Written by Terri Belkas and David Song, DailyFX.com

The US dollar gained against most of the major currencies ahead of the market moving data scheduled for tomorrow, and pushed investors to lower their risk appetite as they raised bets of a 25bp rate cut. As a result, the greenback advanced against most of the commodity currencies expect for the Canadian dollar, which held up amid falling oil prices. The low yielding Yen also strengthened against the US dollar – sparked by a rise in risk aversion, while the Swiss franc inched lower to trade at 1.03. The European currencies continued to lose ground against the US dollar as negative sales data for the UK and Euro-Zone lowered the growth prospects for both countries and pulled back the British Pound and Euro to 1.96 and 1.55, respectively.

Fresh housing data lowered the growth prospects for the US economy as downside risks continued to surface, with more consumers voicing their concerns about the current economic situation. The S&P/CaseShiller Composite fell 12.7 percent, the sharpest decline since record keeping began in 2001. Financial instability paired with tightening credit conditions has made it increasingly difficult for the housing market to get back on its feet, with home prices persistently falling as the inventory of unsold homes reached record levels. Falling consumer confidence has also added damped the growth prospects for the economy as the Conference Board’s Consumer Confidence index fell for the fourth consecutive month to dip to a five year low of 62.3 from 64.5. Consumers continue to feel the economic strains as raging food and energy costs limit their spending capabilities, with growth prospects looking increasingly bleak as economic activity deteriorates. more…

Source: DailyFX.com
The US dollar staged a massive comeback last week as US economic data indicated that, while conditions remain dismal, they aren’t quite as bad as expected. First, the Richmond Fed index “only” fell to 0 from +6, versus expectations of a drop to -1, while existing home sales slipped 2.0 percent. Next, the headline reading of the Commerce Department’s durable goods orders report contracted for the third consecutive month during March, due largely to declines in demand for transportation and defense goods. However, the markets took their cue from the durable goods orders excluding transportation reading, as the index surged 1.5 percent and helped to keep the US dollar rally alive.

Looking ahead to this week, Tuesday’s economic data will likely highlight some of the reasons why traders are ramping up speculation that the country is in midst of a recession. Indeed, the S&P/Case-Schiller index of home prices is likely to fall sharply for the fourteenth consecutive month. Later in the morning, the Conference Board’s consumer confidence index is forecasted to fall to a five year low of 62.0 from 64.5, which won’t be entirely surprising as rocketing food and energy prices combined with the collapse of the US housing sector and tightening credit conditions have sparked widespread pessimism throughout the financial markets. On Wednesday morning, highly anticipated Q1 GDP figures will be released, and a Bloomberg News poll of economists reflects consensus estimates for a 0.3 percent gain. However, these could be rather optimistic expectations, as there is a good possibility that GDP could actually fall negative.

Nevertheless, the market’s response may be muted as the FOMC rate decision will come at 14:15 EST and the Bank is forecasted to cut the fed funds rate by 25bps to 2.00 percent. However, the vote for the March reduction in the fed funds rate had two dissenters, both of whom voted in favor of “less aggressive” policy given upside inflation risks, and futures are now only pricing in a 75 percent chance of a 25bp rate cut and a 25 percent chance of no change in policy. The odds are certainly in favor of more accommodative policy, but if the concurrent policy statement suggests that the FOMC may not cut rates again at their next meeting, the US dollar could actually rally. The latter part of the week will see both ISM Manufacturing and Non-farm Payrolls, though the employment data will likely be the bigger market-mover. NFPs are expected to fall negative for the fourth consecutive month, indicating that consumer spending will continue to deteriorate as record high energy and food prices sap disposable income. – TB

Thursday, 24 April 2008 13:24:40 GMT 

Written by John Rivera, Currency Analyst 

The GBP/USD has remained in a trading range between 1.9600 to 2.000 for nearly a month. The upcoming first quarter growth numbers may provide the impetus to break it free and put it onto its next trend phase. The economic report is expected to show growth slowed for a consecutive quarter to 0.4%, bringing the annualized rate to 2.6%, and remaining below its recent growth trend average of 3%.

