Finotec News Archive - May 08 2008

Euro slumps to a two-month record against the Dollar

Recent signs of slowing growth suggest that the European Central Bank may cut interest rates before the end of the year

Joana Fonseca
08 May 2008

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EUR/USDUSD/JPYGBP/USDUSD/CHF

Resistance
1.5615
1.5590
1.5500
107.40
106.75
105.70
1.9715
1.9635
1.9595
1.0660
1.0625
1.0595

Support
1.5360
1.5235
1.5165
104.65
104.20
103.25
1.9500
1.9425
1.9410
1.0510
1.0430
1.0400

The Euro slid to a eight-week low against the Dollar on speculation that the ECB will signal some concern that economic growth is slowing, after a sharp drop in Euro Zone retail sales; recent signs of slowing growth suggest that the European Central Bank may cut interest rates before the end of the year. The Euro traded at $1.5318 against the Dollar at 6:00am GMT and “may test lower below $1.52 over the next week as markets seek adjustments after the recent Dollar selling and Euro buying”, said Kengo Suzuki, a currency strategist at Shinko Securities. The Dollar is being boosted by some waning worries about the credit crisis, as well as some signs that the American crisis is spreading to other economies. Furthermore, some Euro selling was pushed by a Financial Times article that cited unidentified senior officials from Europe and the US saying they want to see the Dollar rise. On the last 11th of April, The Group of Seven major industrial nations issued a strong concern about the depreciation of the Dollar, signalling they didn’t want the US currency to decline further.

The Euro fell to 159.19 yen at 8:00am GMT from 161.23 yesterday, the weakest since April 14, as traders believe the Yen could gain against higher-yielding currencies as carry trades face profit-taking after recent gains and as stocks were sluggish. The Yen advanced to 103.85 per Dollar at 8:00am GMT from 104.73.After a weak consumer confidence and bad employment data in the UK, the Pound hit an 11-week low against the Dollar, trading at $1.9503. The British currency already reached $1.5200 early today, since Bank of England is expected to signal some interest rates cuts this year, after leave them on hold at 5 percent later today. Concerns about slowing growth hit the New Zealand Dollar; it slid as far as $0.7715 at 8:00am GMT, its lowest level since January. The kiwi slump is due mainly to speculation that a rapid economic slow will force New Zealand’s Central Bank to cut interest rates aggressively from September, a Reuter’s pool of analysts showed yesterday. The Australian Dollar strengthened after its jobs figures for last month beat all expectations; it traded at $0.9435.

Not only the decisions on interest rates from the European Central Bank and the Bank of England will impact the market today; Housing Starts will be revealed in Canada, which are expected to drop to 225K from 243K on the previous month. A downward trend has a negative impact in the nation’s currency because the housing market is a leading gauge for the overall economy. Also, unemployment claims will be revealed in the US; they are forecasted to drop to 370K from 280K on the last month, which will boost the Dollar, if the expectations come true. The US will also reveal its wholesale inventories, which are expected to drop from 1.1 to 0.5 percent, boosting the Dollar, since this indicator measure the value of goods held by wholesalers and that are not sold to final consumers.

Finotec Analysis Team
08 May 2008

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Today's Economic Events





Time Event Currency Period Previous Forecast Significance Actual
14:00Wholesale Inventories m/mUSDMar1.1%0.5%2-0.1%information
12:30ECB Press ConferenceEUR3information
12:30Unemployment ClaimsUSDWeekly380K370K2365Kinformation
12:15Housing StartsCADApr254.7K225.5K2213.9Kinformation
11:00BoE rateGBPMay5.00%5.00%45.00%information
10:00Industrial Production m/mEURMar0.4%-0.5%2-0.5%information
06:00Trade BalanceEURMar16.9B16.9B216.9Binformation
05:45Unemployment RateCHF2.5%2.5%22.6%information
01:30Employment ChangeAUD14.8K10.2K325.4Kinformation
01:30Unemployment RateAUD4.1%4.1%24.2%information

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