U.S. Consumer Confidence Climbs More Than Estimated to a Three-Year High

Confidence among U.S. consumers increased in February to the highest level in three years as a drop in unemployment helped overcome concern over rising food and fuel costs. 

The Thomson Reuters/University of Michigan final index of sentiment climbed to 77.5, exceeding the median forecast of economists surveyed by Bloomberg News, from 74.2 in January, a report today showed. The Commerce Department said the economy grew less than previously estimated in the fourth quarter as state and local governments cut back on spending. 

The sentiment survey showed that for the first time in six years, households this month said they had heard more optimistic than pessimistic news on the economy, boosting the odds that consumer spending will keep bolstering the expansion. At the same time, a jump in fuel costs caused by the unrest in the Middle East threatens to keep the enthusiasm in check. 

“We’ve clearly seen a bounce in the confidence numbers coincide with the gains in financial markets and the pickup in the economy, particularly the improving labor market,” said Jim O’Sullivan, global chief economist at MF Global Inc. in New York. “It was a bit of a surprise given the geopolitical tensions.” 

Stocks extended earlier gains after the report. The Standard & Poor’s 500 Index rose 0.9 percent to 1,317.51 at 11:12 a.m. in New York. Treasury securities were little changed, leaving the yield on the benchmark 10-year note at 3.43 percent compared with 3.45 percent late yesterday.

Range of Estimates

The 59 estimates in the Bloomberg survey ranged from 74.8 to 78. The index averaged 89 in the five years leading up to the recession that began in December 2007 and ended in June 2009. This month’s reading was the highest since January 2008. 

Today’s report mirrors other consumer gauges. 

The Bloomberg Consumer Comfort Index, formerly the ABC News U.S. Weekly Consumer Comfort Index, climbed last week to the highest level since April 2008 as Americans grew less pessimistic about their finances. 

The gauge was minus 39.2 in the period to Feb. 20, compared with minus 43.4 the prior week, a report yesterday showed. Forty-nine percent of those polled held positive views on their financial situation, the most in a year. 

The comfort index often tracks changes in prices Americans pay at the gas pump, whereas changes in the stock prices have more of an influence on the Michigan index, according to economists. Households with yearly incomes of $75,000 or more accounted for the entire jump in confidence last month, today’s report showed.

Other Gauges

The Conference Board’s index of confidence increased to 70.4, the highest since February 2008, from 64.8 the prior month, according to Feb. 22 figures from the New York-based private research group. 

A report from the Commerce Department today showed the economy grew at a 2.8 percent annual rate in the fourth quarter, down from a prior estimate of 3.2 percent. The world’s largest economy expanded at a 2.6 percent pace in the third quarter. 

The sentiment survey’s current conditions gauge, which reflects Americans’ perceptions of their financial situation and whether they consider it a good time to buy big-ticket items like cars, increased to 86.9 from 81.8 the prior month. 

Recent equity market performance may have played a part in boosting peoples’ attitudes. The S&P 500 Index advanced 3.9 percent this year through yesterday, extending gains from 2010. 

Unemployment Drops 

While employers added a fewer-than-forecast 36,000 jobs to payrolls in January, the unemployment rate unexpectedly fell to 9 percent, the lowest since April 2009, according to Labor Department figures released Feb. 4. Unemployment dropped to 9.4 percent in December from 9.8 percent the previous month. 

The index of consumer expectations six months from now, which more closely projects the direction of consumer spending, increased to 71.6 from 69.3. 

Macy’s Inc., the second-biggest U.S. department-store chain, is among companies counting on shoppers to keep spending. The Cincinnati-based retailer this week reported earnings that beat analysts’ estimates as it controlled costs and sold exclusive holiday gifts. 

“We are entering the year with building momentum, which gives us confidence that we should have another strong year,” Karen Hoguet, chief financial officer, said on a conference call with investors on Feb. 22. 

Consumers in the confidence survey said they expect an inflation rate of 3.4 percent over the next 12 months, the same as in January. Over the next five years, the period tracked by Federal Reserve policy makers, Americans surveyed said they expect prices will climb 2.9 percent, also the same as last month. 

Rising gasoline prices may have restrained a further increase in sentiment. The average price of a gallon of regular gasoline at the pump was $3.29 yesterday, the highest level since October 2008, as mounting tension in the Middle East and North Africa drove up the cost of crude oil. 

