Forex News | Currency News by Forexlive

Who hoards large quantities of high-denomination banks notes? Money launderers, organized crime and drug dealers.

Who benefits? The European Central Bank.

Using the rear-view mirror, the market played the fixing pretty well. Dealers look to have pushed up AUD and GBP, two of the currencies we’ve been highlighting as being in demand for month-end rebalancing, and sold them out at the fixing. This made the actual fixing relatively uneventful but the run up to the fix was the main event.

Look for very erratic trading for the balance of the session as many liquidity providers wide down exposures in preparation for closing the books on July.

AUD/USD trades at 0.9050 after holding below 0.9069 highs, GBP/USD trades at 1.5670 after making a new trend high at 1.5677.

Having played blame Bush for the last 18 months, the White House is pulling out a new whipping boy: Europe.

The euro zone debt crisis is a big part of the headwinds now being faced by the US economy.

Europe didn’t take as many tough steps as the the US and that fact has stunted US and global growth, the White House flak says.

We’ve not heard the end of that theme, I’m sure.

Banks use brokers to pair off their fixing orders to the extent possible. Traders say that most pairs are finding relatively balanced order books with about 7 minutes left to go until the fixing.

Not sure if the surge is related to the fixing but AUD has pushed up to fresh session highs near 0.9050. Trend highs at 0.9069 are next resistance.

Risk aversion is clearly receding as US equities rebound to breakeven on the day after falling 1% early on. USD/JPY is rallying strongly as well as AUD.

GBP/USD is jumping too, the subject of speculation of significant demand at the 15:00 GMT fixing.

I’m surprised its not more….

By Theresa Sheehan

PRINCETON (SMRA) – The high point of the week ahead will be the
employment report Friday, but the overall sense of anticipation for
the week’s data is tame. The steady feed of reports over the week has
few standouts, and will mainly serve to flesh out what is already known.

Federal Reserve officials will be silent during the week as the
Federal Open Market Committee meeting approaches. Congress will be
finishing up before the summer recess starts August 9. The U.S.
Treasury’s quarterly refunding will be held on Wednesday. Earnings
season continues with a multitude of reports.

Combine the usual slow summer appearance schedule for Fed officials
with the traditional press blackout period in advance of an FOMC
meeting, and there is a very blank calendar indeed. It is likely to
remain so until after the annual Jackson Hole forum late in August.

There is a cluster of central bank meetings over the next two
weeks. The Reserve Bank of Australia August 3, the Bank of England
August 4 and 5, the ECB August 5, the Bank of Japan August 9 and 10, and
the Federal Reserve August 10. No change in policy or rates expected in
the near-term at any of these.

The July report on U.S. payrolls and unemployment Friday morning
promises to be a disappointment — similar to the June release. Then, a
modest increase in private payrolls was reported, along with a hefty
drop in government jobs due to an unwinding of the temporary Census
hiring, and a lower unemployment rate as the number of unemployed
dropped due to expiration of unemployment benefits. This should persist
into July.

Leading up to the employment data are a series of smaller reports.
The foremost of these is the ADP National Employment Report for July
Wednesday morning. This indicator can track the payroll data fairly well
in normal circumstances, but with the distortions from the Census hiring
and special factors causing swings weekly initial jobless claims, it has
been less useful of late.

The Challenger report on layoff intentions for July also Wednesday
morning could be a little higher, mainly due to increased job cutting in
government. There have also been some layoffs announced related to cost
cutting and consolidation in some industries. Nonetheless, the levels
are likely to remain low relative to the series history.

The Monster.com Employment Index is set for release in the early
hours of Thursday. Recently, it has shown some strength and offers the
prospect of continued improvement in the labor market, especially for
skilled workers.

Mid-morning Monday, the ISM releases its manufacturing index for
July, followed by the non-manufacturing index same time Wednesday. The
employment components of both will figure into last-minute adjustments
for expectations for the employment report. But both will also important
to markets for any sign that the factory or service sectors are showing
further softening.

Personal income and spending for June Tuesday morning should show a
further trend of modest gains in wages and salaries, and some increase
in consumer spending.

The last few reports associated with the housing market for June
will be released this week. The data on construction spending
mid-morning Monday will not have much new to say about private
residential building except for the calculation that shows spending on
renovations and repairs. Public spending will probably be slowing as the
fiscal stimulus monies continue to dwindle.