Trading the News: U.K. Gross Domestic Product

What’s Expected

Time of release:                  04/25/2008 08:30 GMT, 04:30 EST

Primary Pair Impact :          GBPUSD

Expected:                              2.6%

Previous:                               2.8%

How To Trade This Event Risk

The GBP/USD has remained in a trading range between 1.9600 to 2.000 for nearly a month. The upcoming first quarter growth numbers may provide the impetus to break it free and put it onto its next trend phase. The economic report is expected to show growth slowed for a consecutive quarter to 0.4%, bringing the annualized rate to 2.6%, and remaining below its recent growth trend average of 3%. The housing slump brought on by the recent credit crisis has started to weigh on consumer confidence leading to retail sales declining for the first time in three months. The BoE in an attempt to jump start the housing market recently infused 50 billion in liquidity into the market., when it traded treasuries for mortgage back securities. The move brought more fear than relief as speculation grew that there was more fallout ahead from the credit crunch. Inflation concerns on the back of record oil prices  have provided support for the Pound as the BoE has been adamant that price stability remains a focus of theirs. However, growth prospects have grown dimmer as indicated by the recent CBI manufacturing survey. The forward looking indicator saw sharp declines in expectations for orders and output, with 13% more negative responses than positive. Therefore, the inflation argument may lose its influence on the cable, leaving it exposed to more downward pressure.

The negative expectations and recent softening fundamentals leaves the greatest chance for volatility with a rebound in growth. Although March’s retail sales declined, they managed to exceed expectations and were resilient throughout the first quarter. Therefore, the potential for an upside surprise exists, especially considering that unemployment has remained firm  at 2.5%. With strong GDP readings from both the quarterly and annual figures, we will look for a five minute green candle to confirm entry on a long, two lot GBPUSD position. The stop for both lots will be set either at the nearby swing low or at a reasonable, fixed distance. The target on the first half of the trade will equal the distance to the stop, while the second lot’s objective should be taken on discretion. When the first lot takes profit, the stop on the second should be moved up to break even to conserve profit.

The most likely scenario, given the toll the housing slump, rising inflation and tight credit markets have exacted on the economy, is that growth slowed. If the GDP numbers cross the wires worse than expected, we will use the same criteria and strategy setup for a short as we would for the long, except in reverse.

taken from : http://www.dailyfx.com

Written by Kathy Lien, Chief Strategist of DailyFX.com

The Japanese Yen crosses were mixed today with USD/JPY rallying but many of the other yen crosses dipping despite a 42 point rally in the Dow.

After breaking higher last Friday, there has not been much follow through in US equities, which leaves many traders nervous about whether risk appetite is really here to stay.  The latest merchandise trade balance report was weaker than expected, but the surplus still increased last month.  The strength of the Japanese Yen is beginning to take a toll on exports, particularly in the electronic components and machinery sector.  Imports on the other hand rose 11 percent, mainly due to the rise in oil prices.

(CEP News) – It’s an important week for Japan and Australia, with both countries releasing inflation data.Looking at Australian inflation, economists expect the Reserve Bank of Australia weighted median for the first quarter to rise 0.9% following a 1.1 % rise in the fourth quarter of 2007. Annual weighted median data is expected to rise 4.0% following a prior increase of 3.8%.

In Japan, markets will pay attention to Tokyo CPI, excluding fresh food and energy, which is expected to rise 0.5% in April following March’s rise of 0.5%. The annual core rate is expected to rise 0.1% following a prior rise of 0.1%. The national CPI for March, excluding food and energy, is expected to come in flat following February’s fall of 0.1%

All times in EST

Sunday:

The week starts with the release of Australia produce price index for the first quarter, which is expected fall 0.5% following last quarter’s rise of 0.7%. The annualized rate is expected to rise 3.9% following a prior rise of 2.8%.

19:50 JN Tertiary Industry Index (M/M) FEB Exp: -0.5% Prior: +0.7%

21:30 AU Producer Price Index (Q/Q) 1Q Exp: +1.0% Prior: +0.6%

21:30 AU Producer Price Index (Y/Y) 1Q Exp: +3.9% Prior: +2.8%

21:30 AU New Motor Vehicle Sales (M/M) March Prior: -2.3%

21:30 AU New Motor Vehicle Sales (Y/Y) March Prior: +3.1%

Monday:

Japan’s final print of February’s leading economic index will be released, with economists forecasting a 54.5% increase following January’s rise of 50.0%.

1:00 JN Leading Economic Index FEB Final Exp: +54.5% Prior: +50.0%

1:00 JN Coincident Index FEB Final Exp: +70.0% Prior: +44.4%

3:00 JN Convenience Store Sales (Y/Y) March Prior: +1.2%

Tuesday:

It’s a busy day for Australia with the release of first-quarter inflation data. The Reserve Bank of Australia weighted median for the first quarter is expected to rise 0.9% following last quarter’s rise of 1.1%. Annual weighted median data is expected to rise 4.0% following a prior increase of 3.8%.