Source: Bloomberg By Timothy R. Homan

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Euro Gains as Oil Surge Spurs Bets ECB to Raise Interest Rates

The euro gained for the first time in three days against the dollar on speculation rising fuel costs will put further pressure on European Central Bank policy makers to combat inflation with higher interest rates. 

The single currency climbed to a two week-high versus its U.S. counterpart also gained versus the yen and Swiss franc. The Dollar Index snapped two days of advances before a report economists said will show sales of previously owned homes in the U.S. dropped. Oil prices approached a two-year high amid intensifying violence in Libya. The pound strengthened versus the dollar and euro as minutes of the Bank of England’s Feb. 10 meeting showed three out of nine policy makers voted for an increase in rates. 

“The market is focusing more on prospects for higher interest rates and this speculation should offer further relief for the European unit,” said Roberto Mialich, a senior currency strategist at UniCredit SpA in Milan. “The Federal Reserve’s position is very clear; the U.S. outlook is still uncertain and they don’t want to raise rates too soon.” 

The euro rose 0.6 percent to $1.3737 as of 7:37 a.m. in New York, after appreciating to $1.3744, the strongest since Feb. 9. The single European currency advanced 0.7 percent to 113.74 yen. The dollar was at 82.78 yen, from 82.77 yen yesterday, when it reached 82.53, its weakest since Feb. 10. 

ECB officials will “inevitably” have to “rebalance our monetary policy stance,” with the 17-nation euro-area economy strengthening and inflation in breach of the central bank’s 2 percent limit, council member Yves Mersch said yesterday, without giving a time frame. Policy makers will take the decisions necessary to maintain price stability, ECB President Jean-Claude Trichet said in Frankfurt today.

‘Turn Hawkish’

“As policy makers turn hawkish, I get a sense they are getting ready to change their policy stance next week,” said Naoto Minatogawa, a currency analyst at Himawari Securities Inc. in Tokyo. “The euro has been supported.” 

Futures show traders added to bets for higher borrowing costs. The implied yield on the three-month Euribor futures contract for December rose to 1.97 percent today from 1.99 percent yesterday and 1.88 percent on Feb. 16. Futures on the CME Group Inc. exchange show a 27 percent chance Fed policy makers will boost their main rate to 0.5 percent in December, down from 32 percent a week ago. 

The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, fell 0.4 percent to 77.431.

House Purchases

U.S. house purchases decreased 1.1 percent from December to a 5.22 million annual rate, according to the median forecast of 73 economists surveyed by Bloomberg News. A 13-year-low 4.91 million existing houses sold in 2010. The National Association of Realtors’ data is due at 10 a.m. in Washington, with economists’ estimates ranging from 4.86 million to 5.5 million after December’s 5.28 million pace. 

German Chancellor Angela Merkel signaled yesterday that European Union leaders may be ready to renegotiate the terms of Greece’s bailout as part of a broader package to shore up confidence in the euro.

“There certainly is a discussion about whether to consider extending the running time of the Greek program,” Merkel said, noting that last year’s aid plan for Greece was limited to three years while Ireland’s bailout package, agreed last November, runs for seven years. “It’s one point that’s on the table.’

‘Civil War’

Continued protests “will lead to civil war,” Libyan leader Muammar Qaddafi said yesterday in Tripoli. The nation holds Africa’s largest crude reserves. Qaddafi’s crackdown on a week-long uprising has already left more than 200 dead, according to Human Rights Watch. 

Crude for April delivery rose as much as 0.9 percent in electronic trading on the New York Mercantile Exchange, after climbing yesterday to the highest since October 2008. 

Sterling gained 0.7 percent to $1.6246 and was little changed at 84.53 pence per euro, from 84.59 pence yesterday. 

Spencer Dale joined Andrew Sentance and Martin Weale in voting for higher rates as a growing number of officials said the case for tightening policy had “grown in strength,” minutes released in London today showed.

The pound may strengthen to $1.65 during the next few weeks as speculation mounts that the Bank of England will raise its main rate from a record low 0.5 percent, before weakening on concern that higher borrowing costs will crimp economic growth, according to Hans-Guenter Redeker, head of global currency strategy at BNP Paribas SA in London.

Higher Rates

“We will have to think about the sustainability of higher interest rates in an environment where the economy is highly leveraged,” Redeker said in an interview. “Credit is still weak.” Sterling support “may last several weeks,” he said. 

