Forex Market Ideas by Finexo.com
Past Events:
• USD Trade Balance out at -39.7B, versus expected -38.5B, prior -37.0B (revised)
• USD Import Prices m/m out at 0.7%, versus expected 0.9%, prior -0.2% (revised)
• GBP Trade Balance out at -6.2B, versus expected -7.3B, prior -8.1B (revised)
• CAD Trade Balance out at 1.4B, versus expected 0.7B, prior 0.8B
• CAD NHPI m/m out at 0.1%, versus expected 0.5%, prior 0.4%
• AUD Westpac Consumer Sentiments out at -1.0% versus 0.2%
Upcoming Events:
• EUR Industrial Production m/m (1000GMT)
• USD Core CPI m/m (1330GMT)
• USD Core Retail Sales m/m (1330GMT)
• USD Retail Sales m/m (1330GMT)
• USD CPI m/m (1330GMT)
• USD Fed Chairman Bernanke Testifies (1500GMT)
• USD Business Inventories m/m (1550GMT)
• GBP Nationwide Consumer Confidence (tomorrow 0001GMT)
• AUD MI Inflation expectations (tomorrow 0200GMT)
Market Commentary
It is a very busy day for the United States, as the world’s leading economic nation is set to release two sets of very important figures, the monthly CPI and monthly Retail Sales.
At half past one this afternoon, the Census Bureau will release Retail Sales and Core Retail Sales for March. Economists predict retail sales will increase by as much as 1.1%, the biggest increase in four months as better weather and hiring pick up. The market also predicts that core retail sales will increase by 0.5%. Published at the same time as retail sales, the Bureau of Labor Statistics will release the CPI and core CPI for March. Inflation is the key to raising the interest rate, and boosting the value of a currency; however, economists predict that CPI will increase by 0.1%, after remaining 
unchanged last time. Core CPI, which is closely watch by the Fed, is predicted to increase by 0.1%- exactly like last month.
Later today, Fed Chairman Ben Bernanke will testify before the Joint Economic Committee on Capitol Hill. Last night, Bernanke addressed the National Bankers Association. While the Fed Chairman did not comment on the current economic conditions or on the Fed’s interest-rate policy in yesterday’s speech, today he is expected to discuss his economic outlook for the U.S, and explain why he is unwilling to raise the interest rates.
Yesterday, the bureau of Economic Analysis reported that the U.S trade deficit widened in February to $39.7 billion further adding to evidence of a rebound in the country’s economic growth. The trade gap, which surpassed market expectations of $38.5billion, increased 7.4% from a revised $37billion in January. Imports climbed 1.7% as Americans bought more computers and televisions abroad, while exports rose to its highest level since October 2008. The need to replenish depleted inventories and gains in consumer spending mean purchases of goods and services from overseas will keep growing in coming months. Exports will probably also advance as global growth accelerates, giving companies across the board a boost.
Also out yesterday, the Bureau of Labor Statistics reported prices of goods imported into the U.S rose less than anticipated in March, indicating few signs of building inflation pressures from abroad. While markets had expected a 0.9% increase, the report showed a 0.7% increase in the import-price index, which follows a revised 0.2% drop in February.
Following the release of the data, the U.S. dollar was down against the Yen, with USD/JPY trading at 92.87, down 0.41% prior to the release. The USD also weakened against the Euro, falling to $1.3613.
Across the border, Canada posted its fifth straight trade surplus in February, the longest series of reported surpluses since November 2008, adding to yet piece of evidence supporting a growing economic recovery. Yesterday Canada’s balance of goods beat market expectations as Stats Canada reported a monthly trade surplus of C$1.40 billion ($1.39 billion), the largest surplus since October 2008. Despite a rising Canadian Dollar, exports increased 2.8% in February to C$34, led by a 7.2% gain in industrial goods and automatic products. Imports rose 0.9% to C$32.6 billion. However, despite this positive news, the Loonie was little changed at C$1.0033 per U.S. dollar following the report
The recovery of the northern nation’s trade surplus, comes after numerous reports this year that have shown steady gains in housing and wholesale sales along with a drop in the unemployment rate. The BOC has reportedly stated that both output and a key measure of inflation have been higher than expected, leading many economists to believe that the central bank will being raising the benchmark interest rate from 0.25% in the third quarter – well ahead of the U.S Fed.
Released at the same time as the trade balance, the New House Price Index (NHPI) showed a 0.1% increase in the selling price of new homes for February. While smaller than the 0.5% increase the market had predicted, this increase in the NHPI is the eighth straight monthly increase in the selling price of new homes. On a year-to-year basis, new home prices have increased 0.9% between February 2009 and February 2010.
The Canadian Dollar was little changed by yesterday’s close – appreciating 0.11% against its American counterpart to end the day at C$1.00140. However, in the Asian trading session this morning, the Loonie crossed the parity line, to hit a session hit of C$0.99846.
Canada was not the only country rejoicing a better than expected trade balance. Across the channel the U.K’s goods trade gap with the rest of the world narrowed sharply in February to its smallest size since June 2006, after exports rebounded sharply from a weather related weakness in January. The office for National Statistics reported yesterday, that the Britain’s trade deficit lessened from January’s 17 month high of £8.1 billion to £6.2billion in February. The decrease in the country’s deficit can be attributed to a massive surge in overseas chemicals sales which pushed the number of exports to jump 9.5% from the previous month, the biggest increase since January 2003.
Analysts welcomed this news which indicates that euro-zone growth is finally picking up after faltering at the beginning of this year – as the EU is the one of the U.K’s biggest trading partners, U.K exporters are ardently hoping that this continues.
The unexpected news pushed the Pound to $1.5390, appreciating as much as much as 0.2% against the USD. During yesterday’s trading session, the British currency reached as high as $1.54475; however, despite crossing the important 1.54 mark, the Pound fell to close the day at $1.53858.
Across the Channel, the Greek crisis seems near to an end. The €45billion aid package offered to Greece, sent helped eliminate some of the uncertainty around Greece, and helped the debt stricken nation in yesterday’s bond sale. The 52 week bills were sold at 4.85% while the 26 week bills were sold at 4.55%, more than double what Greece paid in January for loans of the same maturities. While it appears investors are willing to buy Greek debt, they are doing so only if they are well compensated. Unfortunately for Greece, this may raise concerns about debt servicing, creating doubt about whether the psychological support provided by the EU is enough. Investors are advised to continue to monitor news regarding the aid package. New developments about Greece’s debts or aid plan would have an impact over the euro against its major counterparts.
After sharp moves on both Friday and Monday, the Euro seems to be stabilizing. While the single European currency depreciated 0.36% yesterday to close $1.35441, the EUR has already erased all of yesterday’s losses, advancing to a high of $1.36641 in this morning’s Asian session.
Forex Market Ideas & Analysis by Finexo.com
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revised higher to show an increase of 0.5 percent after the original report registered a 0.3 percent increase.
