International Forex Inforamtion

FXNewsEffects depicts the timing of economic-related announcements relative to changes in exchange rates. Announcement times, shown as green dots, are superimposed on the rates curve. Clicking on a green dot causes details of the announcement to be displayed in the table below the graph. The rates shown in the graph were OANDA FXTrade dealable rates at the time.
Economic announcements occur when government agencies and central banks release macro-economic information. Such announcements have always been a major factor behind forex market movements. The impact of announcements on market prices differs depending on the type of announcement and the degree to which the specifics of the announcement were anticipated. Some announcements have a strong and immediate impact with sharp increases or decreases in rates. Other announcements affect the market gradually over a longer period of time. Still other announcements can affect the market before the announcement either because of leaks or because their content is anticipated based on other publicly available data.
FXNewsEffects helps traders learn from past impacts of economic announcements and therefore can help increase their forecasting skills and trading time precision.

(RTTNews) - While the Institute for Supply Management - Chicago released a report on Friday showing a continued contraction in manufacturing activity in the month of July, the pace of contraction slowed by a little more than economists had been expecting.

The ISM - Chicago said its index of activity in the manufacturing sector rose to 43.4 in July from 39.9 in June, with a reading below 50 indicating a contraction in the sector. Economists had been expecting the index to come in at 43.0.

A slower pace of contraction in new orders contributed to the improvement in the sector, with the new orders index rising to 48.0 in July from 41.6 in June.

Employment also contracted at a slower pace compared to the previous month, as the employment index rose to 35.3 from 28.9.

At the same time, the report showed an acceleration in the pace of contraction in order backlog, with the order backlog index slipping to 32.1 in July from 37.6 in the previous month.

On the inflation front, the prices index fell to 35.0 in July from 36.3 in June, indicating a faster pace of contraction in prices.

Peter Boockvar, equity strategist at Miller Tabak said, "Bottom line, the data confirms the backdrop for an improvement in GDP."

"The degree and sustainability of the recovery will however remain in the hands of end demand, aka, predominantly the U.S. consumer," he added.
While the Institute for Supply Management - Chicago released a report on Friday showing a continued contraction in manufacturing activity in the month of July, the pace of contraction slowed by a little more than economists had been expecting.

(RTTNews) - The euro edged higher against its lower-yielding rivals as a better-than-expected GDP report in the U.S. fueled hopes of an economic recovery.

The European currency added to recent gains against both the dollar and yen amid higher risk appeal. On the other hand, the euro hovered near a monthly low against the sterling.

On the economic front in the Eurozone, consumer price inflation stayed negative for the second month in July with the latest decline being the biggest on record, extending support to a low interest rate regime. Unemployment reached the highest level since June 1999 as more employers cut headcount in June.

The euro climbed above 1.4250 in mid-day trading against the dollar, moving within a cent of its 2009 high. The European currency slipped to a two-week low of 1.4006 earlier this week.

The U.S. Commerce Department revealed gross domestic product fell 1% in the second quarter. Economists had expected GDP to fall at a 1.5 percent pace. This follows a 6.4-percent contraction in the first quarter.

The euro was choppy against the sterling and moved near its overnight levels around 0.8530 in the early afternoon. The European currency lingered near a monthly low from yesterday.

The euro edged to a three-day high of 135.54 against the Japanese yen, extending the mild rally that began on Wednesday. If the European currency reaches above 136.08 it will reach a monthly high.

In Japan, the seasonally adjusted headline Nomura/JMMA Purchasing Managers' Index or PMI rose to 50.4 in July from 48.2 in the previous month, the first improvement for seventeen months. A PMI reading above 50 indicates expansion in the sector.

On the economic front in the Eurozone, a flash estimate from the European Union statistics office, Eurostat, revealed a 0.6% annual fall in consumer prices in July compared to a 0.1% drop in June. The decline in July was the biggest on record. Prices also dropped more than the expected 0.4%.

Inflation turned negative for the first time in June. The European Central Bank aims at inflation rates below, but close to 2% over the medium term.

Friday, the European Commission approved EUR100 million to Serbia as general budget support to help with the stabilization of the country and ease the economic and social consequences of the crisis.

(RTTNews) - The Treasury and Energy Departments announced Friday that they are now accepting applications for grants to boost renewable energy projects.

The grants, which come in the form of a cash advance on the renewable energy tax credit, are hoped to spur development of energy projects around the country and are funded through the $787 billion recovery and stimulus bill that Congress passed earlier this year.

The departments estimate the program will distribute at least $3 billion in funds to roughly 5,000 bio-mass, solar, wind, and other types of renewable energy production facilities.

"As we move quickly to get our economy back on track and to repair the financial system, we must make investments that lay the foundation for a stronger economic future," Treasury Secretary Timothy Geithner said in a written statement. "Too many renewable energy projects have stalled due to a lack of financing."

He added, "The Recovery Act program will lead to investment in our long-term energy needs, move us towards energy independence, increase jobs at energy-specific businesses, and protect our environment."

Energy Secretary Steven Chu said the goal of the grants is to spur private investment in renewable energy projects, leveraging the federal funds to greater effect.

"This program will play a major role in encouraging private sector capital to invest in clean energy development, creating new jobs that can't be outsourced," he said. "It is an investment that will continue to help our economy grow and ensure advancement in clean and renewable energy development."

Although the tax credit has been widely used in the past, private financing for renewable energy projects had fallen off during the economic downturn and recession.

But both Treasury and Energy expect to see a rapid increase in applications for the payment in lieu of the tax credit, which will likely also provide a stimulus effect in local economies around the country.
The Treasury and Energy Departments announced Friday that they are now accepting applications for grants to boost renewable energy projects. The grants, which come in the form of a cash advance on the renewable energy tax credit, are hoped to spur development of energy projects around the country and are funded through the $787 billion recovery and stimulus bill that Congress passed earlier this year.

(RTTNews) - President Barack Obama said Friday's gross domestic product figures show that the $787 billion economic recovery and stimulus bill passed earlier this year is succeeding in slowing the nation's recession.

The economic figures released Friday showed that the GDP shrank by 1 percent in the second quarter of 2009, less than the 1.5 percent predicted by many economists.

"This morning, the GDP revealed that the recession we faced when I took office was even deeper than anyone thought at the time. It told us how close we were to the edge," Obama said. "But the GDP also revealed that in the last few months, the economy has done measurably better that we had thought -- better than expected."

The stimulus and recovery bill, along with other measures taken by the administration, Obama said, "have helped us put the brakes on the recession," pointing to efforts to help homeowners, spur lending for families and small businesses, tax cuts and extensions to unemployment benefits.

However, Obama noted that unemployment was still worse than had been initially projected.

"I realize that none of this is much comfort to those Americans who are still out of work and struggling to make ends meet," Obama said. "And when we receive our monthly jobs report next week, it's likely to show that we're still continuing to lose far too many jobs."

He added, "As far as I'm concerned, we won't have a recovery as long as we keep losing jobs. And I will not rest until every American who wants a job can find one."

But economic growth is an essential precursor to job creation, Obama said.

"Today's GDP is an important sign that the economy is headed in the right direction and that business investment, which had been plummeting in the last several months, is showing signs of stabilizing," he said. "This means that eventually, businesses will start growing and they'll start hiring again. And that's when it will truly feel like a recovery to the American people."

Obama urged the American people to have patience, saying that recovery may take "many more months." He also emphasized the need to transform the economy in to one of "robust growth" based on a trained workforce and clean energy.

"I will continue to work every single day and take every step that's necessary to make sure that happens," he said. "I also intend to make sure that we don't return to an economy where our growth is based on inflated profits and maxed-out credit cards -- because that doesn't create a lot of jobs."

Obama pointed to the "Cash for Clunkers" program, which offers tax credits to those who trade in old cars for newer, more fuel-efficient models, as an example of the approach the country needs to take.

The program has proved so popular and successful that the House voted Friday to add another $2 billion to the program to keep it from running out of money months before it was scheduled to be brought to a close.

"This gives consumers a break, reduces dangerous carbon pollution and our dependence on foreign oil, and strengthens the American auto industry," Obama said. "I'm happy to report that it has succeeded well beyond our expectations and all expectations, and we're already seeing a dramatic increase in showroom traffic at local car dealers."