Japanese merchandise trade balance for March will also be released. The consensus is for a surplus of ¥1405.0 billion following February’s surplus of ¥970.0 billion.

1:00 JN Supermarket Sales (Y/Y) March Prior: +1.9%

19:50 JN Merchandise Trade Balance Total March Exp: +¥1405.0B Prior: +¥970.0B Revised: ¥966.2B

19:50 JN Adjusted Merchandise Trade Balance March Exp: +¥890.2B Prior: +¥598.4B

20:00 AU DEWR Skilled Vacancies (M/M) April Prior: -2.2%

21:30 AU Consumer Prices (Q/Q) 1Q Exp: +1.1% Prior: +0.9%

21:30 AU Consumer Prices (Y/Y) 1Q Exp: +4.0% Prior: +3.0%

21:30 AU RBA Trimmed Mean (Q/Q) 1Q Exp: +0.9% Prior: +1.0%

21:30 AU RBA Trimmed Mean (Y/Y) 1Q Exp: +3.8% Prior: +3.4%

21:30 AU RBA Weighted Median (Q/Q) 1Q Exp: +0.9% Prior: +1.1%

21:30 AU RBA Weighted Median (Y/Y) 1Q Exp: +4.0% Prior: +3.8%

Wednesday:

Aside from weekly Japan foreign investment data, the day is light for economic data.

19:50 JN Foreign Buying Japan Stocks 18-Apr Prior: -¥3.4B

19:50 JN Foreign Buying Japan Bonds 18-Apr Prior: +¥561.0B

19:50 JN Japan Buying Foreign Stocks 18-Apr Prior: +¥82.6B

19:50 JN Japan Buying Foreign Bonds 18-Apr Prior: +¥490.3B

19:50 JN Corp Service Price (Y/Y) March Exp: +0.7% Prior: +0.7%

19:50 JN All Industry Activity Index (M/M) FEB Exp: -0.5% Prior: 0.0%

Thursday:

The week ends on an important Japan inflation data.

Tokyo CPI, excluding fresh food and energy, is expected to rise 0.5% in April following March’s 0.5% increase. The annual core rate is expected to rise 0.1% following a prior rise of 0.1%.

The March national CPI, excluding food and energy, is expected to come in flat following February’s fall of 0.1%

19:30 JN Tokyo CPI (Y/Y) April Exp: +0.5% Prior: +0.6%

19:30 JN Tokyo CPI Ex-Fresh Food (Y/Y) April Exp: +0.5% Prior: +0.6%

19:30 JN Tokyo CPI Ex Food, Energy (Y/Y) April Exp: +0.1% Prior: +0.1%

19:30 JN National CPI (Y/Y) March Exp: +1.2% Prior: +1.0%

19:30 JN National CPI Ex-Fresh Food (Y/Y) March Exp: +1.2% Prior: +1.0%

19:30 JN National CPI Ex-Food, Energy (Y/Y) March Exp: +0.0% Prior: -0.1%

Friday:

No data is expected to be released.

(CEP News) – On Thursday, markets will focus on Canada with the release of March CPI inflation data. In the United States, the Philadelphia Fed’s manufacturing survey will be the highlight of the day.Canadian annualized core CPI is expected to remain below the Bank of Canada inflation target, coming in at 1.4% for March following February’s increase of 1.5%. Month-over-month core CPI is expected to rise 0.3% following February’s increase of 0.5%.

Fergal Smith, managing market strategist from Action Economics, said Wednesday’s inflation data won’t have much of an impact on the Bank of Canada at the April 22 meeting. He said he still expects the bank to cut 50 basis points.

“I don’t think it is going to have a massive impact on next week’s policy announcement. If we get a weaker than expected core inflation number, the market would start to price in more aggressive easing beyond next week,” he said. “And if we got surprising firm inflation data, markets would start to strip out some of the easing priced in after next week.”

Turning to the U.S., markets will receive more regional manufacturing data with the release of the Philly Fed Survey. Economists expect it will come in at a level of -15 following March’s -17.4 reading.

Economists from Lehman brothers said they are expecting the index to slip further down in March to a reading of -18.0.

“Although new orders and shipments both rose last month, unfilled orders fell sharply, indicating limited potential for a significant improvement,” economists from Lehman Brothers wrote in a research note. “Additionally, the employment and the hours series both suggested that firms were reducing their headcount and trying to manage their production schedules.”

All times in EDT.

