Weekly overview and analysis. -April 28 2008 - May 4 2008 -

USD

USD strengthened against most currencies last week after Fed signals that it might pauses its rate cut on signs inflation is accelerating and economy is showing signs of recovering. The dollar is able to extend its rally, particularly against the euro as economic releases showed appreciating euro is hurting the region economic growth. Last week, euro was weakened by falling consumer confidence report amid Germany retail sales unexpectedly felled, on the other side, US economic releases shows positive recovery in jobs and manufacturing sector, suggesting US recession might be milder than expected.

This week we should see US slightly strengthens against the euro, but might not be at last week pace, as pressure mounts after last week’s rally. Monitor this week’s important US and Euro-zone economic releases, -ABC Consumer confidence, MBA Mortgage applications,  Consumer credit, Initial jobless claims and US Trade balance-. Also monitor speeches by Fed members throughout the week, news related to major corporate, cross currency important economic releases and other central bank member’s statement/comments.


JPY

JPY weakens the dollar last week as the dollar strengthens against the euro and US stocks market rallies on corporate reported better than expected earnings. The BOJ last week reduced its economic growth forecast to 1.5% from 2.1% and predicted inflation would accelerate. Most BOJ member’s supports a rate hold amid slower economic growth on lower exports as US imported fewer goods from Japan on rising fuel cost and as jobless mounts. Inflation accelerated in Japan on rising food and fuel cost, preventing the central bank to cut its benchmark rate to bolster economic growth.

This week, monitor cross currency movement, particularly USD, GBP, AUD, EUR and NZD, central banks bank members statements/comments, news related to major corporate and cross currency important economic releases. Japan’s important economic releases this week –Japan’s Leading economic index 20.0% and Coincident index (33.3%).-


EUR

EUR felled to a 5 weeks high against the dollar last week as Euro-zone economic releases showed consumer confidence felled in the region and Germany retail sales unexpectedly felled amid appreciating euro and lower businesses confidence among executive and investors. The dollar extended its rally against the euro after economic releases showed manufacturing in US contracted less than expected and unemployment rate unexpectedly decreased.

This week, we might see the euro slightly weakens against the dollar amid worsening Euro-zone economic growth as short-covering might slightly supports the euro after last week’s decline. Economists predicted ECB would have its benchmark rate on hold amid signs of slowing inflation and weaker economic growth in the region. Monitor this week’s Important Euro-zone and US economic releases – Sentix Investor confidence, Germany PMI, Euro-zone PPI, France Trade balance, Euro-zone retail sales, Germany Factory orders, Germany Trade balance, ECB Rate decision and France Industrial production -, central bank member’s comments/statements and news related to major European corporate.


Crude oil

Crude oil felled early last week on strengthening dollar and as crude oil inventories rose more than expected but rebounds by last Friday after Turkish warplane pounded PKK rebels in northern Iraq, raising fears that it may disrupt supplies in the region. The dollar recovery and larger than expected crude oil inventories build failed to bring oil price down as investors speculates that Turkish troops action would disrupt supplies in the region and better than expected jobs markets raise speculation fuel demand might sustain as employments recovers.

This week, we should see some sell-off in crude oil amid investor’s exit position as Turkey have not signal any major cross-border action yet (not likely) and the dollar recovery reduce the appeal for commodities as an inflation hedge. Monitor this week storage report, US economic releases, US indexes performance and the dollar movement for indication.


Loh Chang Yuen,

Junior Strategist

All rights reserved: Admiral Markets Ltd

Average: Select ratingPoorOkayGoodGreatAwesome

No votes yet