He added, "I am guardedly optimistic about the direction that our economy is going. But we've got a lot more work to do. ? This administration will not rest until the movement that we're seeing on the business side starts translating into jobs for those people and their families."
President Barack Obama said Friday's gross domestic product figures show that the $787 billion economic recovery and stimulus bill passed earlier this year is succeeding in slowing the nation's recession. The economic figures released Friday showed that the GDP shrank by 1 percent in the second quarter of 2009, less than the 1.5 percent predicted by many economists.

(RTTNews) - After the first days of talks in the U.S.-China Strategic and Economic Dialogue, U.S. officials told reporters that initial sessions had gone well, but not to expect substantive agreements in this series.

David Loevinger, senior coordinator for China affairs at the Treasury Department, said that the economic track discussions had brought all of the senior ministers dealing with economic concerns from China to meet with their counterparts including Treasury Secretary Timothy Geithner, Federal Reserve Chairman Ben Bernanke, U.S. Trade Representative Ron Kirk and Larry Summers, head of President Obama's council of economic advisors.

Loevinger said that both sides had been struck by the similarity of their nations' responses to the global financial crisis.

"It's been very clear how the crisis has kind of highlighted and reinforced how interdependent our two economies are," he said. "The U.S. and China, in some ways, have acted more like each other than many of the other major economies. In particular, both the U.S. and China have put in place a very aggressive fiscal and monetary stimulus policies."

He added, "Both sides talked about the encouraging signs that they're seeing in both places. The stimulus policies are starting to take effect, but it was very clear that neither side was complacent at all."

Both U.S. and Chinese officials also agreed on the need for "structural reforms to rebalance their economies" Loevinger said, referring to U.S. efforts to shift to a clean energy economy and Chinese efforts to promote more domestic consumption to reduce their reliance on exports to the U.S.

Loevinger said the tone of the economic meetings was "very focused and serious," adding that White House Budget Director Peter Orszag had underscored to the Chinese the administration's commitment to bring fiscal deficits down to sustainable levels.

U.S. officials also stressed their support for China's efforts to be brought on to the boards of a broad range of global financial institutions that were created in a very different era, Loevinger said.

"Both sides I think agreed that these institutions need to be modernized to reflect the rise of China and other dynamic emerging economies," he said.

However, a senior State Department official said that while the talks were going well the goal of the meeting was more to set the stage for future action rather than make specific progress at this week's sessions.

"Very constructive, very candid discussion," he said. "This is our effort to identify and then pursue a broad range of common interests with the Chinese."

He added, "We're going to spend most of our time getting to know each other in this session, in this round. We're going to spend a lot of time trying to identify those common interests and between now and the next Strategic and Economic dialogue we're going to try and devise some concrete ways of going after those common interests."

Other discussions had impressed on the Chinese the importance that the U.S. places on global efforts to cut carbon dioxide emissions to fight global warming, said Todd Stern, a U.S. special envoy on climate change.

"I think that they do see this as an issue that is of very significant importance, as a substantive matter, but also in the U.S.-China bilateral relationship and increasingly something that's going to be important for the way that they are perceived by the rest of the world," he said. "I think that is sinking in at a very high level."

Stern said he was hopeful that through incremental progress the U.S. and China could reach some emissions deal in advance of an upcoming summit in Copenhagen, Denmark, based on the framework that industrialized nations would reduce their emissions below a certain, fixed level, while emerging nations' goals would be based on their projected increase of emissions should they not act.
After the first days of talks in the U.S.-China Strategic and Economic Dialogue, U.S. officials told reporters that initial sessions had gone well, but not to expect substantive agreements in this series. David Loevinger, senior coordinator for China affairs at the Treasury Department, said that the economic track discussions had brought all of the senior ministers dealing with economic concerns from China to meet with their counterparts including Treasury Secretary Timothy Geithner, Federal

(RTTNews) - New Zealand's trade deficit grew faster than expected in June.

Statistics New Zealand reported Tuesday that the country's trade balance for the month was NZ$417 million. The figure represented 13.1 percent of exports.

Most economists were forecasting a surplus of NZ$215 million, following an upwardly revised surplus of NZ$907 Million in May.

Exports for the month were valued at NZ$3.2 billion, a decrease of NZ$395 million or 11.0 percent from the month before.

Import values totaled NZ$3.6 billion, down NZ$192 million or 5.1 percent on month.

For the three month period through June, the trade balance was a deficit of NZ$217 million, representing 2.1 percent of exports.

Exports for the quarter were down 5.4 percent while imports were down 3.4 percent.

(RTTNews) - The Conference Board's Leading Economic Index for Australia declined in May, the first drop after three months of increases.

The board said its Leading Index declined 0.1 percent, thanks largely to lower building approvals and exports of rural goods.

The Leading Index now stands at 113.0.

The Coincident Index, which measures current economic activity, increased 0.3 percent, with a continued rise in retail trade boosting the figure.

The Coincident Index now stands at 112.4.

The Board said the rate of decline in the Leading index continued to slow in May, while the strengths among its components have grown more widespread.

(RTTNews) - The results of Albania's parliamentary elections announced Monday by State Election Commission indicated that Prime Minister Sali Berisha's Democratic Party and its coalition partners have won enough seats to form a government.

While the Democratic Party won 68 seats in the country's 140-seat parliament, their coalition partners Republican Party and the Party of Democratic Integration won one seat each. Meanwhile, the opposition Socialists and an ally manged to win only 66 seats.

Though the ruling alliance won enough seats in the general election to form a government, it fell one seat short of a majority. They made up the required numbers by forming an alliance with the Socialist Movement for Integration, a small leftist party that won four seats.

The newly formed alliance, the four-party coalition, consisting of the Democrats, Republican Party, the Party of Democratic Integration and Socialist Movement for Integration, now has secured 74 seats in the new parliament.

The announcement of the final results of the June 28 vote was stretched by a lengthy recount, prompted by opposition allegations that the elections were rigged to ensure victory for the ruling coalition. However, the Democrats have denied any wrongdoing.

In a preliminary report released earlier in the month, international election monitors had criticized the vote, stating that there were irregularities in the poll. They also alleged that political interference delayed the vote count. The monitors are due to submit a final report on the election and the counting process in eight weeks' time.

The election was considered a critical test to Albania's aspirations of joining the European Union. Experts say that the doubts regarding the conduct of the poll and the ballot counting process could seriously hurt Albania's EU accession ambitions.

(RTTNews) - Business confidence in Australia soared in the 2nd quarter to its highest levels since the start of the world economic crisis.

The latest National Australia Bank business confidence survey showed an index reading for Q2 of minus-four points, an improvement of 20 points from the previous quarter.

The accompanying business conditions index improved 11 points or minus 9.0 from the Q1 level of minus 20.

NAB economists said the readings showed "significant" improvement for both near and long term business operations. "Current expectations for the next 12 months are the lowest since mid 1991 and imply further deterioration in business outcomes and capital spending over the next year," they said.

NAB said its forecast for Australia's gross domestic product in 2009 remains unchanged at a contraction of 0.5 percent.

(RTTNews) - Tuesday, a report by the Bank of Korea said the manufacturers' confidence rose to 81 in July from 77 in the previous month. At the same time, the forecast for August climbed 2 points to 80.

Among the non-manufacturers, the confidence index remained unchanged at 76 in July from June. Moreover, the expectations for August also remained unchanged, at 78.

On a seasonally adjusted basis, the manufacturers' confidence improved by 8 points to 85 in July, while the non-manufacturers' confidence grew 2 points to 78.

Himalayan News Service

KATHMANDU: The gold market this week closed on Friday at Rs 23,920 per 10 gram — Rs 345 more than Sunday’s opening price of Rs 23,575 per 10 gram.
According to Nepal Gold and Silver Dealers’ Association (NEGOSIDA), the demand for gold in the international market is increasing rapidly and pushing up the gold price even in the domestic market. Gold per ounce in the international market on Sunday was $913, and which on Friday priced at $937 per ounce in the international market.
Gold opened at Rs 23,575 per 10 gram on Sunday and gained Rs 45 to reach Rs 23,620 on Monday. It remained at the same price on Tuesday. On Wednesday, it rose by Rs 85 to reach Rs 23,705 per 10 gram. Thursday saw another increase of Rs 105, with gold going up to Rs 23,835. The domestic market for gold closed at Rs 23,920 per 10 gram.
Meanwhile, silver opened at Rs 356 per 10 gram on Sunday. However, with a fall of Rs 6 it priced Rs 350. Silver continued to remain at the same price till Wednesday. A slight rise of Rs 3 was observed with silver being traded for Rs 353 per 10 gram on Thursday. Silver closed at Rs 353 per 10 gram on Friday.

