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Euro Mixed Against Majors Following Economic Reports


During early European deals on Wednesday, the euro showed mixed trading against other major currencies amid various economic reports, which include German final GDP for the fourth quarter, GfK consumer confidence index for March, Italy's retail sales and the Euro-zone industrial new orders for December.

While the euro gained against the dollar and the pound, it recovers recent losses against the yen. On the other hand, the euro showed choppy trading against the franc.

German gross domestic product was flat in the three months through December period, the Federal Statistical Office said, confirming preliminary estimates. The stall in German growth follows two quarters of expansion in Europe's largest economy.

Meanwhile, market research group GfK said today that consumer confidence among Germans is likely to decline going into March, as worries over unemployment weigh on consumers. The forward-looking consumer sentiment indicator, based on a survey of about 2,000 Germans, fell to 3.2 in March from an upwardly revised 3.3 in February. This was better than consensus forecasts for a reading of 3.

At 5:25 am ET, the euro reached 0.8786 against the pound, up from yesterday's close of 0.8758. As of now, the euro-pound pair is worth 0.878.

The euro showed range-bound trading against the Swiss currency. The euro bounced between 1.4638 and 1.4650. The euro-franc pair is now trading near Tuesday's close of 1.4643.

The euro staged a recovery against the Japanese yen. Moving up from a low of 121.64 hit at 4:00 am ET, the euro soared to 122.16 at 5:10 am ET. The current quote for the euro-yen pair is 122.12, up from yesterday's close of 121.88.

Against the U.S. dollar, the euro that bounced between 1.351 and 1.355 moved off the range around 5:10 am ET. The euro-greenback pair, which closed yesterday's deals at 1.3511, is now worth 1.3564.

From the U.S., the new home sales report for the month of January is slated for release at 10:00 am ET.

Investors also remain cautious as the Federal Reserve Chairman Ben Bernanke is set to deliver his semiannual report on the economy today and tomorrow. He is expected to shed light on how soon key U.S. rates may start to rise, after the surprise increase last week in the rate the Fed charges banks for emergency loans.


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Japan's unemployment rate came in at a seasonally adjusted 4.9 percent in January, the Ministry of Internal Affairs and Communications said on Tuesday, beating expectations for a steady performance after showing 5.1 percent in December.

The number of employed persons in January was 62.13 million, a decrease of 790 thousand or 1.3 percent from the previous year.

The number of unemployed persons in January was 3.23 million, an increase of 460 thousand or 16.6 percent from the previous year.

Commenting on the data at a regularly scheduled press conference, Japanese Finance Minister Naoto Kan said the numbers show that the labor market is "improving somewhat."

The job-to-applicant ratio was unchanged at 0.46, falling shy of expectations for a mark of 0.47.

Also, household spending was weaker than expected in January, adding just 1.7 percent on year versus expectations for a 2.5 percent gain after climbing an annual 2.1 percent in December.

The propensity to consume was up 1.7 points on year to 88.8 percent.

Also on Tuesday, the Bank of Japan said that the monetary base in Japan was up 2.2 percent on year in February to 95.69 trillion yen, after adding an annual 4.9 percent in January.

Banknotes in circulation were up 0.1 percent, while coins in circulation shed 0.7 percent.

The current account balance jumped an annual 15.3 percent to 1.48 trillion yen, including a 15.7 percent surge in reserve balances.

Seasonally adjusted, the monetary base was down 16.8 percent to 94.97 trillion yen.


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The dollar briefly touched a fresh 9-month high versus the euro and kept most of its dramatic recent gains against the sterling Tuesday morning in New York, with markets waiting for further clues about the condition of the US economy.

A string of lackluster economic data released over the past few weeks has fueled concerns that the robust growth seen in the fourth quarter of 2009 was a temporary result of massive government spending.

However, the economies in Europe remain even more distressed, making the dollar an attractive alternative to the euro and sterling.

