Dollar depend on data

Tammy Wall
28 April 2008

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This week economists and traders will focus on the following important economic data in-order to assess their positions trades. Late Sunday night 27th of April Japanese retail sales figures will be released, this will have an impact on the USD/JPY. Monday the 28th of April the Japanese market will be on holiday, the main focus will be the release of German consumer confidence index which will move the EUR/USD. On Tuesday the 29th of April German retail sales and UK monthly consumer credit data will be announced in Europe. In the USA, the consumer confidence survey data will be published.

The US Fed interest rate decision and Bank of Japan interest rate announcement are expected on Wednesday the 30th of April. In addition, Unemployment Data and consumer sentiment in Europe and the ADP employment survey results in the USA will be released. On Thursday the 1st of May the EU market will be on holiday. The manufacturing PMI index will be released in the UK, the weekly jobless claims and ISM manufacturing data will also be released in the USA. Finally, on Friday the 2nd of May the US Non Farm Payrolls will be the main economic indicator of the day.

Bank of America believes that the Federal Reserve will continue to cut interest rates to as low as 1.5 percent, while the ECB should keep them on hold at least until October. Therefore, the financial institutions recommend investors to buy the Euro at $1.5630 with a target of $1.6250 and sell the currency if the market goes in the opposite direction, closing at $1.5342. “We expect U.S. economic indicators such as jobs data will remain weak and do not think the Fed will be done on rate reduction” said Tomoko Fujii, head of economics and strategy for Japan at the bank. Also, the American government deficit is forecasted to expand to a record of $500 billion for the year ending in September 30. The US depends on foreign investors to finance the deficit, whom are losing value on its treasuries due to the slumping Dollar.

The pound fell against the euro after an industry report showed U.K. house prices dropped the most in more than three years in April, adding to speculation the Bank of England has room to cut interest rates. The U.K. currency snapped two days of gains, dropping the most in a week, after Hometrack Ltd. said the average cost of a home in England and Wales slipped 0.6 percent, the most since December 2004, as surging borrowing costs deterred buyers. Nationwide Building Society will this week say house prices dropped for a sixth month, according to the median forecast of 13 economists in a Bloomberg News survey. The pound fell as much as 0.5 percent to 79.06 pence per euro, and was at 78.87 by 10:31 a.m. in London, from 78.67 pence on April 25. It was at $1.9873, from $1.9858. The U.K. currency may fall to 80 pence per euro this week

Finotec Analysis Team
28 April 2008

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Today's Economic Events

Time	Event	Currency	Period	Previous	Forecast	Significance	Actual
22:45	Trade Balance	NZD		0.26B	0.40B		-0.05B
Measures the difference in value between imported and exported goods and services. A positive Trade Balance indicates that more goods and services were exported than imported over a given period. A rising trend has a positive effect on the nation's currency. When higher levels of exports are sold to the world, demand for the nation's currency is elevated as foreigners convert their native currency to purchase the exports. The Trade Balance also has a sizable impact on GDP because high demand for exports creates increased employment and production, as domestic factories work to fill this demand.
15:45	CPI m/m	EUR		0.5%	0.2%		-0.2%
German 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.
07:00	ECB President Trichet Speaks	EUR
06:00	Consumer Confidence	EUR		4.8	4.6		5.9
German Measures the mood of consumers in regard to economic conditions. The reading is derived from a monthly survey that asks respondents to evaluate the prospects for the economy in the future. Higher readings point to higher consumer optimism. When consumers are optimistic they tend to purchase more goods and services, which stimulates the economy.