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Morning Forex Fundamental Print E-mail
Daily Forex Fundamentals | Written by Dukascopy Swiss FX Group | Feb 20 13 09:43 GMT

Morning Forex Fundamental

EUR

'Despite the upbeat ZEW reading, we remain cautious with regard to Germany's prospects as there are many challenges to overcome in 2013' - Johannes Gareis, euro-zone economist at Natixis

Confidence among German investors soared to the highest level since April 2010 in February, adding to signs that Europe's largest economy is rebounding from its slump, according to the ZEW Center for European Economic Research. A gauge of investor and analyst expectations, which aims to predict economic developments six months in advance, jumped to 48.2 this month, up from 31.5 in the prior month. The reading came well above analysts' expectations, who called for a 35 reading. On Monday, the Bundesbank said it expects Germany to return to growth in the first quarter of 2013 as confidence improves and the global economy gains strength. Europe's largest economy shrank by 0.6% in the final three months of 2012.

'Despite the upbeat ZEW reading, we remain cautious with regard to Germany's prospects as there are many challenges to overcome in 2013,' said Johannes Gareis, euro-zone economist at Natixis in Frankfurt.

'The financial market experts have made their peace with the weak fourth quarter of 2012. In their opinion the German economy faces less headwinds from the euro crisis than throughout the last months', ZEW President Professor Wolfgang Franz remarked after the results.

USD

'It adds to expectations that growth is likely to be lackluster in the opening quarter of the year' - Joe Manimbo, a senior market analyst at Western Union Business Solutions

Confidence among home builders in the world's largest economy turned lower unexpectedly this month, as builders faced higher material costs, the report by the National Association of Home Builders showed Tuesday. Their housing market index stood at 46 in February, down one point from the previous month's reading, which was the strongest since April 2006. Analysts, however, expected the index to rise by one point to 48. The report also showed that growing uncertainties over the labour market and rising costs for building materials weighed on the solid gains seen over the last year. In the meantime, latest data, which showed a strengthening job market, increased property values amid the fact that stocks are trading at five-year highs, which all are providing a boost to Americans' balance sheets.

'We saw a meaningful improvement in overall financial market conditions and home prices, and those are the kind of drivers now for consumer confidence,' said Millan Mulraine, director of U.S. rates research at TD Securities USA LLC in New York.

'It adds to expectations that growth is likely to be lackluster in the opening quarter of the year, due mainly to the expiration of that payroll tax cut,' said Joe Manimbo, a senior market analyst at Western Union Business Solutions.

GBP

'We're going to have to go shopping in world markets at a time when they will be very tight (on supplies) themselves' - Ofgem chief executive Alistair Buchanan

The U.K. consumers will soon face higher energy bills, as he U.K. becomes more reliant on energy imports. According to the Ofgem chief executive Alistair Buchanan, the fall in nation's power production capacity is likely to lead to more energy imports, so customers will pay more. While the shortfall in supply can be replaced by increasing gas imports, competing for those supplies on the global market is likely to cost more, adding more challenges to the U.K. government. At the same time, longer term solutions, such as new nuclear power stations or tapping domestic shale gas reserves, have yet to be given the final go-ahead by the government.

'We're going to have to go shopping in world markets at a time when they will be very tight (on supplies) themselves,' said Ofgem chief executive Alistair Buchanan.

'There isn't a single person or people to blame. In my view it was a single event - the financial crisis. Before the financial crisis the government had backed a visionary approach to energy on wind, water and nuclear... then came the financial tsunami.'

JPY

'I have no intention of doing this as a method to ease monetary policy' - Japanese Finance Minister Taro Aso

Japan's government has no plans of buying foreign currency denominated bonds as part of monetary easing, the Finance Minister Taro Aso claimed Tuesday. This decision is adding to signs that the government could be stepping back from more controversial proposals to end almost 20 years of deflation. One of the reasons for such a decision is the fact that the implementation of the move is seen as likely to attract protest from other countries in the sense that Japan is devaluing the Yen to boost nation's economy at their expense. However, Aso's statement goes in contrast with Shinzo Abe's plans, who called purchases of foreign bonds as a possible solution for monetary policy, as well as saying that the BoJ law may be revised in case the central bank fails to get results.

'I have no intention of doing this as a method to ease monetary policy,' Japanese Finance Minister Taro Aso said, when asked about central bank purchases of foreign bonds.

'I think we can see ... the effect of lessons they learned from the first Abe administration, which gave up mid-stream,' said Tetsuro Fukuyama, an upper house lawmaker whose Democratic Party of Japan (DPJ) ousted Abe's Liberal Democratic Party (LDP) in 2009, only to be crushed themselves at the polls in December.