The New Zealand dollar, known as the kiwi, strengthened after Moody’s Investors Service said it sees no immediate impact from the Christchurch earthquake on the nation’s Aaa credit rating. 

“We’ve seen the kiwi bounce as the market was a little bit carried away in pricing an immediate rate cut,” said Annette Beacher, head of Asia-Pacific research at TD Securities in Singapore. “There are record high commodity prices in New Zealand at the moment and the Reserve Bank puts a lot of weight on commodity prices and the terms of trade boom, so it’s unlikely that we’ll see a cut.” 

The earthquake killed at least 75 people and the disaster is likely to cost reinsurers around NZ$5 billion ($3.7 billion), Prime Minister John Key said. 

The kiwi was little changed at 74.63 U.S. cents after strengthening to 75.13 U.S. cents. It declined yesterday to its weakest level against the U.S. currency since December. The New Zealand dollar was also little changed at 61.79 yen. 

Source: Bloomberg By Lukanyo Mnyanda and Yoshiaki Nohara 

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BOJ upbeat on economy, exports show seasonal dip

(Reuters) - Bank of Japan Deputy Governor Hirohide Yamaguchi said the country's economy will soon pull out of its torpor, despite a near-stalling of export growth in January, but warned that risks remain from rising commodity prices.

Annual export growth slowed to its weakest pace in more than a year in January as shipments to China lost steam before the Lunar New Year, but economists said the central bank's forecast for an export-led recovery remained intact as underlying demand overseas was still strong.

"Exports were weaker than expected but the overall trade data does not alter the scenario that the economy is emerging from a lull in the January-March quarter," said Yoshimasa Maruyama, economist at Itochu Corporation in Tokyo.

Yamaguchi, a career central banker and a close aide to Governor Masaaki Shirakawa, said Japan was making progress toward an end to deflation with annual rises in consumer prices seen accelerating toward the year starting in April 2012.

Still, the government and the central bank are unlikely to draw much comfort as turmoil in Libya and a recent spike in commodity prices cloud the outlook. Yamaguchi also warned against excessive optimism over the U.S. economy.

"Exports are resuming an uptrend," Yamaguchi said in a speech to business executives in Aomori, northern Japan, on Wednesday. "I expect Japan's economy to soon emerge from a lull and resume a moderate recovery path on strong overseas growth."

UNCHANGED ASSESSMENT

His comments are in line with the BOJ's assessment last week that Japan's economy was gradually emerging from a slowdown and heading toward a moderate recovery.

Yamaguchi warned that there was a chance that financial markets' optimistic view on the U.S. economy may be reversed given the huge balance sheet adjustment it needs to go through.

His comments "suggest optimism about the economy from a short-term viewpoint but he rather stressed downside risks for the medium-term, especially about the U.S. economy," said Seiji Shiraishi, chief economist at HSBC Securities Japan.

"The BOJ is examining how such risks will develop. While the economic cycle is recovering, if downside risks materialize, there is a possibility the BOJ will expand its easing steps," Shiraishi said.

The central bank is closely monitoring oil prices, which have soared due to spreading unrest in the Middle East and North Africa, but it sees no reason yet to alter its forecasts, Yamaguchi later told reporters.

Should this trend continue, it could stymie monetary policy because it could both harm growth and possibly hasten an exit from deflation.

STANDING PAT

"Commodity-driven inflation exacerbates terms of trade and weighs on economy, but if commodity price hikes don't accelerate that would keep core consumer prices from approaching levels that the BOJ sees as desirable," said Azusa Kato, economist at BNP Paribas in Tokyo.

"The BOJ will stand pat on monetary policy for foreseeable future, regardless of commodity prices."
Japan's exports in January rose 1.4 percent from a year earlier, the lowest growth since November 2009 and much slower than the median forecast for a 7.4 percent annual increase, Finance Ministry data showed.

Shipments to China, Japan's largest trading partner, increased 1.0 percent from a year earlier, a small fraction of the 20.1 percent annual increase in the previous month and also the smallest increase since October 2009.
The slowdown was mainly due to the Lunar New Year holidays in the first week of February, which are observed in China and some other Asian countries including South Korea, a ministry official said.

In comparison, South Korea's exports to China rose 15.4 percent in January. While the number, reported earlier this month, was far stronger than Japan's, it was also the lowest growth since October 2009 and well below the more than 40 percent overall growth.

