The Forex Daily Digest – October 2, 2009
The USD saw some strength against the EUR after European Union officials voiced concern about the EUR’s recent increase. The E.U. Economic and Monetary Affairs Commissioner, Joaquin Almunia, said the finance ministers from the 16 euro nations will discuss the currency's rise in order to develop a common position ahead of the G7 meeting in Istanbul which begins tomorrow. A senior Canadian finance official said G7 finance ministers and central bank heads will try to figure out how to activate the plans endorsed by the G20 leaders last month in Pittsburgh.
The EUR has appreciated 4.35 percent against the USD so far this year, causing problems for euro zone exporters. European Central Bank President Jean-Claude Trichet, who will also be attending the G7 summit, said too much movement in foreign exchange markets is a bad thing. Trichet said that “excessive volatility and disorderly movement in exchange rates has adverse implications for economic and financial stability.”
The USD saw some gains yesterday after the U.S. Initial Jobless Claims Report rose in the latest week, prompting safe-haven bids for the dollar. Initial claims were at 551,000 last week, while market consensus expected 530,000. It was the highest level of jobless claims since the Labor Day holiday. In other U.S. economic news, consumer spending was up in August by the most since 2001, indicating the biggest part of the economy is starting to rebound from its worst slump in almost 30 years. The 1.3 percent increase in purchases was larger than forecast and followed a 0.3 percent gain in the prior month that was bigger than previously estimated. Incomes were up at a 0.2% rate.
The International Monetary Fund reported that the global economy is recovering faster than anticipated -- but that international governments should not be too quick in pulling added spending or adjusting low interest rates which have helped restore growth. The optimistic report is likely to provide cautious relief that – in spite of a continuing increase in unemployment and concerns about credit availability -- the recession has eased and that a 1930s-style depression has apparently been successfully avoided.
Japanese business morale has improved for a second consecutive quarter and big firms admit that raising cash has become easier, allowing the Bank of Japan to join others in phasing out some of its emergency aid. But the central bank's tankan survey also showed companies continued to cut capital spending plans and the overall mood remained glum, raising doubts about whether the recovery can be sustained. The JPY weakened against the USD and the EUR after economic reports from China and South Korea increased demand for higher-yielding assets in emerging economies.
Canada's ruling Conservatives survived a non-confidence motion in Parliament yesterday afternoon over their handling of the current economic crisis. The New Democrats -- usually harsh critics of Prime Minister Stephen Harper -- say they will keep the current government in power at least until Parliament adopts legislation boosting benefits for the unemployed. Polls indicate the Conservatives would win a third successive minority government if an election were held today.
The GBP advanced against the EUR for the third time in four days as the International Monetary Fund raised the country’s growth forecast for next year. The GBP also advanced against the USD after the IMF said gross domestic product will increase 0.9 percent next year, from a July prediction of 0.2 percent, as the housing market begins to come back and exports start to pick up.
Bank of England Governor Mervyn King was quoted in news reports as saying the GBP’s depreciation was “very helpful” in balancing the U.K. economy, sending the British currency to its lowest level in six months against the EUR and below $1.60 for the first time since July.
On the U.S. economic calendar today is the Non-Farm Payrolls report for September. Along with that, expect the results for the Average Workweek, Hourly Earnings and the Unemployment Rate. Then later in the morning Factory Orders for August is scheduled to be released.
The second quarter earnings calendar has finished and the third quarter earnings season is scheduled to begin when Alcoa reports its quarterly earnings numbers after the market closes on Wednesday, October 7th.
Happy Trading,
James Dicks
The EUR has appreciated 4.35 percent against the USD so far this year, causing problems for euro zone exporters. European Central Bank President Jean-Claude Trichet, who will also be attending the G7 summit, said too much movement in foreign exchange markets is a bad thing. Trichet said that “excessive volatility and disorderly movement in exchange rates has adverse implications for economic and financial stability.”
The USD saw some gains yesterday after the U.S. Initial Jobless Claims Report rose in the latest week, prompting safe-haven bids for the dollar. Initial claims were at 551,000 last week, while market consensus expected 530,000. It was the highest level of jobless claims since the Labor Day holiday. In other U.S. economic news, consumer spending was up in August by the most since 2001, indicating the biggest part of the economy is starting to rebound from its worst slump in almost 30 years. The 1.3 percent increase in purchases was larger than forecast and followed a 0.3 percent gain in the prior month that was bigger than previously estimated. Incomes were up at a 0.2% rate.
The International Monetary Fund reported that the global economy is recovering faster than anticipated -- but that international governments should not be too quick in pulling added spending or adjusting low interest rates which have helped restore growth. The optimistic report is likely to provide cautious relief that – in spite of a continuing increase in unemployment and concerns about credit availability -- the recession has eased and that a 1930s-style depression has apparently been successfully avoided.
Japanese business morale has improved for a second consecutive quarter and big firms admit that raising cash has become easier, allowing the Bank of Japan to join others in phasing out some of its emergency aid. But the central bank's tankan survey also showed companies continued to cut capital spending plans and the overall mood remained glum, raising doubts about whether the recovery can be sustained. The JPY weakened against the USD and the EUR after economic reports from China and South Korea increased demand for higher-yielding assets in emerging economies.
Canada's ruling Conservatives survived a non-confidence motion in Parliament yesterday afternoon over their handling of the current economic crisis. The New Democrats -- usually harsh critics of Prime Minister Stephen Harper -- say they will keep the current government in power at least until Parliament adopts legislation boosting benefits for the unemployed. Polls indicate the Conservatives would win a third successive minority government if an election were held today.
The GBP advanced against the EUR for the third time in four days as the International Monetary Fund raised the country’s growth forecast for next year. The GBP also advanced against the USD after the IMF said gross domestic product will increase 0.9 percent next year, from a July prediction of 0.2 percent, as the housing market begins to come back and exports start to pick up.
Bank of England Governor Mervyn King was quoted in news reports as saying the GBP’s depreciation was “very helpful” in balancing the U.K. economy, sending the British currency to its lowest level in six months against the EUR and below $1.60 for the first time since July.
On the U.S. economic calendar today is the Non-Farm Payrolls report for September. Along with that, expect the results for the Average Workweek, Hourly Earnings and the Unemployment Rate. Then later in the morning Factory Orders for August is scheduled to be released.
The second quarter earnings calendar has finished and the third quarter earnings season is scheduled to begin when Alcoa reports its quarterly earnings numbers after the market closes on Wednesday, October 7th.
Happy Trading,
James Dicks
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