International gold price rising?

COLORADO: Suddenly the pressure from China to change the world’s monetary order is pressing. At the G-8 China asked for the forum to debate proposals for a new global reserve currency! They were largely ignored! China’s rising presence in the global economy ($2 trillion reserves now) and the threatening weakness of the US dollar is prompting China to act in this way and with speed. Not only the Chinese but the French finance minister and Central Bank president called for greater currency stability and a system to avoid piling up currency reserves as we see with the dollar. It is clear that more countries are objecting to the debasement of the US dollar through Trade deficits and Quantitative Easing. In March, the People’s Bank of China (PBoC) governor, Zhou Xiaochuan’s proposed that the Special Drawing Right, a synthetic currency, (but one aimed at being a basket of the world’s most traded currencies) be used as an international reserve currency that’s delinked from sovereign nations. PBoC said, “the IMF should expand the functions of its unit of account, Special Drawing Rights.” — Agencies

By Brian Swint

July 19 (Bloomberg) -- The British economy will shrink 4.4 percent in 2009 before recovering in 2010, Ernst & Young’s Item Club will say tomorrow.

The forecast by the research group, which uses the same economic model as the U.K. Treasury, is worse than the 3.5 percent contraction predicted in April. Tomorrow it will also revise up the prediction for 2010 to show the economy expanding 0.5 percent instead of shrinking 0.1 percent.

U.K. gross domestic product plunged by the most in a half- century in the first quarter, prompting the central bank to cut interest rates to a record low and start buying assets with newly created money. Bank of England Deputy Governor Charles Bean said last week that the economy may return to quarterly growth by the end of this year.

“The economic patient has been in trauma, but thanks to the paramedics at the Treasury and the Bank of England, who pumped billions of pounds worth of medicine into the economy, the patient has been stabilized for now,” Item Club Chief Economic Adviser Peter Spencer will say in a statement. “But it remains unclear how quick and complete recovery will be and there is still a serious chance of a relapse.”

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.

Compared to some of its liquid counterparts, the euro saw relatively staid price action this past week. Fundamental traders can thank the market’s interest in earnings and burgeoning financial troubles which kept traders’ focus on those currencies with more blatant connections to risk appetite. However, the euro is certainly not immune to these underlying drivers; and we will likely see the euro crowd react to these influences more readily going forward.

Impressive rallies in the S&P 500 left the US Dollar lower against all major currencies except the Japanese Yen, but a relative sense of unease across financial markets highlights risks of a major USD bounce. US and European equity indices finished the week anywhere from 6-8.5 percent above their previous close—good for a 2000-3000% annualized rate of return. Early-week moves came on impressive earnings results from Wall Street titan Goldman Sachs and relatively benign economic data. It is easy to claim, however, that recent developments are unlikely to sustain such an impressive rate of returns. A relatively empty week of economic event risk ostensibly limits volatility expectation in the days ahead, but traders should keep a close watch on several key earnings reports and effects on the S&P 500 and US Dollar.

The US currency remains in a wide and choppy range against the Euro and other key currencies, and it may take a fairly significant shift in financial market risk sentiment to break the dollar from its trading channel. Had we known a week ago that the S&P 500 would break to fresh 30-day highs, we may have claimed that the EUR/USD would similarly break to fresh medium-term peaks. Yet forex markets clearly had other things in mind—constraining the heavily-traded currency pair to its two-month wedge formation. Consolidation patterns typically lead to noteworthy breakouts, but a continued downtrend in volatility expectations gives little reason to believe such a break will come in the week ahead. Indeed, the DailyFX 1-week currency volatility currently stands near 12-month lows.

The obvious question remains: What could break the US Dollar from its medium-term trading range? In short, there is no real way to know. Our natural suspicion is that it will take a substantial deterioration or improvement in financial market risk appetite to break the EURUSD below 1.3700 or above 1.4300. The rolling correlation between the EURUSD and US S&P 500 continues to trade near record-highs—emphasizing the US Dollar’s sensitivity to the key risk barometer. Equity markets remain similarly linked to the trajectory in commodity markets; the S&P – Reuters CRB Commodities Index correlation likewise trades near all-time highs. Increasingly clear connections across ostensibly unrelated asset classes underline the risk that a tumble in one will lead to sympathetic moves in another.

It remains critical to monitor the trajectory of key financial market health indicators and their effects on the US Dollar. As we continue to argue, noteworthy deterioration in financial market risk sentiment will likely be the spark to force major US Dollar rallies. Absent the correction, the Euro/US Dollar currency pair may continue to trade in a progressively narrower range.

A lackluster week of economic event risk left the Euro almost exactly unchanged against the US Dollar, and it seems that the EURUSD could remain directionless absent a material shift in sentiment across financial markets. Positive German and broader Euro Zone economic data had relatively little effect on the euro’s trajectory.

Though price action for the world’s reserve currency remained extraordinarily volatile this past week; the heightened activity wouldn’t translate into direction. Aside from the Japanese yen, the dollar’s exchange rates with its major counterparts were ultimately little changed from the previous Friday’s close, reflecting a general lack of market-moving economic data and a tempered interest in risk appetite as the G8 deliberated on the path the world’s financial leaders will take in tending to the global recovery. Looking ahead, the dollar will start the new week in a relatively tight range with its most liquid pairings, looking for the fundamental spark that can encourage a breakout and reignite a trend. What could be that motivating factor? There are more than a few notable indicators populating the docket, fine tuning forecasts for the pace of recovery; but as usual, the true driver will likely come through sentiment and risk appetite.

Over the past month, risk appetite has leveled off and is even threatening to retrace the rally in optimism that began back in March. There are two considerations here for those trading the dollar. First, determine what is will drive sentiment; and then determine how the greenback will respond to the shift. It shouldn’t come as a surprise that the currency’s reaction will depend on what is moving the market. Should the global financial markets be thrown into panic, the dollar will take on the title of safe haven. On the other end of the scale, if there is a broad recovery in investor sentiment, it will be a more discriminating scale. Looking out over the coming week, there are few critical events scheduled – but this sort of thing usual comes out of the blue. More likely, the market’s bearing will feed off bigger trends. Carry over from the G8 meeting over the second half of this past week has increased the rivalry to be the first country to see positive growth and financial stability. In its comments, the group suggested there were early signs of economic “stabilization,” yet there were still hurdles and the commitment would remain with “fiscal sustainability.” This has been the motto for a few months now which only further breeds speculation. Should the calls to recapitalize “viable” banks and deal with distressed debt be taken seriously, the US is already ahead of the curve. However, beyond the short-term, America’s budget deficit dwarfs most of its counterparts; and policy officials remained staunchly opposed to moving on to the next step for a recovery – the government’s graceful exit from the financial markets.

But, when the financial seas are quiet and speculation over some other region is accelerating its exit strategy is settled, the fundamental crowd will turn back to benchmarking the United States’ relative pace of economic recovery. It is important to remember that it doesn’t necessarily matter how quickly one economy returns to positive growth or its pace thereafter. What is important is whether the US is going to pull itself out of recession and push up the throttle on expansion before its global counterparts. For this purpose, we have a slew of economic releases filling out the economic calendar. The most encompassing report to cross the wires will be the FOMC minutes. While their multi-year growth and inflation forecasts are not expected to be updated until the minutes released in August; this will nonetheless provide the short-hand version of their opinion on growth and financial markets. Less comprehensive – but more likely to stir volatility – are advanced retail sales, industrial production and housing starts. These three indicators will offer a status report on three of the most essential regions of growth. Also, though it may be under the radar, an eye should be kept on the monthly budget. The government’s ability to fund its stimulus efforts and the amount of debt they ultimately take on are critical at this point. – JK

Though price action for the world’s reserve currency remained extraordinarily volatile this past week; the heightened activity wouldn’t translate into direction. Aside from the Japanese yen, the dollar’s exchange rates with its major counterparts were ultimately little changed from the previous Friday’s close, reflecting a general lack of market-moving economic data and a tempered interest in risk appetite as the G8 deliberated on the path the world’s financial leaders will take in tending to the global recovery.