CAD

'Our outlook for the Canadian economy is a relatively rosy one, as we expect the pace of expansion to accelerate over the course of 2013 after the weakness experienced last year' - Roberto Cardarelli from IMF

Wholesale in Canada dropped in the last month of 2012 more than initially expected, mainly due to lower sales of computers and communications equipment, such as mobile phones, indicating weak domestic demand. According to the Statistics Canada, Canadian wholesale trade shrank in December by a sharper-than-expected 0.9% on a reversal of the previous month's 0.7% gain. Analysts, however, expected only a 0.4% contraction. As retailers generally order more goods from wholesalers when they expect consumer sales to increase, a contraction in wholesales indicates uncertain economic future. In volume terms, wholesale sales were down 0.9% in the last month of 2012. At the same time sales of machinery, equipment and supplies subsector were down 4.1%, while the computers and communications equipment and supplies industry sank 8.6%.

'Our outlook for the Canadian economy is a relatively rosy one, as we expect the pace of expansion to accelerate over the course of 2013 after the weakness experienced last year—but we project lower average growth for 2013 as a result of weak economic activity at the end of 2012 carrying over to 2013,' said Roberto Cardarelli from IMF.

Press Review

Europe

Unadjusted trade surplus of the 17 countries sharing the Euro was 11.7 billion euros, higher than 8.0 billion euros a year earlier, but lower compared with 13.0 billion in the month ago.

Economic output in the 17-country region shrank by 0.6% in the fourth quarter, after a 0.1% contraction in the prior quarter. German economy shrank by 0.6%, while France and Italy both recorded a 0.3% drop. Latest data marked the currency bloc's first full year in which no quarter produced growth.

François Hollande turns up the warm message of support for Greece

President's visit to Athens after Angel Merkel highlights French ties and EU unity, while Antonis Samaras hails 'historic friend'.

ECB official sees euro zone economic recovery signs

The euro zone economy should show signs of recovery in the first quarter of the year, a European Central Bank policymaker predicted on Tuesday, and another said a small interest rate cut might have little effect.

France to revise down 2013 growth target: FM

The French government could revise down its growth target for the country's economy by some 0.5 to 0.6 percentage points, a government official said Tuesday

USA

The U.S. retail sales edged up only 0.1% after an unrevised 0.5% rise in December. During 2012, retail sales have risen an unadjusted 4.4%, more than twice the rate of consumer inflation.

Sentiment among the U.S. consumers soared to a 3-month high in February, reaching 76.3 from 73.8 in January, above analysts' expectations of 74.8. A strengthening job market, increased property values and the fact that stocks are trading at five-year highs are providing a boost to Americans' balance sheets.

Loonie falls amid growing economic worries

The Canadian dollar fell to a seven-month low, dropping below 99 cents US for the first time since July.

Obama Clashes With Yield Shows Bonds Below Growth Outlook

As President Barack Obama starts his second term, the bond market is already telling him that the administration's forecasts for economic growth over the next four years are too optimistic.

Fed's Lockhart sees bond buying through year end

The Federal Reserve will likely need to keep buying bonds until the end of this year given the still-feeble state of the U.S. labor market, a top Fed official told Reuters on Tuesday

Asia & Pacific

Japan's gross domestic product dropped an annualized 0.4%, following a revised 3.8% fall in the previous quarter, while on a monthly basis the economy shrank by 0.1%. The Bank of Japan maintained its overnight call rate target at a range of zero to 0.1% by a unanimous vote and decided not to expand its asset-purchase and lending programme.

Japanese industrial production rose 2.4% in the last month of 2012, from 2.5% growth in the preceding month, helped by a pick-up in the transport equipment and general machinery sectors.

China waiting for a crisis: Andy Xie

Bank loans and money supply rose sharply in January. The timing of the Spring Festival may have distorted the data. Still, there are signs that many local governments with new leaders want to try an old trick, pushing fixed-asset investment (FAI) to create gross domestic product and fiscal revenue. This would turn bank loans into GDP and fiscal revenue.

Japan trade deficit hits record as yen weakens

Japan's monthly trade deficit hit a record in January after its recent aggressive monetary policy stance weakened its currency sharply.

Australia's Leading Index Signals Above Trend Growth: Westpac

A leading indicator of the Australian economy pointed to moderately above trend growth in December, data from a survey by institutional bank Westpac showed Wednesday

 

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Dukascopy Swiss FX Group

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This overview can be used only for informational purposes. Dukascopy SA is not responsible for any losses arising from any investment based on any recommendation, forecast or other information herein contained.

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