An overnight surge brought the dollar to 1.3434 versus the euro, its highest level since last May. However, the buck quickly turned back to trade at 1.3550.

Tuesday, a flash report from the Eurostat showed that consumer price inflation in the euro area stood at 0.9% in February, down from 1% in January.

The dollar consolidated its gains against the sterling, holding near 1.4950. Yesterday, the dollar skyrocketed to 1.4790 amid concerns about the British economy.

U.K. construction activity contracted in February, a survey conducted by the Markit Economics showed Tuesday. The seasonally adjusted CIPS/Markit Construction Purchasing Managers' Index fell slightly to 48.5 in February from 48.6 in January.

David Noble, Chief ****utive Officer at the Chartered Institute of Purchasing & Supply said, "While the UK economy slowly pulls into recovery mode, the construction sector has now been confined in recession territory for two years and is still very fragile."

Elsewhere, Japanese Finance Minister Naoto Kan said the government will not demand the Bank of Japan to purchase bonds directly from the government.

The dollar saw little movement against the yen, staying near 89 for a fourth day.

Conversely, the dollar remained under heavy pressure against its Canadian counterpart, hitting 7-week low of C$1.0340.

The Bank of Canada will make its interest rate announcement this morning. Economists expect the target for the key overnight rate to remain unchanged at 0.25 per cent.

Individual automakers are scheduled to release their monthly U.S. sales results for February. The data will reveal the unit sales of domestically produced cars and light duty trucks, including sports utility vehicles and mini-vans, during the month.

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China's Prime Minister Wen Jiabao said Friday his country was seeking an 8% annual growth in gross domestic product (GDP), an inflation rate of about 3% and a basically stable Yuan currency for 2010, the year in which China is set to overtake Japan to become the world's second-largest economy.

In his annual "state of the Union" address to the opening session of the National People's Congress (NPC), China's top legislature, he also said that Beijing would maintain an appropriately flexible monetary stance and an active fiscal policy.

Expressing satisfaction over the country escaping, relatively unscathed, from the global financial crisis, Wen warned the nearly 3,000 delegates against complacency, and vowed to reverse the widening income gap between the rich and the poor as the country continued its economic advance.

"We must not interpret the economic turnaround as a fundamental improvement in the economic situation," he said, adding: "There is insufficient internal impetus driving economic growth."

Asserting that China needed to concentrate on restructuring the economy, Wen said: "This is a crucial year for.accelerating the transformation of the pattern of economic development."

After property prices peaked in 21 months in January, he set a target of 7.5 trillion yuan (?750 billion USD 1128 billion) for lending.

However, the premier did not announce any roll-back in the massive 4.0 trillion yuan (?400 billion USD 602 billion) stimulus package that spurred a rebound and helped to ensure the economy grow by 8.7 per cent last year.

The premier unveiled increases of 8.8 per cent on social spending and 12.8 per cent on rural outlays, as he pledged to expand pensions, raise health-and-social-security outlays to avert instability in the economy.

Wen warned of the latent risk in China's banks, and promised to crack down on property-speculation. He also cited excess capacity in manufacturing and weak support for the rural income growth. He urged Chinese firms to improve their ability to innovate and produce high-tech and high-quality products.

In his wide-ranging speech to the rubber-stamp parliament, the premier dwelt on high areas of concern among his 1.3 billion fellow-citizens: soaring house prices, jobs, inflation and corruption. He said: "Everything we do, we do to ensure that the people live a happier life with more dignity."

After the recent ethnic riots in Tibet and the Muslim far western Xinjiang province, the premier lay emphasis on the need to ensure minorities felt a "sense of citizenship", saying: "The Chinese nation's life, strength and hope lie in promoting solidarity, (and) achieving common progress of our ethnic groups."

Wen's speech came a day after Beijing announced an increase of 7.5 per cent in its defense budget for 2010, a reduction of 50 per cent compared to last year's planned growth of 14.9 per cent--the slowest pace of expansion in more than a decade.

