Us Stock Markets Fell On Monday Resulting In Losses To The “carry Trades” As Caution On Risky Assets Returned - Forex Forum

US stock markets fell on Monday resulting in losses to the “Carry trades” as caution on risky assets returned

What’s new?
United States: Bernanke says early response to bank tests encouraging.
United States: Wall Street ended lower Monday with investors taking profits.
United States: GM CEO says bankruptcy "more probable".
China: 1st case of swine flu, the government is taking measures.


Today:
08h00 Germany: Consumer Price Index M/M (APR), exp 0.00%, previous -0.10%.
10h30 UK: Industrial Production M/M (MAR), exp -0.80%, previous -1.00%.
10h30 UK: Trade Balance (MAR), exp £-7.20B, previous £-7.32B.
14h30 US: Trade Balance (MAR), exp $-29B, previous $-25.97B.
14h30 Canada: International Merchandise Trade (CAD) (MAR), exp 0.50B, previous 0.13B.
16h00 US: IDP/TIPP Economic Optimism, previous 49.1.
20h00 US: Monthly Budget Statement (APR), exp $-20B, previous $159-28B.

Overnight Rates & Indices:
EURUSD: 1.3615 – 1.3563.
USDCHF: 1.1106 – 1.1064.
GBPUSD: 1.5142 – 1.5075.
EURJPY: 132.77 – 131.76.
USDJPY: 97.75 – 97.14.
DowJones: 8'419 -1.82%.
NASDAQ: 1’396 +0.12%.
S&P 500: 909 -2,.15%.
Nikkei: 9’340 -1.18%.
Gold: $912.60

Comments:


The U.S. stock markets fell on Monday, resulting in a fall of the "carry trades" and an increase of the U.S. dollar. Investors took their profits from gains in other riskier currencies that had been lifted by optimism about the US banking system. Following the end of the “stress test” episode, concerns are now being raised over bankruptcy issues of large American firms, which is leading to renewed attractiveness of the greenback.


Federal Reserve Chairman Ben Bernanke voiced confidence in the inherent strength of the US economy and its ability to raise cash. He reassured investors by stating that it is the Fed’s policy to contribute to the strength of the dollar. He added that the U.S. dollar would retain its status as the world’s top reserve currency. Bernanke also said he was encouraged by the ability of major US banks to raise cash following the results of the “stress tests”.

Good Day

Emman Xuereb
RTFX Ltd
Head Office

Level 2, Suite 2, The Cornerstone Complex, 16th September Square | Mosta MST 1180 | Malta
Tel: +356 27 78 01 35
Fax: +356 21 41 24 58
Web: www.rtfx.com

This message and any attachments (the "message") are intended solely for the addressees and are confidential. If you receive this message in error, please delete it and immediately notify the sender. Any use not in accordance with its purpose, any dissemination or disclosure, either whole or partial, is prohibited except with formal approval. The internet cannot guarantee the integrity of this message. RTFX Ltd (and its subsidiaries) shall (will) not therefore be liable for the message if modified. Do not print this message unless it is necessary, consider the environment. RTFX Ltd holds a Category 3 license issued by the Malta Financial Services Authority.

May 12th 2009, Trade Balance and Manufacturing
The USD traded within a limited range on Monday on the heels of its poor performance from Friday. There was no major economic data released yesterday, but Federal Reserve Chairman Ben Bernanke gave a limited press conference after making a speech in Atlanta and reconfirmed his commitment to a strong USD saying it was important for the U.S. and world economy. U.S. equity markets gave back some of their gains on Monday turning in a negative day. The action on Wall Street did not cause a sharp move for the USD and basically what was seen yesterday was moderate movement considering the volatility that took place before the weekend. The U.S. will publish its Trade Balance report today and it carries an expectation of minus -29.2 billion, the previous month’s result was negative -26.0 billion. Essentially Ben Bernanke sought to reiterate the U.S. government’s viewpoint that the U.S. economy has stabilized and he added a few positive comments about the Stress Test which had its findings released last week.
Tomorrow Retail Sales data is on the schedule for the U.S. and this report will be another element which can stir sentiment. Much of the global marketplace is focused on the various perspectives being brought forth from government officials, corporate heads, and assorted economists who have found that their comments are in demand. One of the fulcrums of debate continues to be the optimism issued by some that the global economy is going to see some sort of recovery by the end of the year as opposed to those who believe that there are cracks in the armor of the global economies and that it will take much longer to cure all ills. The USD finds itself at the center of this argument because it - for good or bad - is the reserve currency of the world. In many respects people are trying to judge the ability of the USD to maintain its value compared to the other currencies within the midst of this financial mess. The USD in essence finds itself in a beauty pageant of ugly contestants and the question is which one is the best among the ‘plain’. Having found some footing yesterday, the USD could find another day of range trading.
EUR
After a strong week of gaining against the USD, the EUR took a break on Monday and found a tranquil range. The French and Italian Industrial Production numbers were presented and the French figure turned in a result of minus -1.4% compared to the forecast of minus -0.4%. The Italian number was even more unimpressive than the French outcome. Today Germany will offer inflation data with its WPI and Final CPI surveys, both numbers are expected to be unchanged compared to last month’s figures. Tomorrow the European Union will publish its broad Industrial Production data. The week will continue to be rather light on major economic data until Friday when the Germans will present their Prelim GDP report and this number is not expected to be pretty. Thus the crux of the trading for the EUR versus the other major currencies will continue to be about perceptions leading up to hardcore economic realities, which are being managed with sound bytes from various leaders until their opinions have to meet the pavement. Thus we could see the EUR continue to show its strength leading into the German report on Friday when a dose of bad tasting medicine may need to be swallowed.

GBP
Like the other major currencies on Monday, the Sterling found a rather quiet road compared to the previous two sessions of trading. The U.K. released its RICS House Price Balance figures yesterday and the survey turned in a better than expected reading of minus -59.9% compared to the estimate of minus -70.0%. Also the BRC Retail Sales Monitor data was brought forth and showed a positive gain of 4.6%, better than the previous result of negative -1.2%. Today the U.K. will release its Manufacturing Production numbers and a decline of -0.8% is anticipated. Also the Trade Balance figures are due and they are projected to show an outcome of minus -7.2 billion. Tomorrow the Bank of England will release its Inflation Report. With all of this data on cue the GBP will have plenty of firepower to create impetus within its trading. The Sterling has managed to maintain the high end of its trend against the USD in a steady manner the past couple of weeks and traders will continue to see if it is up to the challenge of showing strength.



JPY
The JPY did gain against the USD on Monday as international equity markets tumbled in what would be interpreted as profit taking if these were normal markets and normal financial times. The data from Japan continues to be quite recessionary but the JPY cannot quite seem to manage an escape from its status as a safe haven in these times of uncertainty. It appears the JPY is going to battle its current range in which it trades to the weaker side of the USD, but then is propelled back to a stronger trend upon a flight to quality.

Written by: Robert Petrucci
Bforex Chief Commodity Expert and Forex Analyst