Forex Exchange Morning Report (19/06/2012)

The favourable Greek election result lifted sentiment only briefly. The makeup of the coalition government remains unknown and there is scepticism Greece can meet even its revised fiscal targets. Moreover, the completed elections have served to shift focus onto Spain, its 10yr bond yield surging 45bp to a fresh record high of 7.29%. The G20 meeting offered little support, its draft communiqué offering nothing fresh on a grand European union plan. German Chancellor Merkel appeared to play to her electorate, saying Greece must stick to its reform plan. European stocks closed 1.2% lower (Spain down 3.0%), although the S&P500 is currently up 0.2%. The US homebuilders index is up 3.0% after a strong homebuilders’ confidence report. The CRB commodities index is 0.5% higher. US 10yr treasury yields ranged between 11.56% and 1.60%, currently unchanged at 1.58%.

The US dollar index (DXY) rose by around 1.0% overnight, forming a technically bullish reversal signal. EUR optimism following the Greek election was shortlived, the London session seeing it fall from 1.2725 to 1.2558. USD/JPY fell from 79.30 to 78.86 but recovered in NY to 79.10. AUD fell in London from 1.0125 to 1.0057 but recovered with US equities to make a fresh month high of 1.0142. NZD fell from 0.7944 to 0.7888 and recovered to 0.7933. AUD/NZD made a fresh two-month low at 1.2735 early London before firming to 1.2790

Economic wrap

US NAHB housing market index up 1 pt to 29 in June, after May revised down from 29 to 28. The index is at a 5 year high but still 60% lower than its 2005 peak.

UK house prices up 1.0% in June, for a 2.4% yr annual pace, according to the Nationwide.

Forex Exchange Morning Report(15/06/2012)

JPYINR- will open Up

Weaker US data gave the bulls some hope of Fed stimulus. Headline CPI was slightly below expectations, the annual rate of 1.7% below the Fed’s 2.0% target, although the core level (2.3%) should temper expectations of next week’s FOMC. Jobless claims also rose . There was little news flow otherwise, Greek election predictions the dominant feature. Greece’s stockmarket rose 10.1% on expectations the Eurozone-friendly parties would govern, and the S&P500 is currently up 0.6%. The CRB commodities index is up 1.0% (oil +1.3%, copper +0.3%, and gold 0.2%). US 10yr treasury yields were stuck in a 1.59%- 1.64% range.

The US dollar index (DXY) probed slightly lower. EUR was fi rmer from 1.2543 to 1.2618. ECB member Nowotny denied another LTRO was in the works. USD/ JPY fell from 79.40 to 79.16 before recovering to 79.30. AUD pushed higher from 0.9922 to 0.9996. NZD rose from 0.7754 to 0.7823. AUD/NZD broke below 1.2800 to 1.2770 – a fresh two-month low

Economic wrap

US CPI down 0.3% in May, with energy down 4.3%, food prices flat and the core rate up 0.2% for the third month running. The annual pace of the CPI was just 1.7% yr, its lowest since early last year, although the core annual pace of 2.3% yr is just below the 2.4% yr four year high recorded in April. US current account defi cit widened from $118.7bn to $137.3bn in Q1, the largest quarterly defi cit since late 2008.

US initial jobless claims up 6k to 386k in the week ended 9/6. There is now a clear claims uptrend in place since mid Feb, consistent with other measures of the jobs market which have weakened since then.

Canadian new house prices up 0.2% in Apr, for a 2.5% yr annual pace. A separate report showed capacity utilisation up from 80.5% to 80.7% in Q1, its highest since late 2007.

Euroland CPI confi rmed at 2.4% yr in May, unrevised from the flash estimate. The core rate was steady at 1.6% yr in May, little changed since Sep last year

Forex Exchange Morning Report (14/06/2012)

USDINR- Will open down or Flat

EURINR- Will open Flat

GBPINR- Will open down

JPYINR- Will open up

Markets remained nervous ahead of Sunday's Greek election. There was little fresh news from Europe, Greece's anti-austerity party leader again calling Germany's bluff by saying he intends reneging and renegotiating the existing bailout's terms if elected, believing the Eurozone wishes to avoid a Greek exit. In the US, economic data (retail sales, PPI) disappointed, helping the S&P500 flip from being up 0.5% to being down 0.8% (currently). Commodities were weaker, the CRB index down 0.6%, oil -1.0%, copper -0.5%, but gold acting as a safe haven since mid-May up 0.5%. US 10yr treasury yields reversed during the London morning from 1.70% to 1.59% by the NY afternoon. The 10yr auction went well at 1.622% - an auction record – and with an average 3.1 bid-cover ratio. Spanish and Italian 10yr yields remained close to their recent highs, and the German 10yr – previously considered a safe haven – gapped 11bp higher to 1.53%, possibly reflecting concern regarding Germany's exposure to the Eurozone or tweaked Skandinavian pension fund rules.

