Daily Forex Analysis by Finexo.com 27/04/2010

Past Events:

• EUR GfK German Consumer Climate out at 3.8 versus expected 3.4, prior 3.4 (revised)
• AUD PPI q/q out at 1.0% versus expected 0.7%, prior -0.4%
• AUD NAB Quarterly Business Confidence out at 17 versus prior 18
• CHF UBS Consumption Indicator out at 1.71 versus prior 1.20

Upcoming Sessions:

• GBP BBA Mortgage Approvals (930GMT)
• GBP CBI Realized Sales (1100GMT)
• USD S&P/CS Composite-20 HPI y/y (1400GMT)
• USD CB Consumer Confidence (1500GMT)
• USD Fed Chairman Bernanke Testifies (1500GMT)
• EUR ECB President Trichet Speaks (1515GMT and 2315GMT)
• CAD BOC Carney Speaks (2030GMT)
• RBA Assist Gov Debelle Speaks (2330GMT)

Market Review:

The Euro slipped against all its major currency counterparts yesterday as uncertainty intensified over how and when Greece would get the financial aid sought last week to avert a potential sovereign debt default. The spread between Greek and German 10-year government bond yields hit a new 12-year high of 679 basis points on Monday, indicating market concern over the implementation of the aid package and the conditions attached to it. Comments from Germany, potentially the biggest contributor to any aid package, helped keep markets nervous after Greece on Friday requested an aid package drawn up by the European Union and International Monetary Fund be implemented. German Finance Minister Wolfgang Schaeuble said Germany was aiming to free up financial support for Greece before a May 19 deadline, but the opposition Social Democrats said they would not back an accelerated parliamentary process to approve the aid.

The single European currency retreated from the highest level in more than a week against the Japanese Yen on concern that the joint EU-IMF €45billion rescue package won’t be enough to stop the deficit crisis from spreading. After hitting 126.298 Yen, its highest price since April 16th, the Euro slipped to 125.042 Yen. The EUR/JPY closed at 125.842, down 0.13% from the day’s open.

The Euro’s losses extended across the board as it neared a three month low against the British Pound after German Chancellor Angela Merkel stated that she won’t release any emergency funds for Greece until the nation has a “sustainable” plan to reduce its shortfall. After plunging to a low of 0.86016, the EUR/GBP recovered to close at 0.86620, down 0.27% from the day’s opening price.

After hitting a daily low of $1.32901, the Euro recovered against the greenback to close yesterday at $1.34026, up 0.35% from its opening of $1.33561. However, in the Asian trading session this morning, the single European currency slid to hit a low of $1.33557.

The European Central Bank President Jean-Claude Trichet will speak on multiple occasions this week, mostly while on his trip to the United States. Any comments about the Greek debt crisis or the state of the economies will shake the Euro. He will speak later today at a conference in Chicago (13:15 GMT) and later this evening (2315GMT) at the Kellog School of Management in Evanston. Trichet returns to Europe and will deliver a speech in Munich this Thursday.

In early trading yesterday, the British Pound extended its rally from late Friday after slipping to a four-day low versus the US Dollar of $1.52938. Last week’s volatile trading session ended with a disappointing figure in Britain’s growth. The U.K. economy grew half as much as economists forecast in the first quarter as winter weather hampered expansion, underscoring the recovery’s fragility two weeks before the election. The Prelim GDP report showed a 0.2% increase from the last quarter of 2009, when a 0.4% expansion pushed Britain out of the recession.

Yesterday, the pound strengthened against the dollar for the first time in three days after a report showed U.K. house prices increased for a ninth consecutive month, underpinning signs the economic recovery is gaining traction. Sterling advanced versus 14 of its 16 most-traded counterparts after Hometrack Ltd. said the average cost of a home increased 0.2% from March. The pound gained 0.5% to $1.5450 and appreciated 0.9% to 86.24 pence per euro, after earlier reaching 86.07 pence, the strongest since Jan. 28. The Pound closed at $1.54691, up 0.62% from its opening price.

This week, few economic events are scheduled that will severly affect the value of the Pound. Early this morning (930GMT), the British Banker’s Association will release the number of new mortgages that they approved for home purchases. The BBA represents major banks that make up around 60% of total UK mortgage lending. This figure is generally considered a leading indicator of housing market demand as most home purchases are financed with a mortgage, so it provides an excellent gauge of how many qualified buyers are entering the market. Last month monthly approvals reached a peak of 35.3K; a rise of 39.3K is expected now.

Later this morning (1100GMT), the CBI Realized will be released. The Confederation of British Industry has shown that retailers and wholesalers expect a higher volume of sale in the past two months. Last month’s positive score of 13 is expected to be followed by a better one this time – 16 (above 0 indicates higher sales volume, below indicates lower). A significantly better or worse than expected result will shake the Pound.

Across the Atlantic, the US will release the CB Consumer Confidence, a survey of 5,000 households which asks respondents to rate the relative level of current and future economic conditions including labor availability, business conditions, and overall economic situation. After slipping in February, the index recovered in March to reach 52.5 points. It’s now expected to take one step higher and rise to 54.2 points. Later today, Federal Chairman Ben S. Bernanke will testify before the National Commission on Fiscal Responsibility and Reform. His speech will be closely watched as it comes one day before the Fed’s rate decision announcement.

In Canada Mark Carney, governor of the BOC, will testify to parliament this week in two sessions. The first of which is this afternoon (2030GMT). Over the course of the past week, the Canadian dollar has dipped several times below the parity line with its US counterpart, and speculations continue to increase that the BOC will opt for a rate hike as early as June 1st. Carney will make an overview of the economic situation, and may give some more hints about the imminent rate decision. The big question is if it will come as soon as June 1st, or on the next meeting scheduled for July 20th. The Canadian Dollar continues to flutter around the parity line with the US Dollar. The USD/CAD hit 1.00215 during afternoon European trade, the daily high, but by then end of the day the Loonie managed to erase these losses and closed at 1.00033.

Down under in Australia, The Producer Price Index grew 1% on the first quarter 2010 compared to the Q4 2009 against forecast that expected an increase of 0.6. Australian business confidence and conditions weakened slightly in the first quarter of 2010 as stronger employment growth was more than offset by an easing in retail sales, according to the National Australia Bank’s quarterly business survey issued early this morning. Business confidence fell to an index reading of plus 17 points in the first quarter, down 1 point from the fourth quarter. Despite the small drop, confidence stayed positive among all sectors of the economy, with the mining sector the strongest of all, NAB said. Meanwhile, business conditions fell to an index reading of plus 8 points, down 1 point from the prior quarter. Despite the overall strength of activity across the economy, there is little evidence of an inflationary build-up, according to the survey.

After closing at 0.92771USD yesterday, the Aussie fell this morning, hitting a low of 0.92344USD. Analysts expect the Australian Dollar to reach parity with the U.S Dollar by mid 2010.

Written by Finexo.com