Dollar “bulls” and “bears” met at the border

Although published in the previous session, quarterly reports were once again better than forecasts, the markets have decided instead to beat the American statistics, which do not meet the expectations that led to a strengthening dollar and a slight correction on Wall Street. The number began construction in the U.S. over the next period increased slightly (590 thousand against 587 thousand the previous figure and the forecast 610 thousand), while building permits dropped from 580 thousand to 573 thousand (estimated 595 thousand)

On the recovery of the dollar against the euro / dollar rolled away from the level of 1,50, and not felt it. Speechwriter French President Nicolas Sarkozy Geno called this level “devastating to the European industry and economy.” Finance Minister Lagarde also mentioned that the rate of the euro is concerned (although not say that it is relative to the dollar).

The Canadian dollar was among the outsiders after the announcement of the decision of the Bank of Canada regarding the interest rate. The bank has kept interest rates unchanged, but particularly noted the negative impact of the current strengthening of Canadians, saying that over time it can “cut favorable conditions, which were formed in July. In addition, the Bank recalled that he had in store is the extraordinary political measures (ie increase the money supply). Strengthening U.S. dollar and the weakening of the Canadian dollar has led to the fact that the parity at the rate of USDCAD remained only in dreams, at least in the near future.

Yesterday the chairman of the Bank of England Mervyn King delivered a speech in which he was especially pessimistic for the British economy, saying that despite the possible return of GDP to a positive direction in the second half of 2009, economic recovery will not be neither smooth nor painless. In connection with this conduct of monetary policy will be particularly difficult and problematic. He noted that British banks are still completely dependent on the state, and the impact of the global financial crisis will be felt for a generation. Talking about inflation, he said that it will be volatile and may rise in coming months because of rising gasoline prices, the devaluation of the pound and the abolition of reducing VAT on January 1. With his comments, the chairman may set the stage for the present protocol, the most by placing a pound at a disadvantage.

But the New Zealand dollar is a problem is not threatened, as the representative of the RBNZ Bollard said in a radio interview that the growing rate of NZD is not necessarily an obstacle to raising the discount rate, which led the market by surprise. He later softened his remarks, adding that it was said in the context of increasing domestic demand and housing prices. Nevertheless, in anticipation of meeting the Central Bank’s monetary policy on Thursday, and taking into account market expectations that the RBNZ will leave the current defensive position, today’s comments served to more proof. Currency New Zealand dollar / U.S. Dola after these words quickly rose to 40-50 points, but just as quickly exhausted in a widespread recovery of the dollar. Be that as it may, the New Zealand dollar will find support in the remaining crosses.

Also addressed the deputy chairman of the Bank of Japan Nishimura, who confirmed the current defensive Bank, saying that it is important to adhere to the accommodative policy to support economic recovery. Despite the fact that he looks forward to further improve the economic situation in Japan, he also believes that the risk of recession is still very high and that the developed countries as a whole may be under pressure due to the adjustment of balances. In addition, he believes that inflation is not quickly reach the desired level and that the annual rate of CPI index will decline for a long time. Nevertheless, financial conditions in general are improving, and the BOJ to decide (perhaps at the next meeting on 30 October), I continue to measure corporate support or not. Also, a Japanese news: a car manufacturer Honda commented on the recent decline in the dollar, saying that if the depreciation continues, the company will move to other key export markets except the United States to maintain production at Japanese factories. These statements and the company has joined Nissan, claiming that would export cars made in the USA, in “dollar countries”, such as the Middle East. Recall that Japanese companies have laid in their budgets for 4 quarter dollar / yen at 95, and, judging by the current mood in the market, the target is very far away.

Today is a day to be unsaturated in terms of statistics, so the focus will be records for the 3 quarter. In addition to the protocol of the Bank of England Britain will also publish a quarterly report of CBI, and in the U.S. will only report on applications for mortgages. Also planned series of presentations by the Federal Reserve, among which will be Leker, Cumming and Tarullo.

Saxo Bank