Forex - Dollar slumps to fresh all-time low vs euro on Bernanke comments

Thu, Feb 28 2008, 16:59 GMT
http://www.afxnews.com

LONDON (Thomson Financial) - The dollar slumped to another all-time low against the euro following dovish comments from Federal Reserve chairman Ben Bernanke, adding to the already negative sentiment for the US currency after yet another set of weak data.

In a testimony before the Senate Banking Committee, Bernanke said the US economy is in a worse position now than it was before the recession in 2001, but acknowledged that inflation is "complicating" the Fed's attempts to prop up the economy.

He also warned on the likelihood of "some bank failures" in the US.

"The recent comments from Bernanke have been seen triggering a fresh bout of dollar selling," said Joel Kruger at Thomson IFR Markets.

The dollar plunged to an all-time low of 1.5195 usd per euro, having already hit fresh lows earlier following weaker-than expected data.

US GDP growth was confirmed at a 0.6 pct rate in the fourth quarter, disappointing analysts' hopes for an upwards revision to 0.7 pct.

Meanwhile, the number of first-time claims filed in the week ending Feb 23 rose by 19,000 to 373,000, way above forecasts for around 350,000. Continuing claims for unemployment meanwhile climbed to their highest level in over two years, the figures showed.

"US Q4 GDP growth was left unrevised ... but domestic demand was apparently weaker than initially thought, with a strong showing from net external demand the only thing preventing the economy from slipping into recession over the final three months of last year," said Paul Ashworth, senior US economist at Capital Economics.

"With initial jobless claims getting closer to the 400,000 a week mark, the odds clearly favour a recession at some point in the first half," he said.

At the same time, rising inflationary pressures were confirmed by the US Commerce Department, as the headline PCE index was revised up to a 4.1 pct annual rate from 3.9 pct previously, while the core PCE index -- closely tracked by the Fed -- stood at 2.7 pct, well above the central bank's unofficial comfort zone of below 2 pct.

"The take away from the data so far this week is that the US economy continues to decelerate while inflation continues to rise," said an analyst at Bank of New York.

The dollar has been in the doldrums this week following a series of weak US data and a downbeat assessment of the economy's prospects from Bernanke yesterday.

Elsewhere, the pound slipped to an all time low of around 0.7641 per euro due to a far weaker-than-than expected UK consumer confidence survey.

GfK NOP's consumer confidence barometer for February, which was released a day ahead of schedule, dropped to -17 from January's -13.

This missed Thomson Financial News' consensus expectation for a more moderate fall to -14, and is the worst reading since December 1994.

London 1639 GMT London 1240 GMT

US dollar

yen 105.45 down from 106.33

sfr 1.0511 down from 1.0612

Euro

usd 1.5188 up from 1.5100

stg 0.7634 up from 0.7611

yen 160.15 down from 160.50

sfr 1.5964 down from 1.6027

Sterling

usd 1.9887 up from 1.9832

yen 209.72 down from 210.85

sfr 2.0908 down from 2.1053

Australian dollar

usd 0.9466 up from 0.9414

stg 0.4757 up from 0.4744

yen 100.84 up from 100.08

Bernanke's speech declines the dollar down further

Thu, Feb 28 2008, 11:15 GMT
by Benny Menashe

Finotec Group Inc.

	EUR/USD	USD/JPY	GBP/USD	USD/CHF
	1.526	107.4	2	1.0765
Resistance	1.5215	107	1.997	1.073
	1.5145	106.6	1.985	1.0665
	1.508	105.95	1.974	1.061
Support	1.503	105.3	1.971	1.053
	1.4925	105	1.965	1.05

Euro dollar hit a record high over $1.51 as Fed Chairman Bernanke indicated the central bank is still prepared to cut interest rates which are already at a three year low. ‘The (Fed) will be carefully evaluating incoming information bearing on the economic outlook and will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks,’ Bernake said yesterday in his semi-annual monetary policy report to Congress. Technical analysis shows buy a bounce near $1.5020.

While the Fed are concerned about downside risks to growth, we here at the Finotec Dealing Desk think Bernanke has to address inflationary concerns. “Bernanke has really overweighted the economic risks relative to inflation,'' said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina, following the Fed chief's testimony to Congress yesterday. ``He may get some disagreement'' among colleagues on the Federal Open Market Committee, Silvia said.

US new home sales fell by 2.8% in January to a 13 year low. New home prices fell 15.1% over the past year which was the biggest drop on record. Meanwhile US durable goods orders fell by 5.3% in January after rising 4.4% in December.

The Aussie dollar traded a fresh 24 year high over $0.9400 as private capital expenditure rose 5.1% in real terms, seasonally adjusted for the December quarter. The market was expecting 3.1%. This bullish run is expected to continue as the interest rate differential between Aussie and its pegged currency, the dollar, widen. ”The data just underscores the strength of the Australian economy even in the face of a weaker global environment and that's one of the factors behind the strength of the Aussie,'' Mr Halmarick (Citigroup director of Economics) said yesterday. The Aussie touched highs of $0.9461. Market strategy is to buy a bounce near $0.9365.

Ahead today in the US, we are expecting an upward moderate revision of quarter four GDP. This is mainly due to lower imports opposed to stronger exports.

Today's Economic Events

Time	Event	Currency	Period	Previous	Forecast	Significance	Actual
23:30	Core CPI y/y	JPY	Jan	0.80%		2
23:30	Core Tokyo CPI y/y	JPY	Feb	0.40%		2
23:30	Overall Household Spending	JPY	Jan	2.20%		2
23:30	Unemployment Rate	JPY	Jan	3.80%		2
23:15	Manufacturing PMI	JPY	Feb	52.3		2
21:45	Trade Balance	NZD		0.03B		3
15:00	Fed Chairman Bernanke Speaks	USD				3
13:30	GDP Annualized q/q	USD	Quarterly	0.60%		3
13:30	GDP Deflator	USD	Quarterly	2.50%		2
13:30	Unemployment Claims	USD	Weekly			2
9:00	Unemployment Rate	EUR	Feb	8.10%	8.00%	2	8.00%
8:15	Payrolls	CHF	Quarterly	3.87m		2	3.88m

Bernanke signals another rate cut

Wed, Feb 27 2008, 16:06 GMT
http://www.afxnews.com

WASHINGTON (AP) - Federal Reserve Chairman Ben Bernanke warned Congress that the nation is in for a period of sluggish business growth and sent a fresh signal Wednesday that interest rates will again be lowered to steady the teetering economy.

"The economic situation has become distinctly less favorable" since the summer, the Fed chief told the House Financial Services Committee.

Since Bernanke's last such comprehensive assessment last summer, the housing slump has worsened, credit problems have intensified and the job market has deteriorated. Bernanke said that the confluence of these factors has turned people and businesses alike toward a more cautious attitude toward spending and investment. This, he said, has further weakened the economy.

Incoming barometers continue to "suggest sluggish economic activity in the near term," Bernanke told lawmakers. At the same time, he added, the Fed must keep a close eye on inflation given the recent run-up in energy and other prices paid by consumers and businesses.

For now though, the No. 1 battle is shoring up the economy.

Bernanke pledged anew to slice a key interest rate to help the wobbly economy, which many fear is on the verge of a recession -- or possibly has already toppled into one.

The Fed "will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks," Bernanke said, hewing closely to assurances he offered earlier this month.

The central bank, which started lowering a key interest rate in September, has recently turned much more aggressive. Over the span of just eight days in January, it slashed rates by 1.25 percentage points -- the biggest one-month reduction in a quarter century. Economists and Wall Street investors predict the Fed will cut rates again at its next meeting on March 18.

There are dangers that the economy will weaken even further. "The risks include the possibilities that the housing market or labor market may deteriorate more than is currently anticipated and that credit conditions may tighten substantially further," Bernanke cautioned.

As Bernanke began his first day of back-to-back appearances on Capitol Hill to discuss the economy, there was more bad news on the housing and manufacturing fronts.

-- Sales of new homes fell in January for a third straight month, pushing activity down to the slowest pace in nearly 13 years, the Commerce Department reported. The median price of a new home dropped to the lowest level in more than three years.

-- And, orders to U.S. factories for big-ticket manufactured goods dropped in January by the largest amount in five months.

On Wall Street, skittish investors sent the Dow Jones industrials down in morning trading.

The Fed chief was hopeful that previous rate reductions along with a $168 billion stimulus package of tax rebates for people and tax breaks for business will energize the economy in the second half of this year.

Even as the Fed tries to shore up the economy, it must remain mindful of inflation pressures, Bernanke said.

Record high oil prices -- topping $100 a barrel -- are pushing consumer prices upward. That's shrinking paychecks, and with people feeling less well off because the values of their homes have dropped, consumer spending "slowed significantly" toward the end of the year, the Fed chief said.

