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Concern For The Global RecoveryTitle:
Euro-zone Stress Tests and Systemic Risk Worries to Dominate EUR/USD Next Week
Euro-zone Stress Tests and Systemic Risk Worries to Dominate EUR/USD Next Week
Why, despite such a weak report in the US, did the EUR/USD still end up moving in the greenback's favor, and what does that mean for the fate of the EUR/USD going into next week?
That's a questions we should be asking ourselves as we head into the weekend, and the explanation lies in the difference between systemic risk on the part of Europe while the US faces risks of weak growth and therefore a slower recovery. One is more extreme than the other.
All in all, we should continue to see the EUR pressured as we move through next week due to the focus on higher periphery yields, concern about Italy's banks, and the scheduled release of bank stress tests. The issue of systemic risk will be front and center as ...
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Weekly Economic and Financial Commentary : 08/07/2011
Weekly Economic and Financial Commentary
U.S. Review
Weak Jobs, a One-off or a Trend?
This week's employment report is a challenge to our view that the economy is leaving the spring slowdown behind and moving into a period of trend-like growth of 3 percent with moderate job growth as well.
Yet, the longer-term problems of a generation of overpromising and underfunding challenges both public and private decision makers. Federal and state policymakers have consistently failed to adequately fund entitlement spending. Meanwhile, households have underfunded their retirement ambitions. The adjustments in both areas are still ahead of us.
Weak Jobs, a One-off or a Trend?
This week's employment report challenges our view that the economy is leaving the spring slowdown behind and moving ...
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The Weekly Bottom Line : 08/07/2011
The Weekly Bottom Line
HIGHLIGHTS OF THE WEEK
United States
Friday's employment numbers were disappointing. The payrolls report revealed that in June only 18,000 jobs were added and that the unemployment rate ticked higher to 9.2%.
U.S. politicians continued to wrangle over the debt ceiling and the fiscal austerity measures. Fiscal uncertainty will continue to plague the economic outlook.
Rising inflation rates prompted the European Central Bank and the People's Bank of China to raise interest rates yet again, despite evidence of slower economic growth.
Canada
Canada has recorded stellar job growth in this recovery - almost 600,000 net job gains over two years, with almost 200,000 in the past 6 months alone.
While extremely positive, looking underneath the headline ...
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News in Rest of the World
Economic Data Analysis
News in Rest of the World
Risk aversion continues as Moody's downgrades Portugal, China hikes rates and the US debt ceiling issue ramps up.
EU17 meeting and bank stress test results maintain focus on Europe this week.
July's first US business and consumer surveys may show evidence that soft patch is ending. Bernanke's semi-annual Congressional testimony to update Fed view.
UK CPI inflation likely stays at 4.5% in June.
The periods of market recovery post Eurozone crises have become increasingly brief. The relief rally that followed the passage of Greek austerity measures pulled up short in the last week with Moody's downgrading Portuguese sovereign debt to 'junk' status. While the ECB suspended Portugal's collateral rating requirements at its ...
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Jobs seen boosting hopes of an economic revival
(Reuters) - U.S. companies probably stepped up hiring in June as the economy recovers from a stumble in recent months, although job growth is not expected to be strong enough to eat into high unemployment.
Nonfarm payrolls are seen having risen by 90,000, according to a Reuters survey conducted last week. In May, employment rose a paltry 54,000.
Many economists raised their forecasts on Thursday after a stronger-than-expected reading on U.S. private hiring from payrolls processor ADP, and they now expect gains of anywhere between 125,000 and 175,000.
The private sector will account for all the jobs created, as has been the trend over the last seven months, with layoffs at state and local governments continuing.
Nonetheless, the jobless rate, which is derived from a separate survey of ...
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Dukascopy Morning Forex Overview : 08/07/2011
Previous session overview
The dollar edged up against its major counterparts in Asia Friday as investors speculated that a key monthly U.S. jobs report later in the global day will come in strong, after separate employment data Thursday showed the labor market firming more than expected.
At 0450 GMT, the dollar was up at JPY81.27 from JPY81.24 late Thursday in New York. The common currency was at USD1.4338 at 0450 GMT, down from USD1.4359.
The ICE Dollar Index, which measures the greenback against a basket of currencies including the euro and yen, was up at 75.003 at 0450 GMT from 74.913 late Thursday in New York.
Risk-sensitive Asian currencies gained after the European Central Bank President Jean-Claude Trichet said Thursday, after the central bank raised interest rates, that it ...
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Pessimism Dominate after Portugal’s Rating Cut and China’s Rate Hike
Pessimism spread through global financial markets ahead of the U.S. session, where Moody’s announced it downgraded Portugal’s credit rating to junk, while China announced it raised benchmark interest rates by 25 basis points, and now investors are eyeing the ISM services index from the United States, which is expected to show that activities eased in June.
Moody’s Investors Services, the rating agency, decided to lower the credit rating of Portugal by four notches to Ba2 from Baa1, which spread fear among investors and reignited the concerns from the European debt crisis, where Moody’s expect Portugal will need a second bailout in order to avoid default.
Meanwhile, speculations mounted earlier this week that China was set to raise the benchmark interest rates, where an official ...
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Euro recovers some lost ground
USD
The euro managed to stage a minor recovery overnight as markets digested the Moody’s downgrade of Portugal, which jolted an otherwise sleepy US session. The four-notch move, with hints of more to go, served as a reminder that even though Greece has passed its near-term tests, problems within other economies persist, not to mention contagion risk. As the ECB meets and growth momentum starts to wobble, the sustainability of current plans will be further scrutinised. Nevertheless Asian equities are taking the news in their stride. On Tuesday the S&P 500 closed down -0.13% on a mixed day for global equities. US President Obama said a deal on raising the debt limit must be reached in the next 2 weeks, but that he is opposed to any deal that would only provide a short-term increase. There ...
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RBA cautious
USD
Overnight, the RBA left rates on hold at 4.75% but our economists note that the media release signalled less certainty on growth, both domestic and globally. As a more cautious tone was largely priced in, the AUD was not hit hard, nor was risk in general as there were bright spots elsewhere, but we note that increased uncertainty within policymaking is denting risk:reward generally. Yesterday, the July 4 Independence Day holiday closed US equity and Treasury markets, and ensured an exceptionally quiet session in FX. Ahead today, our European economists expect the Riksbank to deliver another 25bp of tightening. This week’s ECB press conference and Friday’s payrolls report are likely to be the main events. On the data side, German PMI services and composite Eurozone PMIs will be ...
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