Thoughts on the dollar falls from last week. Currency report April 30By james tweed • Apr 30th, 2012 • Category: Currency
Significant items this week:
Tuesday 1st May UK – PMI (Manufacturing)
Australia – RBA Interest rate decision
US – Construction spending
EU – Bank holiday
Wed 2nd May EU – German PMI (manufacturing) & Unemployment
US – Factory Orders
Thurs 3rd May EU – ECB Interest rate decision
US – initial jobless claims
Fri 4th May EU – Retails sales
US – Nonfarm payrolls
Thank you for downloading the foreign exchange market report podcast for April 30th from Coracle Online and Crossbar fx.
One of the potential pitfalls about reporting on foreign exchange rates is that when recalling previous movements, there is, 99% of the time, a set of economic data announcements which enables the reporter to explain why exchange rates have done what they have done. What is less obvious is that when these data announcements were made, the effect they had on the market was more often than not a lot less significant. For example, one could say that last week the USD weakened across the board as data showed an increase in US economic growth for Q1 which gave a significant boost to global risk appetite and hence investors sold the Dollar to go elsewhere. Alternatively one could explain a weakening USD on worse than expected US jobless claims, a fall in Durable Goods orders to the tune of -4.2% and GDP which, although positive, actually fell to 2.2% from 3% in the previous quarter, and finally that US consumer confidence fell in April vs. March. So all negative announcements and hence the markets sold off the USD, instead buying Swedish Kronor and Sterling of all things. What’s true is that it’s usually a mixture of all of the factors, and none of them individually. Market sentiment is looking at the Euro and for some inexplicable reason, if selling Euros, investors are buying sterling instead of dollars as the British Pound is increasingly seen to be the least ugly of the three. The Euro weakens for all the headlines that we can all read – Spanish Bonds are now rated as junk, 1 in 4 is unemployed, and they are back in recession in Q1. Other Euro negative news involved the political upheaval in the Dutch Government, and Sarkozy losing the first round of the French elections. Many investors have shorted core European Bonds in the belief the crisis will worsen. In the UK, government borrowing was more than expected in March at £18.2bn, but was down for the year thereby meeting targets and coming in at £11bn less than last year. The UK is double dipping though as we fell back into recession by 0.2% in Q1.