Weekly Review 6/4/2009:
The Dollar started the week on a bullish note after US officials said bankruptcy may be the best option for troubled US automakers, spurring investors to seek the shelter of the US currency. U.S. lawmakers said the Obama administration is prepared to let GM Corp. and Chrysler go bankrupt. The Dollar reversed later in the week after G-20 global leaders took their biggest steps toward a new world order, increasing IMF funding by $1 trillion. The boost plan weakened the Dollar drastically against most major except for the Yen. NASDAQ and Dow lost some ground in the beginning of the week but rebounded later to complete its biggest monthly rally since 2003. Gold (XAU) dropped below the $900 an ounce resistance point, as the G-20 boost plan reduced demand for the metal. Crude oil dropped below $50 a barrel but jumped towards the end of the week by 9%, its biggest rally in 3 weeks, closing at $52 a barrel after US Treasury Secretary Geithner indicated that the economic markets are showing signs of recovery. Ahead of us this week, Trade Balance forecast at -36.7B vs. -36B forecast. Initial Jobless Claims forecast at 659K vs. 669K and Monthly Budget Sentiment forecast at -148.3B vs. -192.8B previously.
The Euro began the week with a decline against the Dollar on speculation the ECB will cut the rate to its lowest rate ever but rebounded after ECB reduced the interest rate by 25 BP instead of 50 BP as expected, bringing it to 1.25%. EUR/USD traded with a low of 1.3112 and a high of 1.3518. This week, German Factory Orders expected at -2.8% vs. -8% previously. German CPI expected at -0.1% as before and French CPI expected at 0.3% vs. 0.4% previously.
The British Pound climbed against the Euro and the Dollar after positive economic data released in the UK. Manufacturing PMI released at 39.1 vs. 34.9 forecast. Nationwide HPI released at 0.9% vs. -1.5% forecast. GBP/USD traded with a low of 1.4140 and a high of 1.4845. EUR/GBP traded with a high of 0.9341 and a low of 0.9040. Ahead of us this week, Industrial Production expected at -1.1% vs. -2.6% previously. Manufacturing Production expected at -1.3% vs. -2.9% previously. Traded Balance expected at -7.6B vs. -7.7B previously and PPI expected at 0.1% as before.
The Yen plunged against most majors heading for its biggest quarterly loss since June as Asian stocks gained on optimism the worst of the global economic slump is ending, spurring investors to increase purchases of higher-yielding assets. Japan's government report showed Japan’s jobless rate jumped to a three-year high, to 4.4% vs. 4.1% previously. All in all, USD/JPY traded with a low of 96.65 and a high of 100.30. Looking ahead, Interest rate announcement on Wednesday, expected to remain at 0.1%. Current account expected at 0.51T vs. 0.26T previously.