The British Are Coming, The British Are Coming! Forex Trading For Monday, March 31, 2014
United States Dollar: The US dollar advanced against most of its 16 major trading peers Friday as investors remained bullish about the US recovery after latest economic data suggested this year’s slowdown was weather-related and temporary.
Data released by the Commerce Department showed consumer spending rose by a seasonally adjusted 0.3 percent in February, the fastest pace since November, as Americans spent more on utility bills and health care. However, sales of durable goods fell for the third straight month, indicating consumers are delaying the purchase of big-ticket items such as cars.
Personal income also moved up in February. Inflation adjusted disposable income rose 0.3 percent last month, the biggest gain in five months. Personal savings rate ticked up to 4.3 percent from 4.2 percent in January. Higher disposable income typically results in higher consumer spending and is an important gauge for growth as consumer spending accounts for 70 percent of US economic activity.
Consumer sentiment, however, weakened in March, slumping to the lowest level since November. The University of Michigan/Thomson Reuters index of consumer sentiment fell to a final March reading of 80 from February’s level of 81.6. Economists surveyed called for a reading of 81.
The ICE-dollar index, which measures the greenback’s strength against a basket of six rivals, climbed to 80.170 from late Thursday’s 80.123 in North America.
The WSJ Dollar Index, an alternative benchmark that uses a slightly wider basket, edged up to 73.39 from 73.29 late Thursday.
EURO: The euro gained versus 12 of its 16 major trading rivals Friday after data showed confidence in the euro-zone economy rose in March, stoking speculation the European Central Bank will not announce further easing measures when policymakers meets next month.
The euro rose to $1.3759 from late Thursday’s $1.3744.
Inflation data for the 18-member currency block is due March 31 and investors don’t expect it to rise dramatically from the 0.8 percent annual pace recorded earlier. That is well below the ECB’s annual target rate of about 2 percent.
German federal statistics office Destatis said it expects consumer prices to rise by 1 percent from a year ago. The relatively low inflation rate in Europe’s largest economy was attributed to opposite trends; while food prices rose 2.2 percent from March 2013, energy prices slipped 1.6 percent in the past 12 months.
Meanwhile in Spain, consumer prices fell for the first time in more than four years, triggering fears euro zone’s fourth largest economy would fall into a deflationary spiral.
A preliminary report by the National Statistics Office showed consumer prices fell at a 0.2 percent annual pace in March after crawling 0.1 percent in February. A fall in prices typically result in cut in consumer spending in the hope prices will decline further.
Currency strategists said Friday it will become increasingly difficult for the ECB not to act if inflation falls to fresh lows. Price stability is the central bank’s most important mandate and ECB President Mario Draghi said in Paris Tuesday it stands ready to take additional policy measures to maintain price stability.
Separately, a consumer sentiment gauge rose by 1.2 points to 102.4 in March from February, the European Commission said in Brussels Friday. The five-largest economies in the currency zone witnessed a jump in sentiments, bolstered by increased confidence among consumers in the services and retail sectors.
Japanese Yen: The yen edged lower versus the greenback Friday as risk sentiments got a boost after China said it would boost investments to stimulate a cooling economy.
The Japanese unit dropped to 102.82 from 102.17 late Thursday, capping its weekly loss at 0.5 percent.
Investors sold the yen as demand for haven assets eased after Chinese premier Li Keqiang said the People’s Bank of China had the necessary policies in place and the government plans to go ahead with infrastructure investments to boost growth.
China’s manufacturing weakened for a fifth straight month, according to a preliminary survey published on March 24.
The yen sank against all 31 major peers Friday after Keqiang said he’s confident of keeping growth in a reasonable range.
British Pound: Sterling surged against the US dollar Friday after data showed British consumer confidence jumped to the highest level in six years in March.
The British unit finished the week at $1.6647 from Thursday’s level of $1.6614.
Data released by polling firm GfK showed British consumer confidence rose to minus 5 in March from minus 7 the previous month. That is the highest reading since August 2007, the month before reports of financial difficulty at Northern Rock prompted deposit holders to withdraw money, marking the first run on a British bank in over 100 years. The plunge in consumer confidence started early next year and bottomed out at minus 39 in June 2008.
Friday’s reading leaves the GfK gauge 22 points higher than a year earlier, marking the biggest annual gain in over four years.
The latest survey was conducted before British Chancellor of Exchequer announced a modest cut in payroll taxes and relaxed rule on retiree’s pension withdrawals while presenting the annual budget March 19. Such measures could buoy sentiments further in the near term, currency strategists said Friday.
The pound’s gain, however, were pared Friday after a govt. report showed Britain’s fourth quarter current account deficit was wider than economists’ had forecast.
Fourth quarter current account deficit was recorded at 22.4 billion pounds, slightly lower than third quarter’s gap of 22.8 billion pounds, but much higher than the 14 billion pounds forecast by economists.
Canadian Dollar: The Canadian dollar retreated against the US dollar Friday as traders became anxious about the slowing Chinese economy and its impact on commodity prices.
The loonie, as the Canadian dollar is popularly known, slipped 0.3 percent to finish at C$1.1061, trimming its weekly gains at 1.5 percent.
However, speculators reduced bets on the loonie weakening against the greenback, known as net shorts, to 33,215 positions as of March 25 from a week earlier, data from the Commodity Futures Trading Commission showed. That was a reduction of 36,590 from March 21’s reading of 68,805.
The decline in net shorts shows traders are gearing up for more accommodative Chinese policies, which would feed into a bid for commodities as well as related currencies, said currency strategists Friday.
The loonie found support after the federal govt. reported budget surplus for a second consecutive month in January. Data released by the Finance Department showed govt. revenues exceeded spending by $2.16 billion in January, coming after a $1.15 billion surplus in December.
Crude oil, the nation’s biggest export, rose Friday with May futures rising by 30 cents to $101.58 a barrel.
Australian Dollar: The Australian dollar firmed up versus the US dollar Friday amid robust local economic readings and ahead of the Reserve Bank’s cash rate decision next week.
The Aussie, as the Australian dollar is popularly known, rose to 92.66 US cents from late Thursday’s level of 92.61 US cents, capping weekly gains at 1.8 percent.
Demand for the local currency got a boost after Reserve Bank Governor Glenn Stevens said Wednesday there are encouraging early signs in the economy of a shift from mining-led growth to domestic consumption, which could accelerate growth further later this year.
British Pound
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