Market Review - 28/07/2010 22:52 GMT

Market Review - 28/07/2010 22:52 GMT

Dollar drops versus yen on weaker-than-expected U.S. durable goods orders

Dollar retreated to 87.63 versus the Japanese yen in Asia on Wednesday due to profit-taking after Tuesday's rally from 86.83 to 87.98 but renewed risk appetite on the back of rising Asian stock markets lifted price again and the pair rose briefly to an intra-day high of 88.12 in European morning before selling interest there from Japanese exporters capped its upside, price then dropped to 87.43 in NY morning after the release of weaker-than-expected U.S. durable goods orders, which added worries over U.S. economic outlook and later to as low as 87.25 in late NY trading session as U.S. Fed's Beige book stated that U.S. economic activity continued to increase but not robustly and some districts reported slowing economy.

U.S. new orders for durable goods fell for a straight month in June, recording their largest decline since August 2009. Durable goods orders dropped by 1.0%, much worse than the estimate of 1.0% increase.

In other news, BOJ's policy board member Hidetoshi Kamezaki expressed a cautious view and said Japan is not yet in a strong recovery led by domestic demand. He added he will not decide policy with current forex level in mind and yen rise will push down exports for short term.

The single currency rebounded from 1.2967 in Asian morning after Tuesday's sharp fall from a 10-week high of 1.3047 to 1.2952 and although euro ratcheted higher to an intra-day high of 1.3043 in European morning, it traded with volatility in U.S. session, having rebounded from 1.2974 to 1.3029 before dropping again to as low as 1.2969 in NY afternoon after the release of Fed's Beige book before staging a recovery.

Although the British pound rose from 1.5563 in Asia after Tuesday's rally from 1.5441 to 1.5600 and climbed to 1.5627 in European morning, sterling then fell briefly and sharply to an intra-day low of 1.5545 on dovish comments by BoE Governor Mervyn King, however, renewed buying interest there (especially versus the euro) limited the pair's downside somewhat and cable rose to a five-month high of 1.5638 in NY morning before easing on long liquidation, traded around 1.5580/90 in late NY session.

BoE Governor Mervyn King said in his testimony that Q2 GDP growth was encouraging but must be careful not to read too much into one number and he is not certain that U.K. recovery will be sustained. He added the central bank was focusing on the appropriate degree of stimulus, not applying brake on it.

The Australian dollar tumbled against US dollar from 0.9025 to 0.8908 after the release of Australian Q2 CPI, which came in at 0.6% q/q and 3.1% y/y, lower than the expectations of 1.0% and 3.4% respectively and raised speculation that RBA would keep its interest rate unchanged.

On Thursday, the Reserve Bank of New Zealand lifted the official cash rate by 25 basis points to 3.0%, in line with market expectations but the official statements came with a distinctly dovish tone, making the size and the timing of future rate hikes uncertain. Nzd/usd fell sharply to as low as 0.7202 after RBNZ's rate decision and statements.

Economic data to be released on Thursday include: New Zealand Trade balance (nzd), Imports, Exports, Japan Retail sales, U.K. Nationwide hse price, Germany Unemployment change, Unemployment rate, EU Economic sentiment , Consumer Confidence , Business climate, U.S. Jobless claims and Canada PPI.

Jobless rate to stay high: former Fed No. 2

By Lauren Keiper
CAMBRIDGE, Massachusetts (Reuters) - The United States will suffer high unemployment for some time as it slowly recovers from the deep recession that ended in 2009, a former second in command at the Federal Reserve said on Wednesday.
"I see a very slow, uneven recovery. It will not be fast enough to put a dent in the painfully high unemployment rate for some time," Roger Ferguson, the Federal Reserve's vice chairman from 1999 to 2006, told Reuters after a speech in Cambridge, Massachusetts.
Ferguson's prepared remarks at a National Bureau of Economic Research event focused on the fragile state of Americans' retirement savings and the concerns it poses for policymakers.
"For too many people, financial security that lasts a lifetime is beyond their reach," said Ferguson, now chief executive at the financial services company TIAA-CREF.
U.S. consumers' worry about long-term financial stability has been magnified over the last two years by ongoing market turmoil, Ferguson said.
Meanwhile, the replacement for many workers of company-provided pensions with savings schemes like 401(k) plans "has removed an element of security from most Americans' retirement equation," he added.
Employers, by contrast, "have benefited substantially over the past three decades by jettisoning defined benefit pensions."
Ferguson also noted that about 50 percent of U.S. workers do not have access to an employer-sponsored retirement plan, and of those, only a fraction have an individual account such as an IRA.
Besides leading the largest U.S. private retirement system, Ferguson serves on President Barack Obama's Economic Recovery Advisory Board, a panel assembled to advise the White House on potential responses to current economic conditions.
Ferguson noted that the United States is at a "pivotal moment" in the debate about retirement security.
Social Security, the government safety net that has provided an income floor for retirees since the 1930s, will soon pay out annually more than it collects.
"It is unclear when policymakers will develop an appetite for making difficult choices to return the system to more stable footing," Ferguson said.
Inadequate saving by many U.S. workers has long been a topic of concern in the financial and policymaking communities. But with some 76 million Baby Boomers exiting the job market over the next several years and starting to draw down their savings, financial shortcomings may be unavoidable.
Ferguson said saving between 10 and 15 percent of gross annual income is the first step to having a standard of living in retirement near that of one's working years.
A lack of preparation to pay what are often "staggering" medical expenses during retirement is one of the fastest ways to eat through savings, he added.
Ferguson said that guaranteed income in the form of annuities, which pay out a defined sum on a regular schedule, is a way for many to increase their prospects of long-term retirement security.
TIAA-CREF, which specializes in asset management for individuals in the academic, research and medical fields, has $410 billion in assets under management and oversees more than 27,000 retirement plans with 3.7 million plan participants.
(Reporting by Lauren Keiper, editing by Ros Krasny, Dan Grebler and Andrew Hay)

