USD
USD weakened last week after FOMC meeting minutes showed most committee members anticipated US economy contraction in the 1st and 2nd quarter. USD weakens amid some investors speculates credit losses is coming to an end and G7 meeting turned out to be a disappointment with no attempt by G7 nations to support the falling dollar. Although G7 finance ministers voice concern over weakening dollar, but they decided to let the markets fluctuate accordingly to economy conditions.
IMF warned of a 25% chance a global recession might take place as US and Euro-zone economies falters further. ECB hold its interest rate last week amid slowing Euro-zone economy growth as inflation continue to accelerates even with the euro at record high against the dollar. This week most economists forecast a report from the US Department of commerce will show retail sales weakens further as economy slows with jobless rate at highest since September 2005. I expect the dollar to remain little change or to recovers against the euro this week, monitor this week important US economic releases –US Advance retail sales, US PPI, Empire manufacturing, TIC Flows, CPI, Housing starts and Philadelphia Fed Index-, major corporate news and cross currency important economic releases and central banks member statement/comments.
JPY
JPY recovers against most currencies as US capital market led global capital markets to a downturn last week. Disappointing major corporate earnings such as General Electric and other major institution also play a role in last week bearish capital markets amid IMF lowered its global growth rate and warned of a 25% chance of a global recession which makes things even worse.
BOJ new Governor Masaaki Shirakawa said growth will keep slowing as rising oil and commodity prices weigh on Japan’s economy and the central bank kept its benchmark rate at 0.50% amid slowing economic growth and rising inflation in the region. This week, monitor the capital markets movement (Particularly US), Major corporate announcement/news, cross currency movement and economic releases. (EUR, USD, GBP, AUD and NZD).
EUR
EUR strengthened against the dollar last week after FOMC meeting minutes showed most committee members anticipated a contraction in the 1st and 2nd quarter of the US economy. ECB hold its benchmark rate at 4.0% amid slowing economy and accelerating inflation, some financial institution predicts that ECB would cut its rate within this year as global economy slows. IMF lower its euro-zone growth forecast from 1.6% to 1.4% and warned a 25% chance of global recession.
G7 meeting turned out to be a fruitless as G7 nations finance minister would not be at the moment interfering with falling dollar although they are very concern over weakening dollar as it would hurt global economy growth, particularly Europe and Japan. This week, monitor important US/Euro-zone economic releases –France CPI, Italy CPI, ZEW Surveys, Germany CPI, Italy Trade balance, Euro-zone CPI, Euro-zone Trade balance, Germany Producer price- and also monitor central bank members comments/statements.
Crude oil
Crude oil rose to a record last week due to unexpected large crude oil inventories withdrawal which was due to lower imports amid lower domestic demand. Gasoline inventories also declined as record oil price huts refineries profit margin (crack spread). Weakening dollar and falling stock markets is also the main factor that caused commodities rally last week as investors seeks investment alternative and inflation hedge.
Contracting US economy would hurt fuel demand which we would see crude oil price react accordingly in mid-term, this week storage report would be the main focus at the moment, a build in crude oil inventories would turn things around as selling pressure mounts along with crude oil rally. Monitor this week DOE storage report –main-, USD movement and capital markets movement for indication.
Loh Chang Yuen,
Junior Strategist
All rights reserved: Admiral Markets Ltd
Weekly overview and analysis. -April 7 31 2008 - April 13 2008-
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