The Fed forecasts that inflation will moderate this year compared with last year. But the Fed's recently revised inflation projection of an increase between 2.1 percent and 2.4 percent is higher than its old forecast from the fall.

Bernanke said there are "slightly greater upside risks" that inflation could turn out to be higher than the Fed currently anticipates, given the recent run-up in energy and food prices.

"Should high rates of overall inflation persist, the possibility also exists that inflation expectations could become less well anchored," Bernanke warned. If people, companies and investors think inflation will move higher, they will act in ways that could turn inflation even worse, a sort of self-fulfilling prophecy. And Bernanke said that could complicate the Fed's job of trying to nurture economic growth while also keeping inflation under control.

With the economy slowing and prices rising, fears are growing that the country could be headed for a bout of stagflation, a dangerous economic brew not seen since the 1970s.

The Fed for now is focused on bolstering the economy through interest rate reductions. To combat inflation, the Fed would raise rates.

At some point over the course of this year, the Fed will need to "assess whether the stance of monetary policy is properly calibrated" to foster the Fed's objectives of price stability "in an environment of downside risks to growth," Bernanke said

Dollar Drops as Bernanke Sees Downside Risks to Growth

Thu, Feb 28 2008, 00:53 GMT
by Hans Nilsson

CMS Forex

Dollar Drops as Bernanke Sees Downside Risks to Growth

• The dollar fell sharply against most major currencies pressured by speculation the Federal Reserve will continue to cut interest rates to combat US recession risks. Fed Chairman Ben S. Bernanke, echoing yesterday’s dovish comments by Fed Vice Chairman Donald Kohn, signaled the Fed is prepared to lower rates again as he sees downside risks to growth greater than inflation risks. These comments widened the dollar’s interest and growth disadvantages against most key currencies. The yen was higher supported by risk aversion. Sterling fell on weak UK consumption. The Australian dollar traded close to a high on widening yield advantage. The euro and Swiss franc made new all-time highs against the greenback.


• The EUR/USD broke its triple-top yesterday and rose to a new all-time high today. The technical outlook is bullish. The old triple top is acting as important support with no obvious resistance as the pair is in uncharted territory. The pair’s overbought condition is a risk to further advances but may last for a long time.

Financial and Economic News and Comments

US & Canada

• In prepared semiannual testimony on the state of the economy and monetary policy before the House Financial Services Committee, Federal Reserve Chairman Ben S. Bernanke said: “The FOMC will be carefully evaluating incoming information bearing on the economic outlook and will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks.” Bernanke acknowledged inflation risks but said “it is important to recognize that downside risks to growth remain.”


• US new home sales fell to a lower-than-expected annual rate of 588,000 in January, down 33.9% y/y. The pace of sales is the slowest since 1995. The median price of new homes sold was $216,000 in January, down 15.1% y/y. The average price of new homes sold rose to $276,600, still down 12.1% y/y.

• US durable good orders fell a more-than-forecast 5.3% m/m in January. Excluding transportation, orders fell 1.6% m/m, nearly matching consensus expectations. Orders rose 3.0% y/y, 2.8% y/y excluding transportation. The largest contributors to the decline in orders were civilian aircraft orders and fabricated metals orders.

Europe

• The UK GDP rose 0.6% q/q and 2.9% y/y in Q4 2007, the Office for National Statistics said. However, the GDP components indicate growth was less solid. Private consumption growth slowed from 0.9% q/q in Q3 2007 to 0.2% q/q in Q4 2007 and investment fell 0.5% q/q in Q4. Growth was supported by a large increase in inventories, a rise in government spending and a positive contribution from net trade. Inventories rose and imports fell as consumer reduced their spendings, not boding well for further growth.


• GfK’s German confidence index for March held at February’s reading of 4.5. An indicator measuring households’ willingness to make big purchases fell to -15 in February from -8.8 in January. A measure of households’ optimism about the economic outlook dropped to 14.6 from 28.7.

Asia-Pacific

• Japan postponed the nomination of a new Bank of Japan governor, indicating that the government cannot reach agreement with the opposition Democratic Party of Japan. The ruling Liberal Democratic Party-led coalition intended to nominate Toshiro Muto as BOJ Governor this week. He is considered by the opposition to be too close to the finance ministry.

FX Strategy Update

Indonesia Econ Min: Weak Dollar Vs Rupiah To Help Ease Inflation

Thu, Feb 28 2008, 06:43 GMT
http://www.djnewswires.com/eu

Indonesia Econ Min: Weak Dollar Vs Rupiah To Help Ease Inflation

JAKARTA -(Dow Jones)- The U.S. dollar's weakness against the rupiah will help cap inflation in Indonesia, but won't hamper the country's export competitiveness, Coordinating Minister for Economy Boediono said Thursday.

At the same press briefing Finance Minister Sri Mulyani Indrawati said that the higher rupiah is still within the range forecast against the dollar in the 2008 state budget.

-By Jakarta bureau, Dow Jones Newswires; 62 21 3983 1277; Reuben.Carder@dowjones.com

(END) Dow Jones Newswires

February 28, 2008 01:43 ET (06:43 GMT)

Forex Technical Report USD/JPY

USD/JPY Open 107.36 High 108.14 Low 106.23 Close 106.80

The US Dollar lowered against the Japanese Yen by losing the higths gained from the first day this week. In downward direction support is today's bottom at 106.20, followed by 105.75, and 105.00. Upwards resistance is given by the levels 107.35, followed by 108.15 and 108.70, which are 37.8% and 48.6% respectively Fibonacci correction of the descent 114.55 - 104.85. Break at 110.00 may recover the US Dollar and bring it up towards 113.00
Technical resistance levels: 107.35 108.15 108.70
Technical support levels: 106.20 105.75 105.00

Trading range: 106.70 - 106.05
Trend: Downward
Sell at 106.56 SL 106.86 TP 106.16

Already made +30 pips profit on USD/JPY today from the following signal:
6:08 GMT Sell USD/JPY at 107.09 SL 107.35 TP 106.59 exited at 7:16 GMT.
Total results today +190 pips, yesterday +147, as shown in details at our web site.

Forex Technical Report GBP/USD

GBP/USD Open 1.9860 High 1.9969 Low 1.9712 Close 1.9853

The Cable rose against the US Dollar, and reached its highest rate since the beginning of February 1.9970, which is the first resistance for today. Next resistance is expected at 2.0075, which is 49.8% Fibonacci correction of the drop 2.0825 - 1.9340, followed by 2.0140. In the opposite direction support for the Pound is this morning's bottom 1.9840, followed by 1.9760, and 1.9695, which is 23.5% Fibonacci correction of the above mentioned drop.
Technical resistance levels: 1.9970 2.0075 2.0140
Technical support levels: 1.9840 1.9760 1.9695

Trading range: 1.9865 - 1.9950
Trend: Upward
Buy at 1.9877 SL 1.9847 TP 1.9937

Today we made already +41 pips profit on GBP/USD from the following signal:
6:07 GMT Buy GBP/USD at 1.9868 SL 1.9842 TP 1.9928 TP reached at 7:28 GMT
Today so far +190, yesterday +147, as shown in details at our web site.

Forex - Dollar weighed on by soft US consumer confidence, housing data

Tue, Feb 26 2008, 16:35 GMT
http://www.afxnews.com

LONDON (Thomson Financial) - The dollar was lingering within a cent of its all time low against the euro as dismal US housing and consumer confidence figures confirmed market expectations that the Federal Reserve will continue to cut US interest rates.

The Conference Board reported its Consumer Confidence Index fell to 75.0 in February, from a downwardly revised 87.3 in January, much worse than analyst expectations for a more modest fall to 81.3 This was the lowest level since the invasion of Iraq in 2003, while the expectations element was the weakest its been since Jan 1991.

"Consumer spending looks set to grow barely 1 pct this year based on the sentiment indicators suggesting that the Fed will continue cutting rates aggressively," said James Knightley at ING.

The US economy's woes were highlighted further by the S&P/Case-Shiller house price index which showed US home prices fell by 4.6 pct year-on-year during 2007, the biggest fall since the index started in 1987.

This offset earlier data showing US producer prices surged during January, rising 1.0 pct month-on-month sending the annual rate up to 7.4 pct. While the figures indicate that US consumer inflation is set to pick up, analysts said the Fed's concerns are likely to remain focused on the prospect of a sharp slowdown in growth.

"This latest unfortunate news on inflation isn't likely to prevent the Fed from cutting interest rates further - what choice does it have when the real economy could plummet into recession?," said Paul Ashworth, US economist at Capital Economics.

This series of weak data meant the euro continued the sharp ascent against the dollar started this morning after the closely watched Ifo survey of German business sentiment came in above market expectations, further reinforcing expectations that the European Central Bank will not cut rates any time soon.

