Fed Hikes Discount Rate, Funds Rate Range

(RTTNews) - The Federal Reserve Thursday increased its target range for the Federal Funds rate, one of a series of steps taken to modify the Fed's discount lending programs.

The Fed's discount rate was also increased.

The Fed announced the high end of the target range for the federal funds rate would increase 25 basis points, putting the rate at 0 to 0.5 percent.

The discount rate was raised from 0.5 percent to 0.75 percent.

The Fed, which released its announcement after the close of trading on Wall Street, said the discount rate increase would take effect Friday, February 19th.

Poll Finds Lower Confidence In Big Banks, Businesses

(RTTNews) - Confidence in the country's largest financial and business institutions among Americans is lower than it is for the federal and state governments, according to a new poll.

The Zogby poll,released Thursday, found both federal and state government slightly more worthy of voter trust than the so-called "free market giants."

The results from 2,500 likely voters found 83 percent confidence in small businesses, 73 percent in local banks, 60 percent in colleges and universities, 57 percent for local government, 41 percent for federal government and 41 percent for state government.

For major corporations, the confidence factor was 38 percent, national and regional banks 33 percent and Wall Street 31 percent.

The poll was conducted between January 29th and February 1st.

Financial: ABC News Consumer Confidence Deteriorates

(RTTNews) - ABC News said on Tuesday that its consumer comfort index averaged minus 49 in the week ended February 14 compared to minus 48 a week ago.

The index is just 5 points from its all-time low and is well away from its long-term average of minus 13 in 24 years of weekly polls.

ABC News said only 8% of survey respondents rated the economy positively, while just 24% think it is a good time to spend money. Some 44% of respondents rate their personal finances positively.

The latest ABC News consumer comfort survey was based on a sample of about 1,000 telephone interviews conducted in the four weeks ending February 14.

Japan Tertiary Industry Index Sheds 0.9% In December

(RTTNews) - An index measuring the activity of tertiary industries in Japan declined by a seasonally adjusted 0.9 percent in December compared to the previous month, the Ministry of Economy, Trade and Industry said on Wednesday, coming in at 95.8.

That was sharply lower than analyst forecasts for a decline of 0.2 percent on month following the revised 0.1 percent contraction in November.

Among the industries that saw declines, scientific research was down 4.4 percent on month, while miscellaneous services fell 3.1 percent, compound services shed 2.4 percent, wholesale and retail trade shed 1.3 percent, real estate eased 0.9 percent, finance was down 0.3 percent and transport and postal activities lost 0.2 percent.

Finishing higher, restaurants added 2.3 percent on month, while amusement services gained 1.2 percent, learning support was up 0.6 percent, communications climbed 0.5 percent and health care added 0.1 percent.

Electricity, gas, heat and water were flat on month.

For the fourth quarter of 2009, the index was down 0.2 percent compared to the previous three months.

Oil Extends Gains Ahead Of Inventories Data

(RTTNews) - The price of crude oil rose Thursday, finding support in the International Energy Agency's upward revision of oil demand growth, even as the US Dollar strengthened against the Euro.

Crude oil for delivery in March was trading $0.67 higher at $75.19 per barrel in the New York Mercantile Exchange, marking the fourth consecutive day of gains.

The IEA on Thursday upwardly revised its global oil demand growth forecast for 2010 by 120,000 barrels a day to 1.6 billion barrels per day. The agency also expects oil demand to average 86.50 million barrels per day, and oil prices to average $75 a barrel in the year.

A day earlier, the Energy Information Administration had raised its oil demand forecast for 2010 to increase by 1.2 million barrels per day, 120,000 barrels a day higher from the previous estimate.

Traders are awaiting the US Energy Department's weekly inventory report, which will be released on Friday.

Expectations for an increase in US heating oil demand, as the temperatures remain below average, also remain supportive for oil prices.

Meanwhile, the greenback rose against the Euro amid lack of clarity regarding the European Union plans to aid Greece.

Initial claims for jobless benefits fell to 440,000 in the week ended February 6, from the previous week's revised figure of 483,000, according to the US Labor Department. This was more than economists' expectation for a drop to 465,000.

Wednesday, the Commerce Department had reported that the US trade deficit widened to $40.2 billion in December from $36.4 billion in the previous month.

China Inflation, PPI Due On Thursday

(RTTNews) - China is scheduled to release January numbers for its consumer price index and producer price index on Thursday, headlining a modest day for Asia-Pacific economic activity.