By Lisa Twaronite



The dollar was higher against most other major currencies in Asian trade Friday, taking its cues from rising risk aversion as most stock markets across the region traded with a weaker tone.



The dollar bought 93.03 yen, slightly up from 92.99 yen in late North American trading on Thursday, holding well above a more-than-four-month low of 91.81 hit Wednesday.



"The correlation between risk aversion and currencies has decreased over recent weeks. We continue to expect risk aversion to play an important role in driving currencies, but it will not be as dominant a factor as it has been over the past year," said analysts at Calyon



"Our expectations of improved risk appetite over the coming months point to further U.S. dollar weakness," they said in a research note.



The dollar index (DXY), a measure of the greenback against a trade-weighted basket of six major currencies, was at 80.181, up from 79.879 in late North American trading on Thursday.



The euro bought $1.3963, down from $1.4036 late Thursday. The British pound was at $1.6282, down from $1.6338 late Thursday.



The Australian dollar bought 78.11 U.S. cents, down from 78.46 U.S. cents Thursday.



On the data front, Japan's domestic corporate goods price index, the nation's benchmark measure of wholesale prices, fell a record 6.6% in June from the year-ago period, the Bank of Japan said Friday. The report had a muted effect on currency trading, but suggested that deflationary pressures persist in Japan.



The Bank of Japan is scheduled to hold a regular policy meeting next week, and could extend some of its programs designed to add liquidity to the nation's financial markets.

(RTTNews) - An index measuring the prices of domestic corporate goods fell 6.6 percent on year in June, the Bank of Japan said on Friday, marking the fastest pace of decline on record.

Analysts had been expecting a fall of 6.4 percent on year following the revised 5.5 percent decline in May. Originally, the decline had been reported at 5.4 percent.

On a monthly basis, the prices for corporate goods eased 0.3 percent versus expectations for a 0.1 percent decline. The May reading was revised from -0.4 percent to -0.5 percent.

(RTTNews) - Japan's corporate goods prices dropped by the steepest year-over-year pace on record in June, mainly due to a dip in petroleum and coal prices and the prices of scrap and waste products, a report by the Bank of Japan showed Friday.

The corporate goods price index dipped 6.6% year-on-year in June, after falling a revised 5.5% in the previous month, revised from a 5.4% drop. Economists expected prices to fall 6.4%. This was the also the sixth consecutive month that producer prices fell.

In June, petroleum and coal product prices dipped 41.7%, while that of scrap and waste products fell 60.6%. Double digit declines were also seen for chemicals and related products as also for non ferrous metals.

Month-on-month, the corporate goods prices were down 0.3% in June, slower than a revised 0.5% decline in the preceding month, but faster than economists' estimates of a 0.1% drop. The producer prices on a monthly basis have been declining continuously since September last year.

Iron and steel products contributed to a 0.16 percentage points decline in the prices month-on-month, the largest negative contribution among the commodity groups. Iron and steel prices were down 2.5%. Utility prices fell 3.1% and subtracted 0.15 percentage points from the index. Moreover, processed foodstuffs, electrical machinery and equipment made negative contributions. However, petroleum and coal products, scrap and waste as also non ferrous metals made positive contributions.

Consumer prices are also seeing a deflationary trend. Reflecting the weakness in the economy, consumer prices in the economy dropped 1.1% annually in May, sharper than a 0.1% drop in the preceding month, the Ministry of Internal Affairs and Communications said last month. At the same time, the core consumer prices, excluding food, dropped at a record pace of 1.1% in May.

Moreover, the Ministry said the jobless rate in the economy was 5.2% in May, which is the highest level since September 2003, following the 5% rate in April.

However, there were signs that the worst was over for the Japanese economy as the Bank of Japan upgraded its regional economic assessment for the first time in three years. The central bank said economic conditions in the economy continued to remain severe, but the pace of deterioration had slowed.

The bank said developments in inventory adjustments helped increase exports and production, although they remained at a low level. Further, the central bank said the financial system had become calmer, reflecting an improvement in the commercial paper and corporate bond markets.

Meanwhile, a report from the Cabinet Office also showed signs of improvement in the economy. The leading index, measuring signs of future economic activity climbed to 77 in May from 76.2 in April. The coincident index increased to 86.9 from 86 in the preceding month.
Japan's corporate goods prices dropped by the steepest year-over-year pace on record in June, mainly due to a dip in petroleum and coal prices and the prices of scrap and waste products, a report by the Bank of Japan showed Friday.

(RTTNews) - Pakistani President Asif Ali Zardari's confession that Islamabad created and nurtured Islamic terrorist groups for "short-term tactical objectives" has vindicated India's stand that the neighboring soil was being used for launching terror attacks on India, said foreign minister S M Krishna in Parliament Thursday.

Zardari's confessions came months after Pakistan admitted that Ajmal Amir Kasab, the lone terrorist caught alive, was indeed its citizen after denying it initially. Prior to this Pakistan never admitted to its nationals being involved in terrorist attacks in India.

"We have got some kind of confession from the highest authority of Pakistan. To that extent, India's stand has been vindicated in the eyes of the world. All through, India had been saying that the Pakistani soil was being used for attacks on India repeatedly," Krishna said in Rajya Sabha (Upper House) during a discussion on his suo-motu statement on "significant developments in the neighborhood".

"Grudgingly, Pakistan has accepted that terrorist attacks emanated against India from its soil. I would not say they were state-sponsored or engineered," he said, adding, now it's the responsibility of the government there to stop these attacks.

"If peace in the region is to be established ? and we have to lead a path of growth and prosperity, terror infrastructure has to be dismantled and perpetrators of terrorism have to be brought to justice. I hope Pakistan will dismantle terror infrastructure created on its soil."

Days before foreign secretaries and prime ministers of India and Pakistan are due to meet in Egypt, Krishna took a tough stand on terrorism emanating from Pakistani soil, also laying out bench marks for the talks next week.

Krishna emphasized that "terrorism cannot be fought selectively, it will have to be fought across the board", indicating Pakistan would have to take action against anti-India groups in the same way as it has done against Taliban.

In his statement, he said, "It is the responsibility of the government of Pakistan to take all such steps as are necessary to address this issue and expose and take action against the conspiracies and conspirators responsible for such attacks."

(RTTNews) - Boosted by stimulus spending, the prevailing low interest rate environment and signs of stabilization emerging in global economic conditions, the South Korean economy is expected to fare better than initially thought, according to Bank of Korea's latest estimates. In a communiqué, the central bank said Friday South Korea's GDP is expected to decline by 1.6% in 2009, with the economy expected to rebound in 2010 to show 3.6% growth.

The latest projections compare to the bank's earlier estimate for a 2.4% GDP decline in 2009 and 3.5% growth for 2010. The emerging Asian economy had grown at a 2.2% rate in 2008. In line with recent expectations of a small anemic growth in the second half of the year for most of the global economies ravaged by the U.S. subprime crisis and the credit crisis, Korea is also expected to see a 0.2% annual growth in the second half of the year after a steep 3.4% contraction in the first half.

Despite the relatively upbeat projections, the contraction expected for 2009 would make the economic performance the worst since 1998, a period hit hard by the Asian financial crisis, when the economy contracted 6.9%.

Incidentally, the Bank of Korea announced yesterday a status quo position on interest rates, as it held rates at 2% for the fifth straight month after reducing it by a cumulative 300 basis points since October 2008.

Dissecting the numbers that make up the GDP, the central bank noted that facilities investment is likely to take a severe beating, with the metric estimated to show 15.1% year-over-year decline. The predicament comes as no surprise, as the demand decline induced by the economic slowdown has severely impacted capacity utilization. That said, the bank expressed confidence that the decline will decelerate, given the government's unstinted support to improve the investment environment.

Private consumption is expected a show a 1.4% drop, as savings related to providence and the lagged improvement in income conditions may more than offset an improvement in consumer confidence, increases in asset prices and the stimulus-induced spending.

Exports are likely to decline by a more modest 2.8% compared to a 6.8% drop in imports. The improvement foreseen in global economic conditions should bode well for exports. Meanwhile, constructions investment, which held up even in the first half is expected to rise 2.2% for the whole of the year, as the government's expansion of SOC-Social Overhead Capital - investment more than offset lackluster residential and non-residential construction.