Ifo's headline business climate index rose to 104.1 in February from 103.4 the previous month. Analysts polled by Thomson Financial News expected the index to drop to 102.7.

"Todays IFO report combined with the latest weakness in US housing is likely to help euro rise past 1.49 usd and onto 1.4930," said Ashraf Laidi, currency strategist at CMC Markets.

The euro has climbed as high as 1.4890 usd this afternoon - its highest level since Feb 1.

Elsewhere, the pound remained firm as the monthly retail sales survey from the Confederation of British Industry pointed to slowing consumer demand at the same time as mounting price pressures.

Analysts said this combination is likely to keep the Bank of England's rate-setting Monetary Policy Committee on hold for the time being.

"We do expect the MPC to cut rates further over time, but continue to expect that easing will be gradual rather than rapid," said Michael Saunders, chief UK economist at Citigroup.

London 1610 GMT London 1316 GMT

US dollar

yen 107.66 down from 107.84

sfr 1.0848 down from 1.0864

Euro

usd 1.4882 up from 1.4875

stg 0.7542 up from 0.7536

yen 160.26 down from 160.43

sfr 1.6148 down from 1.6163

Sterling

usd 1.9723 down from 1.9736

yen 212.41 down from 212.86

sfr 2.1398 down from 2.1441

Australian dollar

usd 0.9288 up from 0.9270

stg 0.4707 up from 0.4694

yen 100.03 up from 99.97

Fed's Kohn sees spillover effects in slowing economy and rising inflation UPDATE

Tue, Feb 26 2008, 18:30 GMT
http://www.afxnews.com

(updates with Q and A)

WASHINGTON (Thomson Financial) - The financial markets are transmitting the housing downturn into the rest of the US economy and the rising cost of energy, food and imports are spilling over into the core inflation rate, Federal Reserve Vice-chairman Donald Kohn said today.

The Fed can mitigate but not eliminate those effects. "We have the tools" and "we will do what is needed, he said. However Kohn also pointed out the Fed's limits in his address at the University of North Carolina in Wilmington.

"What policy can do is attempt to limit the fallout on the economy," he said, "but easier monetary policy will not forestall a period of economic weakness in the near term."

The housing correction has further to go, Kohn said and the financial markets "are playing a key role in the transmission of the housing downturn to the rest of the economy."

Recovery in the financial markets is likely to be a "prolonged process." It involves not just improved confidence and liquidity but changes in the way some markets do business.

For example, many people "got caught by surprise" when a AAA-rated tranche of a mortgage pool did not behave the same way a AAA-rated corporate bond did. The investment instruments were opaque, investors placed too much reliance on credit rating agencies, and the agencies "got it wrong".

The fallout is that credit is tighter for consumers and businesses across the board. Reduced home and equity wealth, higher energy prices and uncertainty about the economy "seem to be weighing on business and household spending," Kohn said. The 2.25 percentage point reduction in the Fed funds target rate was "intended to counteract the effects on the overall economy" of those factors.

On inflation, Kohn believes the recent core data suggest that "higher costs of energy, a pickup in the prices of imported goods (as the dollar declines), and perhaps, the persistent upward price pressures in commodity markets may be passing through a bit to core consumer prices."

However, he does not expect the "elevated inflation rates to persist." He sees sluggish consumer and business spending, rising unemployment and stabilizing energy prices to reduce the inflation pressure.

Overall, Kohn is predicting what all the other Fed speakers have been predicting lately, a slow first half of the year with the beginnings of a recovery in the second half.

The Fed Vice-chairman was also asked about the role of Sovereign Wealth Funds (SWFs) -- foreign government-controlled investors -- in the US economy. They should be "welcome," he said, as an important source of "recycling a lot of the dollars that have gone overseas," whether to China, oil producing countries or elsewhere.

However to dissipate the suspicion surrounding them, the SWF's need to be much more transparent he said.

As expected, the dollar was helped on Monday

Tue, Feb 26 2008, 07:00 GMT
by Cornelius Luca

Global Forex Trading

As expected, the dollar was helped on Monday by a better “take” on MBIA (no downgrade), one of the monolines in trouble. It rallied versus the low yielders yen and franc while collapsing versus the commodity currencies, and this is good news: it means that the appetite for risk is up again. The stocks should go up today, and the euro and pound should follow.

Euro/dollar

Euro/dollar traded sideways after nailing a three-week high on Friday. It’s been marching higher since February 8 and my model remains long since February 14. The pair is slightly overbought, but sideways to higher trading is favored. Initial resistance is still in place at 1.4875. Above it, resistance comes at 1.4966 from a pivot high. Immediate support remains at 1.4790. Below 1.4765, there is further support at 1.4715. The next level is 1.4640.

Oscillators are rising.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Dollar/yen

Dollar/yen rallied on Monday after the support of a rising trendline held, and my model reversed short positions. Mixed to higher trading is likely today. Immediate resistance is seen at 108.45. Strong resistance follows at 108.75. Further resistance lies at 109.15 from a 50-point pivot that targets 109.65 and 108.65. Key support comes at 107.95 from a 50-point pivot that targets 107.45 and 108.45. Distant support is at 106.75 from a 50-point pivot that targets 106.25 and 107.25.

Oscillators are mixed.

NEAR-TERM: Slightly bullish
MEDIUM-TERM: Slightly bullish
LONG-TERM: Bearish

Sterling/dollar

Sterling/dollar traded sideways on Monday. My model went long on Thursday and the recovery should continue in the medium term. Initial resistance comes at 1.9738. A break above this level would signal a further rally to 1.9787. This is followed by 1.9960. Immediate support is now seen at 1.9615. The next level follows at 1.9575.

Oscillators are mixed.

NEAR-TERM: Mixed
MEDIUM-TERM: Bearish
LONG-TERM: Mixed

Dollar/Swiss franc

Dollar/Swiss recovered Friday’s losses, as expected, but my model remains (barely) short. Mixed trading is likely. Initial resistance now comes at 1.0960. The next level is 1.1000. Distant resistance comes at 1.1065. Immediate support remains at 1.0828. Below 1.0770, support is pegged at 1.0729 from a pivot low.

Oscillators are declining.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bearish

Forex - Dollar steady vs yen, euro in afternoon trade in Asia ahead of US data

Tue, Feb 26 2008, 06:09 GMT
http://www.afxnews.com

HONG KONG (Thomson Financial) - The US dollar hardly moved against the euro and the yen in afternoon Asian trade on Tuesday as investors opted to move to the sidelines ahead of key economic data due for release later this week.

On Friday the US Commerce Department will announce last month's consumer spending, which accounts for more than two-thirds of gross domestic product. Before that, new homes sales for January will be out on Wednesday.

"The currencies are stuck in a pretty narrow range. The currency market is focused on the US economic data," said David Mann, currency strategist at Standard Chartered Bank. "We should see some further increase in dollar selling" should the data confirm market fears that the world's largest economy is on the brink of a recession.

At 1.00 pm (0500 GMT), the euro was quoted at 1.4829 dollars from 1.4832 in Tokyo this morning. The dollar was at 107.92 yen from 108.04.

The dollar, though, may strengthen gradually against major currencies in coming weeks because "we are nearing the end of the dollar weakness," said Mann.

Optimism that the US economy will start showing signs of recovery after the series of interest rate cuts by the Federal Reserve and the economic stimulus package being implemented by the Bush administration may help curb the dollar's fall.

The dollar may rise to 110 yen by the end of the second quarter from 104 at end-March, said Mann. The euro may weaken slightly to 1.45 dollars from 1.51 during the same period, he said.

The Fed has lowered rates by a cumulative 2.25 percentage points since September to ease the credit crunch and lift the economy. The Fed's policymakers will meet next on March 18 to decide on interest rates.

Investors are also waiting for Fed chairman Ben Bernanke's speech before the House Financial Services Committee on Wednesday for further clues on US monetary policy amid an accelerating inflation rate and record-high crude oil prices.

Receding expectations for aggressive rate cuts in the US are also likely to support the dollar.

"The market is still pricing in a 50-basis-point rate cut for the March 18 meeting, but expectations of more aggressive cuts going forward have been scaled back," said John Noonan, analyst at Thomson IFR.

The euro was also rangebound against the US currency as investors were torn between speculations that the European Central Bank will raise rates to fight inflation or lower them to aid its financial sector reeling from losses due to unpaid housing mortgages in the US.

"There is lingering concern that European financial institutions have large exposure to credit derivative investment products, which is potentially a negative factor for the euro," said Minoru Shioiri, forex manager at Mitsubishi UFJ Securities.

"But at the same time, people find it difficult to start selling the euro on this lead as long as the European Central Bank maintains its vigilance against inflation," he said.