Thursday:

7:00 CA Consumer Price Index (M/M) March Exp: +0.5% Prior: +0.4%

7:00 CA Consumer Price Index (Y/Y) March Exp: +1.5% Prior: +1.8%

7:00 CA Bank Canada CPI Core (M/M) March Exp: +0.3% Prior: +0.5%

7:00 CA Bank Canada CPI Core (Y/Y) March Exp: +1.4% Prior: +1.5%

8:30 CA Report on Travel Between Canada and Other Counties

8:30 US Initial Jobless Claims 12-Apr Exp: +375K Prior: +357K

8:30 US Continuing Claims 5-Apr Exp: 2950K Prior: 2945K

9:45 US Fed’s Kohn speaks at conference on credit markets, banking

10:00 US Leading Indicators March Exp: +0.1% Prior: -0.3%

10:00 US Philadelphia Fed. APRIL Exp: -15.0 Prior: -17.4

10:30 US EIA Natural Gas Storage Change 11-Apr Exp: +16 Prior -14

10:30 US Fed’s Prescott, S&P’s Miller and Lehman Brother’s Watkinson Participate in Fed Panel

14:00 US Fed’s Fisher speaks in Chicago

15:00 US Fed’s Lacker to speak to media at credit conference in Charlotte

15:15 US New York Fed’s Calabia to moderate Credit

4:30 US MI and M2 Money Supply

via Action Forex

(CEP News) – Despite the slowdown in the U.S. and other industrialized nations, the outlook for the developing world remains optimistic, U.S. Treasury Secretary Henry Paulson said on Sunday.Paulson was speaking to the Development Committee, a body that focuses on the needs of poorer countries. At the beginning of his speech, Paulson repeated prior statements on the U.S. economy – saying that while the short-term outlook is trying, the long-term outlook is good.

“While the long-run economic fundamentals remain sound, the U.S. economy faces challenges. The housing correction, credit market turmoil and high oil prices are all weighing on growth and short-term risks are to the downside,” he said.

Despite the risk stemming from the world’s richest economy and an anticipated slowdown in global growth, poorer countries continue to develop, Paulson said.

“It is important to remember that developing countries are on track to record their sixth consecutive year of average GDP growth in excess of 6%, an accomplishment unparalleled in recent history,” Paulson said.

“Stronger macroeconomic policies, buoyant external demand, low real interest rates, and increased access to private capital markets – over $600 billion in net private inflows in 2007 – are major factors for strong growth performance.”

Paulson also said high commodity prices have improved developing countries’ terms of trade.

(CEP News) – The Federal Reserve received only $33.95 billion for a $50 billion auction through the term securities lending facility, officials announced Thursday.The absence of participants resulted in a bid-to-cover ratio of 0.68. This is much lower than the previous bid-to-cover ratios of 1.15 and 1.88 and could mean funding pressures have abated. The stop-out rate was 25 basis points – the minimum allowed rate.

“The bid-to-cover ratio is astonishingly low. You have to interpret it as positive but I’m still seeing trouble in other areas,” said Eric Lascelles, chief economist and fixed income strategist at TD Securities.

Some sources say that because the TSFL is still new, some firms are still not able to participate because of operational and accounting changes, but Lascelles said that’s unlikely.

“I have a hard time believing that if they need funding they aren’t participating. If they need it, they’re going to make it work one way or another,” he said.

via Action Forex

(CEP News) – On Thursday night, Asian markets will receive Japan Domestic CGPI for March.Economists expect Japan’s domestic CGPI to rise 0.3% following February’s rise of 0.4%. Annualized, the consensus is for a rise of 3.5% following February’s rise of 3.4%.

Although no economic data is expected for Australia, markets will be interested to see what happens when G7 finance ministers and central bankers attend a meeting in Washington, D.C.

All times in EDT.

19:50 JN Domestic CGPI (M/M) March Exp: +0.3% Prior: +0.4%

19:50 JN Domestic CGPI (Y/Y) March Exp: +3.5% Prior: +3.4%

Friday

14:00 US G7 Finance Ministers and Central Bankers meet in Washington D.C.

(CEP News) – Speaking in an interview with Bloomberg News, U.S. Labour Secretary Elaine L. Chao said she did not think the U.S. economy was in recession yet.She said Friday morning’s decline in nonfarm payrolls, released by the Bureau of Labor Statistics, was due partly to an autoworkers strike at General Motors, and said Thursday’s jobless claims data of 407k was not that bad.

She also said the unemployment rate remained relatively good, and that she was optimistic about the government’s fiscal stimulus package, which is expected to add 600,000 jobs to the economy, according to members of the Treasury Department.