A rebound in facilities investment would set the stage for a return to positive growth in 2010. The bank expects facilities investment to rise by 13.6%, construction investment by 2.1%, private consumption by 2.6%, exports by 8.5% and imports by 9.8%.

After the economy lost about 160,000 jobs in the first half, the central bank expects job losses to mitigate to 70,000 in the second half of the year due to concerted efforts from the government to create jobs. The job losses for the whole of the year are estimated at 110,000. The unemployment rate is expected to touch 3.5% in the latter half of the year, a slowdown from a 3.8% rate in the first half.

Inflationary environment is expected to remain benign, as the overall consumer price inflation rate is estimated at 2.9% for 2008 and 3% for 2010, with the increase in 2010 attributed to a modest recovery in the domestic economy and upward pricing pressure exerted by higher oil prices. If the forecasts prove right, the inflation rate for the three year period between 2007 and 2009 will be at 3.4%, which is within the central bank's target of 3%, plus or minus 0.5%. The core consumer price inflation for 2009 is likely to be 3.5%. In comparison, consumer prices and core consumer prices rose by 4.7% and 4.2%, respectively in 2008.

On the fiscal side, the current account surplus is estimated at $29 billion in 2009, with the surplus for the second half likely to be come in at $8 billion compared with the first half's 21 billion euros. The Bank of Korea expects the current account surplus for 2010 to narrow to $7 billion due to a recovery in domestic demand.

Just like its global counterparts, the Korean government doled out stimulus packages to help the economy emerge out from the pandemic economic crisis. Since last year, the South Korean government has offered about $50 billion in fiscal stimulus and tax cut plans and sealed a $30 billion currency swap arrangement with the U.S. Federal Reserve to shield the country's economy from the global crisis.

It may be recalled that the South Korean government earlier in June raised its GDP forecast for 2009 to a 1.5% contraction from a 2% contraction it estimated earlier, although it held firm to its 2010 forecast for 4% growth.

Even as many of the developed nations saw a recession in the aftermath of the financial crisis, South Korea narrowly averted a recession by showing 0.1% growth in the first quarter. Technically, a recession is two straight quarters of GDP declines.
Boosted by stimulus spending, the prevailing low interest rate environment and signs of stabilization emerging in global economic conditions, the South Korean economy is expected to fare better than initially thought, according to Bank of Korea's latest estimates. In a communiqué, the central bank said Friday South Korea's GDP is expected to decline by 1.6% in 2009, with the economy expected to rebound in 2010 to show 3.6% growth.

(RTTNews) - India's Industrial production for May rose 2.7% on year from revised 1.2% growth in April, beating expectations, report media. Analysts estimated a growth of 1.4% in May.

Manufacturing sector output rose 2.5% in the month while mining and power generation grew 3.7% and 3.3% respectively.

(RTTNews) - Friday, a number of key statistical reports are due from European economies.

At 2.00am ET, wholesale price data for the month of June is due from Germany's Federal Statistical Office.

At the same time, the Statistics Finland would be releasing a report on building cost index for June and another report on manufacturing new orders for May. Industrial output data for May is also scheduled to release.

At 2.45am ET, French industrial and manufacturing output data is due from the INSEE. Economists forecast a monthly increase of 0.4% and an annual drop of 17% in manufacturing output and a 0.2% monthly fall in industrial production.

At the same time, French current account data and central government balance report for May are due.

Inflation figures for June is slated to be out from the Spanish statistical office at 3.00am ET.

Italian industrial production data is scheduled to release from the ISTAT at 4.00am ET. On a monthly basis, production is expected to fall 1.1%.

Half an hour later, U.K.'s Office for National Statistics is likely to release a report on industrial producer prices. Producer input prices are forecast to rise 0.8% month-on-month and to fall by 12.1% year-on-year.

Output prices are expected to grow 0.3% on a monthly basis, while it may fall .8% annually. Core output price index is likely to rise 0.2% month-on-month and 1.1% year-on-year.
Friday, a number of key statistical reports are due from European economies. At 2.00am ET, wholesale price data for the month of June is due from Germany's Federal Statistical Office.

(RTTNews) - Friday, a report by the Turkish Statistical Institute said the rate of capacity utilization in the manufacturing sector increased to 72.7% in June from 70.4% in the preceding month. Economists expected the rate to be 74%. A year ago, the rate stood at 82.3%.

The statistical office said shortage of demand, financial problems, shortage of raw materials and labor problems were the main reasons for working below full capacity.

Meanwhile, production quantity rose 5.8% in June compared to the previous month.

After a six-day selloff, the British Pound is finally attracting buyers. Fundamentally this market has been getting beat-up since June 30th when an economic report showed that the U.K. economy had its worst quarter since 1958. Since then there have been signs that the economy is improving. The service sector is beginning to show growth, housing prices have stabilized and inflation is running ahead of the Bank of England’s target.



Despite these small signs of recovery, the Bank of England announced early this morning that it had decided to leave interest rates at their historically low level of 50 basis points.



This news came as no surprise since investors do not expect the BoE to touch interest rates until it is absolutely sure that the U.K. economy is well on its way to recovery. Although these are small signs of a recovery, credit issues still exist with lending to businesses well down from recent peaks. Mortgage approvals are also down which is a common problem around the world.



Interest rates may not be an issue at this time, but rumors that the Bank of England would increase the level of funds available for quantitative easing helped trigger a sharp sell-off in this market since Sunday night. Quantitative easing, which is essentially the printing of money, is an economic program in which the central bank buys government assets. It is a very dangerous maneuver because it can lead to an inflationary environment which will lead to a debasing of the economy.



The GBP USD surged to the upside following the news that the Bank of England would refrain from increasing the amount of funds available for the purchase of government assets. This came as a surprise to traders who had factored in an increase in the amount of funds available for quantitative easing.



Technically, the British Pound is in a down trend, however it may be short-term oversold. This means that this market may retrace 50% of its recent break back to 1.6362 to 1.6452.



At this time the current up move looks like a simple counter-trend retracement. This means that this market is likely to attract sellers on the first test of the retracement zone at 1.6362 to 1.6452. Traders will have to watch this market carefully while this zone is being tested to determine if new shorts start to build positions.



It may take a couple of days to determine whether this market is going to resume the uptrend or start a serious retracement to the downside.



Please do not hesitate to contact us at 1-800-971-2440, with any questions.



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The euro tumbled against the yen and dollar overnight, falling to 130.44 and 1.3861, respectively. The equity markets are still the key drivers of foreign exchange movements with lingering questions over the global economic recovery and bouts of heightened risk aversion dictating sentiment.

The dollar was mixed in the New York session; firmer against the euro toward the 1.39-region and weaker versus the yen near the 94-figure. The dearth of US economic data out today will keep the focus on stocks, which were marginally higher in early Wednesday trading as earnings season kicks off in earnest.

The British pound rallied sharply in London trading, prompted by the results of the Bank of England’s monetary policy decision and sending cable above the 1.63-level. The BoE left interest rates unchanged at 0.5% and announced that it would maintain its current asset purchase plan at 125 billion pounds. The Bank said it would “review the scale of the program again at its August meeting, alongside its latest inflation projections”.

The dollar lost ground against the euro and the sterling, relinquishing its gain from the previous session to fall to 1.4071 and 1.6379, respectively. The data released earlier included weekly jobless claims, wholesale sales and wholesale inventories. Weekly jobless claims improved to 565k, down from 614k a week earlier. The May wholesale inventories declined by less than estimated at -0.8% and improving from the April reading of -1.4%.

The central bank in the U.K. kept the benchmark interest rate unchanged at 0.50% in June, and maintained its GBP 125B asset purchase program in an effort to stimulate the ailing economy. The Bank of England minutes showed the board voted unanimously to carry out its current policy objects in place, with the MPC stating ‘that the second-quarter decline in consumption would be less than the committee had previously anticipated.’

The euro tumbled against the yen and dollar overnight, falling to 130.44 and 1.3861, respectively. The equity markets are still the key drivers of foreign exchange movements with lingering questions over the global economic recovery and bouts of heightened risk aversion dictating sentiment.

The dollar was mixed in the New York session; firmer against the euro toward the 1.39-region and weaker versus the yen near the 94-figure. The dearth of US economic data out today will keep the focus on stocks, which were marginally higher in early Wednesday trading as earnings season kicks off in earnest.