Hong Kong 1.00 pm (0500 GMT)

US dollar

yen 107.92

sfr 1.0897

Euro

usd 1.4829

stg 0.7536

yen 159.92

sfr 1.6154

Sterling

usd 1.9662

yen 212.13

sfr 2.1425

Australian dollar

usd 0.9278

stg 0.4718

yen 100.13

New Zealand dollar

usd 0.8096

Japanese government bonds close mostly higher on auction results, stocks' fall

Tue, Feb 26 2008, 07:23 GMT
http://www.afxnews.com

TOKYO (Thomson Financial) - Japanese government bond prices closed mostly higher Tuesday, erasing early losses after a special afternoon auction of 20-year government bonds showed better-than-expected results and the stock market reversed an early advance and finished lower.

The lowest accepted price at Tuesday's auction of 800 billion yen worth of 20-year government bonds, which carry a coupon of 2.1 percent, was 99.60 yen, giving a yield of 2.128 percent, the Ministry of Finance said.

The average bid was 99.64 yen and the bid-to-cover ratio was 4.18 to one, compared to 2.60 to one in the previous auction.

On the Tokyo stock market, the benchmark Nikkei key index closed down 0.7 percent at 13,824.72 in cautious trade, after it topped 14,000 points for the first time since January 15 in early trade. The shares were initially firmer as concerns about the credit market crisis eased after the ratings of troubled US bond insurers were affirmed by Standard & Poor's.

"The bond market was supported by the auction results and the stocks' fall, but its upside was heavy compared to the level of decline in stocks," said Ryohei Ajisaka, chief JGB strategist at Daiwa Securities SMBC.

The bond market faced initial selling pressure following weak US Treasury trading overnight as sentiment favored the stock market after the troubled US bond insurers retained their S&P ratings.

S&P affirmed its "AAA" ratings on MBIA Inc and Ambac Financial Group Inc, saying it appears the bond insurers will raise enough cash to pay the claims they are likely to face.

"In the case of the US, it is said investors unwound the flight-to-quality movement. But the ratings affirmation is not an essential solution to the ailing bond insurers and the subprime mortgage loan trouble has not been resolved," Ajisaka said.

The market is also looking ahead to a raft of economic data and events from Japan and the US this week. Japan is set to release industrial output, consumer inflation, unemployment as well as housing market data for January.

"Industrial output will be in focus as production is one of the key data indicators of Japan's economic situation as it leads corporations' capital expenditure. Weaker-than-expected production data could raise worries about the prospects of the economy," said Aijisaka.

The government is predicting that industrial output will fall by 0.4 percent in January from December and decline by 2.2 percent in February from January.

Federal Reserve Chairman Ben Bernanke is to testify before congressional committees on Wednesday and Thursday on monetary policy, in which he is expected to provide some insight on the outlook for the US economy.

Also due out of the US are data on fourth-quarter gross domestic product and the housing market.

The outlook on the US economy seems to be weak and the numbers are likely to support that view, analysts said.

Another area of interest is the replacement for Bank of Japan's governor Toshihiko Fukui, whose term will expire later next month.

The government is likely to present a proposal to appoint Bank of Japan Deputy Governor Toshiro Muto as the central bank's next chief to the ruling and opposition parties this week, according to the Nikkei business daily report over the weekend.

The yield on the benchmark 10-year bond closed down at 1.475 percent from 1.485 percent late Monday.

The yield on the two-year note rose to 0.615 percent from 0.605 percent while the yield on the five-year bond inched down to 0.955 percent from 0.960 percent.

The yield on the 20-year bond fell to 2.110 percent from 2.120 percent and the yield on the 30-year bond declined to 2.345 percent from 2.360 percent.

Bond prices move inversely to yields.

The price of the March futures contract for the 10-year bond was higher at 137.24 yen from 137.15 yen late Monday.

(1 US dollar = 107.91 yen)

Oil close to 100 usd on heightened Middle East tensions UPDATE

Mon, Feb 25 2008, 10:50 GMT
http://www.afxnews.com

(Updates prices, adds details)

LONDON (Thomson Financial) - Oil rose close to 100 usd supported by heightened tensions in the Middle East and the continued flow of fund money into commodities, as market players look for alternative investments during the current financial turmoil.

Turkey's military incursion into northern Iraq in a bid to rout Kurdish separatist rebels operating in the region, and ongoing concerns about Iran's nuclear ambitions have moved geopolitical risks back to centre stage in the oil market.

At the same time, fund money has been pouring into commodities, boosting prices higher despite concerns that a weakening US economy could dent demand for oil.

"Several factors are impacting the price gains at the moment, not least the Turkish incursion into northern Iraq and the fact they look like extending that operation," said Bank of Ireland analyst Paul Harris. "Investors and speculators are also looking at the commodity suite as a whole, and there's a belief there's more upside potential in the market."

At 10.29 am, New York's WTI crude for April delivery was up 35 cents to 99.16 usd per barrel.

In London, Brent crude for April delivery was up 45 cents at 97.46 usd per barrel.

Last week, the International Atomic Energy Agency reported it was still unsatisfied with its investigation into Iran's past nuclear weapons research, despite cooperation in other areas from the Islamic state.

The US has been pressuring Iran over its alleged nuclear weapons programme, heightening fears in the oil market that supplies could be massively disrupted should military action eventually result.

MF Global analyst Robert Laughlin said: "The IAEA, in it's latest update to the UN last Friday, praised Iran for it's increased transparency regarding it's nuclear programme but then appeared to launch a 'stinging rebuke' that the Tehran government had failed to answer key questions relating to its weapon making facilities. This unexpected criticism will no doubt aggravate the Bush administration who will look to push the UN for a third and tougher round of sanctions."

Turkey's military move into Iraq has also stoked fears over supplies, with fighting in the key energy corridor heightening concerns that Kurdish guerillas could target key pipelines in the area. The Ceyhan pipeline, which exports around 300,000 barrels of Iraqi oil through Turkey, has not been affected so far, according to the Iraqi oil ministry.

While price gains have been fuelled by geopolitical risks, many market analysts continue to point to the increase in fund activity in the crude market for oil's return to the 100 usd handle.

Speculative long positions, or bets the price will rise, were up by over 15,000 contracts for WTI in the week to February 19, according to the US Commodities Futures Trading Commission.

Looking ahead, investors are keeping one eye on next Wednesday's OPEC meeting in Vienna. The cartel has repeatedly said it will not up production levels, blaming oil's rise to near record levels on market speculation and geopolitical tension rather than any shortage of supply.

OPEC may in fact consider a cut at its meeting, as demand is seasonally lower in the second quarter of the year, and the cartel is concerned a slowing US economy could see demand for crude fall.

Gasoline demand in the US has been easing in response to higher prices and a struggling economy, though heating oil demand has remained strong due to a cold front in the north-east of the country.

Japan's Demand-Supply Gap +0.7% In 4Q 2007 Vs +0.2% In 3Q '07

Mon, Feb 25 2008, 10:52 GMT
http://www.djnewswires.com/eu

Japan's Demand-Supply Gap +0.7% In 4Q 2007 Vs +0.2% In 3Q '07

TOKYO (Dow Jones)--A gauge of the strength of Japan's economic demand suggests deflationary pressures continued to soften in the final quarter of last year.

The data released Monday by the Cabinet Office showed that the country's so-called gross-domestic-product gap stood at plus 0.7% in the final quarter of last year. The positive figure means that underlying demand of an economy is outstripping the economy's overall supply capacity - a state in which inflation theoretically accelerates because of shortages in workers and other resources needed for production of goods and services.

The latest reading is higher than plus 0.2% in the third quarter of 2007. It also marked the fifth straight quarter in which the GDP gap stayed in positive territory.

But analysts stopped short of saying the economy has shaken off general price falls that have hindered its growth for many years.

"Because the risks of future slowdown (in Japanese growth) are increasing, we can't say that deflationary pressures have receded much," said Yoshiki Shinke, senior economist at the Dai-ichi Life Research Institute. "The consensus is that economic growth will decelerate, at least from its (robust) rise in the October-December quarter. Some even say Japan's economy could contract in the coming quarters. That means that the degree of positive GDP gap could get smaller - or it could even get back into negative territory in 2008."

The surprisingly robust 3.7% annualized expansion in Japan's GDP for the fourth quarter of last year helped hoist the GDP gap in the same quarter. But the GDP growth in that quarter is considered an anomaly, with many analysts forecasting a slowdown ahead.

That's because U.S. demand for Japanese exports is expected to weaken further as housing-market problems sap strength off the U.S. economy, Shinke said. Also at home, high prices of imported oil and other commodities are raising the cost of living for Japanese consumers, chilling their sentiment, he said. Companies are suffering too because weak domestic demand prevents them from passing on high material costs to households.

