Market Headlines for May 7

$       Fed’s Hoenig (non-voter) signaled support for a pause in interest rate cuts: “The current accommodative stance should be sufficient to cushion the economy from a deeper slowdown and the risks that financial disruptions could spill over to the broader economy”’ he added that as conditions improve “it will be necessary for the Federal Reserve to remove the policy accommodation in a timely manner”

$       The Fed’s larger TAF auction of $75bn on 5 May had a bid-to-cover ratio of 1.29 which was lower than in the previous auction on 21 April (1.77); loans were allotted at 2.22% versus 2.87% previously

€       The ECB auctioned a larger amount of $25bn in its USD TAF auction on 5 May; the bid-to-cover narrowed to 1.58 versus 2.01 at the previous auction of $15bn on 21 April

€       The final Eurozone services PMI was revised higher to 52.0 in April versus the preliminary estimate of 51.8 and 51.6 in March; all growth measures improved slightly but input prices also accelerated at the fastest pace since October 2000

€       Eurozone producer prices rose at a steady pace of 0.7%MoM in March after February’s figure was revised up (initially +0.6%); energy prices led the increase and rose 1.8%MoM in March versus +1.1%MoM in February

€       The ECB allotted €150bn in the last MRO of the reserve period which was just €4bn above the benchmark allotment versus an extra €20bn in last week’s operation; the marginal/ average rates were steady at 4.26/ 4.29%

£       The UK services PMI fell to the lowest since March 2003 at 50.4 in April versus 52.1 in March on the back of further deterioration in the financial services sector; overall business confidence declined to the lowest since October 2001

£       UK Nationwide consumer confidence fell to 70 in April from 77 in March, which was the lowest on record since the series began in May 2004

 

Technorati Tags: Economy, USA, Europe, Currencies, fvarga

Cable Crumbles to 11 Week Low

UK Industrial Production missed badly printing at –0.5% versus forecasts of just a small decline of –0.1%. 

The much worse than expected results from the UK industrial sector sent pound tumbling to an 11 week low and raised the possibility that the BoE may be forced to lower rates another 25bp at tomorrow’s meeting of the Monetary Policy Committee.

While consensus estimates call for UK monetary policy to remain stationary keeping rates at 5%, tonight’s weak results from UK manufacturers suggest that the UK economy may be decelerating far faster than most analysts expected.

The news is especially troubling for UK monetary authorities because manufacturing was considered to be the one bright spot in the UK economy with UK producers enjoying the benefits of record high EURGBP exchange rates which helped them to gain a competitive edge in the EZ market.

However, today’s news indicates that the last bastion of strength in the UK economy may have given way, increasing pressure on the BoE to begin easing sooner rather than later despite lingering concerns about inflation amongst most of the MPC members. 

In fact cable may test the 1.9500 figure later in the North American session if traders begin to anticipate a surprise rate cut from the BoE tomorrow.

 

Technorati Tags: England, Economy, GBP, Currencies, Forex, fvarga

USD Slips

The greenback continues to give back last week’s gains, falling just shy of the 1.56-level and 104 against the yen.

The dollar remains under pressure amid soaring oil prices, with crude oil surging to another record above $122 per barrel and fresh calls oil to reach $150 to $200 barrel over the next two years.

Markets will turn to US economic data on Wednesday, which consist of Q1 labor costs, preliminary Q1 productivity and pending home sales.

 

Technorati Tags: Economy, US, USA, fvarga