"I think this is a temporary phenomenon," said Yoshikiyo Shimamine, chief economist at Dai-Ichi Life Research Institute in Tokyo.

"Exports of microchips and other electronics devices to Asia slowed substantially, but the inventory situation is improving. U.S. consumer sentiment seems to be picking up as well."

The trade balance showed a deficit of 471.4 billion yen ($5.67 billion), its first deficit in 22 months. That compared with the median forecast for a 60.0 billion yen surplus.

The purchasing managers index for January lends some support to optimism over exports, showing new export orders grew for the first time in four months.

The BOJ last week raised its assessment of the economy, signaling that no imminent monetary easing is on the horizon.

Still, the central bank is set to maintain its ultra-easy policy and keep interest rates in a range of zero to 0.1 percent unless a rise in consumer prices of around 1 percent seems likely.

The BOJ last year cut interest rates effectively to zero and set up a fund to buy assets ranging from government bonds to private debt, aiming to help the economy and end deflation.
(Writing by Stanley White; Editing by Alex Richardson and Richard Borsuk)

Source: Reuters By Leika Kihara and Tetsushi Kajimoto

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Oil-Price Swings Double as Unrest Spreads Before Saudi Talks

Oil-price swings have doubled this year as unrest spreads through the Middle East, source of one- third of global crude supply, hampering producer and consumer efforts to stabilize the world’s biggest commodity market. 

As officials from more than 90 nations including Saudi Arabian Oil Minister Ali al-Naimi and U.S. Deputy Energy Secretary Daniel Poneman gather in Riyadh tomorrow to seek ways of curbing fluctuations, oil’s 20-day historical volatility has risen to 29.4, according to data compiled by Bloomberg. It was at 12.6, an all-time low, at the end of December. U.S. futures for April jumped as much as 4.5 percent today as violence spread in Libya, holder of Africa’s biggest crude reserves. 

Oil has risen to a two-year high, with Brent crude prices in London exceeding $105 a barrel today, as the Middle East turmoil stoked concern that shipments from the region may be disrupted. Libyan leader Muammar Qaddafi’s son warned yesterday that a civil war would risk the country’s oil wealth as security forces attacked protesters, killing more than 200, according to New York-based Human Rights Watch. Nations including Iran and Bahrain are cracking down on opposition groups demanding change amid upheaval that’s toppled leaders in Egypt and Tunisia. 

“Prices gyrate wildly with each new headline,” said Mike Fitzpatrick, Energy Overview editor in New York, and a former futures broker at MF Global. “If more moderate and friendly-to- the-West governments like Jordan or Bahrain topple, $100 may not be so ridiculous as it seemed only a few days ago.”

Libyan Oil Production

Shokri Ghanem, chairman of Libya’s National Oil Corp., said he didn’t know if unrest sweeping the North African nation has affected its crude output. “Until now, we don’t have any information,” he said in a brief telephone interview from the country’s capital, Tripoli. An official at Milan-based Eni SpA, the biggest foreign producer in Libya, said today that operations in the country were normal. Libya pumps 1.59 million barrels a day, according to Bloomberg estimates, the biggest North African producer to experience mass protests so far. 

In response to rising prices, OPEC is already pumping the most oil since agreeing to production cuts in December 2008. U.S. inventories are 6.4 percent higher than their five-year average, storing up the possibility of a price plunge once the winter-demand period ends.

Riyadh Meeting

Representatives meeting in the Saudi capital tomorrow will include producers in the 12-nation Organization of Petroleum Exporting Countries, the 28 consuming countries of the International Energy Agency, as well as China, India and Brazil. The International Energy Forum meeting will approve a charter aimed at finding mechanisms to stabilize energy markets and improve the collection and publication of supply, demand and price data. 

“The signing of the new charter comes at the right time and place in conditions that witness some fluctuation in energy markets,” al-Naimi said in a Feb. 18 statement e-mailed by the Saudi Ministry of Petroleum and Mineral Resources. 

OPEC’s next policy-setting meeting is scheduled for early June, in Vienna. The group has ignored output quotas as prices have soared, pumping about 2 million barrels a day, or 8 percent, more than the official limit for 11 of its members.