Japanese policy-makers may remain guarded as well. The government Friday cut its assessment of the economy for the first time since November 2006, saying growth is easing mainly because Japanese factory output is cooling on weaker U.S. demand. Japan's economy minister, Hiroko Ota, also warned it's possible for the economy in the near future to enter a lull - a state of sluggish growth or just no growth at all.

BOE's Barker: Recession Outside The Main Possibilities -Report

Mon, Feb 25 2008, 10:52 GMT
http://www.djnewswires.com/eu

BOE's Barker:Recession Outside The Main Possibilities -Report

LONDON -(Dow Jones)- There isn't a strong chance of a recession in the U.K., but the year ahead is likely to be a challenging one, Kate Barker, a member of the Bank of England's Monetary Policy Committee said Monday.

"Recession remains outside the main possibilities," MPC external member Barker said in an interview with the Staffordshire Sentinel during a regional visit.

"We have got this combination of shocks coming from abroad and it's difficult," Barker added. "We certainly expect a period of greater volatility this year."

The BOE reduced interest rates to 5.25% earlier this month, following another 25-basis-point cut in December. But the bank's policy setters face tough decisions ahead - to balance the risk of a sharper-than-expected downturn in growth due to credit tightening, against the upside risk to prices posed by elevated inflation expectations.

While a weakening in sterling should provide support to U.K. exporters, it also means added upward pressure on already strong food and energy price inflation.

The U.K. central bank will have to keep a close eye on economic developments in the U.S. and the euro zone, upon which it relies for a large proportion of its exports.

The credit crunch and the crisis surrounding troubled lender Northern Rock PLC (NRK.LN) are also making it more expensive for U.K. banks to borrow in international capital markets, which provide a major share of their funding.

Forex Technical Report GBP/USD

Fri, Feb 22 2008, 09:49 GMT
by Ted Wilson

iFOREX.bg

GBP/USD 1.9654 - 22 February

GBP/USD Open 1.9633 High 1.9683 Low 1.9389 Close 1.9581

The Cable climbed significantly against the US Dollar, and broke the short term resistances at 1.9500 and 1.9590, recovering for the week's losses in one day. Resistance for today is expected at 1.9685, followed by 1.9750, and 1.9840. In downward direction support is 1.9540, followed by 1.9420, and 1.9350.
Technical resistance levels: 1.9685 1.9750 1.9840
Technical support levels: 1.9540 1.9420 1.9350

Trading range: 1.9640 - 1.9715
Trend: Upward
Buy at 1.9654 SL 1.9624 TP 1.9704

Today we made already +49 pips profit on GBP/USD from the following signal:
7:11 GMT Buy GBP/USD at 1.9634 SL 1.9608 TP 1.9694 exited at 9:13 GMT
Today so far +203, yesterday +132.

Manufacturing slows in the US, as UK Retail Sales soar

Fri, Feb 22 2008, 00:11 GMT
by Easy Forex Team

Easy Forex

Manufacturing slows in the US, as UK Retail Sales soar

U.S. Dollar Trading (USD) eased slightly against a number of majors in a follow through from FOMC minutes on Wednesday, which prompted traders to anticipate further rate cuts from the Fed in the coming meeting (March 18th), as the central bank lowered its 2008 growth forecasts. In data specific news, the Philly Fed survey was lower than forecasts coming in at -24.In US share markets, the NASDAQ was down by -96.23 points (-1.06%) whilst the Dow Jones was lower by 142.96 points (-1.15%). Crude oil eased from it record highs seen in the previous session. Crude dropped by US$2.71 a barrel to US$98.03.

The Euro (EUR) gained broadly versus the dollar as output of the US came in on the weaker side. Despite the views that economic growth is expected to slow to 1.8% in 2008 from the previous 2.7%, inflation is expected to remain above the ECB comfort band. Overall the EURUSD traded with a low of 1.4703 and a high of 1.4838 before closing the day at 1.4815 in the New York session. PMI services and manufacturing surveys are released out of the Eurozone on Friday, and will hold interest amongst investors in identifying the extent of an economic slowdown

The Japanese Yen (JPY) once again in a defined range tracking equity prices, despite coming under pressure in the early part of the trading day as appeal for risky trades were boosted by growing expectations of another rate cut out of the U.S. Overall the USDJPY traded with a low of 107.15 and a high of 108.33 before closing the day at 107.31 in the New York session.

The Sterling (GBP) surged after much stronger than expected UK retail sales data. Sales grew 0.8 % in January recuperating from a 0.2 % fall in December, which was their strongest growth in almost a year. This prompted investors to scale back expectations of rate cuts by the BoE. Overall the GBPUSD traded with a low of 1.9489 and a high of 1.9627 before closing the day at 1.9618 in the New York session.

The Australian Dollar (AUD) was timid, with little data out of Australia for the remaining part of the month. The AUD continued to test key levels above 92 cents, but failed to sustain any gains. Overall the AUDUSD traded with a low of 0.9167 and a high of 0.9209 before closing the day at 0.9191 in the New York session.

Gold (XAU) traded once a gain at a fresh all time high despite oil prices heading lower. XAU traded with a low of 938.50 and a high of 953.60.

TECHNICAL COMMENTARY

Euro – 1.4815
Initial support at 1.4702 (Feb 21 low) followed by 1.4611 (Feb 18 low). Initial resistance is now located at 1.4838 (Feb 21 low) followed by 1.4956 (Feb 1 high).

Yen – 107.45
Initial support is located at 107.16 (Feb 21 low) followed by 106.35 (Feb 11 low). Initial resistance is now at 108.67 (38.2% retracement of the 114.66 to 104.97 decline) followed by 109.82 (50% retracement of the 114.66 to 104.97 decline)

Pound – 1.9630
Initial support at 1.9363 (Feb 12 low) followed by 1.9338 (Feb 7 low). Initial resistance is now at 1.9643 (Feb 21 high) followed by 1.9738 (Feb 5 high)

Australian Dollar – 0.9195
Initial support a 0.9005 (Feb 15 low) followed by 0.8954 (Feb 14 low). Initial resistance is now at 0.9239 (76.4% retracement of 0.9400 to 0.8513) followed by 0.9331 (Nov 9 high)

Gold – 943.40
Initial support at 906.10 (Feb 19 low) followed by 896.50 (Feb 7 low). Initial resistance is now at 954.60 (Feb 21 high) followed by 970.73 (Bull channel resistance)

Oil prices trade below 100 dollars in Asia

Fri, Feb 22 2008, 04:00 GMT
http://www.afxnews.com

SINGAPORE (Thomson Financial) - World oil prices were trading below 100 dollars in Asian trade Friday after a stronger-than-expected rise in US crude oil reserves calmed supply jitters.

In morning trade, New York's main contract, light sweet crude for delivery in April, fell 31 cents to 97.92 dollars per barrel.

The contract closed 1.47 dollars lower during floor trading on Thursday at the New York Mercantile Exchange.

The March contract had expired Wednesday at an all-time closing high of 100.74 dollars after scaling a peak of 101.32 dollars a barrel.

Brent North Sea crude for April delivery rose 5 cents to 96.29 dollars a barrel, after falling 2.18 dollars on Thursday. The contract had struck a record peak of 99.22 dollars on Wednesday.

"Oil has decoupled from the larger economy in the past week but the bigger picture is that fundamentals are still strong and there is still not enough spare capacities," said Tony Nunan of Mitsubishi Corp's petroleum business in Tokyo.

"Prices in the short term will still go down but will stay supported in the middle to long term."

The US government's weekly report on energy stockpiles helped ease market worries about supply, heightened by speculation that the Organisation of the Petroleum Exporting Countries (OPEC) is planning to cut production.

The US Department of Energy (DoE) said crude oil stockpiles rose for the sixth consecutive week, by 4.2 million barrels in the week ended February 15.

That soundly topped analysts' consensus forecasts of a 2.6 million barrel increase.

Gasoline inventories grew by 1.1 million barrels last week, the DoE said, outstripping market expectations of a gain of 450,000 barrels.

Stockpiles will continue to increase unless OPEC, which supplies about 40 percent of the world's oil, decides to cut production, said Nunan.

At an emergency meeting on February 1, OPEC maintained its official daily output ceiling at 29.67 million barrels of oil, despite pressure from US President George W Bush to boost supplies to cool high prices that are slowing economic growth.

"There is a clear perception in the market that OPEC would have moved to defend prices had they slipped much below 85 dollars, implying that the downside might be fairly limited even if the market had got through that wall of consumer buying," said Barclays Capital analyst Kevin Norrish.

Libya's oil chief Shukri Ghanem said Wednesday that OPEC will wait to see if prices hold around 100 dollars per barrel before making any decision on output levels.