Li Zhaoxing, spokesman for the annual session of the National People's Congress (NPC), told a press conference Thursday in Beijing that the planned defense budget was 532.115 billion yuan (about USD 78 billion), an increase of about 37 billion yuan from last year's figure.

This marks the first time that China's defense budget growth rate rose less than 10 per cent after more than 20 years of double-digit increases.

Defense-spending would account for 6.4 per cent of the country's total fiscal expenditure in 2010, the same as last year, he said, adding, as a proportion of the GDP, China was still spending less than many other countries, including the United States.

China's defense expenditure in recent years accounted for about 1.4 per cent of its GDP, he said, noting that ratio was four per cent for the United States, and more than two per cent for the United Kingdom, France and Russia.

Taking into account China's large population, its vast territory, and its long coastline, the country's defense budget was "comparatively low," Li said. But he pointed out that the figures were tentative until the budget plan was approved at the NPC annual session due to open Friday in Beijing.

The spokesman said the increased budget would be mainly used to support military reforms and improve its capability to deal with various security threats and complete diversified tasks. A part of the money would be used to raise the living standards of servicemen, he added.

Li also claimed that China was increasing transparency on its expenditure on defense after Washington repeatedly urged Beijing to be more open about its rapidly-rising military-spending. As a part of this exercise, he said his country was submitting defense budgets to the NPC annual sessions for approval, issuing white papers every two years on its national defense, and establishing a spokesperson system and websites for its Defense Ministry.

Asserting that the only purpose of China's military strength was to safeguard the country's sovereignty and territorial integrity, the NPC spokesman added Beijing had always taken the path of peaceful development in line with its national defense policy.


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Greece Prime Minister George Papandreou will meet with U.S. President Barack Obama in Washington on Tuesday, where he will appeal for assistance in regulating the currency traders and hedge funds that have bet against Greek debt.

Greece recently announced measures to resolve its debt issues, hoping to attract aid from its European neighbors.

While Papandreou did not come to Washington looking for a hand out, he stressed the U.S. must play a vital role in stopping "unprincipled speculators" from aggravating the Greek debt problems, doing damage to already frail global financial markets.

A number of European leaders are pointing to speculators as the main reason that Greek financing costs have skyrocketed. For its part, profligate Greece has run up a deficit that is 12.7% of GDP, far beyond the 3% limit set by euro area nations.

"Unprincipled speculators are making billions every day by betting on a Greek default," said Papandreou, after meeting with Secretary of State Hillary Clinton on Monday.

"That is why Europe and America must say 'enough is enough' to those speculators who only place value on immediate returns, with utter disregard for the consequences on the larger economic system - not to mention the human consequences of lost jobs, foreclosed homes, and decimated pensions," he added.

Papandreou stressed that speculation does not allow Greece to borrow at the same rates other European Union countries and the Eurozone countries borrow at, a situation that is unsustainable within a common currency.

"We're not asking for money," Papandreou insisted. "We're not asking for bailouts. We're simply saying what we want to be is equal partners, as we have taken these measures on the market to be able to get what others also can get, which is basically normal rates of borrowing."

Secretary Clinton commended the prime minister for "moving quickly to put in place changes that are called for given the economic consequences of the fiscal situation that he inherited."

"What I think Greece is looking for...is that the United States, working in the G-20, will make some of the changes in regulatory regimes governing some of these financial instruments that have been used to the detriment not only of Greece, but of other countries, including our own."

Prior to remarking on the Greek debt crisis, Clinton congratulated Iraq on holding parliamentary elections. In a lighter moment, she quipped that Greece, as the birthplace of democracy, should get a royalty any time there's a democratic election anywhere in the world.

"It would help my deficit, too," Papandreou joked.

Papandreou will meet today with President Obama and Treasury Secretary Timothy F. Geithner.


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While the Labor Department released a report Thursday morning showing a modest decrease in first-time claims for unemployment benefits in the week ended March 6th, the report also showed an increase in continuing claims.

