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Video for May 21th, 2008 (3 min 30 sec): Dollar Continues to Weaken as Oil Reaches $133 and US Stocks Sink
AUS WMI Consumer Sentiment Has First Rise Since December
In Australia, the WMI consumer sentiment index increased 2.7% to 89.8 for May. Consumers were heartened by the government's promised income tax cut, a stronger stock market and and a resilient labor force. It's the first improvement in the index since December. GER IFO Business Confidence Unexpectedly Increases In May, the German IFO Business Confidence Index showed improvement to 103.5, with both current conditions and expectations increasing. It comes in contrast to yesterday's lower investor confidence data. Today's report showed that business are coping with the surge in oil prices and the strong Euro, and helped ease the need for the ECB to lower rates. EUR/USD - Euro Up 150 Pips on Dollar on IFO and Oil Prices
Yesterday the Euro gained on inflation expectations and rising oil. Today oil continued climbing, breaking above $133 a barrel. Combined with the business confidence report the Euro-Dollar pair saw a 150 pip surge from its overnight low. It is now at a four week high and is approaching 1.58. FOMC Minutes at 2PM shows the Fed is ready to stay on the sidelines. The news did little to help the Dollar, while it sent the US stock markets reeling. At 3 PM EST the Dow Jones was down 250 points. SWZ Investor Confidence Improves to -60.4 In Switzerland, the ZEW expectations index improved for May, as fewer respondents saw the Swiss economy continuing to deteriorate. Half of respondents see inflation continuing to rise. However, a majority believes that rates will see no change, even as more analysts speculate short-term interest rates increases, such as those for credit cards. UK BOE Minutes Keep Focus on Inflation The Bank of England minutes showed that policy makers voted 8 to 1 to keep interest rates steady. A rate cut would send the signal that the bank was trying to stabilize growth rather than maintain its focus on the inflation target. Some believe growth has to slow for inflation to cool. GBP/CHF - Franc Has 200 Pip Swing vs Pound
The Pound-Franc pair fell steeply overnight, breaking through support at 2.04 overnight. The swing from its open to today's low amounted to around 200 pips, with the pair finding support just below 2.02. The better than expected Swiss ZEW report acted to bolster the Franc while the BoE minutes weakened the Pound. USD/CHF - Franc Hits 1 Month High vs Dollar
The Swiss Franc advanced to the highest level in almost a month against the Dollar. The Dollar-Franc pair has swung 280 pips from its high on Monday. Today, it found support near 1.0275. GBP/USD -Pound Weaker on BOE Minutes, But Dollar Succumbs to Weakness
During a time of Dollar weakness, the Pound-Dollar pair was one of the few currency pairs to go in the greenback's favor. Overnight the Dollar pared some of its losses from yesterday, but it eventually fell victim to weakness during NY trading. CAN Consumer Inflation Jumps in April Consumer prices in Canada surged above expectations in April. The monthly figure for all-items doubled expectations, rising 0.8%, while annual prices accelerated to a rate of 1.7%. Core prices were up as well, increasing 0.3% on the month and 1.5% on the year, both above expectations. The report cites higher gasoline prices and less downward pressure from passenger vehicle prices as the main culprits. CAN Leading Index up 0.1% Similarly to the US, the Canadian economy's leading indicators index showed a 0.1% improvement in April. Only 3 components of the index declined. The main positive contributors were stock prices and household demand, while a fall in housing starts was the main negative drag on the index. USD/CAD - Loonie Hits 2 Month High
Following the report, the US Dollar-Canadian Dollar pair fell to the lowest level in more than 2 months near 0.9820. The inflation data makes it less likely the Bank of Canada will cut rates in its June meeting, helping to strengthen the Loonie. Climbing oil prices are also a major factor supporting the Canadian Dollar. Upcoming Releases Tonight Japan will reveal its All Industrial Activity Index and trade balance. Overnight the UK will post data on business investment, retail sales and manufacturing. Also overnight, the euro-zone will release data on industrial new orders. Tomorrow, Canada will post its retail sales and the US will reveals weekly jobless claims numbers and its housing price index. |
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