USD
USD posted its biggest advance in 3 months versus the euro last week as stocks decline and figures shows recession in Euro-zone is deepening despite government measures and ECB lowered its rate to a record low. Skepticism on global economy stabilizing remains amid investors speculates that some banks will post more losses and may need to seek more loans from the government as revenue plummet and a report showed fewer Americans sought credit to make purchases amid recession, spurring concerns over consumer spending and retailers revenue may fall as Americans cut back on spending as jobless rise. Last week's dollar advancement was supported by weakening euro on signs that Euro-zone economy is weakening amid reports showed Germany manufacturing orders extended its their worst decline on record in February and France Industrial production fell for a 6th consecutive month at the same month. Demand for the dollar as safe haven remained strong as stocks fell on speculation major corporate revenue dropped amid recession and banks may have additional writedows no bad debt.
ECB council members signaled that the central bank are ready to lower its rate beyond 1% in coming months to bolster the region's economy after measures to bolster Euro-zone's economy proved to be futile as recession deepens. The dollar may be on range trading between 1.2900 – 1.3300 versus the euro this week as some investors remain skeptic on speculation that global economy is stabilizing. Monitor this week's US economic releases – US Advance retail sales, US Retail sales less autos, US PPI, US Business inventories, Fed Chairman Bernanke speaks on financial crisis, US ABC Consumer confidence, US MBA Mortgage application, US CPI, US Empire manufacturing, US TIC Flows, US Industrial production, Publication of Fed's Beige book, US Housing starts, US Initial jobless claims, US Philadelphia Fed, University of Michigan consumer confidence index and Fed Chairman Bernanke Speaks at Fed Conference -, 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 rose against most currencies last week as US stocks decline on speculation the worst of the global recession isn't over yet and banks may report more losses on bad debt. Most analysts said bank shares may decline on weaker revenue and said US stocks rally may not last as government measures to shore up banks may not help as much as expected. The yen are supported by figures that shows recession in Euro-zone and Japan is deepening despite measures and rate cuts to bolster the economy, Europe's economy even contracts more than estimated in the 4th quarter, adding reinforcing speculation that recession in the region is deepening. Amid contracting economy in Japan, government officials said that they will likely spend about $150Billion in its next economic stimulus package and BOJ will start offering $10Billion in subordinated loans to banks next month in an effort to bolster their capital and encourage lending, but both moves, which floods the markets with more yen failed to weaken the currency as investors remain skeptic that the global economy is stabilizing.
The yen slightly pared its gains last Thursday as US stocks rose after Wells Fargo reported a better than estimate earnings in first quarter, and a report showed Japanese machinery orders unexpectedly rose in February, but it didn't have any significant effect on the yen as investors' bets that the rally will not last as other industry may report losses amid rising unemployment rate and weaker consumer spending. The yen should remain strong and supported this week as selling pressure on the market persist despite investors improving appetite and mood. Monitor this week's Japan economic releases – Japan Industrial production, Japan Machine tool orders, Japan Tertiary industry index, Publication of Cabinet Office monthly economic report, Japan Consumer confidence, Japan Households consumer confidence, Tokyo Department store sales, Japan Nationwide Department store sales -, 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 had its biggest weekly decline in 3 months versus the dollar last week as US stocks decline and figures showed recession in Europe is deepening, while US economy may be stabilizing as corporate profit improved and home prices rebounds. Figures showed Europe's recession deepened more than estimated in the 4th quarter as companies scaled back production and retail sales dropped by a record in February compared to a year ago, adding to evidence that deepening recession and rising unemployment in Euro-zone is forcing consumers to cut back on spending. Demand for manufactured goods from Europe plummet as recession in US and Japan eroded demand, while demand for goods weakened, industrial producer scaled back production to save cost. ECB council member Ewald indicates cutting the benchmark rate below 1% is still an option and the bank buying corporate debt is a efficient measure, spurred speculation that the ECB will lower its benchmark rate below 1% at next month's meeting and encouraged investors to hold dollar denominate assets and securities to protect their value.
Besides Germany manufacturers that saw orders plummet, France industrial production also fell in February for the 6th consecutive month and the Bank of Italy said the country's economy contracted significantly in the 1st quarter, raising concerns that the region's economy may contract further despite measures and rate cuts. The euro may decline further versus the dollar this week as investors shifts their holdings from euro denominated to dollar backed securities and assets on optimism that the US economy will stabilize while recession in Europe's will deepen. Monitor this week's - France Current account, Germany Wholesale price index, Italy CPI, Euro-zone CPI, Euro-zone Core CPI, Euro-zone Industrial production, Italy Industrial sales, Italy Industrial orders, Euro-zone Trade balance and Italy Current account -, 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 EU nations/officials.
Crude oil
Crude oil fell last week despite optimism grows that the US economy is stabilizing as recession in Europe and Japan is deepening and as he dollar strengthened, reducing appeal of commodities as inflation hedge. Concerns over weak fuel demand remains as consumer spending remains weak amid rising unemployment and manufacturers slashed production to save cost. Despite Japan's announcement for an $154Billion stimulus package and Germany's government pledged $109Billion to stimulate growth which spurred speculation that it will boost fuel consumption in both region, oil price remain pressured on bets that the stimulus package will fail bolster both countries economy on signs recession in EU and Japan is deepening. IEA slash its demand forecast for oil and expects global oil demand to decline by 2.4Million barrels a day this year as global recession reduces consumption to the lowest level in 5 years.
Crude oil should remain week on range trading between $47-$53 this week as the dollar continues to strengthen and Energy Department storage report will show inventories increased as fuel consumption weakens. 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
All rights reserved: Admiral Markets Ltd
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