USD
USD strengthened against most currencies last week as US stocks decline on selling pressure as previous week's losses versus the euro was overdone and too fast sustain. US stocks also slid on concern non-banking sector earnings will weaken in 2nd quarter as consumer spending slow and businesses are slashing investments amid grim economy outlook. Last week's Initial jobless claims report indicates the US job market remained weak as private sectors increase firing to survive the recession despite governments efforts to encourage hiring. Declining euro also played a role in the dollar advances as economic figures signals that the region's manufacturing sector remains weak as demand abroad slumped, causing the Europe's industrial production fell the most on record in March.
The euro was further weakened by declining stocks market and retreating commodities price which increases demand for the dollar as hedge, while a report showed Europe's economy contracted at the fastest pace in at least 13 years in the 1st quarter as companies cut output and jobs to slash expenses. The dollar should continue its rally versus the euro this week as stocks may retreat further on selling pressure and demand for safe haven is picking up amid uncertainty. Monitor this week's US economic releases – US NAHB Housing market index, US Housing starts, US Building permits, ABC Consumer confidence, MBA Mortgage application, US Treasury's secretary Geithner on TARP, FOMC Meeting minutes, US Initial jobless claims, US Philadelphia Fed index, US Leading indicators and Fed Chairman Bernanke Speaks -, cross currencies important economic releases, Fed/Treasury or other central banks' member statements/comments, US indexes movement, news related to major corporate and any measures/plans intended to bolster the region's economy.
JPY
JPY advanced against most currencies last week as US stocks retreated on selling pressure amid optimism on a quick recovery receded. Economic figures suggests that Japan's recession may be abating as record rate cuts and government measures to bolster the region's economy is working, while economy in Europe remain depress on weaker exports and spending. Investors was caught off-guard last week after a report showed an unexpected drop in US retail sales, which previous' figures indicates consumer and businesses confidence is improving, stoked fear that non-banking sector earnings may remain weak through 2nd quarter. Japan exporters saw an unprecedented collapse in exports last quarter as demand for Japanese goods tumbled on weaker spending and as wholesalers are reducing inventories on concern economy recovery may take longer than expected.
Reports showed Europe's economy contracted at at the fastest pace in at least 13 years in 1st quarter despite ECB rate cuts and governments measures to bolster the region's economy as businesses remains worried that recession in Europe may be prolonged by high unemployment and weaker consumer spending. The yen will slightly strengthen this week as stocks may retreat on selling pressure and the euro may weaken on figures which indicates recession in Europe may linger till 4th quarter. Monitor this week's Japan economic releases – Japan Consumer confidence, Japan Households consumer confidence, Tokyo Department store sales, Japan Nationwide department store sales, Japan Industrial production, Japan Machine tool orders, Japan GDP, Japan Convenience store sales, Japan Tertiary industry index, BOJ Rate decision, Japan Leading index and Japan Coincident index -, cross currencies important economic releases, central banks' member's statements/comments, US indexes movement, commodities performance, news related to major corporate and governments' measure/plan to bolster the economy.
EUR
EUR fell against most currencies last week as stocks in Europe and US retreated on fading optimism that economy in both region will recovery quickly and as reports indicates consumer spending remained slow despite government fiscal stimulus and ECB rate cuts to ease the region's credit access. Exports in Europe remained weak as demand for European made goods tumbled on global recession, causing Europe's industrial production fell the most on record in March and Europe's economy contracted at the fasted pace in atleast 13 years in 1st quarter. Demand for the dollar rose last week as stocks around the world decline on slower economic recovery outlook and retail sales in the US unexpectedly fell in April, raising concerns that despite easing credit access and government stimulus package, consumer continue to cut back on spending on jobs uncertainty.
Americans claiming for first-time jobless benefits rose at the week ended May 9 as private companies are increasing firing to survive the recession. The euro will retreat versus the dollar this week as selling pressure on the currency mounts on fading optimism that economy in the region's will recover quickly. Monitor this week's Euro-zone economic releases – Euro-zone Trade balance, Italy Trade balance, Germany ZEW Survey, Euro-zone ZEW Survey, Germany Import price index, Germany PPI, Italy Industrial orders, Italy Industrial sales, Italy Current account, France PMIs, Germany PMI, Euro-zone PMIs and Italy Retail sales - cross currencies important economic releases, central banks' member's statements/comments, news related to major corporate, US indexes movement and speculation on any additional measures by European countries or its officials from the region.
Crude oil
Crude oil retreated from a 6-month high of $60 last week as the dollar strengthened versus the euro and stocks in Europe and US decline on selling pressure as optimism for a quick recovery in both slowly fades. Oil prices remained weak last week as IEA cut its 2009 forecast for world oil demand, projecting consumption will drop the most since 1981 and down 3% from 2008, offsets a government report that showed crude oil inventories unexpectedly decreased in previous week, by 4.7Million barrels while gasoline inventories also decreased, by 4.1Million barrels as refineries operated at lower rate and exports slows amid demand falters.
Initial jobless claims in US rose at the week ended May 9 as private companies increase firings to survive the recession and economists said that US jobless rate will average 8.5% in 2011, raising concerns over prolong job market recovery and raising concerns fuel consumption will weaken. Crude oil may be on range trading between $52-$58 this week, but end up on the lower side as the dollar will strengthen and stocks are likely to remain depress on selling pressure. Monitor this week's US economic releases, central banks' member's statements/comments, news related to major corporate, US indexes movement, USD movement, geopolitical risk, major corporate fiscal results, stimulus to bolster the economy and storage report.
Loh Chang Yuen,
Junior Strategist
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