Forex Options:Dollar/Yen Volatilities Quiet; May Rise Monday

Fri, Feb 22 2008, 03:40 GMT
http://www.djnewswires.com/eu

Forex Options:Dollar/Yen Volatilities Quiet; May Rise Monday

                              Thursday       Thursday
Dollar/Yen   10.55%/10.95%   11.0%/11.4%   11.15%/11.55%
Euro/Dollar   8.60%/8.90%    8.70%/8.90%    8.75%/9.00%
Euro/Yen     11.75%/11.25%   12.0%/12.6%   12.15%/12.80%

  3 Month Option Implied Volatilities
Dollar/Yen    10.3%/10.6%    10.4%/10.65%   10.3%/10.6%

  The volatilities used are over-the-counter, at-the-money rates.

1-month 25 delta risk-reversals favor: yen call/dollar puts by 2.00%/2.40%, compared with 2.00%/2.40% in New York Thursday.

TOKYO (Dow Jones)--Dollar/yen currency options were little changed in Tokyo on Friday as options players remained doubtful whether the greenback will fall sharply against the yen, although such concerns are increasing.

One-month at-the-money figures are misleading because "nobody wants to buy these options today" since their expiration dates will be around the Easter holidays, Tokyo options dealers said.

Instead, they stress the importance of one-week and three-month implied volatilities in gauging market sentiment. Those volatilities stood at 11%/11.5% from New York's 11%/11.4%, and 10.3%/10.6% versus 11.4%/11.65% in New York, respectively.

The option dealers said volatilities would rise if the dollar/yen spot rate falls below Y107, and may spike on Monday as players are likely to wait until next week to buy options to maximize their value.

The dealers said players are becoming more pessimistic about the U.S. economic outlook.

Overnight, the Federal Reserve Bank of Philadelphia's manufacturing index for February fell below -20 for the second straight month, which some analysts said is a clear sign the U.S. is about to enter recession.

"The dollar will probably fall against the yen," one option dealer in Tokyo said. "But (traders) are in no hurry since it's Friday, and to some extent they are still doubtful whether the dollar will fall sharply."

That's because the greenback, contrary to expectations, is hovering above New York Thursday's close of Y107.30 even though New York and Tokyo share prices declined in the morning. And options dealers tend to avoid buying short-term contracts on Fridays because they lose value over a weekend.

However, some spot dealers warn the dollar may soon fall below Y107 and they expect volatilities to spike on Monday.

"Today's dollar rates are bit tricky," said a spot dealer in Tokyo. "Since today is oil settlement day, players need the dollar. So once such demand is cleared away, the dollar has a great chance to drop."

In the Tokyo Friday morning session, some players bought one-week dollar put/yen call options with a Y107 strike and a $50 million face value at 11.5%, while others bought similar deals expiring next Wednesday at 11.25%. The deals are a hedge against a possible fall in the dollar, dealers said.

Japanese government bonds end morning sharply higher on US recession worries

Fri, Feb 22 2008, 03:20 GMT
http://www.afxnews.com

TOKYO (Thomson Financial) - Japanese government bond prices were sharply higher Friday morning after US Treasury prices climbed as more data indicated a further deterioration of the US economy.

Overnight, the US bond market rallied after the Philadelphia Federal Reserve said local manufacturing shrank further in February, marking the largest contraction in seven years.

"Funds were flowing in the bond market as the US data dampened economic sentiment and the Nikkei index fell sharply," said Maki Shimizu, a fixed-income strategist at UBS Securities.

On the Tokyo stock market, the Nikkei 225 Stock Average plunged 264.34 points or 1.9 percent to 13,423.94 in the morning session.

The bond market showed little reaction to remarks by Bank of Japan governor Toshihiko Fukui who warned of increased uncertainties about the Japanese economy at a parliamentary committee.

He cited the growing downside risks to the US economy and continuing volatility in the financial markets.

While Fukui expressed confidence about the sustainability of a recovery in the world's second-largest economy, he indicated that the central bank will place emphasis on downside risks when managing monetary policy in the near term.

"Amid little market incentives today, investors are expected to track the stock market performance and another speech by Bank of Japan governor Fukui today as he may provide a greater explanation of the economic conditions," Shimizu said.

At midday, the yield on the benchmark 10-year bond was down at 1.445 percent from 1.490 percent late Thursday.

The yield on the 2-year note dropped to 0.570 percent from 0.595 percent and the yield on the 5-year bond fell to 0.920 percent from 0.965 percent.

The yield on the 20-year bond declined to 2.080 percent from 2.110 percent and the yield on the 30-year bond was down at 2.320 percent from 2.345 percent.

Bond prices move inversely to yields.

The price of the March futures contract for the 10-year bond climbed to 137.55 yen from 137.08 yen late Thursday.

(1 US dollar = 107.45 yen)

Forex - Dollar takes a pounding as US data signals recession

LONDON (Thomson Financial) - The dollar came in for a pounding after a set of dismal US economic numbers suggested that the world's biggest economy may not be able to avert recession after all.

The Federal Reserve Bank of Philadelphia reported today that its headline Philly Fed index fell to -24.0 in February from -20.9 in January. The latest reading was twice as low as economists had expected, and is now at its lowest levels since the 2001 recession. The index measures manufacturing activity in the area.

Many analysts consider it a signal of impending or even current contraction in the US economy.

"The further deterioration in the US Philly Fed activity index in February confirms that the collapse in the index last month was not statistical noise," said Paul Ashworth at at Capital Economics.

"As far as this indicator is concerned, a recession, and a severe one at that, is already underway," he added.

It was not surprising then that the dollar fell sharply after the news, with the euro coming close to the 1.48 usd level, its highest since Feb 5.

The bad news for the dollar did not stop there. Also out today, the index of leading US indicators fell by 0.1 pct month-on-month in January. The drop was the fourth in a row and was driven by losses in the equity market and continued signs of weakness in housing sector.

While not alarming at first glance, the six-month change in the index showed a steep drop and firmly pointed to a recession, added Ashworth at Capital Economics.

"It is a fairly reliable indicator as well, successfully predicting every recession since 1960 and only throwing up one false-positive back in 1967," he said.

Elsewhere, the pound got a boost from strong UK retail sales data, which suggested UK high street activity is much more buoyant than previously thought.

The Office for National Statistics revealed that retail sales in January were up 0.8 pct higher on a seasonally-adjusted basis from February, when retail sales fell by 0.2 pct.

January's performance beat expectations for a 0.2 pct monthly rise, and helped the annual rate double in January to 5.6 pct, again beating analysts' forecasts of a 4.8 pct increase.

"The pound continues to benefit from January's forecast-busting UK retail sales figures," said Robert Howard at Thomson IFR Markets.

The news will allay fears of an imminent slowdown in the UK economy, and keep in place expectations that though there appears to be room for the Bank of England's Monetary Policy Committee to cut interest rates further, it will do so gradually rather than aggressively.

"Today's release perhaps reinforces why the BoE envisages a more gradual easing in monetary policy than markets," said David Page, UK economist at Investec.

After the day's dismal US data, the pound was able to rise back above 1.96 usd.

London 1653 GMT London 1303 GMT

US dollar

yen 107.60 down from 108.15

sfr 1.0920 down from 1.1004

Euro

usd 1.4812 up from 1.4733

stg 0.7550 up from 0.7526

sfr 1.6180 down from 1.6215

yen 159.42 up from 159.35

Sterling

usd 1.9617 up from 1.9579

yen 211.19 down from 211.69

sfr 2.1420 down from 2.1537

Australian dollar

usd 0.9211 up from 0.9194

stg 0.4691 down from 0.4695

yen 99.11 down from 99.42

Low Rates Only Temporary?

With a strong CPI reading y'day. The FOMC called inflation "disappointing," and thoughts are of raising rates, possibly at a "rapid" pace once the economy recovers.

Overnight News Bullets

• UK Public Finances (JAN) out at -22.1B vs. -19.5B expected vs. 17.0B prior read.

• UK Public Sector Net Borrowing (JAN) out at -14.1B vs. -9.5B expected vs. 7.8B prior read (revised lower to 6.9B)

• UK M4 Money Supply MoM/YoY (JAN) out at 1.3%/12.9% vs. 0.8%/12.0% expected vs. 1.5%/12.3% prior read (revised higher to 1.6%/12.4%)

• UK M4 Sterling Lending (JAN) out at 21.6B vs. 16.0B expected vs. 17.4B prior read (revised higher 18.5B)

• US MBA Mortgage Applications (FEB) out at -22.6% vs. -2.1% prior read.

