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Video for April 29th, 2008 (3 min 26 sec): Risk Aversion Steals the Show Prior to Tomorrow's FOMC Decision NZ Trade Balance Unexpectedly Falls to Deficit In New Zealand, imports increased in March, while exports declined. The trade balance therefore deteriorated and showed a deficit of NZ$50 million. The figure was lower than the NZ$400 million expected by economists. AUS Business Confidence Falls to Lowest Level Since 2001 In Australia, business confidence for the 1st quarter took a sharp turn downward, posting a reading of -4. It's the lowest level since 2001, as near and medium term expectations have lowered. AUD/USD - Aussie Falls After Report Shows Business Sentiment Down
The AUD/USD pair fell around 70 pips after the news. In NY trading it found a boost as US Dollar weakness took over the markets. It was a similar story for the New Zealand Dollar against the greenback. NZD/JPY - Yen Gains On Kiwi After Trade Balance Data
The Kiwi and Aussie also fell against the Yen. Overnight, the Kiwi-Yen pair after its trade deficit release. The yen continued to gain into the New York trading session on the back of increased risk aversion. The uncertainty in the equities market can be attributed to the anticipation of tomorrow's FOMC interest rate statement. UK Mortgage Approvals Down to 64K, Mortgage Lending at 3 Year Low Mortgage approvals and lending in the UK disappointed. UK mortgage approvals fell to 64K in March, the lowest level since records began being kept 9 years ago. Net mortgage lending amounted to 6.9B pounds, the lowest in 3 years. The figures reiterate the weak conditions of UK's mortgage market and validates the BoE's interventions. However, investors seem to be looking for more rate cuts above anything else. GBP/USD - Pound Falls on Weak Mortgage Lending
The releases sent the Pound lower against the Dollar, wiping away yesterday's gains. The Pound fell further after Bank of England's Blanchflower said aggressive action was needed to avoid a UK Recession. By 2:10 PM EST, the GBP/USD pair has dropped about 200 pips for the session. GBP/JPY - Pounds Sinks Sharply vs Yen on Data, Risk Aversion
The Pound-Yen pair saw an even steeper fall of 400 pips. Losses fueled by the poor lending numbers were extended in NY trading as a wave of risk aversion hit the markets ahead of the FOMC meeting tomorrow on the back of poor US news. US S&P Housing Price Index Shows 12.7% Annual Decrease for February Home prices in 20 metropolitan areas decreased 12.7% compared to last year. Prices do not seey any bottom yet, as the report showed 17 of the 20 metro areas posting record low annual declines and some of the steepest drops occurring during February. US Confidence Falls to 5-Year Low in April The Conference Board consumer confidence index fell to 62.3 for April, a 5 year low. The data showed consumers increasingly pessimistic about their present situation, even as the future expectations index actually increased slightly USD/JPY - Yen Gains as US Stocks and Data Weaker
US stocks were lower to start the day and the weak news from housing and consumer confidence, coupled with tomorrow's FOMC statement increased risk aversion. The Dollar-yen pair moved about 100 pips in favor of the Yen, finding support near 103.20. EUR/USD - Euro Declines Further on Speculation of FOMC Pause After Tomorrow
Carry trade sentiments aside, the Dollar advances against the Euro to a three-week high. The Euro-Dollar pair has been falling recently in favor of the greenback, as investors speculate that the Fed will signal it is done cutting interest rates after tomorrows expected 25 point basis cut. Upcoming Releases The fundamental docket heats up tonight and tomorrow, with several important releases. Tonight, Japan will reveal data on manufacturing, consumer spending, employment, and housing while the country's central bank is expected to hold rates steady. Overnight, the euro-zone will post its flash estimate of CPI, along with indicators on business and consumer sentiment. The UK meanwhile will reveal data on housing prices. The US opens the day with ADP employment numbers and GDP data and follows that up with the Chicago PMI. At 2:15 EST all eyes will turn to the Fed, as it decides on interest rates and traders turn to its announcement for clues for future policy. Canada will also post GDP data and its producer prices. |
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