GMT Ccy Events Actual Consensus Previous Revised
1:00 AUD Consumer Inflation Expectation Jul 3.20% -- 2.80%
1:30 AUD Employment Change Jun -21.4K -20.0K -1.7K -5.1K
1:30 AUD Unemployment Rate Jun 5.80% 5.90% 5.70%
6:00 EUR German Trade Balance (EUR) May 9.2B 9.4B
6:00 EUR German CPI M/M Jun F 0.40% 0.40%
6:00 EUR German CPI Y/Y Jun F 0.10% 0.10%
8:00 EUR ECB Publishes Monthly Report Jul -- --
8:30 GBP Visible Trade Balance (GBP) May -6.7B -7.0B
11:00 GBP BoE Interest Rate Decision 0.50% 0.50%
12:15 CAD Housing Starts Jun 130.0K 128.4K
12:30 USD Initial Jobless Claims 608K 614K
14:00 USD Wholesale Inventories May -1.00% -1.40%
14:30 USD Natural Gas Storage -- 70B

U.S. Dollar Trading (USD) enjoyed gains against most currencies as Oil tumbled to $60 a barrel and risk currencies were pared back. Wall St. managed to finish slightly stronger but the damage done via the Yen and it crosses as market volatility surged. US Consumer Credit came in at -3.2B vs. -9.8B forecast in May. Crude Oil closed down $2.68 at $60.14. In US share markets, S&P ended -1.47 points (-0.17%) at 879.56, NASDAQ ended 1 points (0.06%) at 174 and DOW JONES ended -161.27 points (-1.94%) at 8163.60. Looking ahead, Weekly jobless claims forecast at 605k vs. 614k previously.

The Euro (EUR) came under pressure as EUR/JPY capitulated but held up better than other currencies against the USD. Very strong May German Industrial Production at 3.7% vs. 0.5% previously added to the strong Factory Orders seen yesterday. Support at 1.3830 from Asian Central Banks helped reverse the slide. Q1 GDP was revised lower to 2.5% as expected. Overall the EUR/USD traded with a low of 1.3831 and a high of 1.3940 before closing at 1.3880. Looking ahead, June German CPI forecast at 0.4% vs. -0.1%. May Trade Balance forecast at 9Bn.

The Japanese Yen (JPY) was the major mover as the USD/JPY broke through support at 94, 98.35 and 93.50 in capitulation like trading hit 91.80. All the crosses were crushed 4-5% lower even as the US stock market recovered. A large bounce did eventuate at the end of the day but is technically extremely oversold on multiple pairs. Overall the USDJPY traded with a low of 9178 and a high of 94.76 before closing the day around 92.95 in the New York session.

The Sterling (GBP) was one of the hardest hit by the Yen strength with the GBP/JPY falling over 4 yen on the USD/JPY move and the GBP/USD being dragged through 1.6000. The pair managed to reclaim the 1.60 figure but the market is fragile and may come under more selling of Oil falls further. The market is focused on the Quantitative Easing measures the BOE may discuss post rate decision today. Overall the GBP/USD traded with a low of 1.5982 and a high of 1.6142 before closing the day at 1.6060 in the New York session. Looking ahead, BOE announcement widely expected to hold at 0.5%.

The Australian Dollar (AUD) was sold aggressively as the AUD/JPY broke lower and the bottom of the month long range at 0.7780 was broken to the downside. AUD had received support from better economic data but this was overshadowed by concerns about Global growth and slumping commodities. Overall the AUD/USD traded with a low of 0.7722 and a high of 0.7894 before closing the US session at 0.7790. UPDATE Australian Employment for June is forecast at -21.4k vs. -25K forecast and 5.8% vs. 5.9% Unemployment Rate.

Gold (XAU) finally broke out of its recent range to the downside with $900 the natural target on the downside in Oil continues lower. Overall trading with a low of USD$904 and high of USD$927 before ending the New York session at USD$909 an ounce.
Currency Sup 2 Sup 1 Spot Res 1 Res 2
EUR/USD 1.3749 1.3827 1.3885 1.4051 1.4201
USD/JPY 91.33 92.52 92.75 93.86 95.46
GBP/USD 1.5803 1.5986 1.6060 1.6346 1.6546
AUD/USD 0.7630 0.7790 0.7785 0.8038 0.8155
XAU/USD 895.00 906.00 909.00 913.00 934.00
Euro 1.3885

Initial support at 1.3827 (Jun 22 low) followed by 1.3749 (Jun 16 low). Initial resistance is now located at 1.4051 (July 7 high) followed by 1.4201 (Jun 1 high)
Yen 92.75

Initial support is located at 92.52 (Feb 20 low) followed by 91.33 (Feb 16 low). Initial resistance is now at 93.86 (May 22 high) followed by 95.46 (Jul 7 high).
Pound 1.6060

Initial support at 1.5986 (Jun 9 low) followed by 1.5803 (Jun 8 low). Initial resistance is now at 1.6386 (Jul 6 high) followed by 1.6546 (July 1 Level).
Australian Dollar 0.7785

Initial support at 0.7780 (Previous range low) followed by the 0.7630 (May 19 low). Initial resistance is now at 0.8038 (Jul 7 high) followed by 0.8155 (Jun 30 high).
Gold 909

Initial support at 906 (May 8 low) followed by 895 (May 8 low). Initial resistance is now at 913 (Jun 23 high) followed by 934 (Jul 3 high).

Gold prices are falling at the moment as the dollar remained firm, sapping gold's appeal as an alternative investment, and on easing inflation fears as oil prices weakened. Gold has been hurt by the dollar's strength as investors have recently preferred the U.S. currency to bullion as a safe store of value amid fears over the economic outlook. 'At the moment, gold prices have been driven heavily by the movement in the U.S. dollar, but if we get down toward $900, we might see some opportunistic buying,' said David Moore, a commodities analyst at the Commonwealth Bank of Australia. Gold is trading at $920 as of 9:18am, London Time. Gold's Pool-Position is 42% Long, meaning that most Finotec clients are Selling the precious metal.

Spot Gold prices fell to a new two-week low lunchtime Wednesday in London, dropping 1.5% from this week's start to bounce off $918.50 an ounce. US stock futures meantime held flat after Tuesday's sell-off, while stock markets across the Far and Middle East ended the day lower.

Written by Easy Forex | Wed Jul 08 09 22:23 ET
Gold (XAU) finally broke out of its recent range to the downside with $900 the natural target on the downside in Oil continues lower. Overall trading with a low of USD$904 and high of USD$927 before ending the New York session at USD$909 an ounce.

Commodity prices continued to sink deeper Wednesday amid renewed concerns about global economic recession. The energy complex got the biggest hit with crude oil plunging -4.4% to close at 60.14 while gasoline and heating oil diving -5.7% and -3.9% to 1.63 and 1.54, respectively. Although the black gold's selloff stabilizes and recovers slightly after hitting 60.01 (currently trading at 60.8), we find the level can just provide temporary support and further decline after consolidation is likely.

The inventory report by the US Energy Department was generally bearish. Although -2.9 mmb decline in crude inventory came in higher than consensus and API's estimates, Cushing stock rose for the second consecutive week and by an impressive +1.6 mmb. We worry that, as the peak driving season ends and refinery facilities enter the maintenance season, crude stockpile will set to increase in coming weeks.

Gasoline inventory came in higher-than-expected as high gasoline price continued to motivate refiners but discourage consumers. 4-week average gasoline demand was down -1.4% yoy. We believe the high margin is unsustainable and recommend selling short on every rebound in gasoline crack.

Condition for distillate was disastrous. Its inventory level rose +3.74 mmb to 158.74 mmb, the highest since 1985. At the same time, its demand reached the lowest level since mid-2003 with 4-week average falling -21.6% yoy. Same as gasoline, we are bearish on distillate crack.

Natural gas is expected to have gained +85 bcf to 2806 bcf in storage in the week ended July 3. Gas price plummeted -2.2% to 3.35 Wednesday as driven by broad-based decline in energy and commodity prices. Its fundamentals remain weak as industrial consumption is expected to fall -8.2% while total demand will decline -2.3% to 62.1 bcf a day in 2009.

