Written by ActionForex.com | Feb 20 08 22:08 GMT |
Dollar gives back most of earlier gains, in particular against Euro, Aussie and Canadian dollar, after the release of FOMC minutes which reaffirmed markets' expectation that further rate cut from Fed will be seen down the road. In general, the minutes emphasized the risks to growth. In particular, some members noted that the "risks of a downturn in the economy were significant". With the background of deepening housing correction, slowing consumer spending, tightening credit conditions deteriorating labor markets as well ass softening business investments, the accumulated 125bps cuts in Jan was needed to help the US economy to expand at a "moderate pace over time".
The impact of higher energy prices on inflation was viewed as temporary and "members agreed that inflation was likely to moderate in coming quarters." Financial markets are functioning "notably" better now after Fed's Term Auction Facility. Also, Congress' fiscal stimulus package is expected to support economic growth in the second half of the year.
Together with the minutes, FOMC also released the latest central tendency forecast for growth, inflation and unemployment. GDP growth forecast was revised down from 1.8-2.5% to 1.3-2.0% for 08. Core PCE, on the other hand, was revised up from 1.7-1.9% to 2.0-2.2%. Unemployment rate was noticeably revised higher from 4.8-4.9% to 5.2-5.3%.
Dollar was boosted in early US session after release of stronger than expected CPI as well as new residential construction data. But the greenback quickly reversed and give back most earlier gains. In particular, EUR/USD was supported by EUR/JPY strength. Aussie remains the stronger one with firm expectation on further RBA rate cut. Meanwhile, Canadian dollar also staged a broad based rebound after crude oil reached new record of $101.32 a barrel.
US headline CPI rose 0.4% mom in Jan, pushing yoy rate higher from 4.1% to 4.3%, above expectation of 4.2% and just slightly below the two year high of 4.4% last November. Core CPI rose 0.3% mom, pushing yoy rate from 2.4% to 2.5%, which also beat expectation and being at a 11 month high. Housing starts surprisingly recovered by 0.8% to 1012k annualized rate in Jan after two consecutive months of decline. Building dropped -3.0% to 1048k.
Sterling recovers mildly in GBP/JPY and GBP/CHF crosses but remains under tremendous pressure against other major currencies. Sterling's renewed weakness was trigger earlier after release of the BoE meeting minutes which revealed that the decision to cut interest rates by 25 basis points this month was supported by eight of nine monetary policy committee members. More importantly, David Blanchflower, the 'ultra-dove', voted for a cut of 50bps. Though, in generally, inflation pressures remains in most committee member's mind even though slower growth is still the major concern.
Looking ahead, all industry index and trade balance in Japan will be released in Asian session. Though, focus should mainly be on retail sales from UK as well as Philly Fed index from US later in the day.
Source : Actionforex.com
Japan's Export Growth Unexpectedly Quickens to 7.7% (Update3)
By Jason Clenfield
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Feb. 21 (Bloomberg) -- Japan's export growth unexpectedly quickened in January, as rising demand for cars and steel from China and Russia made up for falling U.S. sales.
Exports, the engine that drove almost half of the economy's expansion last quarter, rose 7.7 percent, from December's 6.9 percent gain, the Finance Ministry said today in Tokyo. The median estimate of 18 economists surveyed by Bloomberg was for a 6.6 percent increase.
Shipments to Asia and Europe rose to records for the month, as growing consumer classes in China, India and Russia create new customers for exporters including Mitsubishi Motors Corp. and Matsushita Electric Industrial Co. Exports to the U.S. fell for a fifth month amid the worst housing slump in 26 years.
``The good news is the destinations for Japan's export products have become far more diversified,'' said Jan Lambregts, head of Asia research at Rabobank International in Hong Kong. The bad news is that ``a protracted U.S. recession would be much harder to shelter from.''
The yen was little changed, trading at 108.10 per dollar at 12:13 p.m. in Tokyo from 107.99 before the report was published.
The International Monetary Fund last month forecast emerging economies will expand 6.9 percent in 2008, compared with 1.5 percent growth in the U.S. China will expand 10 percent.
Waning demand in the U.S., the world's biggest economy, will eventually take its toll on the emerging markets where Japan ships about half its goods, Economic and Fiscal Policy Minister Hiroko Ota said last week.
`Feel Some Pain'
``We still haven't felt the hit of slowing growth in Asia,'' said Martin Schulz, a senior economist at the Fujitsu Research Institute in Tokyo. ``We're going to feel some pain.''
Exports to Asia gained 8.2 percent to 3.04 trillion yen ($28 billion), the largest amount for the month of January, today's report showed. Shipments to Europe rose 10.6 percent to 993.1 billion yen, also a record for the month.
Imports climbed 9 percent from a year earlier on surging oil costs. Rising imports, combined with a New Year holiday that erased three business days for Japanese shippers, caused the trade deficit to widen to 79.3 billion yen.
Japan tends to have a deficit in January, when ports are closed for the New Year holiday. The country had a shortfall of 3.5 billion yen in January 2007.
Mitsubishi Motors, Japan's fastest-growing auto exporter, said last month its exports last year surged 41 percent, led by demand from Russia. Russian sales jumped 46 percent in 2007.
Matsushita Sales
Matsushita, the nation's largest consumer electronics maker, said last month it expects sales to rise 25 percent next fiscal year in Brazil, Russia, India, China and Vietnam.
Shipments to the U.S. accounted for only about 20 percent of total exports last year, compared with about 30 percent in 2000. In the same period, China's share jumped from 7 percent to 15 percent. Sales to Russia doubled in the past two years.
Japan's economy grew an annualized 3.7 percent last quarter, double the pace economists expected, a report showed last week, as sales to Asia helped companies weather the U.S. slowdown.
Still, there are signs that Japanese manufacturers are bracing for a slowdown. Machinery orders fell for a second month in December and manufacturers said they plan to cut production in back-to-back months for the first time in almost three years.
Slower Profit Growth
Canon Inc., Japan's biggest camera maker, last month forecast that belt-tightening among U.S. consumers will cause sales in the Americas to fall for the first time in nine years. Profit will grow at its slowest pace in as many years, the company said, as a weakening dollar erodes the value of earnings when they're converted back into yen.
Japan's currency has gained 3.5 percent against the dollar this year. Canon said the yen will average 107 a dollar in 2008.
IMF Managing Director Dominique Strauss-Kahn said this month that emerging markets are ``not immune'' from a weakening U.S. economy. The ability of developing countries to sustain growth as the U.S. cools has been ``exaggerated,'' he said.
Source : Bloomberg.com
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