Thursday Look Ahead: Jobless Claims in Focus as Data Paints a Weaker Picture of Economy

Each economic report recently is like another brush stroke in the portrait of a slowing economy.

Weekly jobless claims numbers will be big event for Thursday's markets.

Weekly jobless claims will again be a big event for Thursday's markets, and economists think the number will not really show any improvement. Wednesday's durable goods and Fed beige book report on the economy both disappointed the market. The beige book commentary, however, was not unexpected since the Fed downgraded its economic forecast.

"The tan book painted a black picture," said Art Cashin, director of floor operations at UBS. "If you put the minute-by-minute chart up, you could see the sell off accelerate at 2 p.m. The economic activity was flat in Cleveland and Kansas, and in Chicago and Atlanta, things actually slowed. It clearly underscored that the economy remains weak and also underscores what Bernanke said."

Yet, while the stock market sold off Wednesday, its decline was shallow as investors worked through the dual story of good earnings news and the idea that the economy has hit a soft patch. Many economists see slower growth in the second half, but most do not expect a double dip.

The Dow Wednesday was down 39 at 10,497, while the S&P 500 was down 7 at 1106. So far in July, the Dow is up 7.4 percent and the S&P is up 7.3 percent, the best monthly performance in a year.

Over the past 60 years, the S&P has been higher 53 percent of the time in July, for an average gain of 4 percent. In years the S&P has had a July gain, it has followed up with an August gain 56 percent of the time.

In the bond market Wednesday, the 10-year gained but its yield held just above 3 percent, a positive sign to stock traders who saw a sub-3 percent yield as a warning sign on the economy. The 2-year Wednesday also saw buying, which lowered its yield to 0.625 percent. The dollar was slightly weaker against the euro, at $1.2986.

Treasury prices also rose after the auction of $37 billion in 5-year notes was well bid, with a yield of 1.796 percent. The 5-year was yielding 1.71 percent, at the end of the day. There are $29 billion in 7-year notes at auction at 1 p.m. Thursday.

What to Watch

Thursday's early morning earnings news includes Exxon Mobil [XOM  60.91    0.10  (+0.16%)   ], Royal Dutch Shell

Royal Dutch Shell Plc ADR 1 : 2 RDS'A 55.87  -0.94  -1.65%  NYSE

Quote  |  Chart  |  News  |  Profile

[RDS'A  55.87    -0.94  (-1.65%)   ], Sanofi-Aventis [SNY  29.47    -0.04  (-0.14%)   ], Siemens, Apache, Avon Products, Barrick Gold, Colgate-Palmolive, Dr. Pepper Snapple, Moody's, CME Group, Interpublic, Kellogg, Potash, Celanese, Williams Cos, Waste Management, Southwest Air [LUV  12.01    0.01  (+0.08%)   ], Noble Energy, Goodrich and Northrop Grumman [NOC  58.39    0.25  (+0.43%)   ]. ASA, Taiwan Semiconductor, and Sony [SNE  29.56    -0.16  (-0.54%)   ] also report overnight New York time.

After the bell Thursday, Amgen [AMGN  53.76    -0.75  (-1.38%)   ], Expedia, MetLife, McAfee, Genworth and Maxim Integrated report.

CNBC.com Biotechnology company Amgen reports after the bell Thursday.

The stream of earnings news continues to be strong, now that 49 percent of the S&P 500 companies have reported. Earnings have risen an average 42 percent, and 77 percent of the companies have beaten earnings estimates. Sixty-four percent have beaten revenue estimates.

