German Import Prices Mark Biggest Decline on Record, Raising the Risks for Deflation

Fundamental Headlines

·    Congress Approves Obama’s $3.6 Trillion Budget  – Wall Street Journal

·    Hard Sell Drove Stanford’s Rise and Fall  – Wall Street Journal

·    Barrack Targets Distressed Baking Assets – Financial Times

·    Bernanke Easing Mortgage Rates for Consumer-Driven Rebound – Bloomberg

·    RBS to Cut Jobs as Goodwin Considers Pension Payback – Bloomberg

EURUSD – The final services PMI reading for the Euro-Zone was revised to 40.9 from an initial reading of 40.1, while the composite figure increased to 38.3 from 37.6. At the same time, service-based activity in Germany increased as the PMI rose to 42.3 from a preliminary reading of 41.7, and the data suggests that economic activity in the euro-region is starting to improve as the European Central Bank employs all of its available tools to simulate the ailing economy. Meanwhile, the German import price index for February marked the biggest contraction in over a decade as prices slipped 6.4% from the previous year on the back of falling commodity prices, and the data continues to reinforces a weakening outlook for inflation as the downturn in the global economy intensifies. Moreover, prices fell at an annual rate of 1.2% even after excluding energy prices, and dropped 0.1% from January. As price growth falters, the ECB could be inclined to lower rates further as they maintain a 2% target for inflation, and may trim the interest rate by another 25bp next month as the outlook for growth and inflation remains bleak. Discuss the topic and your trade ideas in the EUR/USD Forum.

GBPUSD – The HBOS home price index crossed the wires worst than expected as the gauge dropped another 1.9% in March, while the annualized reading showed that prices dropped 17.5% from the previous year, and the data continues to reinforce a dour outlook for the U.K. as households face a weakening labor market paired with tightening credit conditions. Meanwhile, service-based activity fell at a slower pace in March as the PMI reading increased to 45.5 from 43.2, and the bigger than expected rise in the index spurred hopes that the market is beginning to stabilize as a result of the extraordinary efforts taken on the by government. Discuss the topic and your trade ideas in the GBP/USD Forum.

USDCHF – Consumer prices in Switzerland unexpectedly fell 0.3% in March, while the annualized reading for inflation plunged 0.4% from the previous year to mark the biggest decline since December 1959, and the data continues to foreshadow a weakening outlook for price growth as the region faces its worst economic downturn in over a quarter century. As the risks for deflation intensify, the Swiss National Bank may take further steps to stem the downside risks for the export-driven economy, and may continue to intervene in the currency market in an effort to mitigate the appreciating in the Swiss franc. For more news and resources, visit the new Swiss franc Currency Room.