USD
USD fell against the euro but strengthened versus the yen last week as US stocks rose on optimism that the recession in the US is receding and G-20 nations' leader pledge $1Trillon in aid to revive global economic growth boosted investors risk appetite, increasing carry trade demand and reducing demand for safe haven. Last week, President Obama's administration rejected GM's recovery plan and gave both GM and Chrysler last chance to fundamentally restructure or risk losing further long term federal bailouts raised concern over auto industry companies. Despite government efforts to bolster the region housing markets, a report showed home prices in 20 US cities fell at the fastest rate on record as record foreclosure forced sellers to sell at discount and demand plummeted amid weaker consumer spending and rising unemployment in the region. Unemployment in US rose to the highest level since 1983 in March as the recession forced companies to cut back on cost and spending to cope with declining revenue, and service industries unexpectedly contracted in March at a faster pace than anticipated, while the average work week among US companies fell to the lowest level since record begin in 1964 in March as most employers avoid losing its experienced workers, and prefer cutting back on employee hours so they are better positioned to boost sales when the economy emerges from the current recession.
Figures showed that recession in Europe are deepening despite the ECB slash its rate to record low and impose stimulus package to bolster spending in the region, while some parts of US economy are showing signs of stabilizing. The dollar will strengthen against the euro this week as recession in Europe deepens and economic figures are showing no signs of slowing, while US stocks may retreat on selling pressure as many analysts expects companies to report smaller profit at 2nd quarter amid weak economy. Monitor this week's US economic releases - US IBD/TIPP Economic optimism, US Consumer credit, US ABC Consumer confidence, US Wholesale inventories, FOMC Meeting minutes, US Trade balance, US Import price index, US Initial jobless claims and US Monthly budget statement -, 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 week as US stocks markets advanced on optimism that the US economy is stabilizing and G-20 nations' leader pledged $1Trillion in aid to revive global economy. Figures showed Japan recession is deepening amid demand for Japanese made goods declined, pushing Japan's unemployment rate a 3-years high as manufacturers increase firing as revenue dropped. G-20 nations' leader urged more oversights and tighter regulation for financial institutions to prevent another meltdown caused by lax oversights and US Treasury Secretary Geithner said he wants to bring hedge funds, private equity firms and derivatives markets under federal supervision. Last week's Tankan survey showed plunging demand has saddled companies with too many employees, signaling that Japan's unemployment rate may jump beyond a 3-year high and threatens consumer spending.
Carry trade demand rose last week as investors' risk appetite grow as economic figures shows that some part of US economy is recovering and equities rose, signaling that the US economy may be stabilizing as investors and consumers confidence improved. The yen may slightly recover this week after last week's losses and declining stocks in Europe may drag equities lower. Monitor this week's Japan economic releases – BOJ Rate decision, Japan Leading, Japan Coincident Index, Japan Current account, Japan Trade balance, Publication of BOJ monthly report, Japan Eco watchers surveys, Japan Machine orders, Japan Machine tool orders, Publication of BOJ meeting minutes and Japan M3 -, 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 US stocks rose on optimism that global economy downturn is stabilizing G-20 nations' leader pledged $1Trillion in aid to revive the global economy encouraged investors to buy equities. ECB consecutive rate cuts led Europe's inflation rate to the lowest on record in March and offer no clear indication that record low interest rate and numerous measures imposed are leading the region's economy to a quick recover. Exports in the Euro-zone remained weak as demand abroad fell on weak consumer spending and companies cut back on investments as revenue dropped. Last week's economic figures showed Europe's jobless rate climbed to the most in almost 3 years and Europe's manufacturing industry contracts in March, adding to evidence the region's recession is worsening. ECB council member decided to slash its interest rate by 0.25% in a meeting last week, lower than economists forecast on concern a rapid rate cuts will deflation in the region which is already under deflationary pressure recently due to previous rate cuts, but ECB President Trichet said that the central bank will announce its decision on new policy tools next month, suggesting that the ECB may expand its fiscal aid to troubling nations and major corporate.
European finance chiefs last week assured that ECB assured that doing what it can to fight the recession despite most council member and nations' leader previously stated that they will let the region's economy to automatically stabilize. The euro will retreat this week as recession in Europe deepens and stocks will fall this week after recent gains, increasing demand for the dollar as safe haven. Monitor this week's Euro-zone economic releases – Euro-zone Sentix investor confidence, Euro-zone PPI, Euro-zone Retail sales, Euro-zone GDP, Euro-zone Household consumption, Germany Trade balance, Germany Current account, Germany Exports, Germany Imports, France Trade balance, Germany Factory orders, Germany CPI, Italy Industrial production, Publication of ECB's monthly report, Germany Industrial production, Germany Wholesale price index, France CPI, France Industrial production and France Manufacturing production -, 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 leaders.
Crude oil
Crude oil advanced last week as US stocks rose optimism that the US economy is stabilizing and G-20 nations leader pledge $1Trillion to revive global economy, spurring speculation that fuel demand will rise. Oil advance was slightly pressured by the early dollar advance versus the euro last week and figures showed recession in Europe deepens despite measures to stem the economy downturn. Energy department storage report showed US daily fuel demand averaged over the past 4 weeks was down 4.4% from a year earlier, raising concerns that OPEC production reduction maybe inadequate to curb oversupply on the market and may prompt OPEC members to consider additional cuts to boost oil price.
Reports showed US jobless rate rose to the highest level is atleast 25 years and US service indusries contracts more than forecast failed to make a major impact on oil prices last Friday as investors remained optimism the the US economy will stabilize by 2nd quarter. This week, oil prices are likely to be on range trading between mid $47 - $54, unless there's clear indication that the US economy downturn are bottoming out, oil prices will remain pressured on skepticism that fuel consumption will increase significantly. 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 economy and storage report.
Loh Chang Yuen,
Junior Strategist
All rights reserved: Admiral Markets Ltd
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