The NAR’s Pending Home Sales Index for June later Tuesday morning
should stabilize after plunging in May as the deadline had passed for
contracts to meet requirements in the homebuyer tax credit program.
However, the readings will be back to levels more consistent with a
stagnant housing market.

Sales of domestically produced motor vehicles in July will be
released on Monday as available. The units sold will probably be above
to the 8.4 million SAAR of June. Industry same-store sales comparisons
are scheduled for release on Thursday, and will probably be consistent
with consumer activity during hot weather with demand summer items, but
little for new fall merchandise.

Factory orders for June mid-morning Tuesday could be down for a
second month in a row, signaling some further softness in manufacturing.
The durable goods report for June was already reported down 1.0%, and
nondurables orders are likely to be about flat. However, it is possible
the durables component could be revised higher, and if so, will put a
better complexion on conditions in manufacturing.

Consumer credit outstanding for June published Friday afternoon is
mainly a footnote to the week. Consumers remain wary of taking on new
debt or adding to existing lines of credit, and lenders are cautious in
issuing any new loans.

The quarterly refunding announcement will take place on Wednesday
morning, to be preceded by the release of the quarterly borrowing
requirements on Monday afternoon. The refunding package will include new
3- and 10-year notes, and 30-year bonds, to be auctioned the subsequent
Tuesday, Wednesday, and Thursday, respectively.

A multitude of earnings reports are on the calendar, but fewer of
the big names are in the pack. Nonetheless, there are some notable
companies still to report.

Monday, the companies include BNP Paribas, Celadon Group,
Chesapeake Utilities, Fannie Mae, Freddie Mac, HSBC Holdings, Kaiser
Aluminum, and Sotheby’s.

Tuesday’s reports include Archer Daniels Midland, BMW, Clorox,
Coach, Dole Food, Duke Energy, Electronic Arts, Inland Real Estate,
Lear, Marathon Oil, MasterCard, OfficeMax, Pfizer, Pitney Bowes,
Priceline.com, Procter & Gamble, Dow Chemical, Unum Group, and Whole
Foods.

Wednesday, reports are expected from Hughes Communications, News
Corporation, Owens Corning, PG&E, PulteGroup, Societe Generale,
Allstate, Hanover Insurance Group, Time Warner, Toyota, and TRW Auto.

Thursday, the pace slows down but a number of major earnings
reports are expected including; Cigna, Ethan Allen, Hyatt Hotels, Kraft,
Novo Nordisk, Unilever, Viacom, and Walt Disney.

By Friday the number of reports are a comparative trickle, and
include Harleysville and The Washington Post Company.

** Stone & McCarthy Research Associates **

[TOPICS: M$$FI$,M$U$$$,MAUDS$]

PARIS (MNI) – The French government is too optimistic about the
strength of domestic economic growth ahead and must go further on fiscal
consolidation to meet its goal for a reduction in the public deficit to
3% of GDP by 2013, the International Monetary Fund said Friday.

France’s recovery is still “fragile”, the IMF said in its annual
Article IV review of economic and fiscal policy, highlighting the
downside risks from weak domestic and foreign demand and the
vulnerability of the banking system to any aggravation in the sovereign
debt crisis.

“The fragile recovery and possible spillovers from the European
sovereign debt crisis are now putting renewed stress on the financial
system,” the report noted. “As a result of the recession, asset quality
has worsened, and large exposures of the French financial system to
southern Europe have raised concerns about spillovers and contagion.”

While welcoming the government’s policy response to the recession
and its initiatives to stabilize the financial system, the IMF warned
that its assumption for a pick-up in GDP growth to 2.5% from 2011 onward
was too optimistic, forecasting instead 1.6% next year after a 1.4%
upturn this year.

“The same features of the French economy that partly shielded it
during the recession – large automatic stabilizers, high social
protection, and long-standing rigidities in labor and product markets –
are also likely to slow the pace of the recovery,” it said.

Moreover, risks to the economy are “slanted to the downside,” it
asserted. The recovery “is being tested … by weakening household
confidence and demand amid market concerns about sovereign risks in the
euro area,” it said.

The export rebound earlier this year may well prove short-lived,
given the moderate recovery of main trading partners and chronic
problems of competitiveness, “with the depreciation of the euro likely
to provide only limited relief,” the report said. Inflation is expected
to remain low at 1.3% this year and 1.6% next year.