OPEC revised down its forecasts for world oil demand by -5.7M bpd to 87.9M bpd for year 2013 as world economic outlook remains uncertain and recovery from global recession will only take place gradually, thus demand for crude should only 'rise slowing over the medium term and return to 2008 level by around 2013'. At the same time, the cartel's production will be reduced to 31M bpd by that time, compared with 31.2M bpd in 2008 as increase in Canadian oil sands and biofuels, together with stable non-OPEC crude and NGLs, will take up the balance.

While the market has expected discussions about 'exit strategies' at the G-8 summit, world leaders concluded that it's too early to 'exit' as world economy remains weak. Rather, more stimulus measures may be needed. Although IMF revised upward its economic forecasts in 2010, its trimmed inflation outlook as well as underlying comments still pointed to the fragility of world economy which was negative for risky assets including commodities.
IMF forecasts the world economy will contract -1.4% in 2009, down from -1.3% projected in April. However, in 2010, the lender expected it will grow by +2.5%, compared with +1.9% in April's estimate, as led by emerging countries including China while Europe will be lagging both the US and Japan. For advanced economies alone, GDP will contract -3.8% in 2009 before expanding +0.6% (April's projection: +0%) in 2010. For the US, the world's largest oil consumer, GDP is expected to contract -2.6% this year and then rise +0.8% in 2010.

Concerning inflation, the IMF forecast global CPI will increase +0.1% in 2009 and then rise to +0.9% in 2010. In its previous Outlook in April, it had forecast increases of +0.3% and +0.6% respectively. The Fund said that although there's small risk for sustained deflation, the risk of inflation remains subdued through 2010 due to the significant output gap.

Diminished inflation outlook, strength in dollar and weakness in commodity prices continued to drive precious metals lower. The benchmark contract for gold slipped to as low as 904.8 Wednesday before finishing the day at 909.3 (-2.1%). Others in the precious metal complex also got hammered with silver, platinum and palladium losing -2.8%, -3% and -2.7% to 12.85, 1101.8 and 234.1, respectively. While we see buying interest above 900, near-term outlook for gold remain skewed to the downside. USD rallied against major currencies except for Japanese yen as risk-averse investors sought safe investments. Against the euro, the greenback rose to 1.383 before retreating to 1.394. Against the pound, USD surged to 1-month high at 1.5984 before pulling back.

Dollar continues to attempt to strength in general as mixed data from US provides little inspiration to the markets. Finalized Q1 US GDP was revised up from -5.7% to -5.5% annualized contraction unexpectedly. GDP price index was unchanged at 2.8%. However, initial jobless claims unexpectedly climbed back to 627k. Continuing claims rose again to 6.74m. From Eurozone, industrial new orders dropped much more than expected by -35.5% yoy in April.

Dollar is back under pressure again as stocks and commodities rebound. Following the 172pts rebound in DOW, Nikkei opened higher today and is back to 9877, up 81 pts. Crude oil is back above 71 level after diving to as low as 61.37 earlier this week while Gold is also back above 944 level. Nevertheless, note that the outlook in greenback is still rather unclear. The developments in GBP/USD and AUD/USD are supporting new high in these pairs, i.e. new low in dollar. However, USD/CHF is still in favor to extend recent rebound from 1.0590. While some pull back might be seen in USD/CAD, the whole rise from 1.0784 is still in healthy shape. The outlook in EUR/USD is also mixed with somewhat 50/50 chance of breakout of this week's range on either side. Markets are still in search for direction.

Dollar falls further today as more reserve talk from China. PBoC said in the annual financial stability report release today that there is a need to create a "super-sovereign reserve currency" that's delinked from the economies of the issuers so as to "prevent the deficiencies in the main reserve currency". Without naming the dollar, the report also said that "an international monetary system dominated by a single sovereign sovereign currency has intensified the concentration of risk and the spread of the crisis." The bank also urged IMF to manage part of its members' FX reserves. However, some support is seen in early US session as commodity pares earlier gains. Crude oil reached as high as 71.29 earlier today but is back under 70 level while

It was a rather mixed week with sentiments flipped flopped a few times. Dollar weakened against most major currencies in general but remained in familiar range. Markets are still undecided on which way to push the greenback further. Euro staged a strong rebound against Swissy, thanks to another round of SNB intervention and also managed to gain some ground against higher yielders but there was also lack of follow through buying in general. Nevertheless, traders will be prepared for a breakout this week considering the list of important events including Non Farm Payroll, ISM, ECB and Japanese Tankan.

Dollar recovers as the week starts following comment from PBoC Governor Zhou that there are no "sudden changes" in China's stable foreign exchange reserve policy. Zhou emphasized that the policy aims at "liquidity, safety and returns." The dollar was sold off last Friday after PBoC called for a "super-sovereign reserve currency" that's delinked from the economies of the issuers in the annual financial stability report. Traders pare some speculation that China will be speeding up diversifications of its $1.95T reserve soon after today's comment from Zhou.

Dollar pares earlier gain as markets remains cautiously in range ahead of the key events later this week. Euro was lifted mildly in European session following release of generally better than expected business and consumer survey data. Sentiments across different components improved for the third consecutive months in Jun. Economic sentiments rose from 70.2 to 73.3. Industrial confidence was up from -33.2 to -31.9. Consumer confidence was up from -28.1 to -25.1. Services confidence also rose from -22.5 to -19.8. The overall sentiment index is also at highest level since November. Though, the data were not strong enough to suggest sustainable near term recovery in economic activity yet. Markets will likely remain cautious on Euro ahead of ECB meeting later this week.

Sterling is leading the breakout in forex markets today with GBP/USD taking out this year's high of 1.6617 and soars to as high as 1.6747 so far while strength of the pound is also clearly seen against Euro and Yen. While risk appetite is cited as the main driving force somewhere on the market, we're a bit skeptical as the rebound is Aussie is not as clear as in Sterling. On the other hand, while Crude oil breaches 73 level briefly, there is no comparable strength seen in Canadian dollar. Hence, while Sterling's strength is clear, as seen with recent resilience, some more evidence is needed to confirm broad based downside breakout of dollar.

Dollar strikes back in early US session, with the help from falling oil and gold prices, and rebounds against most major currencies. In addition, worse than expected consumer confidence data from US sends stocks back into negative territory, which in turn lifts the dollar further against commodity currencies. As noted earlier, while Sterling's rally earlier today was impressive, the strength in other major currencies, including Euro, Aussie and Loonie were not that apparent which cast some doubts about weakness of the greenback. Markets look indecisive for the moment and would likely continue to gyrate inside established range until Thursday's key events of ECB and NFP.

Risk appetite is driving the dollar lower in early US session as stocks rebound strongly after yesterday's fall. Dow opens higher and the development continues to indicate it has bottomed out in near term at 8259 last week. Rally in stocks provide some support to commodity and pressure the greenback in general. In addition, dollar is pressured by disappoint employment data released today even though the impact is somewhat offset by better than expected ISM report. Euro, and to a lesser extent, Sterling, are lifted by upside surprises in today's PMI manufacturing data. Some more downside might be seen in the greenback today. But after all, traders remain generally cautious and will likely keep major pairs in range ahead of tomorrow's key events of NFP and ECB.

Dollar recovers strongly on supportive comments from China again but after all, financial markets are generally indecisively mixed ahead of key events of ECB rate decision and US Non-Farm Payroll report today. In the currency markets, note that EUR/USD's rebound from 1.3747 is still looking corrective in nature. Meanwhile, yesterday's rebound in GBP/USD and AUD/USD was rather unconvincing and both pairs were held below this week's low. There isn't any follow through selling to send the greenback out of recent range yet but on the other hand, dollar is not decisive enough to have a reversal from recent decline. In other markets, Asian stocks are generally mixed even though DOW did have some nice recovery yesterday. Crude oil continue to hover around 70 level while Gold is also gyrating in range of 920 and 950. All eyes will be on today's key events for inspiration for some sustainable move.

Yen and, to a lesser extent, dollar are generally higher in early US session on risk aversion following the release of worse than expected Non-Farm Payroll report from US. The report showed deeper than expected -467K contraction of the job market in Jun, versus consensus of -375K. Though, prior month's data was revised up from -345k to -322k. The figure in Jun was indeed quite close to ADP number of -467k released yesterday. Unemployment rate, on the other hand, climbed less than expected to 9.5% in Jun. Higher yielders are generally lower as futures point to lower open in US stocks. Commodities are also pressured, in particular with Crude oil falling back to below 68 level again.