Oil Surges

Crude for April delivery advanced as much as $4.04 to $93.75 a barrel in electronic trading on the New York Mercantile Exchange while April Brent on the London-based ICE Futures Europe surged as much as 2.5 percent to $105.08, the highest for a contract closest to expiration since Sept. 22, 2008. 

The Paris-based IEA raised its forecast for 2011 global oil demand for a fifth straight month in a Feb. 10 report, as consumption recovers from the recession. 

“The current wave of geopolitical uncertainty is affecting both expectations of potential volatility in immediate oil flows and the longer-term implications of a more uncertain investment climate,” said Paul Horsnell, London-based head of commodities research at Barclays Capital. 

Price swings are likely to be in focus at the International Petroleum Week conference in London this week, attended by oil traders and brokers from companies such as BP Plc, ICAP Plc, Vitol Group and state-run Saudi Aramco.

London’s IP Week

The mood in London will probably be “positive,” with “a lot of talk of OPEC capacity and the Middle East violence” said Andrey Kryuchenkov, a London-based analyst at VTB Capital. 

Exporters are concerned there may still be a drop in prices amid rising U.S. inventories and the onset of spring in the northern hemisphere, when fuel consumption typically ebbs. 

“The lesson is that until the market is confident that risks have subsided, volatility will remain high,” Lawrence Eagles, head of commodities research at JPMorgan & Chase Co., said in a note. “To this extent, the market is happy to absorb the extra barrels that are coming from OPEC, despite the beginning of seasonally lower demand for crude and heating fuels.” 

The widening discount of U.S. West Texas Intermediate crude to North Sea Brent crude will be another “key theme” in discussions in London, Horsnell said. “It is likely to be difficult to get too far away from the gyrations in WTI prices, and the severe stress that the Midwest oil market is under.” 

WTI crude traded as much as $16 a barrel less than Brent last week, comparing April contracts for both grades, as the U.S. futures benchmark remained under pressure from a supply glut at its delivery point in Cushing, Oklahoma. 

The 20-day historic volatility index measures how much crude fluctuates around its average price during that period. OPEC’s 12 members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. 

Source: Bloomberg By Grant Smith and Lananh Nguyen 

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Home Sales Probably Fell, Goods Orders Rose as Factories Head U.S. Economy

Home sales probably fell in January, while orders for long-lasting goods climbed, a reminder that housing lags behind manufacturing as the U.S. recovery strengthens, economists said before reports this week. 

Combined purchases of new and existing homes fell 2 percent to a 5.5 million annual pace, according to the median forecast of economists surveyed by Bloomberg News. Durable-goods bookings increased 3 percent last month, the survey showed. 

Unemployment hovering near 9 percent means foreclosures may keep rising, adding to a glut of inventory that is depressing property values, hurting builders and homeowners. Growing exports, combined with increasing profits and tax incentives signed into law by President Barack Obama in December, will probably keep orders flowing to companies like Caterpillar Inc. 

“Housing is basically flat on its back, and manufacturing is growing very fast, probably the biggest contrast in the economy,” said Nigel Gault, chief U.S. economist at IHS Global Insight Inc. in Lexington, Massachusetts. Home prices are still on the way down.” 

Sales of existing homes fell 1.5 percent to a 5.2 million annual pace, economists surveyed by Bloomberg forecast the National Association of Realtors will report Feb. 23. Commerce Department figures the following day may show demand for new homes dropped 8.8 percent to a 300,000 rate, the survey showed. Purchases reached a record low 274,000 pace in August.

More Orders

Orders for durable goods rose in January after a 2.3 percent decline the prior month, economists forecast the Commerce Department will report Feb. 24. Excluding demand for transportation, which is often volatile, bookings may have climbed for a third month. 

The business spending that helped lead the economy out of recession may gain a second wind from a new tax provision that was part of Obama’s compromise with congressional Republicans. Companies will be able to depreciate 100 percent of investments in capital equipment this year. 

Demand from abroad is also growing. Exports in December rose to the highest level since July 2008.

Caterpillar, the world’s largest maker of construction equipment, is projecting 2011 sales will top $50 billion after coming in at $42.6 billion last year. 

“Sales are improving in every region, and are at or near records in the developing world,” Mike DeWalt, director of investor relations at Caterpillar, said on a Jan. 27 teleconference. “Over the past quarter, we’ve become somewhat more positive about economic growth in the developed economies of North America, Europe, and Japan.”

