The Forex Daily Digest – October 30, 2009
The USD weakened against the EUR after government data showed the U.S. economy returned to growth in the third quarter, reducing the dollar's safe-haven allure and sending investors elsewhere for better returns. The Labor Department reported that the U.S. economy grew at a 3.5 percent annual rate, the fastest pace since the third quarter of 2007, according to preliminary data, and slightly better than forecasts of a 3.3 percent rise.
China and the United States agreed to deal with a series of trade problems and repeated pledges against protectionism, but left the broader questions of the value of Chinese yuan and U.S. debt unsolved at high-level talks this week. Speaking to reporters after the bilateral meetings, officials from both nations tried to keep the focus on areas of agreement, not contention. President Obama will travel to China next month, preceded by a flurry of official American visits as the United States tries to reach accords on currency, the environment and trade with its second-largest trading partner and the largest foreign holder of its government debt.
Russia’s central bank cut its key interest rates to record lows to boost lending, stem speculative inflows and help carry the commodity-reliant economy out of its worst slump since official records began more than a decade ago. Bank Rossii lowered the refinancing rate to 9.5 percent from 10 percent and reduced the repurchase rate charged on central bank loans to 8.5 percent from 9 percent, effective today.
The NZD fell, heading for its first monthly drop since February, after the central bank signaled interest rates will stay at a record low until the second half of 2010, slowing demand for the nation’s assets. The AUD was close to its lowest level since the first part of the month as Asian stocks extended a global fall and prices dropped for commodities that make up more than half the nation’s exports. The Reserve Bank of New Zealand Governor Alan Bollard said he sees no urgency to begin withdrawing monetary policy stimulus after leaving the official cash rate at 2.5 percent.
The Bank of Canada governor, Mark Carney, said he has “options” to slow an increase in the CAD if the currency threatened the bank’s ability to hit its inflation target. Speaking at a Parliamentary committee, Carney said the options include quantitative and credit easing, adding the bank “would do that if necessary, and only to the extent necessary” to return inflation to target. The current commitment to keep the bank’s key interest rate at 0.25 percent through June 2010 unless inflation shifts should work to bring consumer prices back to policy makers’ two percent target.
On the U.S. economic calendar today watch for Personal Income and Spending, PCE Prices, the revised University of Michigan Consumer Sentiment report, and the Employment Cost Index. .
Some of the major companies scheduled to report earnings today include Chevron, Sony, Alcatel-Lucent, NYSE-Euronext, Duke Energy, ITT Corp, Constellation Energy, Sanofi-Aventis, Magellan Health, Simon Property Group, Weyerhaeuser, and Progress Energy.
And finally, Foreign Exchange rates can definitely come into play where corporate earnings are concerned. For instance, Avon Products Inc., the world’s largest door-to-door cosmetics seller, said third-quarter profit declined 30 percent as foreign-currency translations hurt sales. Avon makes more than 75 percent of its revenue outside North America. Foreign-exchange translations hurt revenue growth in the quarter by about 11 percentage points.
And Japan Tobacco Inc., the world’s third-largest publicly traded cigarette maker, raised its full- year profit forecast 8 percent in part to projected currency gains. The cigarette maker predicted exchange rates of 0.73 euro, 0.65 British pound, 32.25 rubles and 93 yen to the dollar. The projected rates for the European currencies are an average of 11.6 percent higher compared with the initial forecast in April, while the yen’s is 2.2 percent higher.
Happy Trading,
James Dicks
China and the United States agreed to deal with a series of trade problems and repeated pledges against protectionism, but left the broader questions of the value of Chinese yuan and U.S. debt unsolved at high-level talks this week. Speaking to reporters after the bilateral meetings, officials from both nations tried to keep the focus on areas of agreement, not contention. President Obama will travel to China next month, preceded by a flurry of official American visits as the United States tries to reach accords on currency, the environment and trade with its second-largest trading partner and the largest foreign holder of its government debt.
Russia’s central bank cut its key interest rates to record lows to boost lending, stem speculative inflows and help carry the commodity-reliant economy out of its worst slump since official records began more than a decade ago. Bank Rossii lowered the refinancing rate to 9.5 percent from 10 percent and reduced the repurchase rate charged on central bank loans to 8.5 percent from 9 percent, effective today.
The NZD fell, heading for its first monthly drop since February, after the central bank signaled interest rates will stay at a record low until the second half of 2010, slowing demand for the nation’s assets. The AUD was close to its lowest level since the first part of the month as Asian stocks extended a global fall and prices dropped for commodities that make up more than half the nation’s exports. The Reserve Bank of New Zealand Governor Alan Bollard said he sees no urgency to begin withdrawing monetary policy stimulus after leaving the official cash rate at 2.5 percent.
The Bank of Canada governor, Mark Carney, said he has “options” to slow an increase in the CAD if the currency threatened the bank’s ability to hit its inflation target. Speaking at a Parliamentary committee, Carney said the options include quantitative and credit easing, adding the bank “would do that if necessary, and only to the extent necessary” to return inflation to target. The current commitment to keep the bank’s key interest rate at 0.25 percent through June 2010 unless inflation shifts should work to bring consumer prices back to policy makers’ two percent target.
On the U.S. economic calendar today watch for Personal Income and Spending, PCE Prices, the revised University of Michigan Consumer Sentiment report, and the Employment Cost Index. .
Some of the major companies scheduled to report earnings today include Chevron, Sony, Alcatel-Lucent, NYSE-Euronext, Duke Energy, ITT Corp, Constellation Energy, Sanofi-Aventis, Magellan Health, Simon Property Group, Weyerhaeuser, and Progress Energy.
And finally, Foreign Exchange rates can definitely come into play where corporate earnings are concerned. For instance, Avon Products Inc., the world’s largest door-to-door cosmetics seller, said third-quarter profit declined 30 percent as foreign-currency translations hurt sales. Avon makes more than 75 percent of its revenue outside North America. Foreign-exchange translations hurt revenue growth in the quarter by about 11 percentage points.
And Japan Tobacco Inc., the world’s third-largest publicly traded cigarette maker, raised its full- year profit forecast 8 percent in part to projected currency gains. The cigarette maker predicted exchange rates of 0.73 euro, 0.65 British pound, 32.25 rubles and 93 yen to the dollar. The projected rates for the European currencies are an average of 11.6 percent higher compared with the initial forecast in April, while the yen’s is 2.2 percent higher.
Happy Trading,
James Dicks
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