USD
USD strengthened against most currencies last week as US stocks retreated from previous week gains on skepticism that the global economy is recovering as figures showed recession in Asia and Europe is deepening. Early last week, US Treasury Secretary Geithner announced plan to finance as much as $1Trillion in purchases of distressed assets to spur growth, and record foreclosures pushed down home prices and lured buyers into the market, increasing sales of previously owned homes in the US to 4.72Million in February, adding on top of Housing starts increase reported last week, US housing markets are showing signs of recovering. A report showed US orders for durable goods unexpectedly rose in February on a rebound in demand for machinery, while despite recent economic report shows signs of a economy recovery, a report showed initial claims for jobless benefits last week rose to 652,000 suggest pace of firings accelerated last week and the trend will continue as corporate cut investments and laying off workers to reduce cost. Investors reduce holdings of the euro and the yen last week as the currencies lost its appeal after figure shows the recession in Europe and Asia is deepening despite US economic data are showing signs of recovery.
Germany business confidence slid to the lowest level in 26 years and France's economy contracted the most in more than 30 years, suggesting companies may slash investments and reduce cost, while Japan's exports plunged a record 49% in February as foreign demand for Japanese made goods slid. The pound, following the euro, slid against the dollar last week as report showed UK economy shrank more than forecast last year. Weak economic figures from Asia to Europe stoked demand for the dollar as safe haven, and by late week, heads of JPMorgan Chase and Bank of America said results deteriorated in March, dimming investors expectations that banking corporate is recovering, contrary to previously announced profitable claims. The dollar will remain supported this week as demand for currency as safe haven increase, and on concern ECB will slash its interest rate further to bolster the region's economy, while stocks may retreat on selling pressure as corporate earnings forecast may disappoint investors. Monitor this week's US economic releases – US S&P/Case-Shiller Composite 20, US Chicago PMI, US Consumer confidence, US ABC Consumer confidence, US Domestic vehicle sales, US MBA Mortgage application, US ADP Employment change, US ISM Manufacturing, US ISM Price paid, US Pending home sales, US Initial jobless claims, US Factory orders, US NFP, US Change in manufacturing payrolls, US Average hourly earnings, US ISM Non-manufacturing composite and Fed Chairman Bernanke speaks at Fed Credit Markets Conference -, cross currencies important economic releases, Fed/Treasury or other central banks' member' statements/comments, US indexes movement, news related to major corporate, any measures/plans intended to bolster the region's economy and G-20 summit.
JPY
JPY fell against most currencies last week as the recession in Japan is deepening despite measures and bonds purchase by the government to bolster the region's economy. US stock market rose early last week after US Treasury Secretary Geithner announced to purchase up to $1Trillion of toxic assets to spur growth in the region spurred investor appetite for carry trade. Figures showed Japan's exports plunged a record 49% in February from a year earlier as demand for Japan manufacture goods dropped abroad amid deepening recession, and economists said that this week's Japan Tankan large manufacturers survey will probably fall to the lowest level in more than 30 years in March. While the US economic figures is showing signs of recovery in some sector, Europe's economic figures are pointing towards deeper recession. Better than estimated earnings at Best Buy and ConAgra Foods, spurred speculation that US consumer spending may be increasing, suggesting retailers' earning may improve in coming months as credit access eases.
The yen pared its losses before the weekend as US stocks slid after JPMorgan Chase and Bank of America said results deteriorated in March, spurring concerns that the January and February earnings may come short-lived and as lower oil price dragged down energy producers. Stock market around the world are likely to remain pressured this week as recession in Europe and Japan deepens and global central bank are almost out of tools to bolster its region economy after previous spendings' on measure and fiscal aid. Monitor this week's Japan economic releases -Japan Industrial production, Japan Vehicle production, Japan Manufacturing PMI, Japan Jobless rate, Japan Household spending, Japan Annualized housing starts, Japan Small business confidence, Japan Tankan Large manufactures index, Japan Tankan Large manufactures outlook, Japan Tankan Non-manufacturing index, Japan Tankan Non-manufacturing outlook and Japan Vehicle sales - cross currencies important economic releases, central banks' member's statements/comments, US indexes movement, commodities performance, news related to major corporate, governments' measure/plan to bolster its economy and G-20 summit.