Fed Views

Federal Reserve policy makers noted the dichotomy in their Jan. 26 policy statement. 

“Business spending on equipment and software is rising,” they said. At the same time, they said housing remained “depressed” and falling home values continued to stymie the consumer spending that accounts for about 70 percent of the world’s largest economy. 

Homebuilder shares have underperformed the broader stock market since the middle of last year. The Standard & Poor’s Supercomposite Homebuilder index of 12 builders has gained 24 percent since June 30, compared with a 30 percent increase for the S&P 500 Index. The S&P Machinery Supercomposite Index is up 58% during that time. 

The S&P/Case-Shiller index of home values in 20 cities fell 2.4 percent in December from the same month in 2009, the biggest 12-month decrease in a year, economists surveyed forecast the group will say Feb. 22.

Industry projections reinforce the concern about housing. The number of homes receiving a foreclosure notice will climb about 20 percent in 2011, reaching a peak for the housing crisis, RealtyTrac Inc., an Irvine, California-based data seller, said last month.

Underwater Mortgages

At the end of last year about 15.7 million mortgaged single-family homes, or 27 percent, were worth less than the amount of loans outstanding, according to Zillow Inc., a Seattle-based real-estate information company. It was the highest share in data going back to the first quarter of 2009. 

Higher borrowing costs may further hurt sales. The average rate on 30-year fixed mortgages exceeded 5 percent for a second week in the period ended Feb. 11, the first time that’s happened since April, the Mortgage Bankers Association said last week. Rates have climbed from a record low of 4.21 percent in October. 

While consumer confidence has been climbing, it remains below pre-recession levels. The Conference Board’s sentiment index decreased to 65 this month from a revised 65.6 in January that was the highest since March 2008, economists forecast the New York-based private research group will report on Feb. 22. 

The Reuters/University of Michigan final confidence index for February may rise to 75.4 from a preliminary reading of 75.1, and 74.2 at the end of January, economists forecast the group will report on Feb. 25. 

Lastly this week, the second report on gross domestic product for the fourth quarter, due Feb. 25, may show the economy grew at a 3.3 percent rate, faster than the 3.2 percent originally estimated, according to the survey median.

Bloomberg Survey

================================================================
==
                        Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
================================================================
==
Case Shiller Monthly MO   2/22      Dec.     -0.5%     -0.5%
Case Shiller Monthly YO   2/22      Dec.     -1.6%     -2.4%
Case Shiller Monthly In   2/22      Dec.     143.9     143.3
Case Shiller Quarterly    2/22       4Q      -1.5%     -3.5%
Case Shiller Quarterly    2/22       4Q      135.5     132.6
Consumer Conf Index       2/22      Feb.      65.6      65.0
Exist Homes Mlns          2/23      Jan.      5.28      5.20
Exist Homes MOM%          2/23      Jan.     12.3%     -1.5%
Durables Orders MOM%      2/24      Jan.     -2.3%      3.0%
Durables Ex-Trans MOM%    2/24      Jan.      0.8%      0.5%
Cap Goods Core MOM%       2/24      Jan.      1.9%     -1.0%
Initial Claims ,000’s     2/24     19-Feb     410       405
Cont. Claims ,000’s       2/24     12-Feb     3911      3880
BCCI                      2/24    Feb. 20     -43       n/a
New Home Sales ,000’s     2/24      Jan.      329       300
New Home Sales MOM%       2/24      Jan.     17.5%     -8.8%
GDP Annual QOQ%           2/25      4Q S      3.2%      3.3%
Personal Consump. QOQ%    2/25      4Q S      4.4%      4.2%
GDP Prices QOQ%           2/25      4Q S      0.3%      0.3%
Core PCE Prices QOQ%      2/25      4Q S      0.4%      0.4%
U of Mich Conf. Index     2/25     Feb. F     75.1      75.4
================================================================

Source: Bloomberg By Bob Willis

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All Big 5 Currency was moving up Caused By Good Indicator Result

On this week, i am gonna make a summary of 5 currency mover instead of giving a prediction. If we look detail information especially for fundamental factors, some of indicators that give big influence for currency moving whether are below:

• Retail sales m/m for NZD was going down from previous (1.2%) to actual (-1.1%)
• Prelim GDP q/q for JPY was also down from previous (0.8%) to actual (-0.3%)
• Home Loans m/m for AUD was better than forecast which up about 2.1% (actual)
• German prelim GDP q/q dropped from previous (0.7%) to actual (0.4%)
• CPI for GBP increased slightly from 3.7% to 4%
• German ZEW economic sentiment dropped from forecast 20.1% to actual 15.7%
• Claimant Count Change still bad about 2.4K
• Current Account for EUR dropped from previous -10.5B to actual -13.3B
• Retail Sales m/m for GBP showed good result from previous (-1.4%) to actual (1.9%)  

All these above indicators will move toward USD currency. As a result, in this week all five currency showed a good sign, it was because of good indicator result.