The US dollar index (DXY) shed around 0.5%. EUR rose from 1.2500 to 1.2610 but reversed early NY to 1.2570. USD/JPY fell sharply around midday London from 79.75 to 79.30 ahead of the BOJ meeting which starts today. AUD ground higher in London from 0.9940 to 1.0003 and reversed with US equities to 0.9945. NZD ground up to 0.7810 before slumping in NY to 0.7750. AUD/NZD firmed from 1.2790 to 1.2830, possibly reflection caution ahead of this morning's RBNZ meeting.

Economic wrap

US retail sales down 0.2% in May. Although auto sales rose 0.8%, there was broad-based weakness in many May retail components including discretionary spending like DIY, health/personal care, sports goods and restaurants. Along with downwards revisions to April, the first back to back retail falls in two years paint a softer consumer spending picture in Q2 than in Q1. Separately, business inventories rose 0.4% in Apr, the new information in the report being a 0.6% rise in retail stocks.

US producer output prices down 1.0% in May. Gasoline prices slumped 8.9%, food was down 0.6% but the core PPI rate rose an on trend 0.2%, with a rise in auto prices off set by falling light truck prices. Intermediate and crude PPI prices also fell, on both total and core definitions.

Euroland industrial production fell 0.8% in April, its 7th decline in 8 months, for a –2.3% yr annual pace of decline, its weakest since 2009. The national detail showed Germany down 2%, Spain down 0.7%, Italy down 1.9% but France up 1.5%.

Forex Exchange Morning Report (13/06/2012)

USDINR- Will open down

EURINR- Will open down

GBPINR- Will open flat or down

JPYINR- Will open flat or down

Market wrap

Markets flipped back to a less risk averse tone last night. The news flow was of only moderate importance but mostly positive. Following yesterday's comments from Fed dove Evans allowing for global policy coordination, voting centrist Lockhart said stimulus options should remain on the table, keeping alive market expectations of the Fed. The ECB, in its Financial Stability Review, endorsed the European Commission's proposal to guarantee European bank deposits. Rumours circulated that the ECB has intervened in the peripheral bond markets. Fitch rating agency provided some off set to the above, downgrading 18 Spanish banks in the wake of its recent sovereign move, and commenting the country will probably miss its budget deficit targets.

The S&P500 is currently up 0.7%, and the CRB commodities index is up 0.1% (oil +0.9%, copper unchanged, gold +0.8%). US 10yr treasury yields ground higher from 1.59% to 11.66%. The 3yr auction went well (3.5 bid-cover vs 3.4 average). The slightly improved sentiment did not extend to Eurozone peripherals, though: Spain's 10yr rose 31bp to an all-time high of 6.83%, and Italy rose 27bp to 6.30% - a five-month high.

The US dollar index (DXY) was range-bound. EUR was similarly consolidative inside 1.2440-1.2530, currently at 1.2505. USD/JPY chopped around inside 79.37 and 79.70. AUD ground high in hesitant fashion, from 0.9880 to 0.9940. NZD similarly ground from 0.7705 to 0.7772. AUD/NZD broke below the key 1.2815 to 1.2775, targeting 1.2600 during the weeks ahead

Economic wrap

US NFIB small business optimism down slightly from 94.5 to 94.4 in May. However some of the detail was positive, including a further gain from 5 to 6 in the intention to hire index, up from 0 in April.

US import prices fell 1.0% in May, due mainly to a 4.2% fall in petroleum prices. Food prices also fell but ex food/fuel prices were flat. Exports prices fell 0.4% in May.

US IBD-TIPP economic optimism down from 48.5 to 46.7 in June, driven my lower readings for the economic outlook, federal policies and to a lesser extent the personal financial outlook.

Fedspeak. Known dove Charles Evans of the Chicago Fed said he would support a range of measures to generate faster jobs growth.

UK industrial production flat in April, with factory output down 0.7% but utilities surging 13.6% after March's mild weather turned miserable in April. In other news, the RICS house price balance improved from –19% to –16% in May, about where it was at the start of the year, and less pessimistic than in early 2011.

Spanish bank downgrades. The credit ratings of 18 Spanish banks were cut by Fitch today. Spanish govt 10 yr bond yields hit new highs today at over 6.75%, with Italy on 6.25% and Germany 1.40%. Fitch said other eurozone country ratings, including the AAA nations', were at risk