• US Consumer Price Index MoM/YoY (JAN) out at 0.4%/4.3% vs. 0.3%/4.2% expected vs. 0.3%/4.1% prior read (revised higher 0.4%)

• CA International Securities Transactions (DEC) out at C$1.241 vs. C$1.500 expected vs. –C$4.840 prior read (revised lower to –C$4.898)

• US CPI Ex. Food and Energy MoM/YoY (JAN) out at 0.3%/2.5% vs. 0.2%/2.4% expected vs. 0.2%/2.4% prior read

• US CPI Core Index (JAN) out at 213.765 vs. 213.148 prior read (revised lower to 213.103)

• US Consumer Price Index (JAN) out at 211.080 vs. 210.900 expected vs. 210.036 prior read.

• US Housing Starts (JAN) out at 1012K vs. 1010K expected vs. 1006K prior read (revised lower to 1004K)

• US Building Permits (JAN) out at 1048K vs. 1050K expected vs. 1068K prior read (revised higher to 1080K)

• US FOMC Minutes •JN Trade Balance Total (JAN) out at –JPY79.3bln. Vs. JPY8.2 expected vs. JPY877.9B prior read.

• JN Adjusted Trade Balance (JAN) out at JPY861.9B vs. JPY900.0B expectd vs. JPY642.5B.

Markets

• FX: USD initially higher on CPI but sold off after FOMC minutes – resistance in EURUSD coming in at 1.4760. CHF loosing strength on credit worries.

• Stocks: Europe down across the board, US reversed higher after FOMC closing in on first resistance at 1370. Asian indices enjoying positive momentum on solid earnings. Nikkei up 2.8%.

• Fixed Income: US 10yrs continue lower, testing the 50 day MA, Bunds congesting but with a bearish bias. JGB’s selling massively off on risk willingness.

• Commodities: WTI Crude not able to close above $100 yet, but a draw in today’s DOE inventories could be the trigger. Precious metals continue higher – silver testing $18.

Daily Forex Technical Report − Sterling Recovers Mildly ahead of Retail Sales, Philly Fed Survey Eyed

Thu, Feb 21 2008, 08:15 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Sterling Recovers Mildly ahead of Retail Sales, Philly Fed Survey Eyed

Sterling recovers mildly against major currencies ahead of retail sales report from UK. Sales is expected to rebound from Dec's -0.4% mom fall to rise 0.1% mom in Jan. Yoy rate is expected to climb from 2.7% to 4.6%. The expectation is inline with recent BRC survey which showed 2.6% rebound. So far, sterling has been under much pressure on expectation of further rate cut of 50bps to 75bps from BoE by the end of the year. Such expectation was reinforced by yesterday's dovish BoE minutes which showed ultra dove Blanchflower voted for a 50bps cut in Feb. It will need some persistent improvement in consumer spending to shift such expectations and any downside surprise today will trigger another round of sell off in the pound.

Elsewhere, the Japanese yen weakens mildly in general but is still staying in established range against dollar and Sterling. Data released overnight saw Jan trade balance unexpectedly turned to a deficit of -79.3b versus expectation of 8.2b, primarily due to strong import growth of 9.0%. All industry index dropped -0.2% in Dec, also weaker than consensus of -0.2%.

Dollar gave back most of the post CPI gains after yesterday's dovish FOMC minutes which also has growth forecasts revised sharply lower and unemployment forecasts revised higher. Focus will now turn to Philly Fed index which is expected to improve mildly from Jan's shockingly poor reading of -20.9 in Dec to -10.5 in Jan. Jan leading indicators is expected to drop -0.1%. Jobless claims, is expected to drop slightly to 345k but stay near to the 4 week moving average.

More Technical Analysis Reports Here

GBP/JPY Daily Outlook

Daily Pivots: (S1) 209.02; (P) 209.95; (R1) 210.85; More

GBP/JPY turns into sideway consolidation after fall from 213.05 was initially contained by 61.8% retracement of 205.86 to 213.05 at 208.61. Nevertheless, intraday bias remains on the downside as long as 211.79 minor resistance holds. As discussed before, consolidation from 204.49 has possibly completed at 213.85, after being limited by inner falling channel resistance. Further decline is now expected to be see to retest 204.49 low. Meanwhile above 211.79 will dampen this view and turn intraday outlook neutral first.

In the bigger picture, the fall from 241.35 has made a short term low at 204.49, after being supported by double channel support and turned into sideway consolidation since then. Though, with the inner falling trend resistance remains intact, down trend from 241.35 should still be in force. Break of 204.49 low will confirm that such decline has resumed for next downside target of psychological support at 200, which overlaps with next medium term fibo support of 50% retracement of 148.19 (006) to 251.09 (07 high) at 199.64.

However, decisive break of 214.00 resistance, which will also have the inner falling channel taken out firmly too, will firstly indicate that fall from 241.35 has completed. Secondly, it will alert that whole down trend from 251.09 has possibly completed with three waves down to 204.49 too. Further break of 221.25 support turned resistance will have medium term outlook will turn neutral first in such case and focus will be back on outer channel resistance (now at 230.90).

Thomson Financial Europe AM at a glance share guide: Stocks, oil mixed

Thu, Feb 21 2008, 05:14 GMT
http://www.afxnews.com

LONDON (Thomson Financial) - US SUMMARY: Stocks gain, gold surges

Index Change Pct change

*DJIA 12,427.30 +90.00 +0.73

*Nasdaq 2,327.10 +20.90 +0.91

*S&P 500 1,360.05 +11.25 +0.83

Nymex crude

for March 100.74 usd +0.73 usd

10 yr US

treasury 3.91 pct +0.04

* Yesterday's close

STOCKS: Stocks came off early losses to finish higher Wednesday as investors set aside some concerns about the economy after finding reassurance that the Federal Reserve remains committed to stoking growth before worrying about inflation.

In corporate news, Hewlett-Packard late Tuesday posted a 38 pct surge in its fiscal first-quarter profit following an increase in computer sales. The company, one of the 30 stocks that comprise the Dow Jones industrial average, raised its profit forecast for the year.

BONDS: Treasury prices closed mixed Wednesday after a session made volatile by a worrisome rise in consumer inflation and news that the Federal Reserve cut its growth forecast. Long-term bonds closed higher in price as shorter maturities succumbed to selling.

FOREX: The dollar rose against the euro and the pound Wednesday after a government report showed US consumer prices rose more than economists expected in January and the release of Federal Reserve January meeting minutes hinted at future rate hikes.

The dollar also rose to 108.15 yen from 107.60 yen and to 1.0993 sfr from 1.0943 sfr.

OIL: The contract for March delivery of light sweet crude, which was expiring later Wednesday, rose 73 cents to settle at a record 100.74 usd on the New York Mercantile Exchange after earlier rising as high as 101.32 usd, a new trading record.

METALS: Gold surged to a record in aftermarket trading Wednesday after oil rallied above 100 usd a barrel and investors bet the Federal Reserve will again slash interest rates -- boosting the metal's appeal as a hedge against inflation.

Other precious metals traded mixed, with silver also touching a record-high and platinum retreating from historic levels.

Gold for April delivery jumped as high as 949.20 usd an ounce in electronic trading on the New York Mercantile Exchange -- the highest ever and within striking distance of the psychologically important 1,000 usd barrier.

EVENTS:

Initial weekly jobless claims (1330 GMT)

Jan composite indexes (1500 GMT)

Feb Philadelphia Fed Survey (1500 GMT)

Chesapeake Energy Corp Q4 results. EPS forecast 0.81 usd vs 0.90 (after market closes)

CMS Energy Corp Q4 results. EPS forecast 0.19 usd vs 0.27 (before market opens)

Express Scripts Inc Q4 results. EPS forecast 0.64 usd vs 0.51 (after market closes)

Intuit Inc Q2 results. EPS forecast 0.36 usd vs 0.45 (after market closes)

Newmont Mining Corp Q4 results. EPS forecast 0.40 usd vs 0.47 (1700 GMT)

Patterson Dental Q3 results. EPS forecast 0.45 usd vs 0.43 (before market opens)

JC Penney Inc Q4 results. EPS forecast 1.97 usd vs 1.71

Quest Diagnostics Inc Q4 results. EPS forecast 0.78 usd vs 0.77 (before market opens)

Safeway Inc Q4 results. EPS forecast 0.69 usd vs 0.61 (before market opens)

Williams Cos Inc Q4 results. EPS forecast 0.48 usd vs 0.30 (before market opens)

ASIA SUMMARY: Stock rise; oil hits record-high

Index Change Pct change

Nikkei 225 13,702.02 +391.65 +2.94 (0408 GMT)

S&P/ASX 200 5,545.00 +48.50 +0.88 (0408 GMT)

Straits Times 3,059.08 +32.25 +1.10 (0210 GMT)

Hang Seng 23,900.54 +309.96 +1.31 (0408 GMT)

Seoul Composite 1,706.76 +18.85 +1.12 (0409 GMT)

BSE Sensex 17,844.13 +226.53 +1.29 (0429 GMT)

usd-yen 108.025 -0.145 -0.13 (Intra-day)

10-year JGBs 1.465 pct +0.04 +2.81 (Intra-day)

Brent North Sea 98.46 usd +0.04 +0.05 (Intra-day)

crude for April.

