-USD-:
1.USD weakens further last Monday as investors speculate that Fed will keep cutting interest rates to avoid a possible recession.
•USD fell to a 7 week low against EUR on speculation US interest rates will drop below those of the 15 nations that share the single European currency for the first time in three years, investors sold USD ahead of next day PPI and advance retail sales report which most economist said will not be favorable for USD and US economy.
2.USD decline further against most currencies last Tuesday on weaker than expected retail sales data.
•USD traded at the lowest level since 2005 against JPY last Tuesday after US retail sales data bolstered speculation the economy is headed for recession, raising the odds that Fed will cut interest rate by 0.75% to avoid a recession when Fed announces rate at Jan 30.
3.USD strengthens the most in a month against EUR last Wednesday on US CPI index matched investors estimates.
•CPI index figure matched economist forecast, giving investors a slight relief after experiencing recent mostly weaker than expected economic releases figures, investors also bet US capital markets and USD to strengthen on speculation that next day Bernanke’s testimony.
4.USD retreats from previous day gain as Housing index shows weaker than expected housing markets, dragged further on Philadelphia fed index declined to -20.9 while Bernanke's acknowledgment that the economy is weak.
•Housing index shows housing markets continue to falls deeper than expected and Philadelphia Fed index reached the lowest reading since October 2001, figure posted was far worst than what economist had forecasted earlier. Bernanke's acknowledgments that the economy is weak enough to need stimulus raise investor’s speculation that the Fed will lower interest rates by at least 0.50% this month when members meets on Jan 30 to decide on rates.
-JPY-:
1.JPY strengthens against most currency last Monday amid European and US capital markets rose
•JPY strengthens against most currencies amid most European rose as investors pared carry trades on weak economy outlook, but retrace from earlier gains on US capital market surge.
2.JPY continue its rally against most currency, particularly EUR and USD as global capital markets fell.
•JPY strengthens last Tuesday as US capital markets slump after Citibank Group posted record quarterly loss of $9.83B, heightening investors concern on financial companies losses from home loan defaults will mount, assisting recession.
3.JPY weakened against most currencies last Wednesday as JP Morgan posted smaller than expected losses on credit writedowns and economic releases shows higher than expected consumer confidence (University of Michigan Consumer confidence index), lifting capital markets.
•JPY weakened against most currencies on capital markets surge as JP Morgan posted smaller than expected loss in its financial reports and University of Michigan consumer confidence index shows higher than expected figures, easing investors concern over US going into recession.
4.JPY strengthens against most currencies last Thursday as capital markets slide on US economic releases posted worse than expected figures, prompting sell offs in the money markets.
•USD approached a 2 ½ years low against JPY after economic releases shows weaker than expected housing markets and Philadelphia Fed index slides, touching the lowest level since October 2001, triggering panic selling as the figure was far worst than economist has predicted, but was supported by news releases that shows President Bush are likely to propose a stimulus plan that he believes will help revive US economy.
-EUR-:
1.EUR continues to strengthen against USD and reached a 7 weeks high against the USD last Monday.
•EUR strengthens against USD amid slowing economy in the euro zone as investors speculate that ECB will raise rate to curb inflation and US Fed will keep cutting rates to avoid a possible recession.
2.EUR gain on early trading session last Tuesday after euro zone economic releases, but retraces from gain on early US trading session.
•USD weakened against EUR on early US trading session amid weaker than expected retail sales report and investors selling pressure on speculation US interest rate will fall below those of the 15 nations that share the euro for the first time in three years.
3.EUR retreat from gain against USD, touching 2 weeks low on investors selling pressure after ECB officials said economic growth is slowing
•ECB council member Yves Mersch comments last Wednesday hints a rate cut is now possible on slowing economy, giving most investors a very good reason to sell previously overbought EUR and euro-zone economic releases is within forecast range, posted nothing significant.
4.EUR continue its rally against USD on weaker than expected US economic releases and short-covering.
•EUR rose against USD after US housing and Philadelphia Fed indexes shows housing market is weakening faster than expected and economist forecast totally missed Philadelphia Fed index actual, touching the lowest level since October 2001.
-Crude oil-:
•Crude oil snaps its 3 days losing streak on last Monday trading session, but remains steady throughout US trading session as USD weakens further, triggering investors buying interest in commodities to hedge against inflation and weather agencies forecasted below normal temperature from Jan 19 to Jan 23 increasing energy product demand for furnace use.
•Crude oil continues it slides on last Tuesday after being snapped previous day (Jan 14) as retail sales data shows consumer spending slowed and investors speculated next day US storage report would post first build in 9 weeks on high refineries operating capacity and lower consumption as consumer curbed spending.
•Crude oil slides, touching below 90USD per barrel as storage report posted larger than expected crude inventories increase, the first build in 9 weeks, furthermore investors starts their selling after looking at the inventories build amid the operating capacity, which dropped 4.2% from the week before, the report showed, that was the biggest one week drop since September 2005 when Hurricane Rita shut refineries in Texas and Louisiana.
•Crude oil decline further as investors speculating US are heading into recession, based on economic releases, economist forecast and falling capital markets. Most OPEC members said that oil markets remain adequately supplied causing investors to keep guessing how OPEC members would react to crude oil prices when meeting take place on Feb 1.
USD
USD overall strengthened last week mostly on cross currency weakness, even with housing data and Philadelphia fed index fail to drag USD as cross currency such as EUR fell against the dollar on weaker economic outlook and some selling pressure by investors because many considered EUR rally against USD previously was overdone.
We should see USD to remains in range, but it might weakens by late this week ahead of rate decision, continue monitor for any comments by economist, Fed members or updates on the stimulus plan proposed by President Bush administration and cross currency movement.
JPY
JPY rallied well against EUR and USD last week on capital markets slump and cross currency weakness, this week BOJ rate announcement we should see BOJ members agree on a rate hold to avoid hurting its already weakened economy.
JPY like always will track capital markets movement and cross currency strength US, Japan economic releases itself are unable to shift JPY tracking the capital markets, capital markets should recover this week if there is no major interruption such as major corporate financial statement posted far worst than most analyst expected losses related to credit writedowns.
EUR
EUR weakened against USD last week as most investors considered previous rally was overdone and weaker outlook on euro-zone economies also helped dragged the EUR, causing it to slide against must currencies.
Rate cut speculation also fuel the slide as ECB council members comments shows they are very concern over weak economic growth in the euro-zone caused by slowing US economy. Cross currencies should be the main mover for EUR prices this week, particularly USD and GBP. Continue monitor for any comments/statements by ECB council members, large corporate or its top executive comments and economist outlooks regarding euro-zone economies.
Crude oil
Crude oil slide below 90USD last week on storage report posted first build in 9 weeks amid significant drop in refineries operating capacity. Crude oil import increased a week before last and consumption in US slowed on weaker economic growth.
With price traded around low 90USD, it gives investors without a clear indication whether OPEC will increase its production to pressure crude oil prices or they sees present prices as “fair” prices. I personally think they will leave production unchanged, because on slowing of major economies such as US, UK, Euro-zone and Japan where consumption is getting lower, they wont take the risk by oversupplying the markets.
(Without any major interruption) Crude oil are likely to be in range trading in between 89-92USD before Wednesday storage reports, as always monitor for any geopolitical risk, weather disruption, economy outlooks and major economic releases.
Loh Chang Yuen,
Junior Strategist
All rights reserved: Admiral Markets Ltd
Weekly overview and analysis. -Jan14 2008 - Jan20 2008 -
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