"Jobless claims are a real flip of the coin. There are some people who think they could flip up again, and that would hurt the market," said Cashin.

J.P. Morgan economist Michael Feroli said he expects claims to be about the same as last week's 464,000, which were slightly elevated from the week earlier.

"You're still in that goofy period of the year where the seasonals are very strong, and on top of that you have some changed patterns of motor vehicle (plant) shutdowns and so forth, so it's going to be problematic. I think it will be unchanged but more likely up than down, just because the seasonal is very aggressive, and I would guess it's not getting realized. It's kind of a technical story," he said.

Feroli said he will also be watching Kansas City Fed's Manufacturing survey, due at 11 a.m. Increasingly, economists are looking at the regional surveys for clues on the economy, as the once better-than-expected string of data turned to disappointments.

Durable goods orders for June showed a decline of 1 percent, worse than expected. "I thought durables was not as bad as the headline, but not great. It's like the core capital orders and shipments were both up, and that's good, but they weren't up much, particularly given that in June that should be up more. Also the fact that inventories were strong is not encouraging, and you have to pay back for it in the third quarter" he said.

The stronger inventories would push up second quarter GDP slightly, by about 0.2 to 0.3 percent, he said. Feroli expects to raise his number to about 2.8 percent for the second quarter, which is released Friday.

forex news

EUR/USD
In this example euro is the base currency and thus the "basis" for the buy/sell.

If you believe that the US economy will continue to weaken and this will hurt the US dollar, you would execute a BUY EUR/USD order. By doing so you have bought euros in the expectation that they will appreciate versus the US dollar. If you believe that the US economy is strong and the euro will weaken against the US dollar you would execute a SELL EUR/USD order. By doing so you have sold euros in the expectation that they will depreciate versus the US dollar.

USD/JPY
In this example the US dollar is the base currency and thus the "basis" for the buy/sell.

If you think that the Japanese government is going to weaken the yen in order to help its export industry, you would execute a BUY USD/JPY order. By doing so you have bought U.S dollars in the expectation that they will appreciate versus the Japanese yen. If you believe that Japanese investors are pulling money out of U.S. financial markets and repatriating funds back to Japan, and this will hurt the US dollar, you would execute a SELL USD/JPY order. By doing so you have sold U.S dollars in the expectation that they will depreciate against the Japanese yen.

GBP/USD
In this example the GBP is the base currency and thus the "basis" for the buy/sell.

If you think the British economy will continue to be the leading economy among the G7 nations in terms of growth, thus buying the pound, you would execute a BUY GBP/USD order. By doing so you have bought pounds in the expectation that they will appreciate versus the US dollar. If you believe the British are going to adopt the euro and this will weaken pounds as they devalue their currency in anticipation of the merge, you would execute a SELL GBP/USD order. By doing so you have sold pounds in the expectation that they will depreciate against the US dollar.

USD/CHF
In this example the USD is the base currency and thus the "basis" for the buy/sell.

If you think the US dollar is undervalued, you would execute a BUY USD/CHF order. By doing so you have bought US dollars in the expectation that they will appreciate versus the Swiss Franc. If you believe that due to instability in the Middle East and in U.S. financial markets the dollar will continue to weaken, you would execute a SELL USD/CHF order. By doing so you have sold US dollars in the expectation that they will depreciate against the Swiss franc.

Buying/Selling
First, you should determine whether you want to buy or sell.
If you want to buy (which actually means buy the base currency and sell the quote currency), you want the base currency to rise in value and then you would sell it back at a higher price. In trader's talk, this is called "going long" or taking a "long position". Just remember: Long = Buy = Ask.
If you want to sell (which actually means sell the base currency and buy the quote currency), you want the base currency to fall in value and then you would buy it back at a lower price. This is called "going short" or taking a "short position". Short = Sell = Bid.

» How to calculate Profit and Loss

Bid/Ask Spread
All Forex quotes include a two-way price, the bid and ask. The bid is always lower than the ask price.
The bid is the price in which the dealer is willing to buy the base currency in exchange for the quote currency. This means the bid is the price in which you the trader will sell.
The ask is the price at which the dealer will sell the base currency in exchange for the quote currency. This means the ask is the price in which you the trader will buy.
The difference between the bid and the ask price is popularly know as the Spread.

Let's take a look at an example taken from a trading software:



On this EUR/USD quote, the bid price is 1.2293 and the ask price is 1.2296. Look at how this broker makes it so easy for you to trade away your money. If you want to sell EUR, you click "Sell" and you will sell Euros at 1.2293. If you want to buy EUR, you click "Buy" and you will buy Euros at 1.2296.

