Forex Crunch Forex Daily Outlook – April 22nd 2010

Forex Daily Outlook – April 22nd 2010
Happy Wednesday at StartOptions: A Huge 85% Return on EUR/USD
Excellent Employment Figures – Not Necessarily Pound Friendly

Forex Daily Outlook – April 22nd 2010

Posted: 21 Apr 2010 02:00 PM PDT

A very busy day expects forex traders, Flash Manufacturing PMI and Services PMI influence on Europe; let’s see what’s awaiting us today.

Group of Twenty (G20); while it’s not an institution, the G20 is an influential global policy-making body operating at the highest level, and their initiatives and policies can impact the currency markets.

In the US, Producer Price Index (PPI); indicating change in the price of finished goods and services sold by producers, is expected to drop down by 0.2%. And Core Producer Price Index (PPI) is expected to follow.

Later in the US, Existing Home Sales, Annualized number of residential buildings that were sold during the previous month, is expected to rise by 0.26M, and the Unemployment Claims expected to drop down by 32K.

Finally in the US, President Barack Obama will speak about Wall Street Reforms at the Cooper Union, in New York;

In Canada, Bank of Canada (BOC) releases the Monetary Policy Report that provides valuable insight into the bank’s view of economic conditions and inflation. This is followed by a Press Conference. It’s among the primary methods the BOC uses to communicate with investors regarding monetary policy.

More in Canada – Leading Indicators, the change in the level of a composite index based on 10 economic indicators – will probably be similar this time.

For more on USD/CAD, read the Canadian dollar forecast.

In Europe, French Flash Manufacturing PMI and Services PMI are both expected to rise slightly. Then, German Flash Manufacturing PMI and Services PMI will probably remain almost unchanged. The all-European figure will complete the picture.

Also in Europe, ECB President Jean-Claude Trichet speaks; as head of the ECB, which controls short term interest rates, he has more influence over the euro’s value than any other person.

For more on the Euro, read the EUR/USD forecast and Casey Stubbs' latest analysis.

In Great Britain, Public Sector Net Borrowing, Difference in value between spending and income for public corporations, is expected to rise up from 12.1B to 24.1 B – there are both debt and investment implications;

More in Great Britain, Retail Sales expected to drop off by 1.4%, It’s the primary gauge of consumer spending, which accounts for the majority of overall economic activity; good for currency.

Later in Britain, the relative level of order volume expected during the next 3 months; Level of a diffusion index based on surveyed manufacturers expected to be -32 in comparison to the previous -37

Finally in Britain, Number of new mortgages approved for home purchases during the previous month; expected to rise from 48K to 51 K

Read more about the Pound in the GBP/USD forecast.

In Switzerland, the Trade Balance value, difference in value between imported and exported goods during the reported month is expected by 0.5 B. Also note the Swiss ZEW Economic Expectations.

In Aussie, New Motor Vehicle Sales, Change in the number of new cars and trucks sold domestically will impact the currency.

For more on the Aussie, read the AUD/USD forecast.

In Japan, Bank of Japan (BOJ) Governor Masaaki Shirakawa speaks. As head of the central bank, which controls short term interest rates, he has important influence over the nation’s currency value.

That’s it for today. Happy forex trading!

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Posted: 21 Apr 2010 10:10 AM PDT

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Excellent Employment Figures – Not Necessarily Pound Friendly

Posted: 21 Apr 2010 05:57 AM PDT

For a second month in a row, British employment figures were superb – Claimant Count Charge showed that 32,900 got back to work, and also last month’s figure was upgraded. While this is normally good news for the currency, the delicate timing could turn it into a burden. Here’s why.

Also yesterday’s inflation figures came out stronger than expected. It seems that inflation is no longer limited to oil prices, but gathering pace elsewhere. This could be problematic for the economy, but Pound-positive. The employment numbers were definitely positive for the economy, but not necessarily for the Pound:

Claimant Count Charge, Britain’s first and foremost employment figure, released a few weeks after the months ends, was quite impressing once again. Similar to last month’s number, 32,900 people got back to work. And last month’s figure was upgraded – 40,100 people got back to work.

This figure, the reflection of the US Non-Farm Payrolls, is very impressive. It’s the biggest decline since 1997. Any country that sees an improvement in the job market sees its currency on the rise. More jobs mean more spending, a higher chance of inflation and a higher chance of a rate hike, making the currency attractive.

Well, the initial response of the Pound was indeed positive – GBP/USD jumped from 1.5380 to 1.5410 and later advanced up to 1.5440, higher than yesterday’s highs. But this didn’t last, and the pair fell back down.

Close elections in Britain

The delicate timing make this release problematic – the general elections are due on May 6th, two weeks time. Every economic indicator is highlighted by the three opposing parties.

The first television debate was won by Nick Clegg – the leader of the small Liberal Democratic party. Following this debate, his party passed Gordon Brown’s ruling Labour Party in the polls. The Conservatives, led by James Cameron kept the lead, far enough for both rivals.

Many months ago, they were projected to replace Labour, but as the elections came close, the situation became more complicated, and fear of a hung parliament began looming on the Pound.

A parliament where no party has an absolute majority means that it’s hard to pass decision and manage the economy with full control. Each time that the parties got close in the polls, the political uncertainty took its toll on the Pound.

Employment figures - back wind for Brown

Labour, the ruling party since 1997 which fell to the third place in polls, can now mark a victory – these excellent employment figures belong to them. Brown will probably highlight these figures towards the elections. The other parties will try to ignore it, but the figures are too good.

Jobs are the most sensitive economic issue and they might erase some of the Tories’ lead, adding to the tension and to the fear of a hung parliament.

So, this is a rare case where excellent figures could hurt the currency.

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