Forex News | Currency News by Forexlive

• Eurogroup finance ministers to meet in Brussels Sunday afternoon to finalize details of Greek aid package
• US GDP rises 3.1% in Q1, consumer spending improves, inflation low
• Canadian GDP rises 0.3% m/m in Feb
• Chicago PMI rises to 63.1 in April from 60.5 in March
• University of Michigan consumer sentiment 72.2 in April from 73.6 in March
• S&P 500 slides 1.7% on Goldman Sachs criminal investigation report
• Oil rises 1% to $86. Gold reaches $1180 amid Greek uncertainty

EUR/USD was quite choppy in US trade today, rallying as high as 1.3343 in NY morning trade, supported by talk of massive month-end demand for EUR along with optimism that the EU and IMF will unveil an aid package that is sufficient to tide Greece over for the next three years.

Central bank sales above 1.3335 helped slow the EUR/USD rally and helped set the stage for a sharp dip to 1.3255 after the month-end fixing passed. Many were long front-running the fixing and had to scramble for the exits late. EUR/USD rebounded toward 1.3310 in the afternoon and stayed there into the close.

USD/JPY was whippy as well today. It rallied as 94.59 after the upbeat US GDP report but it was soon knocked down by aggressive selling from a US investment bank. We fell on risk aversion as stocks slipped sharply in the afternoon but support at 93.85 held fast. Dealers suspect Kampo remains on the bid on dips. Stops are seen just outside either end of today’s range.

USD/CAD was boosted by rumors of a good size impending M&A transaction and well as a weaker than forecast GDP report for February. Hopes for a quick BOC rate hike continue to fade.

Cable was undermined by the usual month-end demand for EUR/GBP as the UK makes an intergovernmental payment to the EU. EUR/GBP rallied a cent from 86.25 to 87.25 before easing to close at 0.8700. Cable fell as low as 1.5253.

All eyes will be in Brussels Sunday afternoon for details of the Greek package. “Shock and awe” (a very large package) is likely needed give the euro a sustained boost. Stops lie above 1.3380 and 1.3405.

Dollar longs across the currency futures complex hit their highest levels since August 2008, according to CFTC data.

Here are the details.

Federal prosecutors in New York have launched a criminal investigation into Goldman’s structuring and marketing of a collateralized debt obligation that cost investors $1 billion.  For the time being, the criminal probe involves only the U.S. Attorney’s Office in Manhattan, and not the Federal Bureau of Investigation or other federal agencies.

The investigation stems from a criminal referral by the Securities and Exchange Commission.   The SEC brought civil charges against Goldman two weeks ago, which followed a highly-publicized questioning of Goldman executives by the U.S. Senate committee.    Read more

USD/JPY has repeatedly found support on pullbacks to the 93.85 level in recent session. A late Friday afternoon stock swoon could make it a bit vulnerable though. Stops have to be piling up from short-term specs just below that level, it stands to reason.

As stocks fall, US yields fall and those tend to undermine USD/JPY.  News earlier today that the BOJ would take steps to help Japanese banks ward off deflation has helped undermine the JPY but it remains to be seen if short-term traders can withstand an afternoon pullback. We trade now at 93.93.

EUR/USD has clawed its way back above the 1.3400 level and trades now toward 1.3310. The S&P has rallied about 0.5% off its lows 1192 in the cash and oil has bounced back, again above the $86.00.

Look for more choppy, thin trade into the close with rallies capped by central banks toward 1.3340/50.

Thanks to Ryan for the suggestion!

For a coveted ForexLive tee shirt, guess the opening level of EUR/USD on Sunday afternoon/Monday morning in Asia. EBS will be official data source.

Closest to the opening rate wins.

UPDATE: Just to four decimal places, kids… No need to amend earlier entries…

UPDATE 2: Entries close at 21:00 GMT, April 30.

The S&P is down 15 points in early afternoon trade, helping prompt some risk aversion. AUD is the main victim, tumbling to session lows at 0.9255. Minor support is at 0.9240 and 0.9220 on further weakness.

–President Instructs Deficit Panel To Consider All Options
–Fed’s Bernanke Says ‘Significant Changes’ Needed To Fiscal Policy
–Republicans Focus On Spending Cuts, Dems Seek To Protect Key Programs

By John Shaw

WASHINGTON (MNI) – Whatever else may have been lacking in
Washington this week, it wasn’t words about the severity of the nation’s
fiscal problems.

Both at the first meeting of the newly appointed Fiscal
Responsibility and Reform Commission and at a day-long budget summit
hosted by the Peterson Foundation, top administration officials,
congressional budget leaders, and respected budget experts agreed the
U.S.’s fiscal policy is moving into very dangerous territory.

