest Rate Statement
Each month, excluding January, the Reserve Bank of Australia (RBA) Board meets to set the nation’s short term interest rate (i.e., “cash rate”). The Board announces the decided rate shortly after the meeting, and when there is a change in rates they also releases a statement that contains the economic conditions that effected their decision. A rising trend in interest rates has a positive effect on the nation’s currency. Short term rates are the paramount factor in currency valuation; traders look at most other indicators merely to predict how interest rates may change in the future. High interest rates attract foreigners looking for the best “risk-free” return on their money, which can dramatically increases demand for the nation’s currency. The decision on where to set interest rates depends mostly on inflation. The primary objective of the central bank is to achieve price stability; when inflation rises above an annualized rate of approximately 3%, they will respond by raising interest rates in an attempt to bring prices down.
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Oil Prices above $70 Oil
If crude continues to rise, it will not be long before the average price of gasoline in the US moves back above $3 a gallon. When this happens, companies around the world will begin to add fuel surcharges, which will also boost core inflation. Over the past few years, we have seen oil become the primary driver of hawkish monetary policy across the globe. The higher oil prices rise, the longer central banks will keep interest rates high, which in one word, boils down to CARRY.
Will ISM Manufacturing take the EUR/USD to 1.36?
How Will The Markets React?
Next week, the US economic calendar will be exceptionally busy and US manufacturing ISM is the first of many key pieces of data due for release. Regional indexes have been strong. Both the Empire State and Philadelphia Fed surveys jumped in the month of June. The Empire State survey reached a 1 year high while the Philly Fed survey hit the highest level since March 2006. Even though Chicago PMI fell in the month of June, it still remains above 60, which is well into expansionary territory.
Dollar In Retreat As Weak Consumer Data Adds To Soft Inflation
Today’s economic calendar was a good follow up to the Fed’s decision to leave rates unchanged at the end of its two day meeting yesterday. The central bank’s favored inflation gauge cooled to a new multi-year low, while weak consumer spending numbers added another facet to the concerns for the economy.
Economy hard to figure out
U.S. stocks are expected to remain choppy next week as investors look to key employment and manufacturing reports to determine whether the economy is headed for a recession next year.
Dollar reached 20-Month Low as U.S. Manufacturing Contracts
The dollar tumbled to the lowest level since March 2005 against the euro after a report showed U.S. manufacturing unexpectedly contracted last month for the first time in more than three years.The dollar weakened to $1.33 per euro for the first time in 20 months as the Institute for Supply Management index prompted traders to increase bets the Federal Reserve will cut interest rates, shrinking the rate advantage of the currency.
European Manufacturing Expands
European manufacturing expanded for a 17th month and unemployment declined as executives and consumers became more confident about the economy’s strength.
U.S. Economy: Incomes, Spending Keep Economy Growing
Incomes rose and personal spending rebounded in the U.S. last month, suggesting consumers may keep the economy growing in the face of downturns in housing and manufacturing.Americans earned 0.4 percent more than in September, the Commerce Department said today in Washington, and purchases climbed 0.2 percent after declining the prior month. Meanwhile, a business barometer from a Chicago-based group contracted for the first time in more than three years, a sign of weakening demand at factories. Another report from the government showed home prices grew the least in eight years last quarter.
Weak November start hurt retailers’ sales
The nation’s largest retailers reported mostly disappointing sales for November as sluggish performance early in the month outweighed a robust post-Thanksgiving start to the holiday shopping season.
Sterling in sight of $2 by year-end
The British pound has rallied to its highest level since 1992 versus the U.S. dollar, making the elusive $2.00 mark an increasingly realistic target before the end of the year, strategists said Thursday.
A weak dollar further exacerbated the move. The U.S. currency sold off sharply after a report showed business activity in the Chicago region slowed to its lowest level in more than three years in November, sparking concerns over a sharp slowdown in the U.S. economy.
Economic conditions have improved slightly over the past month, with increasing retail sales and cautious optimism about the holiday-shopping season, the Federal Reserve’s latest survey of economic conditions found.
Dollar Drops as Cooling Economy May Prompt Fed to Lower Rates
Nov. 22 (Bloomberg) — The dollar weakened the most against the yen in almost three months on speculation the Federal Reserve will lower interest rates as the economy cools.
The U.S. currency declined against all 16 of the world’s most actively traded currencies after economic advisers to President George W. Bush yesterday cut their forecasts for growth next year. The dollar was close to a three-month low against the euro and approached the weakest this month against the yen before tomorrow’s Thanksgiving U.S. public holiday.
US initial job claims 312000
The number of people filing new claims for unemployment insurance in the latest week rose by more than expected to its highest four-week average in three months, the Labor Department said Thursday.
Initial jobless claims rose by 12k to 321,000 which suggest some cooling in the labour market. The number of claims for the previous week has been revised upwards to 309,000 from the previous 308.000. This reading has been much worse than expected, since analysts advanced a decline by around 2,000.
US CPI Proves A Volatility Letdown
With speculative positioning growing before the New York session’s multiple economic releases, event risk and expectations for sharp moves were running high. However, the predicted levels of volatility never came to pass as nearly every indicator printed close to its respective consensus. For most of the majors, the letdown led to range trading that was more reserved than yesterday’s fundamentally-inactive session.
Japan July household spending down 1.3 pct
Spending by households in July dropped 1.3 pct in real terms from a year before to an average 292,328 yen, declining for the seventh straight month, the Ministry of Internal Affairs and Communications said.The fall was smaller than what the market had expected. A Nihon Keizai Shimbun poll of 18
brokerage and research firms were looking for a year-on-year drop of 1.5 pct.
The overall income of households rose 5.9 pct year-on-year and the income of household heads increased 0.3 pct. Disposable income was up 5.6 pct from a year earlier, the ministry said.