Indian Rupee closed at 51.48 levels erasing gains after climbing to its highest in more than two weeks earlier as a drop in local shares renewed concerns of further capital outflows. Dollar has remained supported through overnight trading as recent risk appetite has started to wane. Confidence is increasing that the banking sector troubles will start to disappear as the global efforts to reinforce them take hold, but traders remain cautiously optimistic. The consensus is that governments still need to do more in particular the FOMC. Expectations are that the central bank following their two day meeting will announce more aggressive measures to increase monetary expansion. Markets have started to focus on credit card defaults after American Express announced that write offs in February rose 8.7%. These concerns have weighed on European equity markets and could carry over to the U.S. today, which could add further greenback support. Producer prices will cross the wires and is expected to show an annualized decline of 1.4% after a 1.0% drop in January. The drop in factory gate costs will allow the Fed to continue to expand its balance sheet with it concerns of fueling near-term inflation. Meanwhile housing starts are expected to have fallen to an all-time low of 450,000 as tight credit markets have sunk demand and discourage new construction. Euro was trading below the 1.300 price level for most of overnight trading on the back of declining equity markets, before an unexpected increase in theGerman Zew print sent the EUR/USD to as high as 1.3022. Indeed investor confidence rose for a second month to -3.5 from -5.8 in March despite ongoing concerns over the banking system and a deepening recession for the country. However the survey did show a decline in the current assessment as things continue to worsen in the region. The improvement in sentiment and stabilizing prices will take some of the pressure off of the ECB which has come under scrutiny for not acting aggressive enough. As other central banks have brought their lending rates near zero and have embarked on off balance sheet efforts the ECB remains committed to their measured approach. Pound fell to an intraday low of 1.4017 as declining risk appetite has pressured the currency. Additionally, the ongoing quantitative easing efforts remain a drag on Sterling. The pound’s reaction to tomorrow’s U.K. employment report will give us a clue to future price action as it is expected to show the economy lost another 84,000 jobs. Meanwhile, U.K. house price falling another 11.5% according to the DCLG U.K. house price index shows that the central bank will need to remain committed to their efforts in order to stabilize the housing market. Sterling has started to find some support after the better than expected German investor confidence survey .USD/JPY declined against the majors but its attempt to rally was short lived, after a timid entry at levels above 98.85 resistance level.Bank of Japan decided to explore a new framework for providing subordinated loans to banks in order to ensure smooth functioning of financial intermediation and the stability of the financial system.
Tuesday, March 17, 2009
EVENING REPORT-MAR 17
Indian Rupee closed at 51.48 levels erasing gains after climbing to its highest in more than two weeks earlier as a drop in local shares renewed concerns of further capital outflows. Dollar has remained supported through overnight trading as recent risk appetite has started to wane. Confidence is increasing that the banking sector troubles will start to disappear as the global efforts to reinforce them take hold, but traders remain cautiously optimistic. The consensus is that governments still need to do more in particular the FOMC. Expectations are that the central bank following their two day meeting will announce more aggressive measures to increase monetary expansion. Markets have started to focus on credit card defaults after American Express announced that write offs in February rose 8.7%. These concerns have weighed on European equity markets and could carry over to the U.S. today, which could add further greenback support. Producer prices will cross the wires and is expected to show an annualized decline of 1.4% after a 1.0% drop in January. The drop in factory gate costs will allow the Fed to continue to expand its balance sheet with it concerns of fueling near-term inflation. Meanwhile housing starts are expected to have fallen to an all-time low of 450,000 as tight credit markets have sunk demand and discourage new construction. Euro was trading below the 1.300 price level for most of overnight trading on the back of declining equity markets, before an unexpected increase in theGerman Zew print sent the EUR/USD to as high as 1.3022. Indeed investor confidence rose for a second month to -3.5 from -5.8 in March despite ongoing concerns over the banking system and a deepening recession for the country. However the survey did show a decline in the current assessment as things continue to worsen in the region. The improvement in sentiment and stabilizing prices will take some of the pressure off of the ECB which has come under scrutiny for not acting aggressive enough. As other central banks have brought their lending rates near zero and have embarked on off balance sheet efforts the ECB remains committed to their measured approach. Pound fell to an intraday low of 1.4017 as declining risk appetite has pressured the currency. Additionally, the ongoing quantitative easing efforts remain a drag on Sterling. The pound’s reaction to tomorrow’s U.K. employment report will give us a clue to future price action as it is expected to show the economy lost another 84,000 jobs. Meanwhile, U.K. house price falling another 11.5% according to the DCLG U.K. house price index shows that the central bank will need to remain committed to their efforts in order to stabilize the housing market. Sterling has started to find some support after the better than expected German investor confidence survey .USD/JPY declined against the majors but its attempt to rally was short lived, after a timid entry at levels above 98.85 resistance level.Bank of Japan decided to explore a new framework for providing subordinated loans to banks in order to ensure smooth functioning of financial intermediation and the stability of the financial system.
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