Fundamental Analisis By InstaForex

[IFX Darika]

Moody's Downgrades Latvia's Currency Ratings

Moody's Investors Service Thursday lowered the Latvian government's foreign and local currency ratings to Baa3 from Baa1, giving a negative outlook.

The rating agency said that with the depth and the pace of economic adjustment in Latvia being more severe than anticipated, the government's revenues and budget deficits were being negatively affected, causing budget-related conditions in the IMF stand-by arrangement to be missed.

Moody's noted that the Latvian government's liquidity was under undue stress owing to reduced revenues, problems in the locally owned portion of the banking sector, and limited financing options in the domestic and international markets. Moody's therefore said that the government should identify sufficient budget adjustments to maintain access to the IMF/EU funding.

The firm forecasts the debt/GDP ratio to double to more than 50% of GDP by the end of 2010. Moody's noted that delaying expenditure cuts could damage investor confidence and risk the goal of euro adoption in 2012.

Meanwhile, the firm forecast the Latvian economy to shrink 12-13% in 2009, which is likely to have a negative effect on incomes, profits and consumption that are unlikely to recover in the near term.

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News are provided by InstaForex in partnership with RTT.

 

[IFX Svetlana]

US dollar tumbles to 4-week low against yen; higher versus European majors.

(RTTNews) - During early deals on Monday, the US dollar plunged to a 4-week low against the Japanese yen on concern over the possible damage the economy could suffer due to the outbreak of swine flu in North America. On the other hand, the dollar showed strength against the European currency, the British pound and the Swiss franc. The greenback climbed to a 4-day high against the pound.

Lawrence Summers, director of the White House National Economic Council, in "Fox News Sunday" stated that he suspects that the U.S. economy will continue to decline for some time to come. Summers also said that it was clear that there were going to be sharp declines in employment for quite some time this year.

Treasury Secretary Timothy Geithner said Friday that while it is "too early" to determine that risks have receded in the midst of a severe global economic downturn, there are "some encouraging signs."

Speaking following a meeting in Washington with finance ministers from the largest industrialized countries, Geithner praised the recent international cooperation and said that he has seen the progress since the meeting of the Group of 20 earlier this month.

"There are signs that the pace of deterioration in economic activity and trade flows has eased," Geithner said. "Some measures of spending.outputs.and conditions in some markets have shown modest improvements."

Against the European currency, the US dollar traded higher during early deals on Monday. At 2:15 am ET, the dollar reached a high of 1.3137 against the euro, compared to 1.3239 hit late New York Friday. The euro-dollar pair is currently trading at 1.3179 with 1.28 seen as the next target level.

The US currency that closed Friday's North American session at 1.4665 against the British pound edged higher to 1.4545 at 2:30 am Eastern Time Monday. This set a 4-day high for the dollar. The next upside target level for the greenback is seen around 1.424. The pound-dollar pair is currently quoted at 1.4621.

House prices in the UK fell 0.3% month-on-month in April, by the slowest pace in a year, a report by property consultants Hometrack said Monday. The report said the slower pace of decline in prices reflected a rise in optimism from estate agents due to increased levels of market activity. Year-on-year, house prices were down 10.1% in April.

Against the Swiss franc, the US dollar showed strength during Monday's early deals. At 2:15 am ET, the dollar-franc pair climbed to 1.1472, compared to Friday's closing value of 1.1404. If the pair gains further, 1.152 is seen as the next target level. The US currency is presently trading at 1.1438.

The greenback that closed Friday's New York deals at 97.20 plunged to a 4-week low of 96.54 at 11:55 pm ET. On the downside, 94.4 is seen as the next target level for the US dollar. The dollar-yen pair is now worth 96.63.

At 3:30 am ET, the Italian research institute ISAE is set to release consumer confidence survey results. Consumer confidence is forecast to stay stable at 99.8 in April.

At 4.30am ET, the British Bankers' Association is scheduled to publish the details of house purchase loans approved in March. In February, 28,179 loans were approved in the UK.

With little first-tier economic data to consider today in the North American session, attention will likely turn to the Federal Open Market Committee (FOMC) rate decision on Wednesday.

The Fed is mostly likely to retain its fed funds target rate at the record low of level of 0%-0.25% after holding it at the level in each of its first two meetings of this year. The Fed's focus now is on stabilizing the financial markets and stimulating the economy using quantitative tools and massive expansion of its balance sheet. State Street Global Advisors is of the view that the central bank is most likely to fine-tune the TALF, including a possible expansion into other more impaired credits than expanding its asset purchase program.

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News are provided by InstaForex in partnership with RTT.

 

[IFX Svetlana]

Demand For French Manufactured Goods Falls in Q1 - Survey.

(RTTNews) - Global and export demand for French manufactured goods fell in the first quarter of 2009 and it is expected to fall further in the second quarter, but in a less pronounced way, results of the latest quarterly business survey by the INSEE showed Tuesday.