• GBP/USD was increasing from 1.6064 to 1.6244 about 220 point

• EUR/USD raised from 1.3506 to 1.3683 point, it was about 183 point

• AUD/USD from 1.0006 to 1.0142 point, raised about 144 point

• USD/JPY for this currency, the difference was just a bit from 83.45 to 83.10 point

• USD/CHF had showed good currency from 0.9739 to 0.9455 point, the gap was about 300 point

In conclusion, the fundamental analysis is taking a big part of making a right decision instead of technical analysis. By combining two analysis, i hope that the decision maker can take in a right moment to buy or sell currency.

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Euro Rises After Bini Smaghi Says ECB May Raise Rates as Inflation Climbs

The euro reached a one-week high against the dollar after European Central Bank Executive Board Member Lorenzo Bini Smaghi said the bank may need to raise interest rates as global inflation pressures mount. 

The shared currency erased earlier losses that followed data showing producer prices in Germany rose 1.2 percent, faster than forecast. The pound remained higher against the euro and the dollar amid speculation that inflation may soon force Bank of England policy makers to raise interest rates. 

“Yield plays are and have been the main focus of the foreign-exchange markets,” said Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London. “These guys are ratcheting up their rhetoric and are clearly concerned about what weakness in currencies can do to imported inflation.” 

The euro rose 0.1 percent to $1.3627 at 9:10 a.m. in New York and touched $1.3646, the highest level since Feb. 10. Earlier it dropped as low as $1.3546. The common currency gained 0.3 percent to 113.69 yen, from 113.37 yesterday. The dollar was little changed at 83.34 yen, compared with 83.31. 

“As the economy gradually recovers and global inflationary pressures arise, the degree of accommodation of monetary policy has to be monitored and, if needed, corrected,” Bini Smaghi said in an interview with daily newsletter Bloomberg Brief: Economics. Commodity-price increases will “have an unavoidable impact” and “it is a key challenge for monetary policy to avoid spillovers and maintain inflation expectations in check,” he said. “This requires the ability to take pre-emptive actions if needed.”

Fastest Pace

Bini Smaghi’s comments suggested officials are becoming more concerned about inflation, which has already breached the ECB’s 2 percent limit and is running at the fastest pace in more than two years. Companies are facing stronger input-price pressures, and forecasters in an ECB survey this month raised their longer-term inflation expectations to 2 percent. 

The greenback has declined this week versus 14 of 16 major counterparts as minutes from the Reserve’s January meeting showed the central bank was dissatisfied with job growth and would continue monetary stimulus. Policy makers under Fed Chairman Ben S. Bernanke have held its benchmark interest rate at zero to 0.25 percent since December 2008, and have said it will remain near zero for “an extended period.” 

The ECB has kept its key rate at 1 percent since May 2009, helping the euro region haul itself out of recession. 

Bini Smaghi, who make his remarks in an interview conducted by e-mail on Feb. 16, said it’s “essential” to continue to anchor inflation expectations.

‘Going Long Euro’

“You juxtapose that with what Bernanke is saying about rates in the U.S., that they’re going to remain low for a while, and you gain more on your interest payments by going long euro versus dollar,” said Tim O’Sullivan, chief trader at FOREX.com, a unit of the online currency trading company Gain Capital in Bedminster, New Jersey. A long position is a bet a currency will strengthen. 

IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six of major U.S. trading partners, fell for a fourth day, declining 0.2 percent to 77.839. It closed at 78.460 on Feb. 11. 

The euro dropped 0.5 percent over the past week, according to Bloomberg Correlation-Weighted Currency Indexes, a measure of 10 developed-nation currencies. The dollar lost 1.2 percent, while the Swiss franc gained 1.5 percent. 

Source: Bloomberg By Allison Bennett and Catarina Saraiva

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