US & European Summary: Sterling & Yen Tumble, US Manufacturing Beats Forecasts: The yen began Japan's fiscal year on a down note as traders expected some reversal of pre-fiscal year balance sheet-related buying. Tensions at Japan's MoF did not help the currency when Ministry Senior official Eisuke Sakakibara (Mr. Yen) came under fire today for stating that Japanese politicians were engaged in a "stupid" debate over stripping powers from the MoF. The dollar rose by more than 1.5 yen reaching 120.65. Sterling also took a dive despite a slight improvement in UK March Purchasing Managers' Index (PMI) which rose to an 11-month high at 47.2 from February's 45.9, reflecting improvement in exports. Expectations of an interest rate cut by the BoE next week continue weighting on the currency. EUR/$ consolidated around the 1.08 level while $/CHF did the same around the 1.48 mark. Acceleration in US manufacturing was confirmed by a jump in March NAPM Index to 54.3, beating expectations of 51.8, and 52.4 in February. Further US economic strength is seen through Jobless claims, which dropped below 300,000 for the ninth consecutive week . Personal incomes rose 0.5% in February showing the 2nd consecutive monthly gain. As result of this data, bonds engaged in a pre-holiday sell-off as the 30-year bond tumble reached its lowest level since March 4, yielding 5.68%. US stocks moved higher as the Dow gained 46 pts to 9832, NASDAQ rose 32 pts to 2493 and the SP500 gained 7 pts to 1293. On the Federal Reserve front, FOMC Minutes of the February Meeting showed the 11-member Committed to have voted unanimously in leaving interest rates unchanged at 4.50 (discount rate) and 4.75% Fed Funds rate. One member however, argued for a tightening bias, while a few stated that a rate increase might be needed later this year.Overall, the Committee decided inflation to have remained nonthreatening, but the economy could reach full capacity later this year. Business investment is expected to slow due to reduced earnings growth.
Reprinted from www.forexnews.com with permission. |