Canadian Dollar Retrieves Bullish Path

The Canadian dollar advanced for the first time this week, on Tuesday, markets with strong correlation with the Canadian dollar provided support for the currency to gain especially against its U.S. counterpart, but, as well as major world currencies . After the Canadian dollar traded near parity with the dollar last week, the currency experienced a considerable drop in the rally as traders considered excessive, especially after the oil rally ended stronger in 2010 to the end of the session last week, affecting the performance of the Canadian dollar, as it represents a good percentage of the income of Canadian exports. The pessimism in Europe over a week of economic performance in Norway and Greece's budget deficit has also contributed to the advancement of the loonie hoy.El Canadian dollar seems to have found its way back towards parity, again, such commodities as stocks rebounded today. European markets are, so far, unattractive, and, as the Fed signaled that the increases would not go so soon, the Canadian dollar is one of the best bets for the moment the market divisas.USD / CAD was trading at 1, 0170 from 04:01 GMT from as high as 1.0225 during Tuesday's session.

Euro: Who Will Rescue Greece?

The European single currency dropped sharply in a highly volatile day on Thursday, as neither Greek officials, and ECB officials have found a solution to Greece's budget deficit issues, in a drama that has been a longer than traders in the region could esperar.Hoy after a major multi-nation European leaders using the euro, said a rescue plan would need the support of Greece International Monetary Fund, the euro fell against most of 16 major currencies traded on currency markets, the continuing uncertainty regarding several members of the eurozone growing budget deficit continue to affect confidence in assets in the region, as traders opt for safer bets at the regional level, as the Swiss franc, and the world, as the U.S. dollar. Each day that passes with Greece's budget crisis unresolved, will weigh more on the euro because the evidence not only financial complications in some countries Eurozone members, but also the inability of European officials to offer a viable solution to the problem which further atractivo.EUR euro / USD traded at 1.3463 as of 01:46 GMT at a rate above 1.3519 intraday .

Dollar Ends Week Advancing on Uncertainties

The U.S. dollar, along with the Japanese yen were the best performers in the currency markets before the end of trading session this week at various events around the world risk aversion to higher levels , as the news published today shows negative surprises for investors in financial markets.

The Dow Jones industrial average fell the first day in nearly two weeks today, were once reigned and pessimistic and commodity stocks fell worldwide, with investors to protect their portfolio in safer assets available in the States USA. British pound fell after the central bank said the country could slide into a recession again, and in the euro area, concerns about who is to deliver a rescue plan in Greece again denied the market confidence in the region.

Today's market seemed to those in the worst of the global crisis, when bad events were positive for the dollar as traders opted for safety. The spending cuts increasingly European and general uncertainty into financial markets can lead the world into another recession.

EUR / USD closed at 1.3527 to the rate of 1.3603 on Thursday.

Recession’s Return Sets Pound Down

The pound lost today against several major currencies as both the national and international markets scenarios were quite pessimistic before the end of the session this week, setting the pound to plunge cut back the progress achieved during the midweek.

The economic situation in England is really struggling to pick up, and today, after Bank of England, responsible for policy Andrew Sentance said today that the UK can meet again in a negative economic growth, which could mean that the rate No interest hikes Aren BOE plans for the coming months, investors fled asset price pounds. Another negative factor that weighs on sterling rates is that a growing budget deficit in the country is likely to lead the Government to strengthen its expenses, which may reflect on the British economic growth conditions.

Not only in the UK, but pessimism was the state this Friday in Europe, no one has a direct answer to the question of the Greek budget deficit, the establishment of new operators in their risky bets. It seems that this year will be a good year for the UK economy, again.

GBP / USD closed the week at 1.5009 from 1.5263 on Thursday.

If you want to comment on the recent action of the pound in Britain or have any questions regarding this coin, please feel free to reply below.

Loonie’s Rally Ends on Oil Drop

Pessimism again today to the European financial markets, as economic problems to the owners once more in the most economical sites Thursday. Markets that influence the Canadian dollar, as crude oil and other commodities fell, which also affect progress in the loonie.

The Canadian dollar ended today their longest winning streak in more than five years and increased pessimism in Europe, extending later to a global scale, affecting resource stocks and commodities in North America, markets with strong correlation with rates Canadian dollar, making Canadian currency to step back towards parity with its U.S. counterpart.

The positive aspect of today for the withdrawal of the Canadian dollar is so strong after the advance was not the Bank of Canada, which led to its currency down with statements or concrete steps to end their demonstration, but in fact The fundamentals of the international market scene were behind the loonie's fall today, noting that by the time the central bank is not new levels of hard currency.

USD / CAD traded at 1.0166 as of 03:53 GMT from a low of 1.0071 on Thursday.

If you want to comment on the Canadian dollar's recent action or have any questions regarding this coin, please feel free to reply below.