President Obama met Tuesday with the fiscal panel he created by
executive order and he urged it to carefully consider all options to
attack the U.S.’s long-term budget deficits.

“Everything has to be on the table,” he said in remarks after the
meeting, adding “I want this commission to be free to do its work.”

Obama said the nation faces “long-term, structural deficits, which
threaten to hobble our economy and leave our children and grandchildren
with a mountain of debt.”

The president said he inherited a $1.3 trillion budget deficit when
he assumed office in January of 2009 and acknowledged that policies he
has pushed would add about $1 trillion to the budget deficit over a
decade.

Obama said the administration has pushed pay-as-you-go budget
enforcement rules, identified more than $20 billion in savings from
government agencies and imposed a freeze in non-security discretionary
spending over three years.

“But all these steps, while significant are simply not enough,” he
said.

White House budget director Peter Orszag delivered remarks to the
panel and urged the group to offer sound recommendations — however
difficult they may be.

“The options to further reduce the deficit may not be popular, but
they are necessary,” Orszag said.

Federal Reserve Board Chairman Ben Bernanke also issued a stern
fiscal warning, saying that “without significant changes to current
policy, the ratio of federal debt to national income will continue to
rise sharply.”

The National Commission on Fiscal Responsibility and Reform is
chaired by former senator Alan Simpson and former White House chief of
staff Erskine Bowles. The commission includes the chairmen and ranking
members of the Senate and House Budget committees, the chairman of the
Senate Finance Committee, and a former White House budget director and
vice chairman of the Federal Reserve Board.

The panel includes some of the fiercest partisans of recent budget
battles, including five congressional Republicans who appear to believe
that tax increases should be off the table for fixing the U.S.’s fiscal
challenges. It also includes several representatives of Democratic
congressional leaders who argue that job creation is more important than
deficit reduction and that key social programs should be protected.

Obama created the commission on Feb. 18 by executive order after an
attempt by lawmakers to create a panel by statute failed in the Senate.
The commission is charged to issue a report by Dec. 1 that would cut the
deficit to about 3% of gross domestic product by fiscal year 2015 and
begin slowing the growth of debt over the long term.

In order for the panel to issue recommendations, 14 of the 18
members need to reach an agreement.

Analysts say it will be very difficult for this panel to reach an
agreement, but some hope the debate generates ideas that could be useful
in future budget deliberations.

Speaking to the fiscal summit the day after their first meeting,
Simpson and Bowles said their panel will try to develop a bipartisan
consensus on the precise nature of the nation’s fiscal problems and the
range of solutions that could be implemented to fix these problems.

“The American people know something is very, very wrong,” Simpson
said, adding that a critical goal of his panel is to “educate the
American public” about the specific nature of the U.S.’s fiscal problem.

He said the recent economic crisis may allow for consideration of
budget reforms that were politically unacceptable when earlier budget
commissions were convened such as the 1994 Kerrey-Danforth panel which
he served on.

Bowles said the 18-member panel will use a “real set of numbers” by
the Congressional Budget Office and the actuaries of the Social Security
and Medicare programs.

Once the scope of the problem is clearly identified, Bowles said,
the commission will try to outline a range of options and then coalesce
around a package of recommendations.

“If we don’t change and make big changes, we’re heading for
disaster,” Bowles said.

“The options are clear. The solutions are relatively easy to see,”
Bowles added.

The Peterson Foundation’s day-long fiscal summit heard from former
President Bill Clinton, former Federal Reserve Board Chairmen Paul
Volcker and Alan Greenspan, former Treasury Secretary Bob Rubin and
Orszag.

Rubin said the U.S.’s fiscal position is deeply troubling. “I’m
more worried about this than at any time in my lifetime,” he said.

** Market News International Washington Bureau: (202) 371-2121 **

[TOPICS: M$U$$$,MFU$$$,MCU$$$]

Obama economic adviser Larry Summers is on the wires with some fairly downbeat comments. Even by optimistic standards, there will be substantial unused capacity in the economy near-term. The economy has made progress but work to ensure a robust recovery is incomplete, he says.

I feel better already…

By Steven K. Beckner

(MNI) – In its Federal Register notice, the Fed expounds on the TDF
purpose and anticipated operations at considerable length.

“Term deposits are intended to facilitate the conduct of monetary
policy by providing a tool for managing the aggregate quantity of
reserve balances,” says the notice.

“The Board expects term deposits to be one of several tools that
could be employed to drain reserve balances and support the effective
implementation of monetary policy,” it goes on. “Term deposits drain
reserve balances because the funds that pay for the term deposits are
removed from the accounts of participating institutions for the life of
the term deposit.”

