Forex News RBA keeps rates unchanged at 7.25%
- INTEREST RATES ARE APPROPRIATE FOR THE TIME BEING
- RECENT INFORMATION SHOWS DEMAND IS MODERATING
- INFLATION SHOULD DECLINE OVER TIME
- GLOBAL FINANCIAL MARKET SENTIMENT REMAINS FRAGILE
- SHORT-TERM INFLATION LIKELY TO STAY RELATIVELY HIGH
- LARGE RISE IN TERMS OF TRADE LIKELY THIS YEAR
- TIGHTER CREDIT IS REDUCING PRESSURE ON INFLATION
- WORLD ECONOMY IS SLOWING
- CREDIT DEMAND HAS SLOWED SOMEWHAT
- FINANCIAL CONDITIONS HAVE TIGHTENED SUBSTANTIALLY
- BUSINESS AND CONSUMER SENTIMENT HAVE SOFTENED
Analysis: With the stock market declining (the All Ordinaries Index has fallen 16 percent in three months), consumer and business confidence down and higher mortgage rates that average 81 basis points higher this year versus bank rate rises totaling 50 basis points, the effects of the RBA tightenings are starting to be felt by the consumer. On the positive side, unemployment is at 33 year lows.
Although analysts have been expecting another hike in May, perhaps the comments out of the RBA’s Stevens and company, suggest they may instead be on hold for a more extended period. If the market starts believing this, the AUD should start to weaken.
Forex AUD Interest Rate Statement
AUD Interest Rate Statement coming out at 11:30pm. No change is expected.
So far the market has been pretty quiet market even with the softer then expected Tankan Report out of Japan. USD/JPY has been ranging between 99.70 to 99.95. There is upside trendline resistance that comes in at the 100.05 area.
Forex News The Japan Tankan report falls to 4 year low
The confidence among large manufacturers fell to a four year low. Exporters struggle with the yen rise and the slow growth out of the US. The index fell to 11 from 19. The expectations were for a fall to 13. The Manufacturers Outlook also fell to 7 from 15 last quarter.
On the Service side, the Non-manufacturers index fell to 12 from 16. This was as expected. Finally, the outlook by Non-manufacturers showed a decline to 13. This was higher than the 10 estimate.
The large manufacturers index is still well above the negative numbers that occurred during the last Japan recession that ended in 2002. During that time the index reached a low of -51 and was negative for all but three quarters between December 1997 and June of 2003. Since June 2003, the index has been positive, reaching a high level of 25 in December 2006.
Overall, the report shows declining growth prospects and will most likely force the BOJ to cut its forecasts for fiscal 2008. Some analysts feel the Bank of Japan may be inclined to cut rates in 2008 to stimulate growth. However others feel that Japan businesses are in fairly descent shape given the increase in the yen which makes exports more expensive abroad. Japanese businesses have benefitted from demand from Asia and Europe who have been less effected by the slowdown that has hit the US consumer.
The report should support the USDJPY and the yen cross pairs. There is some modest buying in the pairs since the report was published.
Forex News Australia PMI due out at 6:30 PM
At 6:30 PM Australia releases the AiG Performance of Manufacturing Index. Last month the index rebounded above the key 50 level which indicates a growing manufacturing industry. In January the index dipped to 49.2, the first reading below the 50 level since June 2006.
The Australia economy has been growing consistently with strong employment growth. Export demand by China and other emerging markets for Australias commodities has propeled the growth. This is despite the strong AUD which makes exports less competitive abroad.
Traders willl be looking at the key components to see if there are signs of weakness started to show. Below are the component indices released in February for comparison.
PMI 51.4
Production 48.8
New Orders 54.9
Employment 49.3
Inventories 51.3
Deliveries 51.4
Input prices 84.5
Exports 45.5
Forex Tokyo News
We have a major number coming out tonight at 7:50pm with the JPY Tankan Large Manufacturers Index; should be some volatility tonight.
Forex News Japan Tankan Report due at 7:50 PM
The Tankan Large Manufactures Index measures the general business conditions of large manufacturers. The index is derived from a quarterly survey that asks respondents to rate subjects such as general business conditions, supply and demand conditions for products and inventories, prices, sales, and employment conditions. The manufacturing sector is vital for the export driven economy. So this index give good clues on the state of that market. Last quarter the index came in at 19, down from 23 and the lowest reading since the 3rd quarter of 2005.
This quarter both measures are expected to show further declines. The Manufacturers index is expected to decline to 13 from 19. While the non-manufacturers index is expected to show a decline to 12. Some expect that the BOJ will need to lower rates before the end of 2008.
Forex Trading NZDUSD remains pressured
The NZDUSD remains under pressure as corrective moves higher have been offered lower.
The pair has been pressured today on the back of weak overnight statistics. First, Building Permits fell for the 4th time in 6 months.
Clearly high interest rates are doing the job on the housing market. New Zealand borrowing rates were raised four times in 2007 to 8.25% from 7.25% - the last increase in July 2007.
In addition to the building permits, the NBNZ Business Confidence fell to -57.9, from -43.9 in February. This was the lowest reading since December 2005. Record-high interest rates and a global credit crisis have made companies more reluctant to hire and invest. Some are speculating that the RBA may have scope in 2008 to cut the benchmark interest rate from a record 8.25 percent to stimulate demand.
Last week the Westpac Consumer Confidence for the 1st quarter fell to the lowest level since June 1998. Clearly, things seem to be turning.
From a technical perspective, the NZDUSD broke the daily trendline today and targets the 0.7800 area. which corresponds to the 50% retracement level and the 100 day moving average. Below that, 0.7709 the trendline up from the August 17th.
Forex Trading Month End/Quarter End volatility
The market at month end/quarter can get quite volatile as positions are squared or hedged by longer term money managers who are more concerned with the longer term trends. It seems that is what we saw from the 10:30 on. As a result, we saw EURUSD rally up to 1.5896 and liquidate back down to 1.5813. From a technical perspective the move, made a nice double top at the all time high (got within 6pips of the high). This may be limit the upside for the time being.
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