Dollar and yen were under much pressure in the early part of last week as optimistic investors sent global stocks higher. Economic data were generally positive, until the release of worse than expected ADP employment and then the disappointing non-farm payroll. NFP alone sent DOW -223pts lower to close the week near the low. Dollar and yen rode on the turn in investor sentiments and rebounded, additionally supported by weakness in commodities. But after all, major pairs are still staying in prior week's range and it needs something more drastic to trigger a breakout. Nevertheless, some large moves in the forex markets could be around the corner considering the technical developments in stocks and crude oil.

Japanese yen surges across the board as the week starts as risk aversion is back to be the theme of the markets. Aussie, Kiwi and Sterling are hardest hit in yen crosses which also dragged them lower against dollar. While Euro also weakens sharply against yen, it remain steady against the green back so far even though EUR/USD looks vulnerable. Nikkei dropped over -1.3% or -135 pts today while European indices are set to open lower. Crude oil dives through 65 level which further confirms the double top reversal pattern.

Japanese yen remains firm in early US session as risk aversion continues to dominate the markets. Yen's strength is seen across the board and in particular against AUD, GBP and NZD. Some stabilization is seen in early US session after release of stronger than expected ISM non-manufacturing index. However, today's sharp fall in yen crosses still carry some technical significance as the medium term trend line support are finally taken out in EUR/JPY, GBP/JPY and AUD/JPY which is building up the case for medium term rally in yen. Major global indices including Nikkei, FTSE 100, DAX, CAC 60, are down over 1% on concern of sustainability of recovery in the economy. Dow opens lower in early US session and dives to as low as 8211 level but recovers mildly. Nevertheless, the break of head and shoulder neckline support in Dow does suggest more downside ahead. Crude oil also falls to as low as 63.4 so far and remains pressured.

Major currencies recover against dollar and yen as markets stabilize following yesterday's late recovery in US stocks. Asian equities are mildly higher but lack clear momentum in the rebound yet. With some intraday levels taken out in dollar and yen crosses, some consolidation will likely be seen in near term. While reversal in crude oil is clear, the head and shoulder tops in DOW and S&P 500 are not confirmed by a close below neckline support yet. But after all, we'd expect risk aversion to continue to build up on summer doldrums and hence, more upside is favored in dollar and yen in general

Euro rebounds strongly today, boosted by combined effect of strong Germany data and rebound in stocks. Germany factory orders posted strong upside surprise today, showing 4.4% mom gain in May while markets expected a mere 0.5% rise. This was the third consecutive month of expansion and the fastest pace since June 2007. The data argues that German industrial production's deterioration may be coming to an end and worst of recession in the economy has passed. Major European stocks index also recovers mildly from yesterday's loss. Euro takes the lead to rebound against dollar and yen and is followed by strength in Aussie. Canadian dollar is also lifted by strong building permits data which rose 14.8% mom in May even though crude oil remains soft.

Yen and, to a lesser extent, dollar rise sharply today riding another round of risk aversion trades in the markets. Asia stocks followed yesterday's decline in US and fell broadly today while European stocks are also generally lower. Indeed MSCI world index dropped for fifth consecutive days and reaches the lower level since mid May. The case for reversals in global equities continue to build up as DOW finally closed below head and shoulder top neckline support yesterday and opens up the case for deep fall to 7389/7673 region at least. Crude oil is also moving away from mentioned double top neckline support and dipped to as low as 62.03 so far today.

Yen and dollar turns sideway in early US session after strong rally earlier today. With no important economic data from US scheduled, some sideway trading might be seen in the currency markets in US session. But after all, further rally in dollar and yen is expected in general. Recovery in US stocks at the open is so far mildly and did nothing to change the near term bearish view. Falling commodity prices are providing additional support to dollar and yen. And the next main focus will be on Crude Oil Inventory report which could trigger volatility in oil and thus stocks and currencies indirectly.

As expected the RBA decided to keep the cash unchanged at 3% as Australia's economic conditions have 'not been as weak as expected a few months ago while 'growth in China strengthened' which have positively impacted Australia.

After cutting the policy rate by 25 bps in April, the RBA has left interest rates unchanged at current level for the 3rh consecutive months. Decisions by policymakers have been unanimous as they saw diminished downside risks to the economic outlook. In the accompanying statement, the central bank said that 'conditions in global financial markets improving this year and action to strengthen balance sheets of key financial institutions under way'.

Concerning domestic economy, the RBA acknowledged a pick-up in housing credit demand and increase in housing prices. Although economic conditions improved faster than previously anticipated, the RBA still has its worries. 'Output has been sluggish and capacity utilization has fallen back to about average levels, with some further decline likely over the rest of the year. Weaker demand for labor is leading to lower growth in labor costs. These conditions should see inflation continue to abate over the period ahead'.

In the last paragraph, the RBA said that 'outlook for inflation allows some scope for further easing of monetary policy, if needed. In assessing how it might use that scope, the Board will continue to monitor how economic and financial conditions unfold and how they impinge on prospects for a sustainable recovery in economic activity'. Although the RBA has reserved the right to ease monetary policy further if necessary, we find the tone is less strong than previous meetings. In June, RBA stated 'Nonetheless, the prospect of inflation declining over the medium term suggests that scope remains for some further easing of monetary policy, if needed. In assessing how it might use that scope, the Board will continue to monitor how economic and financial conditions unfold, and how they impinge on prospects for a sustainable recovery in economic activity'. In May, the central bank said that 'In assessing whether further reductions in the cash rate are required over the period ahead, the Board will monitor how economic and financial conditions unfold, and how they impinge on prospects for a sustainable recovery in economic activity'. Comparing the change in tones in the 3 meetings, we increasingly believe that the current easing cycle in Australia has probably ended.

In fact, the most critical issue that will trigger another rate cut is employment condition. Thursday's report should show that Australia's unemployment rate have risen to 6% in June, compared with 5.7% in May and a surprising drop to 5.5% in April. The unemployment rate has soared by 1.48 percentage point in the last 12 months and it's likely that unemployment will continue to head higher over the rest of the year. However, the pace of increase should slow down and the RBA may refrain from cutting rate by counting on this point.

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The euro tumbled against the yen and dollar overnight, falling to 130.44 and 1.3861, respectively. The equity markets are still the key drivers of foreign exchange movements with lingering questions over the global economic recovery and bouts of heightened risk aversion dictating sentiment.

Story By:
Chartwhiz.com

Crude oil prices rallied early last week to new 2009 highs at $73.38 on dollar weakness and an attack on an oil pipeline by Nigerian militants, but failed to hold on to gains as the end of the 2nd Quarter ignited profit taking while a slew of bearish reports reversed momentum for the remainder of the week. Crude oil settled lower for the 3rd straight week at $66.73, down $2.43 from the prior week.

With oil rallying 41% for the 2nd quarter, it was not surprising for profit taking to come in. But the real story last week was a turn in the fundamentals. For starters, consumer confidence set the bear tone, falling to 49.3 in June, down from 54.8 in May as consumers grew more pessimistic about an economic recovery. This came as a surprise as analysts were expecting to see a rise to 55.5. The weekly inventory report added pressure to oil prices as supplies at Cushing rose 200,000 barrels to 28.6 million while gasoline and distillates posted larger-than-expected builds as demand for the products remains weak. To top things off, a disappointing jobs report sent the market tumbling to close the shortended week with 467,000 jobs lost in June vs. an expected loss of 325,000 jobs, a clear indication the economy is not yet improving. Additional selling came as traders sqaured off positions ahead of the long 4th of July holiday weekend.

The ‘fundamental reality’ appears to have set in as the 2nd half of 2009 begins and substantial evidence of an economic recovery is non-existent. The technicals gave us a heads up 2-weeks ago on the break of the major 10-week uptrend line while last week’s ‘double top’ rejection at the 2009 highs provides decisive evidence a correction is underway. The Bulls will continue to watch for dollar weakness and geo-political tensions to keep prices high, however, with lack of support from the fundamentals, rallies will likely be short lived.

own a bit, up a bit and then back down a bit. That's the story for the JPY crosses and I would suggest that the remainder of the session will be quiet. Technical resistance in the form of the previous bullish trendline in EUR/JPY is holding thus far. The major level to watch now is 94.50 in USD/JPY- if that level can be broken then many non-believers such as myself start to take notice of the bear argument.