Japan’s Finance Ministry Cuts Forecasts
The Japanese Finance Ministry cuts its assessment of regional economies, suggesting the economies are continuing to weaken and it is worsening. The regional chiefs in Japan said it was necessary to monitor developments in the currency market as well as the impact from the government’s stimulus packages. This is the 5th consecutive quarterly downgrade effecting 10 of Japan’s 11 regional economies.
Cable Retracing Losses – Looking for Support
The devalued Cable (GBP/USD) pair has retraced some of it losses from the sell-off to open the week. It has also reacted to the 38.2% retracement which has defended today’s appreciation in the pair. As the Asian session opened ranging lower, helped lower with some profit taking on the pair, we will now look for support to continue the pair move north toward the 100 & 200 hour moving averages and the 50% retracement. If the pair does continue lower to open the European session, we will look for the 21 hour and 23.6% retracement levels to provide some initial support off Monday’s lows.
Australian 1st Quarter CPI
The Australian 1st quarter CPI was released as follows, with the AUD trading off session lows:
CPI (QoQ) – Survey:0.5% Actual:0.1% Prior:-0.3%
CPI (YoY) – Survey:2.8% Actual:2.5% Prior:3.7%
Also released was the DEWR Skilled Vacancies figure for April at -8.9% versus the prior month reading of -10.8%.
Japan’s March Merchandise Trade Balance
The market has bid the Yen on a better than expected release of the March Merchandise Trade Balance figures from Japan (#’s are in Yen):
Merchandise Trade Balance – Survey:-27B Actual:11.0 Prior:-49.4
Adjusted Merchandise Trade Balance – Survey: -250.7B Actual:-97.1 Prior:-43.3
Merchandise Trade Exports – Survey:-46.6 Actual:-45.6 Prior:-49.4
Merchandise Trade Imports – Survey:-37.3 Actual:-36.7 Prior:-43
This is the second positive total surplus after 5 months of deficits.
ECB’s Weber in a Press Interview
The ECB’s Weber had the following comments on the economy in a press interview:
- Suggestions that the European Commission would force lenders to withdraw from foreign markets due to financial crisis would stifle European financial growth and integration.
- The global economy is still in a sharp downturn, he considers 1% a reasonable lower bound for main refinancing.
- There are no clear signs of leveling off of economic slump in Europe.
- Expects deceleration of downward economic pressure.
- Expects negative inflation in summer months due to base effects.
- There are no sign the risks of deflation are materializing.
- Weaker inflation is a welcome relief for consumers’ buying power.
- Medium-term inflation expectations are relatively anchored and the ECB’s main monetary policy concerns are still anchored in inflation expectations.
- Leaving rates too low too long can create imbalances later.
- In regards to government bond buying, the EU treaty forbids direct buying of government bonds in the primary market.
ECB Papademos on the newswires
- TOO EARLY TO ASSESS GOVT MEASURES ON FUNDING
- FINANCIAL MARKETS REMAIN VULNERABLE
- A NUMBER OF RISKS LIE AHEAD
- WRITEDOWNS CAN BE EXPECTED IN COMING QUARTERS
- TO FOLLOW EXIT STRATEGY AS ECONOMY NORMALIZES
- ECB TO PURSUE CREDIBLE EXIT STRATEGY
- TO TAKE APPROPRIATE MEASURES, STANDARD OR NOT
- ECB TO FOSTER MONEY MARKET FUNCTIONING
- EURO REGION’S MONEY MARKET RATES NOW VERY LOW
- ECB’S BALANCE SHEET SUBSTANTIALLY INCREASED
- ECB TO DO NECESSARY TO ENSURE PRICE STABILITY
Comments for Bank of Canada
- KEEPS LOWER END OF OPERATING BAND AT 0.25%
- RECESSION HAS INTENSIFIED SINCE JANUARY
- SAYS GLOBAL FINANCIAL FIXES SLOW TO BE ENACTED
- RATE EXPECTED TO STAY AT 0.25% THROUGH JUNE 2010
- CUTS GROWTH FORECAST TO 2.5% FROM 3.8% for 2010
- CUTS FORECAST FOR 2009 GDP CONTRACTION TO 3% FROM 1.2%
- INFLATION WON’T REACH TARGET BEFORE 3RD QTR 2011
- RECOVERY DELAYED UNTIL 4TH QUARTER, WILL BE GRADUAL
- A BENCHMARK RATE NOW AT EFFECTIVE LOWER BOUND
- INFLATION RATE AS LOW AS -0.8% IN 3RD QTR
Bank of Montreal cuts the Prime Rate to 2.25% from 2.5%. The BOC has cut rates by 425 basis points since the peak.
Bank of Canada Rate decision at 9:00 AM. Wholesale Sales at 8:30 AM
The Bank of Canada will announce their monthly rate decision at 9:00 AM. Rates in Canada are already at 0.5% and there is a chance rates are cut 0.25%. It is a toss up. However, there may be more quantitative type measures aimed at stimulating the Canadian economy. The Canadian Monetary policy report will be due on Thursday. It is expected that growth will be cut from the -1.2% decline forecast in January for 2009 and the +3.8% gain forecast for 2010. Inflation which they target at 2% is also likely to be less than expectation and should be below the target as a result of lower commodity prices and slower growth. It is thought that the Canada economy contracted by 5.8% in the 1st quarter.
Meanwhile at 8:30 AM the Canada Wholesale Sales is expected to rebound from the steepest decline since August 2003. The cumulative sales pace declined to 41.1 billion Canada, which was the lowest level since November 2006. Sales have declined for 4 straight months.
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