USD
USD slightly weakens against the euro last week, thanks to late week recovery on speculation that the Fed will slowdown on cutting rates as inflation accelerates. USD weakened against the euro amid US retail sales unexpectedly rose last week as Euro-zone inflation accelerates to a 16 years high, reducing the chances that the ECB will follow the Fed in cutting interest rates. A government report last week showed Housing starts in the US felled to a 17 years low and manufacturing in Fed 3rd district contracted more than expected causing the dollar to weaken further.
Last week late dollar recovery was due to major corporate posting better than expected earnings, easing concern over major financial meltdown and raising speculation that the Fed would slowdown on cutting its interest rate as companies in the US is showing signs of recovery amid rising inflation. This week, we should see USD recovers further against the euro amid most economists predict New home sales would continue its downtrend with no signs of recovering in the near term before a report this week. Monitor news related to major corporate, central bank members statement, Euro-zone and US economic releases –US Existing home sales, US House price index, US durable goods orders, US Initial jobless claims, US New Home sales and University of Michigan consumer confidence index-.
JPY
JPY weakened the most since November last week as US capital market rally on better than expected earnings reported by major financial firms, easing investors concern on a major financial crisis. Last week BOJ meeting minutes showed the central bank is favoring a rate raise in future even as economy slows. Consumer confidence in the region rebounded from a 5 years low amid rising oil and food prices.
Last week US stock markets rally was because Intel Corp sales forecast and Coca-Cola Co earnings topped analyst’s estimates, while Merrill Lynch reported smaller than expected credit losses. This week we should see JPY continue its downtrend against most currencies as US capital markets rally on returning investors buying interest in equities as most speculates credit losses have almost come to an end. Monitor cross currency movement, particularly the dollar, euro and pound, US and Euro capital markets, news related to major corporate and Japan’s economic releases –Japan Tertiary index, Leading economic indicators, Japan Merchandise Trade balance, Tokyo CPI and National CPI-
EUR
EUR slightly strengthens against the dollar last week after a report showed Euro-zone inflation accelerated to a 16 years high, reducing that chances that the ECB would follow Fed in cutting rates as economy slows. Euro-zone inflation rose to 16 years high due to rising oil and foods cost. Although survey showed investor and analyst confidence declined in April, most ECB policy members insisted they would not cut its benchmark rate even as economy slows as inflation is their main concern.
This week, we might see EUR retreats against the dollar on buying interest and as investors speculates credit losses is almost near an end in the US after last week corporate earning reports showed signs of recovery. We might see a weak momentum on the dollar side while any major disruption would again push the dollar towards another record against EUR. Monitor central banks member’s statement/comments, news related to major corporate, US and Euro-zone economic releases –Italy Trade balance, France Consumer spending, Euro-zone PMI, Italy Retail sales, Euro-zone Current account, Germany IFOs and Germany Import price index-.
Crude oil
Crude oil rose to an all time high last week as crude oil inventories unexpectedly declined last week. Crude oil inventories felled last week as imports level dropped on lower demand from refiners because lower profit margin (Crack spread) hurts earnings amid gasoline at record price. Refineries operated at 81.4% of capacity, the lowest since October 2005 and imports were averaged at 8.9Million barrels.
Crude oil rallied further last week after corporate reported better than expected earnings signaled a strengthening economy that may boost demand. This week, we might see slide in crude oil prices as imports recovers and probably a build in crude oil inventories as refineries order less crude oil on lower profit margin. Furthermore we should see the dollar recovers against the dollar, reducing investors need for commodities investment as an inflation hedge. Monitor the dollar, corporate earnings report, geopolitical risk, economic releases and storage report.
Loh Chang Yuen,
Junior Strategist
All rights reserved: Admiral Markets Ltd
Weekly overview and analysis. -April 14 2008 - April 20 2008 -
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