Analysts are expecting the inflation rate to come in at 2.1 percent, up from 1.9 percent in December. Wholesale inflation is tipped at 3.5 percent, jumping from 1.7 percent in the previous month.

The South Korean central bank will conclude its monetary policy meeting and then announce its decision on interest rates. The bank is widely expected to keep rates on hold at the record low of 2 percent.

Australia will release employment figures for January. The unemployment rate is expected to climb up to 5.6 percent from the current level of 5.5 percent. The employment change is expected to show an increase of 15,000 after unexpectedly adding 35,200 in December.

Finally, the stock markets in Japan and Taiwan are closed on Thursday. Japan is off for National Foundation day, and will re-open on Friday. Taiwan is getting an early start on the Chinese Ney Year break and will be out of action until February 22.

EUR USD UNLIKELY TO REVERSE DOWNTREND UNTIL SOVEREIGN DEBT ISSUES ARE RESOLVED

The EUR USD traded all over the intraday charts while experiencing a choppy two-sided trade throughout today’s session. Volatility and indecision could be the theme this week as traders are unlikely to make up their minds about reversing this market to the upside until a resolution is reached regarding the sovereign debt issues in the Euro Region. Continue to look for volatility, highlighted by directionless trading until the European Central Bank, European Union or International Monetary Fund offers a viable solution to Greece’s fiscal problems.

The U.S. Dollar finished mixed in a day highlighted by volatility and indecision. Traders could not make up their minds after news regarding the fiscal problems in Greecefailed to instill confidence to the markets. Some traders feel that a resolution will be reached which may involve aid or stronger assurances that Greece will strictly follow its newly proposed budget.  Others feel that the Dollar is taking a breather before the next leg up.

Volatility and choppiness also affected the British Pound. Besides the weak economy, investors had to deal with the possibility that the U.K. will suffer the same fate as Portugal,Spain and Greece and have its debt rating reduced because of its huge budget deficit. Furthermore, news that the June election could result in neither party receiving a majority also hurt the British Pound. 

The USD JPY was little changed at the finish.  Today’s trading range was the smallest of the year and was inside Friday’s range. This pattern suggests impending volatility. This market could shift quickly to the upside if risk aversion returns to the markets. Budget problems in Europe, the U.K. and the United States may encourage traders to seek the safety of the lower yielding Asian currencies.

The USD CHF finished higher and inside of Friday’s range. The current trade is being determined by the movement in the Euro. A weaker Euro will increase the chances of a Swiss Bank intervention, thereby strengthening the Dollar versus the Swiss Franc. A short-covering rally in the Euro will pressure the USD CHF.

Dovish comments from Bank of Canada deputy governor Duguay helped drive the USD CAD higher. On Monday, he reiterated that interest rates will hold steady until at least the end of the second quarter. Furthermore, he emphasized that a weaker Canadian Dollar scenario is necessary to keep the economic recovery on course. Stronger gold and crude oil should have helped to pressure the USD CAD, but it looks as if weaker equity markets exerted a larger influence on this currency pair.

The AUD USD and NZD USD felt downside pressure throughout the New York session while trading inside of Friday’s ranges. Technically, these markets are poised to move higher following Friday’s closing price reversal bottom. Unless demand for higher risk assets increases, these markets will resume their downtrends and negate the counter-trend reversal bottom formation.

Euro Ends Dismal Week At Lowest Level Since May

(RTTNews) - The battered euro remained under heavy pressure versus the dollar and yen on Friday, hitting a fresh 8-month low against the greenback amid lingering concerns about sovereign debt and the health of the global economy.

A murky report on the US jobs situation failed to stop the surging dollar in its tracks. Traders have sold off the euro due to deepening fears that debt crises now plaguing Greece, Portugal, and Spain could spread, derailing the already sluggish EU recovery.

The US economy shed an additional 20,000 jobs in January, with employment in the construction industry showing a notable decrease. However, the report also showed a surprise drop in the unemployment rate to 9.7%.

Traders failed to make much sense of the report, generating additional risk aversion and further interest in the low-yielding dollar and yen.

The euro dropped to 1.3650 versus the greenback, extending its lowest levels since last May. A brutal stretch has seen the euro pair more than 15 cents from its November highs.

The euro also continued to decline versus the yen, hitting a new 11-month low near 121.50.

Meanwhile, the euro extended its run of choppy trading versus the sterling, which has also become unfashionable over the past few weeks. The pair was bouncing back and forth near .8720 on Friday.

Yesterday, the European Central Bank and Bank of England both held steady on respective interest rates, but policy makers in the UK halted their quantitative easing program.