The gauge for total demand fell to minus 60 in the three months to April from minus 52 recorded in the three months to January, while the measure for export demand dropped to minus 60 from minus 54.

The forward looking indicator for the second quarter stood at minus 41, up from minus 44 in the previous quarter, indicating that the pace of decline in new orders is likely to ease.

Further, business leaders surveyed noted that the fall of industrial manpower increased in the first quarter and it is expected to continue over the next three months.

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[IFX Darika]

Mexican peso extends falls against greenback 26-day

Extending morning deal's downtrend, the Mexican peso weakened against its US counterpart during New York afternoon trading on Monday. At present, the peso is trading near a 26-day low of 13.9755 versus the greenback, compared to Friday's North American session close of 13.3398. The next downside target level for the Mexican currency is seen at 14.20. The peso plummeted on concern that the outbreak of the swine flu will deepen the country's economic slump.

The flu outbreak may slow dollar flows from tourism and curb consumer spending at restaurants, theaters and other venues where crowds gather. Suspected deaths in Mexico have risen to 103 from the 81 announced earlier, Health Minister Jose Cordova said yesterday.

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News are provided by InstaForex in partnership with RTT.

 

[IFX Darika]

Euro mixed following German's preliminary inflation report

The euro showed mixed trading against its major counterparts after a preliminary report from the German statistical office showed that consumer price annual inflation rose to 0.7% in April from 0.5% recorded in March. While, the euro gained slightly against the pound it moved sideways against the rest of majors. As of now, the euro is trading at 0.8916 against the pound, 1.3076 against the greenback and 126.26 versus the yen.

On a monthly basis, the consumer price index, or CPI, was flat. Economists had forecast the CPI to climb 0.8% annually and 0.1% month-on-month.

The harmonized index of consumer prices, or HICP, climbed 0.7% year-on-year after rising 0.4% in March, while the consensus forecast was for a 0.8% increase. Compared to March, the HICP was flat.

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News are provided by InstaForex in partnership with RTT.

 

[IFX Darika]

German Govt. Expected To Cut GDP Forecasts

The German government is expected to slash its economic forecasts for 2009, reports said Wednesday, citing sources close to the government.

Gross domestic product, or GDP, is expected to decline 6% in 2009, the worst contraction since the World War II. The forecast was cut from a 2.25% fall predicted in January. Economy Minister Karl-Theodor zu Guttenberg will announce the latest set of forecasts at 7.00am ET.

Last week, a group of German economic think tanks jointly lowered their forecast for the biggest Eurozone economy. They now expect Germany to contract 6% in 2009, quicker than a 2.25% fall estimated previously. For 2010, the forecast group does not expect a dramatic recovery. GDP should decline 0.5%. Unemployment was forecast to rise to an average of 3.7 million this year and to 4.7 million next year.

In March, seasonally adjusted unemployed persons in Germany rose 69,000, bigger than 50,000 increased in February.

The International Monetary Fund forecasts the German economy to contract 5.6% in 2009 and 1% in 2010. Meanwhile, the Commmerzbank expects Germany to shrink 6%-7% this year.

On April 27, European Central Bank Governing Council member Axel Weber told German newspaper Franfurter Allgemeine that the German economy is unlikely to grow before the second half of the next year.

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News are provided by InstaForex in partnership with RTT.

 

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[IFX Darika]

BoE Inflation Report: Inflation Likely to Fall Below 2% Target Later This Year

Wednesday, the latest quarterly Inflation Report from the Bank of England said CPI inflation is likely to drop below the central bank's target of 2% later this year.

The central bank said, "Under the assumptions that Bank Rate moves in line with market rates and the stock of purchased assets financed by the issuance of central bank reserves reaches GBP 125 billion, it is more likely than not that CPI inflation will be below the 2% inflation target in the medium term."

The Inflation Report is produced quarterly by Bank staff under the guidance of the members of the Monetary Policy Committee.

The central bank estimates a 1.9% contraction in the first quarter of 2009, a larger decline than anticipated at the time of the February Report. The outlook for economic growth is unusually uncertain, the BoE revealed. The MPC sees a relatively slow recovery in economic activity.


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[IFX Darika]

IEA Revises Down 2009 Global Oil Demand

Thursday, the International Energy Agency, or IEA, revised its forecast for 2009 global oil demand by 0.2 mb/d to 83.2 mb/d from 83.4 mb/d forecast in April.

As prospects of a strong economic recovery later this year remain elusive, the weakness in oil demand is expected to continue, the IEA said in its latest Oil Market Report.

Further, the agency said global oil supply averaged 83.6 mb/d in April, up 230 kb/d versus March on higher OPEC output, which rose 270 kb/d to 28.2 mb/d.


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News are provided by InstaForex in partnership with RTT.