Finotec News Archive - September 02 2008

Dollar rises against the Euro and the sterling as oil falls

Tammy Wally
02 September 2008

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The dollar rose to its highest level since February against the euro on speculation oil prices near a four-month low will support economic growth in the U.S., the world's largest energy consumer. The U.S. currency advanced to its strongest level in more than two years versus the British pound as Hurricane Gustav weakened ``The decline in oil and weak economic activity in Europe are contributing to the dollar's rise,'' said Satoru Ogasawara, foreign-exchange analyst and economist in Tokyo at Credit Suisse Group, the second-largest Swiss bank. ``Should oil continue to fall, it would mean lower energy costs for U.S. manufacturers and increased purchasing power for U.S. consumers.'' The EUR/USD is currently trading at $1.4500 as of 7:55am, GMT.

The British pound weakened for a sixth day, dropping to the lowest level since April 2006 against the dollar, before Prime Minister Gordon Brown announces a plan to reverse a slump in property values. ``The fear is that the economic downturn has gained momentum,'' Hans-Guenter Redeker, the London-based global head of currency strategy at BNP Paribas SA, France's biggest bank, wrote in a research note yesterday. ``The burden of adjustment is currently falling on sterling.'' The GBP/USD is currently trading at $1.7857 as of 8:22am, GMT.

The Australian dollar fell to its lowest level in almost a year after the Reserve Bank of Australia cut interest rates for the first time since 2001. Australia's dollar is the second-worst performer among the 16 major currencies in the past month. The RBA cut its benchmark interest rates by a quarter-percentage point to 7 percent today. ``Investors are risk averse, given worries over a global downturn and the slump in equities,'' said Lee Wai Tuck, a currency strategist at Forecast Pte Ltd. in Singapore. ``The RBA has cut rates. The Australian and New Zealand dollars would be under downward pressure in such an environment.'' The AUD/USD is currently trading at 0.8340 as of 8:28am, GMT.

Finotec Analysis Team
02 September 2008

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Today's Economic Events

Time	Event	Currency	Period	Previous	Forecast	Significance	Actual
14:00	ISM Manufacturing Prices	USD	Aug	50.0	49.9		49.9
The Institute of Supply Management (ISM) Manufacturing Prices measures the monthly inflation experienced by manufacturing organizations when purchasing materials and services
14:00	Construction Spending m/m	USD	Aug	-0.4%	-0.3%		-0.6%
Measures the total amount spent by builders on public and private construction projects.
09:00	PPI m/m	EUR	Sep	0.9%	1.3%		1.1%
The Producer Price Index (PPI) measures the rate of inflation (i.e., the rate of price changes) experienced by manufacturers when purchasing goods and services. A rising trend has a positive effect on the nation's currency. When manufactures pay more for goods and services, they are likely to pass the higher costs to the consumer, so PPI is thought to be a leading indicator of consumer inflation. PPI is highly regarded, and at extremes will have a market impact equal to that of its CPI counterpart.
08:30	Construction PMI	GBP	Aug	36.7	36.0		40.5
The Chartered Institute of Purchasing and Supply (CIPS) Construction Purchasing Manager\'s Index (PMI) measures the activity level of purchasing managers in the construction sector, with a reading above 50 indicating expansion.
06:30	BOJ Governor Shirakawa Speaks	JPY	Sep
05:45	CPI m/m	CHF	Aug	-0.4%	-0.1%		-0.3%
The Consumer Price Index (CPI) measures the rate of inflation (i.e., the rate of price changes) experienced by consumers when purchasing goods and services. A rising trend has a positive effect on the nation's currency. The primary objective of the central bank is to achieve price stability; when inflation rises above an annualized rate of approximately 2%, they will respond by raising interest rates to bring prices down. Higher interest rates attract foreign investment, thus increasing demand for the nation's currency. CPI is one of the most closely watched indicators and will usually have a high impact upon release.
04:30	Cash Rate	AUD	Aug	7.25%	7.00%		7.00%
04:30	RBA Governor Stevens Speaks	AUD	Sep
Reserve Bank of Australia (RBA) Governor Glenn Stevens will deliver a speech titled \"Asia, Australia and Financial Markets\" at the Asia Society AustralAsia Centre CEO Asia Update luncheon, in Sydney. As head of the central bank\'s governing body, which is responsible for setting the nation\'s short term interest rate, his speeches can sometimes cause market volatility as traders react to clues regarding future monetary policy.
01:30	Building Approvals m/m	AUD	Aug	2.2%	0.3%		-2.3%
Measures the number of new residential building permits issued.
01:30	Retail Sales m/m	AUD	Aug	-1.0%
Measures the value of sales at the retail level. 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 and has a sizable impact on GDP. Traders pay close attention to Retail Sales because it is usually the first significant indicator of the month that relates to consumer behavior and is susceptible to surprises.