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Video for April 25th, 2008 (3 min 26 sec): Week Recap: Pound Gains Today Despite GDP Data, Dollar Strengthens For the Week vs Rivals JPN CPI Driven Higher by Energy Costs Japan's national headline CPI and the core measure, which excludes fresh food, were up 1.2% in March. Core inflation saw its highest increase in almost 10 years. As energy was the major driver of prices, inflation was at 0.1% when this component is excluded as well. The Tokyo CPI, a leading indicator for national CPI posted a rate of increase of 0.6%, for April, higher than expected. Excluding food, prices were up 0.7%. After taking energy out of the equation, prices were flat. USD/JPY - Dollar Rally vs Yen Stalls
The US Dollar's 3-session rally against the Yen stalled at 104.80 in European trading. The pair then fell down to test the level it was at from this week's open. As NY trading progressed, the Dollar pared some of those overnight losses, despite a weaker stock market. US investors are starting to believe that the worst of the credit crunch problems may be behind them. Speculation that the Fed is done cutting rates fueled dollar strength during the second half of the week. UK GDP Shows 1st Quarter Growth of 0.4% The UK economy grew only 0.4% in the first quarter. The credit crunch has affected lending by financial institutions and has made securing loans harder for businesses and mortgage-seekers. Higher inflation and the downturn in housing and property values will work to limit consumer spending, even as employment seems to be holding up. GBP/USD - Pound Recovers After Dipping Following GDP Data
Despite the report of weak growth the Pound had a strong day. The GBP/USD pair set a low near 1.9675 directly following the release but then recovered and rallied 180 pips. Today's session continued the choppy and volatile trading seen in this pair as of late and for the week the Dollar is set to finish stronger. EUR/GBP - Pound Gains on Euro's Run of Weak Data
The Euro-Pound pair fell 100 pips overnight, and 180 since yesterday's high. The Pound gainesd as speculation increased that the ECB may be pressured to soften its hawkish stance if the economy continues to give poor economic data like we saw earlier in the week. After today's movement the pair is back the levels it set to end last week. US UMich Consumer Confidence Falls to 25 Year Low In the US, the University of Michigan consumer sentiment index cast a somber mood as the index slipped to 62.6 a 25-year low. 9 out of 10 respondents said the economy was in recession, and inflation expectations deteriorated in the face of higher gasoline and food prices. Also, many plan to spend their money from the government stimulus package to pay down debt or to save, meaning the effect on the economy will be limited from the plan. EUR/USD - Euro Sinks In Second Half of the Week as Interest Rate Expectations Shift
The Euro continued losing against the US Dollar overnight until the pair found support near 1.5560. The Euro then recovered following the US consumer confidence data. After setting a high on Tuesday, the pair swung 450 pips in favor of the Dollar as European data disappointed and speculation increased that the Fed may pause cutting rates after another 25 basis point move next week. USD/CAD - Loonie Weaker This Week on Bank Rate Cut
The US Dollar gained on the Canadian Dollar this week, with most of the gains coming following the interest rate cut of 50 basis points by the Bank of Canada on Tuesday. The pair has been in choppy consolidation since then. This morning the Canadian Dollar gained as oil spiked $3 higher following a report that there was an incident in the Gulf region between US and Iranian boats. For the week the USD/CAD pair is up a little more than 100 pips. Next Week's Releases Next week will prove to be volatile as markets will digest a flash estimate for euro-zone CPI, the interest rate decision from the Fed, and non-farm payroll data to end the week. Also, the US, UK and the Euro-zone will reveal how activity in manufacturing held up during April. |
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