STOCKS: Markets across Asia rose today, tracking gains on Wall Street overnight as investors focused on the Federal Reserve's apparent commitment to further interest rate cuts in the minutes from its latest meeting and shrugged off, for now at least, its warning about high inflation.

BONDS: Japanese government bond prices plunged in the morning as improved outlooks for stocks reduced investor appetite for bonds against a background of renewed hopes for further rate cuts in the US.

FOREX: The US dollar was weaker against major currencies midway through the morning session in Sydney, after the Federal Reserve reduced its growth forecast for the world's largest economy, raising expectations for further interest rate cuts.

OIL: World oil prices hit a new record of 101.32 usd a barrel on renewed concerns over global crude supplies. New York's main oil futures contract, light sweet crude for delivery in March, touched the all-time peak in electronic trading before it lapsed. In Asian morning trade, the contract for April delivery, which took over, was trading at 99.90 dollars a barrel, up 20 cents from the previous day.

METALS: Gold remained under pressure yesterday on broad dollar strength and profit-taking following strong gains yesterday, while platinum was also hit by markets cashing in on the white metal's storming run of the past three weeks while platinum remained weak on profit-taking after setting a series of record highs in the past three weeks. Palladium and silver also edged lower. Copper declined as Tuesday's run to four-month highs sparked further profit taking, and as players were reminded that US economic risks remain very real. Most of the other base metals also declined yesterday.

EVENTS:

Japan Dec all-industries index

Japan weekly capital inflows

Qantas Airways H1 results

Telstra H1 results

Brambles H1 results

OCBC FY results

COSCO FY results

EUROPE SUMMARY: London shares close lower; oil down

Index Change Pct change

*FTSE 5893.57 -73.36 -1.22

*DAX 6899.68 -102.61 -1.46

*CAC 4812.81 -73.02 -1.49

UK 10-year

Bond 102.59 -0.22

UK 30-year 103.18 -0.30

Bond

stg-usd 1.9424 -0.0086 (Intra-day)

eur-usd 1.4645 -0.0005 (Intra-day)

Brent Crude

ICE (April) 97.20 usd -1.36 usd (1611 GMT)

* Yesterday's close

STOCKS: UK blue chips closed lower as Wall Street remained weaker after disappointing inflation data with Alliance & Leicester

down after reporting a fall in core operating profit, held back by large scale write-downs.

Meanwhile, Defence group BAE Systems PLC should report higher full-year profits today, thanks to strong growth in its land & armaments and programmes divisions.

Kingfisher PLC, the global home improvement retailer, is expected to reveal a slowdown in underlying sales growth in its key UK and French markets when it updates on fourth-quarter trading today.

Reed Elsevier, the Anglo-Dutch publishing giant, will report its annual results today. With analysts cutting forecasts for media companies in response to an increasingly gloomy economic outlook, investors will pay particularly close attention to Reed's outlook for the year ahead.

BONDS: European government bonds remained lower as concerns over inflation came to the fore and as market players awaited the

release of the US Federal Reserve minutes to the last policy meeting.

Over in the UK, gilts were also lower, tracking their European counterparts.

FOREX: The pound came under renewed pressure after the Bank of England's latest interest rate deliberations, revealed yesterday, suggested more rate cuts ahead. The currency has been on the back foot all week, with the nationalisation of ailing mortgage lender Northern Rock adding a new sense of uncertainty at a time when the overall economy is predicted to slow rapidly.

The euro was also down amid fresh worries that German regional banks may be in trouble, with markets speculating more write-downs. Yesterday, German finance minister Peer Steinbrueck called for consolidation of Germany's state-owned Landesbanks that were hit by fallout from the US sub-prime mortgage loan crisis.

OIL: Oil continued down on the day after closing above 100 usd for the first time ever Tuesday, with profit taking and concerns

crude's latest rally could be overdone knocking the top off prices.

METALS: Gold remained under pressure on broad dollar strength and profit-taking, while platinum was also hit by markets cashing in on the white metal's storming run of the past three weeks. At 1442 GMT spot gold was at 919.70 usd per ounce from 926.60 usd in late New York trade Tuesday.

Palladium was also lower at 469 usd per ounce against 493 usd, while silver was down at 17.29 usd per ounce against 17.49 usd.

EVENTS:

UNITED KINGDOM

INTERIMS

Antisoma

Galliford Try

Premium Bars & Restaurants

FINALS

Aricom

BAE Systems

BATM Advanced Communications

Centrica

Colt Telecom (Q4)

Delta

Electric Word

IBS OPENSystems

Invista Real Estate

Orpak Systems (Q4)

Reed Elsevier

Shire

Telephonetics

Tomkins

Zetex

AGMs

Crystalband

easyJet

Sunrise Diamonds

EGMs

Tertiary Minerals

Ukrproduct Group

TRADING STATEMENTS

Kingfisher

ECONOMICS

UK Jan retail sales

UK govt Oct-Dec housebuilding figures

BoE's Barker speaking at ABI Research Conference

BoE's Sentance speech in Exeter

BENELUX

Dutch Nov-Jan unemployment

Heijmans FY results. Net profit forecast 55-58 mln eur vs 82 mln; sales 3.65-3.747 bln eur vs 2.942 bln

EVS FY results

GIMV trading statement

TomTom FY results. Net profit forecast 88.4-108 mln eur vs 80 mln; sales 600.9-683 mln eur vs 478 mln

Reed Elsevier FY results. EPS forecast 35 pence vs 33.6

SNS Reaal FY results. Net profit forecast 208 mln eur vs 185 mln; EPS 0.79 eur vs 0.78

EASTERN EUROPE

Czech 26-wk T-bill auction

Czech central bank governing board meeting (non interest-rate setting)

Polish central bank publishes minutes from Jan policy meeting

Polish treasury minister Aleksander Grad news conference

Telefonica O2 Czech Republic FY results. Q4 net profit forecast 2.11 bln crowns vs 1.17 bln

EUROPEAN UNION/EURO ZONE

EU Commission forecasts

ECB governing council meeting; no decision on interest rates

European Business Summit

Euro zone Dec current account. Forecast -3.0 bln eur vs +0.7 bln

EU's Almunia gives press conference on EU interim forecasts

EU rules on acquisition by Sacyr Vallehermoso of Eiffage

UK Prime minister Gordon Brown, Foreign Secretary David Milliband visit EU's Barroso followed by lunch with commissioners

UK Prime minister Gordon Brown meets Belgian acting PM Guy Verhofstadt

FRANCE

Jan CPI. Forecast mth-on-mth -0.1 pct vs +0.4; yr-on-yr +2.8 pct vs +2.6

Jan HICP. Forecast mth-on-mth -0.2 pct vs +0.4; yr-on-yr +3.0 pct vs +2.8

Groupama FY results

Dassault Aviation FY results

CIC FY results

Societe Generale Q4/FY results. Net profit forecast 947 mln eur vs 5.2 bln

Eramet Q4 results. Net profit forecast 574.6 mln eur vs 327.4 mln; EBIT 1.197 bln vs 607 mln

Technip FY results

Eurodisney AGM

GERMANY

Ministry of Finance monthly report for Jan

Allianz FY results. Operating profit forecast 10.8 bln eur vs 10.4 bln

BASF FY results. Pretax profit forecast 1.604 bln eur vs 1.532 bln

Continental FY results. Net income forecast 1.18 bln eur vs 981 mln; sales 16.09 bln eur vs 14.89 bln

ITALY

Adj Feb consumer confidence. Forecast 102.2 vs 102.2

Benetton preliminary FY results. EBITDA forecast 320.5-326.0 mln eur vs 276.0 mln; sales 2.074-2.084 bln eur vs 1.911 bln

PORTUGAL

Vivo FY results

SCANDINAVIA

Swedish Riksbank governor Stefan Ingves speech "Monetary policy with an inflation target"

Petroleum Geo-Services Q4 results. EBITDA forecast 165 mln usd vs 173 mln; sales 360 mln usd vs 361 mln

GN Store Nord FY results. EBITA forecast 300 mln dkr

TDC FY results

SPAIN

Indra FY results. Net profit forecast 148 mln eur; revenue 2.165 bln

Antena 3 FY results. Net profit forecast 188-211 mln eur vs 289.7 mln; revenue 943 mln-1.019 bln eur vs 1.001 bln

Endesa FY results. Net profit forecast 2.358-2.683 bln eur vs 2.969 bln

SWITZERLAND

Nestle FY results. Net profit forecast 10.339 bln sfr vs 9.197 bln

Actelion FY results

Jan exports

Jan watch exports