The report showed that initial jobless claims edged down to 462,000 from the previous week's revised figure of 468,000. Economists had expected jobless claims to slip to 460,000 from the 469,000 originally reported for the previous week.

Peter Boockvar, equity strategist for Miller Tabak, said, "Due to the noise around the snow storms, it's best to look at the 4-week average, which smoothes out the data."

The less volatile four-week moving average rose to 475,500 from the previous week's revised average of 470,500. With the increase, the moving average reached its highest level since late November of 2009.

Additionally, the Labor Department said that continuing claims, a reading on the number of people receiving ongoing unemployment help, rose to 4.558 million in the week ended February 27th from the preceding week's revised level of 4.521 million.

With the increase, continuing claims bounced off the more than one-year low set in the previous week, which was the lowest level since claims came in at 4.487 million in the week ended January 3rd, 2009.

On the other hand, the report also showed that those receiving emergency unemployment compensation fell by almost 160 thousand in the week ended February 20th to 5.528 million. Those receiving extended benefits also fell by about 15 thousand in the week.

Boockvar said, "We hope this category begins to fall due to recipients finding new jobs rather than from exhaustion of benefits, but the hiring outlook still remains uncertain."

Last Friday, the Labor Department released a report showing that payroll employment showed a relatively modest decrease in the month of February, despite the impact of severe winter weather.

The report showed that non-farm payroll employment fell by 36,000 jobs in February following a revised decrease of 26,000 jobs in January. Economists had expected a more substantial loss of about 68,000 jobs compared to the loss of 20,000 jobs originally reported for the previous month.

While the Labor Department acknowledged that the data was impacted by the severe snowstorms in early February, it said it is not possible to precisely quantify the net impact of the storms.

The Labor Department also said that the unemployment rate in February remained unchanged from the previous month at 9.7 percent. The unemployment rate had been expected to tick up to 9.8 percent.


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China's consumer price inflation rate accelerated more than expected in February, increasing the pressure on its central bank to raise interest rates amid fears the economy may be overheating.

Consumer prices increased 2.7% year-on-year in February, the National Bureau of Statistics said, exceeding expectations for a 2.5% increase following the 1.5% growth in the previous month.

The rise in prices was mainly driven by a 6.2% surge in food prices. Non-food prices climbed 1%.On a monthly basis, the consumer price index rose 1.2% in February.

In the first two months of the year, consumer prices increased 2.1% compared with the same period a year ago. Economists look for the combined inflation data for the first two months as it smoothes the distortion caused by the Chinese New Year holiday.

The pickup in the inflation rate adds to worries that China's economy may be expanding too quickly.

However, a spokesman for the statistical office said inflation will ease in March as weather conditions improve, bringing down food prices.

Figures released today by the People's Bank of China showed that bank lending was down sharply in February, as the government seeks to rein in runaway growth in the economy.

Chinese banks extended CNY 700.1 billion in new local-currency loans in February, down from the CNY 1.39 trillion lent in January.

M2 money supply - the broadest measure of money supply in the country - surged up 25.5% year-on-year in February, slower than the 26% increase in the previous month.

Separately, the statistical bureau said that producer prices surged 5.4% annually in February. The growth exceeded expectations for a 5.1% increase and follows the 4.3% growth in the previous month.

Industrial production in China increased 12.8% year-on-year in February. This came below forecasts for a 19.5% increase.

In the first two months of the year, industrial production increased 20.7% compared to the same period a year ago.

The statistical bureau also announced that retail sales were up 22.1% annually in February, also exceeding expectations for a 18.7% gain. In the first two months, retail sales were up 17.9%.

Meanwhile, urban investments in fixed assets in the first two months of 2010 increased 26.6%, above expectations for 25.6% growth.

A separate real estate report from the statistical office showed that property prices in 70 major cities across the country were up 10.7% year-on-year in February, faster than the 9.5% increase in the previous month.

Housing prices were up 13% year-on-year in February, faster than the 11.3% increase in January, the statistical office said.