The notice anticipates that “reducing the quantity of reserve
balances should tighten the link between the interest rate the Federal
Reserve pays on excess reserve balances and other short-term interest
rates, resulting in improved control in implementing monetary policy.”

“Authorization of term deposits does not, however, preclude the use
of other tools to drain reserve balances,” it adds.

The Federal Register notice says that final determination of the
structure, amount and method for offering term deposits “depends largely
on related monetary policy discussions, including decisions regarding
the most effective way to drain the appropriate level of reserves.”

“As a result, the Board has determined to finalize the parts of its
proposal that facilitate the authorization of term deposits and to
reserve to a later date the final decisions regarding the manner in
which term deposits will be offered (for example, by auction, by open
offer or by some other method) and the details of those offerings,” it
said.

“Actual offerings of term deposits,” the Fed said, “will occur as
needed based on monetary policy objectives.”

“Details about the periods when term deposits will be offered will
be announced periodically in order to allow institutions to adjust their
use of this facility,” it said.

The Fed said interest rates on term deposits “could not exceed the
general level of short-term interest rates,” which it defined as
including “the primary credit (discount) rate and rates on obligations
with maturities of up to one year in which eligible institutions may
invest, such as rates on term federal funds, term repurchase agreements,
commercial paper, term Eurodollar deposits, and other similar rates.”

While saying that term deposits could be offered for up to one
year, the notice suggests that the terms will probably be shorter than
that. “In recognition of the demand to hold term deposits of varying
maturities, the Board expects that term deposits of more than one
maturity will be offered and that maturities of term deposits likely
will be six months or less,” it says.

The notice also says “the Board also expects that term deposit
maturities will be aligned with 14-day reserve maintenance periods.”

“Maturities will be announced in advance of a term deposit
offering,” it adds.

Despite comments from some firms that the Fed should permit early
withdrawals from the TDF, the Board decided against that.

“The Board believes,” says the notice, that “early withdrawal of
term deposits would weaken the ability of term deposits to serve as an
effective tool for draining reserve balances, and therefore would
undermine the effective implementation of monetary policy.”

“Accordingly, the Board expects that early withdrawals from term
deposits will not be permitted.”

The notice suggests a Board leaning toward auctions of term
deposits, but doesn’t exclude other methods.

“The Board expects that an auction mechanism may be the most
effective way to allocate term deposits in a manner that effectively
achieves the Federal Reserve’s monetary policy objectives,” it says, but
it adds, “Based on monetary policy considerations and experience with
the auction mechanism, the Board may consider offering term deposits
through different mechanisms.”

The notice makes clear that the Fed intends to communicate clearly
and prospectively the size of its reserve absorbing operations through
the TDF — a policy which MNI understands will also be followed with
regard to reserve draining operations generally.

“The Board anticipates announcing the terms and conditions of any
auction in advance, including the quantity of term deposits offered and
their maturity, any minimum and maximum bid amounts, and a
maximum-allowable bid interest rate,” says the notice.

However, it adds, “the Board does not expect to seek comment in
advance of changing the terms and conditions of term deposit offerings
unless those changes require amendments to Regulation D.”

It has not been decided yet whether multiple bids for term deposits
can be submitted. The notice says, “The Board is considering permitting
multiple bids per institution for term deposits and anticipates that, if
multiple bids are permitted, there will likely be some limit on the
number of bids an institution may submit.”

The notice goes on to stress that the Fed intends for the TDF to be
as inclusive as possible. “The Board expects to implement the term
deposit program in a way that promotes equitable access to term deposits
for institutions of all sizes, while most effectively meeting the
Federal Reserve’s monetary policy objectives.”

“Eligible institutions would not be required to maintain required
reserve balances at Reserve Banks in order to hold term deposits, nor
would they need to maintain a master account at a Reserve Bank in order
to participate in term deposit offerings,” it says. “The Board also
expects to set minimum bid amounts for term deposit offerings low enough
so as to not be a barrier to participation by smaller institutions.”

The Fed intends to strictly limit the use of TDF deposits as
collateral by participating firms: “The potential complexity of
administering pledges (and re-pledges) of term deposits as collateral to
third parties throughout the term of the deposit could be substantial.”

The Board does expect that institutions “will be permitted to use
their term deposits as collateral for discount window advances in order
to manage unanticipated funding needs,” the notice says. “This would
allow institutions to obtain liquidity from the Federal Reserve by
pledging term deposits or to obtain liquidity from other sources by
substituting term deposits for other types of collateral pledged to the
discount window that could then be pledged as collateral to secure
advances from Federal Home Loan Banks and other third parties.”

However, it says, “the Board does not expect to permit pledges of
term deposits to third parties.”

(2 of 2)

** Market News International **

[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$,M$$BR$]

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