Central Banks Coordinate to Soothe Markets, US Stocks Gain
Fundamental Archives |
Written by CMS Forex |
Sep 18 08 22:15 GMT |
Central Banks Coordinate to Soothe Markets, US Stocks Gain
JPN Services Improve in July
Japan's Tertiary Industry Activity Index showed increased activity in the services sector in July. This comes after two month's of declines. A second release, the monthly BOJ monetary policy report showed that the central bank is expecting a more pronounced slowdown as commodity prices are restraining business investments and hurting corporate profits.
UK Retail Sales Rise 1.2% in August
In the UK, retail sales showed a strong gain of 1.2% in August after an upwardly revised 0.9% gain in July, mainly driven by a surge in textile and footwear sales. The figures on the year jumped from 2.1% to an annual pace of 3.3%, twice the projected number. Despite being a bright spot in a line of weak fundamentals, UK retail activity still remains pressured, according to the British Retail Consortium, which showed retail activity down 1.0% on the year in August.
UK Gov't Spends 10.4B in August
The public sector in the UK borrowed 10.4B in August, more than forecast. Government spending has increased, partially due to the takeover of Northern Rocks earlier in the year, which increased the weight of net debt to GDP from 36.4% to 43.3%.
GBP/USD - Pound Hits 1.8250 Then Retreats
The Pound-Dollar pair hit a low near 1.81 prior to the retail sales data, but climbed back slightly prior to and following the release. After rising and testing the 1.8250 level several times today the pair fell back below 1.82 in afternoon trading. A very interesting development is the announcement that British financial regulators cited "extreme" conditions in banning short positions on financial shares till January.
SWZ Swiss National Bank Holds at 2.75%
The Swiss National Bank left the benchmark rate at 2.75%, still saying that inflation calls for the bank's vigilance. It also mentioned that it was concerned with the more pronounced slowdown in the economy and the recent market turmoil, but did not propose any action soon regarding interest rates.
EUR/CHF - Franc Gains Following SNB Decision
The Euro-Swiss Franc pair declined in the wake of the interest rate statement falling to test 1.5770. The Swiss central bank may be less inclined to lower rates as inflation in the short-to-medium term remains high and the bank needs to stay vigilant to its dangers.
US Jobless Claims Rise 455K
In the US there were 455K new claims for jobless claims and has been above 400K since mid-July. The high jobless claims data in the week ending September 13 was partially due to the first wave of unemployment claims stemming from Hurricane Gustav in Louisiana.
US Leading Index Down 0.5%, Philly Fed Rises 3.8 in Aug
The Conference Board composite of leading indicators declined for the third month in a row in August, declining 0.5%. Four of the ten indicators improved, while the rest declined. The coincident index came in 0.1% lower. The US Philly Fed manufacturing index was stronger than expected. The overall index improved to 3.8 for the September period jumping from August's -12.7. Prices paid and received both moderated, while the employment sub-index was the only one that did not have impressive improvements.
US Fed Coordinates With Central Bank to Inject Liquidity into Money Markets
Another important development following this tumultuous week was an injection of billions of dollars into the financial system by the world's biggest central banks to try and soothe distressed money markets, which coincided with the European open.
EUR/USD - Euro Climbs to 1.4535 Then Retreats
The Euro-Dollar rose to test 1.4535 in European trading after a strong 200 pips move in the wake of the announcement about the coordinated move by central banks. At the NY open however the Dollar regained its footing and pared some of its earlier losses. Still, the pair seems to be heading in the Euro's favor since hitting 1.39 six sessions ago.
USD/JPY - Dollar Recovers as US Stocks End Positive
US stocks were positive today, with the Dow Jones climbing as much as 350 points, after being down parts of the day. AIG was removed from the Dow index and replaced by Kraft. Investors weighed whether the move by the Fed will help to ease the flow of credit. The Dollar-Yen hit a low at the 104 level around 1 PM when stocks were negative but rebounded along with the US stock market.
CAN Wholesale Sales Rise 2.3% in July, Leading Index Climbs 0.3%
In Canada, wholesale sales improved in July, reflecting resilience in demand. The Canadian economy is fairing relatively better than the rest of the developed nations, not succumbing entirely to the neighboring economic slowdown. Canada's leading indicators grow 0.3% in July, after an upwardly revised 0.1% growth in June.
USD/CAD - Greenback and Loonie Trade Around 1.07
The US Dollar-Canadian Dollar pair fell lower overnight testing below 1.06, but rebounded in NY trading. It's interesting to note that the price of this pair has been returning to the 1.07 level around 2 PM the last 4 sessions as we face ranging conditions.
Overnight Releases
Overnight's fundamental docket is very light with the only major release being German PPI.