“Although financial conditions have improved, credit growth remains
depressed,” the report noted. Despite the relative resilience of the
banking system, “asset quality has worsened and additional write-downs
on risky assets are likely.”

While debt yield spreads to German Bunds have so far remained
“moderate”, French banks have “relatively large” exposures to Greece,
Ireland, Italy, Portugal, and Spain that account for 7% of bank assets
and 30% of GDP, the report estimated. These exposures are largely in
private Italian and Spanish debt, while sovereign debt positions in
Greece are “small”, it said.

Thus, “the direct impact on French banks of the Greek debt crisis
is likely to be manageable,” the report assessed, pegging individual
banks exposures to Greece, Portugal, and Spain at 2-10% of equity,

“However, French banks remain vulnerable to spillovers,” it
cautioned. “Exposure to mature markets represented 83% of total foreign
claims in 2009, dominated by exposures to Belgium, Germany, the U.S.,
and the U.K. France would be vulnerable to spillovers from these
countries too if they were to be affected in the first place, which
would significantly weaken the capital and liquidity position of the
banks.”

The IMF welcomed a shift in government policy focus to fiscal
consolidation, but underscored the need for further measures in order to
hit deficit targets. On the basis of its own growth assumptions, it
projected the public deficit at around 4% of GDP in 2013 without
additional efforts.

“Unless a substantial fiscal consolidation is undertaken, the debt
is bound to further increase over the medium term (including as a result
of population aging), thereby threatening the sustainability of public
finances,” the report warned.

“Under current policies, the primary balance is set to remain in
deficit through 2014 and, as a result, the debt ratio could climb more
than 25 percentage points above its pre-crisis level, reaching 90% of
GDP over the medium term,” it said. In case of “adverse shocks” it could
top 110%.

The economic crisis has cost France a “permanent loss” of about
3.5% of potential output, the report estimated. Potential growth over
the medium-term is likely to be around half a point below that of the
past decade due to the “sharp contraction of investment and the
resulting slowdown in capital accumulation, a rise in structural
unemployment, and a possible temporary reduction in allocative
efficiency that could lower total factor productivity growth.”

–Paris newsroom +331 4271 5540; e-mail: stephen@marketnews.com

[TOPICS: M$F$$$,M$X$$$,MFX$$$,M$$CR$,MGX$$$,MT$$$$]

By Brai Odion-Esene

WASHINGTON (MNI) – U.S. consumer sentiment rose in July according
to the final reading of the Reuters/University of Michigan Consumer
Sentiment data released Friday.

The index came in at 67.8 vs. July’s preliminary reading of 66.5.

The index’s preliminary number for current conditions came in at
76.5 for July vs. 75.5 earlier in the month and expectations rose to
62.3 vs. 60.6 reported initially.

Consumers’ updated 1-year inflation expectations came in at 2.7%
compared to July’s preliminary expectation of 2.9%. Five-year inflation
expectations were 2.9% vs. July’s early reading of 2.9%.

The median forecast in the Market News International survey of
economists was for the index to rise half a point to 67.0, consistent
with a mixed bag of economic reports — modest improvement in some
sectors, slowing activity in others.

The advance estimate of U.S. Q2 GDP revealed growth of 2.4%, close
to the MNI consensus forecast of 2.5%. The downside move, from +3.7% in
Q1, was due to a smaller positive contribution from consumer spending
which rose 1.6% in Q2, reflecting just a 0.8% rise in services
consumption.

Federal Reserve Chairman Ben Bernanke described the U.S. economic
outlook as “unusually uncertain” in recent Congressional testimony,
while in its latest survey of economic conditions around the country —
the “Beige Book” — the Fed said only eight Districts reported stronger
activity, with “a number” of them describing the increase as “modest.”

This compared with the June findings that showed activity improved
in all 12 Districts.

Similar to Friday’s U.S. consumer sentiment data, the European
Commission Thursday, as part of its report on EMU economic morale, said
consumer sentiment rose another three points in July after a one-point
upturn in June to stand just one point below the long-term average.

The gain reflected mainly a higher assessment of recent economic
activity (+6) and prospects for the year ahead (+6), which had eroded
sharply with the intensification of the sovereign debt crisis in May.

Preliminary consumer sentiment index data for August will be
released August 13.

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

[TOPICS: M$U$$$,MAUDS$]

As many of you may know, I find consumer sentiment to often be at odds with consumer behavior, so I don’t pay too much attention to the surveys.

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