Property sales in the first two months of the year soared 70.2% compared to the same period a year ago.

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Euro Gains On Dollar Despite Specter Of Deflation


The euro was mixed on Tuesday, firming up against the dollar despite concerns about deflation in the Euro zone.

Eurozone core inflation dropped to an all-time low in February, suggesting that deflationary pressures persist in the 16-nation economy.

Core inflation, which excludes energy, food, alcohol and tobacco, stood at 0.8% in February, down from 0.9% in January, data released by the Eurostat showed Tuesday. That was in line with the consensus forecast and was the lowest rate since comparable data was compiled in 1990.

However, this morning's economic news will likely be overshadowed by the Federal Reserve's latest statement on interest rates, which is expected at around 2:15 pm ET.

While the Fed is expected to keep interest rates near zero, the accompanying statement will garner significant attention for subtle changes the central bank's assessment of the US economy and timeline for future rate hikes.

Yesterday, European finance ministers worked out a strategy for emergency loans to Greece, in case the country's $6.6 billion tax hikes and wage cut plans fail. Standard & Poor's affirmed the nation's credit ratings.

The euro rose to 1.3740 versus the dollar, staying away from a 9-month low of 1.3434 set earlier this month.

The euro slipped to .9054 versus the sterling, but remained within hailing distance of its 2010 highs above .9150.

In news from the US, new residential construction showed a notable decrease in the month of February, according to a report released by the Commerce Department on Tuesday. Analysts say the data was impacted by unusually bad winter weather in the Northeast.

The report showed that housing starts fell 5.9 percent to an annual rate of 575,000 in February from the revised January estimate of 611,000.


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The Latvian government has said the baltic country will officially adopt the euro on January 1, 2014.

The Latvian Cabinet of Ministers said the country must meet several criteria of the Maastricht Treaty before adopting the common currency.

The country's budget deficit must below 3% of the gross domestic product and total government debt must not exceed 60% of GDP.

After the common currency is adopted, both the lat and the euro will be in circulation within Latvia in order to ensure a smooth transition.

In order to quicken the process, change will only be given in euros during the transition period, the government said.

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Manufacturing activity in the mid-Atlantic region is continuing to show signs of growth in the month of March, according to a report released by the Federal Reserve Bank of Philadelphia on Thursday, with the index of activity in the manufacturing sector rising by more than expected.

The Philly Fed said its index of regional manufacturing activity rose to 18.9 in March from 17.6 in February, with a positive reading indicating growth in the sector. Economists had been expecting a more modest increase by the index to a reading of 18.0.
While the headline index showed a continued improvement in activity in the sector, the new orders index fell to 9.3 in March from 22.7 in February and the shipments index slipped to 13.6 from 19.7 in the previous month.

At the same time, the report showed an acceleration in the pace of employment growth in the sector, as the number of employees index rose to 8.4 in March from 7.4 in February. With the increase, the index rose to its highest level since October of 2007.

The Philly Fed said firms' responses continued to suggest that labor market conditions have been stabilizing in recent months.

On the other hand, the inventories index fell to a negative 11.0 in March from a positive 3.2 in February, indicating another contraction in inventories.

The report also showed that the prices paid index rose to 38.6 in March from 32.4 in February, while the prices received index fell to a negative 0.4 from a positive 3.7 in the previous month.

Looking ahead, the future general activity index remained positive for the 15th consecutive month, rising to 52.0 in March from 35.8 in February.

The Philly Fed added that the percentage of firms expecting employment to increase over the next six months exceeded the percentage expecting declines for the eleventh consecutive month.

Earlier this week, the New York Fed released its report on regional manufacturing activity, showing that conditions for New York manufacturers continued to improve at a steady pace in March.

The New York Fed said its index of regional manufacturing activity edged down to 22.9 in March from 24.9 in February, but a positive reading still indicates growth in the sector. Economists had expected the index to slip to a reading of 22.0.

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