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- Nov, 20 US Dollar, Japanese Yen Surge on Risk Aversion as Dell Earnings Disappoint
- Nov, 19 US Dollar Advances as Nikkei Leads Stocks Lower in Asian Trading
- Nov, 18 Currency Markets May Look Past BOE Minutes, Focus on US Inflation and Housing Data
- Nov, 17 Greenback Finding Some Support into European Trade
- Nov, 13 Euro Vulnerable If Third-Quarter GDP Continues to Show Weak Private Sector
- Nov, 12 Australian Dollar Hits Fresh Yearly High as Jobs Data Boosts Rates Outlook
- Nov, 11 British Pound in Focus as BOE Reveals Inflation Report, Jobless Rate Hits 12-Year High
- Nov, 10 Pound Tumbles on UK Credit Outlook, Euro Exposed with ZEW to fall for Second Month
- Nov, 09 New Zealand Dollar Soars on Exports Outlook, USD Sinks Amid Bets on Dovish Fed
- Nov, 06 Currency Markets to Look Past European Economic Data, Focus on US Jobs Report
- Nov, 05 British Pound in Focus with BOE Set to Expand Stimulus, Likely Inaction from ECB
- Nov, 04 Euro in Focus as Producer Prices Fall For Ninth Month, Threatening Continued Deflation
- Nov, 03 Australian Dollar Falls Despite Interest Rate Hike as RBA Hints Shift to Neutral
- Nov, 02 US Dollar May Correct Lower but Risky Assets are on Shaky Ground
- Oct, 30 Japanese Yen Gains as BOJ Ends Corporate Bond Scheme, Jobless Rate Drops
- Oct, 28 Euro May Extend Losses as German Inflation Shrinks, Paring Bets on ECB Rate Hikes
- Oct, 27 US Dollar Consolidates Gains, Australian Business Confidence Hits 15-Year High
- Oct, 26 US Dollar Falls as Asian Stocks Advance on Earnings, South Korea GDP
- Oct, 23 Euro Gains in Focus Ahead of IFO, PMI Data; UK GDP May Disappoint in Third Quarter
- Oct, 22 US Dollar Rises as Stocks Sink in Asia on Wells Fargo Downgrade, China GDP
The US Dollar may continue to advance in European trading hours as Germany’s unemployment rate reverses higher after an unexpected decline in August while lending to UK consumers registers the first three-month decline in at least 16 years, weighing on confidence and boosting demand for the safety-linked currency.
Key Overnight Developments
• New Zealand: RBNZ Disappoints, Trade Deficit Shrinks on Imports
• Australian New Home Sales See First Drop Since May, Says HIA
• Euro, British Pound Correct Higher Against US Dollar in Asian Trading
Critical Levels
The Euro corrected a bit higher in overnight trading, adding as much as 0.2% against the US Dollar. The British Pound followed suit, briefly testing above 1.64 against the greenback.
Asia Session Highlights
The Reserve Bank of New Zealand kept interest rates unchanged at a record-low 2.5%. Although the outcome was widely expected, traders were clearly betting that policymakers will accelerate the timetable to begin raising the benchmark lending rate and sent the New Zealand Dollar tumbling when this proved not to be the case. Indeed, RBNZ Governor Alan Bollard explicitly said that “in contrast to current market pricing, we see no urgency to begin withdrawing monetary policy stimulus, and we expect to keep [interest rates] at the current level until the second half of 2010,” reiterating the status quo on when tightening would begin. For our part, we noted in our weekly New Zealand Dollar forecast that policymakers will be wary of acting on rates or even projecting a hawkish bias to protect the still very fragile export sector which accounts for 30% of the economy’s total output and has suffered from a stronger currency.
Separately, the Trade Balance deficit narrowed more than economists expected to –NZ$1.5 billion in the year to September, the smallest in over six years, from –NZ2.36 billion in the previous month. Forecasters were calling for a –NZ1.8 billion result. The outcome is far from encouraging however considering it came as the annual drop in imports (-26.6%) outpaced the decline in exports (-10.9%), pointing to a battered domestic consumer rather than robust overseas demand.
In Australia, New Home Sales fell for the first time in since May according to the Housing Industry Association, down -4.5% in September from the previous month. Meanwhile, the pace of contraction in Japanese Industrial Production unexpectedly slowed to -18.9% in the year to September.
Euro Session: What to Expect
A dismal set of economic data on tap in European hours looks to extend the reversal in risky assets that have driven stocks sharply lower around the globe in recent days. Germany’s Unemployment Rate is expected to rise to 8.3% in October, reversing the previous month’s unexpected decline. While the labor market in the Euro Zone’s largest economy has seemingly fared relatively well with a jobless rate steadily below that of the currency bloc average by over a full percentage point, the picture is far from rosy: Germany’s comparative resilience comes courtesy of a government subsidy to firms to keep employees but have them working shorter hours, a scheme that is likely to be unwound along with other stimulus as the public deficit soars to levels unseen in at least two decades (expected to average close to 5% of GDP this year and in 2010). This may translate into a sudden surge in the jobless rate down the line. Indeed, a survey of economists polled by Bloomberg forecasts the jobless rate will average 9.6% next year.
UK lending data looks far from encouraging as well: Net Consumer Credit is set to shrink for the third consecutive month in September, the longest losing streak in at least 16 years, with lending using property as collateral failing to gain traction above record lows yet again despite an apparent rebound in home values over recent months.
Euro Zone Consumer Confidence is expected to push higher for the seventh consecutive month in October, but the metric seems hardly indicative of underlying spending conditions: the metric is 87.6% correlated to a Dow Jones regional benchmark index of Euro Zone stock performance, but it bottomed out a month after equities. This suggests that the stock ticker is leading consumer sentiment rather than the other way around, which makes the improvement in sentiment vulnerable to any reversal in capital markets’ performance.
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