Finotec News Archive - August 28 2008

Euro Rises on presumptions that Trichet won’t lower rates

Tammy Wally
28 August 2008

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The euro rose against the dollar on speculation that the region's interest-rate advantage over the U.S. will draw investors after a European Central Bank official signaled a cut in borrowing costs is unlikely. The euro approached a record high against the British pound after ECB council member Axel Weber said yesterday that rates may have to rise as the economy recovers. ``The euro is getting a boost from these hawkish comments from the ECB,'' said Hiroshi Yoshida, foreign-exchange trader in Tokyo at Shinkin Central Bank, Japan's fifth-largest publicly traded lender by assets. ``Investors have been given good reason to start pricing out a rate cut in Europe. From the dollar's perspective, any rise in oil is unwelcome.'' The EUR/USD is currently trading at $1.4765 as of 7:40am, GMT.

The UK pound fell yesterday to 1.8280 against the dollar and 80.23 against the euro, a survey from Nationwide Building Society, the nation's fourth-biggest mortgage lender, showed the average value of a home dropped 1.9 percent in August, exceeding economist’s estimates for a decline of 1.5 percent. Loans approved for house purchases slumped 65 percent last month, the British Bankers' Association said yesterday. The U.K. economy may shrink over the next year as a deepening recession leads to the first full-year fall in national income since 1991, the London-based Times reported, citing Capital Economics. The GBP/USD is currently trading at $1.8360 as 7:58am, GMT.

Fannie Mae Chief Executive Officer Daniel Mudd replaced three top deputies in an effort to restore investor confidence after record losses and a 90 percent drop in the shares. Mudd is seeking to show investors the company is taking action after $9.4 billion of losses the past four quarters eroded capital and sparked concern the company may not weather the worst housing slump since the Great Depression. The decline prompted U.S. Treasury Secretary Henry Paulson to forge a rescue package for the company and smaller rival Freddie Mac.

Finotec Analysis Team
28 August 2008

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Today's Economic Events

Time	Event	Currency	Period	Previous	Forecast	Significance	Actual
12:30	Current Account	CAD	Jul	5.6B	8.0B		6.8B
Measures the quarterly difference in value between imported and exported goods, services, income flows, and unilateral transfers. A rising trend has a positive effect on the nation's currency. The Current Account is a comprehensive accounting of the nation's trade with other countries. It includes the previously reported Trade Balance (which covers trade of goods and services), so traders focus on the income flows and unilateral transfer portions of the report.
12:30	GDP q/q	USD	Jul	1.9%	2.6%		3.3%
Gross Domestic Product (GDP) measures the total value of all goods and services produced by the economy.
12:30	Unemployment Claims	USD	Weekly	432K	427K		425K
Measures the number of individuals who filed for unemployment insurance for the first time over the past week. A falling trend has a positive effect on the nation's currency. Working people tend to spend more, and consumer spending is a major driver of the economy. However, unemployment usually draws little attention because traders view it as a lagging indicator.
12:30	GDP q/q	USD	Jul	1.1%	1.1%		1.2%
Gross Domestic Product (GDP) measures the total value of all goods and services produced by the economy.
10:00	CBI Distributive Trades Realized	GBP	Jul	-36	-30		-46
The Confederation of British Industry (CBI) Distributive Trades Realized measures the health of the retail sector by asking executives if their firm experienced an increase or decrease in sales compared to a year ago. A positive number indicates that more retailers reported an increase. A rising trend has a positive effect on the nation\'s currency because Retail Sales make up a large portion of consumer spending, which is a major driver of the economy.
08:00	M3 Money Supply y/y	EUR	Jul	9.5%	9.1%		9.3%
Measures the value of all currency and liquid cash assets held by the public.
07:55	Unemployment Rate	EUR	Jul	-20K	-10K		-40K
Measures the percentage of the total work force that is unemployed and actively seeking employment. A falling trend has a positive effect on the nation's currency. Working people tend to spend more, and consumer spending is a major driver of the economy. However, unemployment usually draws little attention because traders view it as a lagging indicator.
07:15	Employment Level	CHF	Jul	3.90M	3.91M		3.92M
Measures the number of people employed full or part-time during the previous quarter.
01:30	Private New Capital Expenditure q/q	AUD	Jul	-2.5%	2.0%		5.7%
Measures the total amount of new capital expenditures by private businesses.
00:00	Leading Index m/m	AUD	Jul	-0.1%			-0.5%
Measures overall economic health by combining ten leading indicators including average weekly hours, new orders, consumer expectations, housing permits, stock prices, and interest rate spreads. The index is published monthly by The Conference Board, a leading private US research group, but traders tend to pay little attention because the components that make up the index are reported at an earlier date.