EUR
EUR fell against the dollar last week as investors dumped the euro in favor for the dollar after figures showed recession in Europe is deepening despite government efforts to bolster the region's economy. The euro earlier last week strengthened versus the dollar, but show signs of losing momentum by mid-week after ECB's council member Erkki Liikanen spurred rate cut speculation by saying that there's room to lower interest rate and said he's not opposed to cutting the bank's deposit rate to close to zero, and figures shows Europe's manufacturing and service industries contracted for a 10th month in March, while France manufacturers' confidence held at the lowest level in almost 50 years at the same month, reinforced speculation the recession in Europe is deepening. Despite governments efforts to ease financial turmoil and bolster economy in the region, investors begin doubting that those measures will spur growth in EU as recent figures shows economy are showing no signs of bottoming. Reports showed Germany business confidence fell to the lowest level in more than 26 years in March and Italy business confidence fell to a record as pace of firing increased and companies are paring investment amid deteriorating business activities.
Selling pressure on the euro mounts by late last week after figure showed European industrial orders dropped 34.1%, the most on record in January and France’s economy contracted the most in more than 30 years in the 4th quarter stoked purchase on the dollar as safe haven and traders reduces equities holding in favor for the greenback on concern the worst of banking crisis may persists as JPMorgan and Bank of America said results deteriorated in March. The euro will weaken against the dollar and the yen this week as stocks will probably pressured by selling on unfavorable economic figures and on speculation ECB will slash interest rate below 1% amid recession deepening in EU region. Monitor this week's Euro-zone economic release – Germany Retail sales, Euro-zone Business climate indicator, Euro-zone Consumer confidence, Euro-zone Economic confidence, Euro-zone Industrial confidence, Euro-zone Services confidence, Germany ILO Unemployment rate, Germany Unemployment change, Italy Retail sales, Italy CPI, Euro-zone CPI Estimate, Italy Manufacturing PMI, France Manufacturing PMI, Germany Manufacturing PMI, Euro-zone Manufacturing PMI, Euro-zone Unemployment rate, France PPI, ECB Rate decision, Italy Services PMI, France Services PMI, Germany Services PMI, Euro-zone Services PMI and Italy PPI -, cross currencies important economic releases, central banks' member's statements/comments, news related to major corporate, US indexes movement and G-20 summit.
Crude oil
Crude oil fell last week as the dollar strengthened against the euro and a government report showed US crude oil inventories increased more than expected for the week that ended on March 20. Oil prices remained weak last week as stocks in US and Europe fell after figures showed recession in Europe and Asia is deepening despite governments spendings and measures to bolster the region's economy. Despite OPEC is cutting production to comply with December's quota, US crude oil inventories rose by 3.3Million barrels at the week that ended on March 20 as fuel demand fell, daily fuel demand averaged consumption over the past 4 weeks was down 3.2% from a year earlier. Appeal of commodities as alternative investment fell last week on skepticism that global economy is stabilizing and as the dollar strengthened.
Some trader bets that oil will rise in coming months after figures showed housing market is recovering and Best Buy and ConAgra Foods reported better than estimated earnings spurred speculation that consumer spending will increase as credit crisis eases and home value rise. Analysts said oil price may decline this week as US inventories will increase because the recession has cut consumption and as strengthening dollar will reduce appeal of commodities as inflation hedge. Oil prices will leans towards weaker side this week on falling stock market and on strengthening dollar, but are likely to be on range trading between $47-$54. 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 economies, storage report and G-20 summit.
Loh Chang Yuen,
Junior Strategist
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