Financial: Consumer Credit Fell By $1.73 Bln In December

(RTTNews) - While the Federal Reserve released a report Friday afternoon showing that consumer credit fell for the eleventh consecutive month in December, the decrease in credit was much smaller than economists had been anticipating.

The report showed that consumer credit fell by $1.73 billion in December after a revised $21.8 billion decline in November. Economists had been expecting credit to decrease by a much more substantial $10.0 billion compared to the $17.5 billion decrease originally reported for the previous month.

The smaller than expected drop in total credit came as a $8.5 billion decrease in revolving credit, which includes credit cards, was partly offset by a $6.8 billion increase in non-revolving credit such as loans for new cars.

Dollar Surges on Soft Jobs

The dollar advanced sharply in the Thursday session, climbing to its highest level since May 2009 against the euro at 1.3728 and surging against the Canadian dollar to 1.0752. The US equity indexes retreated sharply, with the Dow Jones lower by 2.3%, the S&P 500 tumbling by more than 2.6% and the Nasdaq falling by nearly 2.5%. Crude oil plunged by more than 5% to below $73-per barrel while spot gold shed 4.3% to $1,062 per ounce. 

Weekly jobless claims missed consensus estimates for an improvement to 455k, instead increasing to 480k from an upwardly revised 472k in the previous week. The larger than expected weekly jobless claims figure bodes poorly for Friday’s highly anticipated non-farm payrolls report. The Q4 non-farm productivity missed forecasts, up 6.2% and down from 7.2% in the previous month while unit labor costs fell by 4.4% versus a 1.5% decline from Q3. Meanwhile, factory orders increased by 0.5% in December compared with a downwardly revised 1.0% increase in the previous month. 

Markets will look ahead to the highly anticipated labor report due out tomorrow morning at 8:30 AM. Consensus estimates call for the unemployment rate to remain unchanged at 10.0% while non-farm payrolls are forecast to show an increase of 8k jobs versus a loss of 85k jobs in December. Also to be closely focused on will be the revisions to previous months’ NFP. If the payrolls figure disappoints sharply to the downside, the dollar is seen extending today’s gains across the board. 
by Korman Tam
ForexNews.com

Canada’s Dollar Weakens on Pessimistic Markets

The Canadian dollar touched a new record low for 2010 versus its U.S. counterpart as a massive wave of risk aversion irradiating from Europe caused commodities and equities markets to decline worldwide.

The loonie was once again affected by pessimism in trading markets globally, as Europe’s budget deficit brought risk aversion back to markets with strong influence in the loonie rates, specially those of energetic commodities and stocks in North America. As appetite for riskier assets falls, traders protect their portfolios in refuge investments like assets in the U.S. and Japan, making the loonie to post the biggest falls versus these currencies.

USD/CAD traded at 1.0723 as of 20:56 GMT from a previous rate of 1.0615 yesterday.

From: TopForexNews.com

Euro May Fall Further After Monthly Drop

The start of 2010 was rather grim for the European single currency as consumer confidence and economic acceleration decreased in the European Union, adding to the negative sentiment spread in markets but some of the bloc’s members raising budget deficits.

The Eurozone has been shunning investors as multiple countries using the single currency like Ireland, Portugal, Italy, Spain and specially Greece are having a hard time to tighten the gap on their national accounts, as budget deficits seem, according to some analysts, out of control. Greece’s situation, which already involved speculations suggesting that the country should leave the euro, is likely to impact the outlook for the currency even further, as its budget deficit is breaking record highs consecutively, and as other nations using the euro are likely to follow the same path.

The situation for the euro doesn’t look great, specially after the economic rebound slowed down in the region, combined with a stronger sentiment of risk aversion globally and after most investors started to avoid banking sector equities in multiple countries using the euro. The Euroland may experience new record lows, specially versus refuge currencies, if risk aversion remain high among forex traders.

EUR/USD traded at 1.3876 as of 01:16 GMT. EUR/JPY traded at 125.30

From: TopForexNews.com

Pound Slides on Real Estate Data

The pound was of the few currencies which couldn’t profit from a higher risk appetite today versus the dollar and the yen as another real estate report declined attractiveness for Britain’s currency, which started the week falling versus multiple currencies.

After two reports published today in London showed a decline on house prices and mortgage approvals in the British real estate market, the pound slid versus a stronger euro, an attractive Swedish krona that benefited from a national manufacturing report beating forecasts, and also versus commodity linked currencies as demand metals and the crude oil rose today.

EUR/GBP traded at 0.8725 as of 23:09 GMT from an opening rate yesterday of 0.8692.