Analytics, News, and Forecasts for CFD Markets: currency news — 02-05-2011.

The stock market continues to probe highs.
Financials and tech stocks were primary sources of weakness a couple of hours ago, but they have managed to stabilize. In the meantime, energy stocks have moved deeper into negative territory, so that the sector now trades with a 1.0% loss. Energy's downturn comes even though oil prices have successfully trimmed morning losses so that they are unchanged for the session at $113.55 per barrel.

• reiterates can only take decisions based on average EMY inflation;

• debt crisis hasn't derailed recovery;

• Greece can try to strengthen program credibility;

• privatizations have to be implemented, markets must be convinced;

• privatization will have big fiscal impact;

• core inflation is a good leading indicator of inflation but not advisable for it to be target;

• EMU rates still very low by historical standards;

• no decision to rusk into a series of hikes.

• reiterates can only take decisions based on average EMY inflation;

• debt crisis hasn't derailed recovery;

• Greece can try to strengthen program credibility;

• privatizations have to be implemented, markets must be convinced;

• privatization will have big fiscal impact;

• core inflation is a good leading indicator of inflation but not advisable for it to be target;

• EMU rates still very low by historical standards;

• no decision to rusk into a series of hikes.

USD/CAD holds at C$0.9489 area after stalling earlier at C$0.9500. Area of C$0.9460 said to hold some light stops, offers expected on any rally to C$0.9530.

Modest buying this morning took the stock market to its best level in almost three years.
Stocks started the session in higher ground. Traders' attention was mostly tuned into news that U.S. forces killed terrorist leader Osama bin Laden.
The news was widely cited as a cause for an early morning drop in oil prices to about $111 per barrel, but it has since worked its way up to $113.85 per barrel. Part of oil's rebound is owed to another drop in the dollar.

  

The dollar fell for a 10th straight day, the longest slump in 17 years, after slower manufacturing growth reinforced speculation the Federal Reserve will maintain record-low rates.
Dollar index advanced earlier after the U.S. said al-Qaeda leader Osama bin Laden had been killed.
The euro gained to a 16-month high before the European Central Bank, which raised interest rates last month, meets this week. The Fed kept its rates on hold last week.
“You are now getting more interest-rate differentials between the euro and the dollar, and that’s going to continue,” said Fabian Eliasson at Mizuho Financial Group Inc.. “Unless the U.S. changes its policy, you’re still going to be leaning toward a weaker dollar.”
The Institute for Supply Management’s factory index was at 60.4 for April, slipping from 61.2 the previous month. Manufacturing expanded for a 21st straight month.
“Even though we’re still seeing fairly stronger growth in the U.S., it’s not as strong as it has been,” said David Mann at Standard Chartered Plc.
A widening interest-rate gap between America and the rest of the world may mean no rebound this year for the dollar.
The Fed is expected to hold its benchmark interest rate at zero to 0.25% benchmark interest rate, where it’s been since December 2008, until the first quarter of 2012, according to the weighted average forecast.
While a weaker dollar may signal waning confidence in the U.S., it also may help President Barack Obama reach his goal of doubling exports by 2015 and reducing unemployment.
The yen snapped two days of gains versus the euro after Obama said bin Laden was killed after a firefight at a house in Pakistan. Bin Laden was the architect of a radical Islamist movement that killed almost 3,000 people in the U.S. on Sept. 11, 2001, and recast global security and politics.

• Second round inflation effects must be avoided

• Main scenario for EMU financial stability is broadly favorable

• Uncertainty surrounding financial stability outlook remains high

HFE ests mfg ISM will dip to 57 in the next few mos as commodities prices rise.
HSBC says a high ISM points to a Q2 growth rebound.
Pierpont Securities says the data give not much evidence that Japan is hurting mfg, good news for the US economy.

Nomura economist David Ressler says Apr mfg ISM fell slightly to 60.4 but the index "has topped 60 for four straight months, averaging 60.9, the highest over any comparable span since March 1984."

USD/JPY weakens to Y81.10 amid dollar weakness elsewhere. Rate holds a bit higher the overnight low just below Y81.00 where bids mentioned. Risk may be for the usual collection of stops in place just below the overnight low but bids possible sub Y80.70 where a layer of interest was reported Friday.

The blue chips have eased back a bit in recent trade, but in general they are still up with modest gains this morning.
Health care stocks and consumer discretionary stocks are this morning's top performers. Both of the two sectors are up 0.6%. Harley-Davidson (HOG 37.84, +0.58), which announced early this morning that it will increase its quarterly dividend by 25% to $0.125 per share, is a primary leader among consumer discretionary plays. Cephalon (CEPH 80.96, +3.94) is a leader among health care issues following news that it will be acquired by Teva Pharmaceuticals (TEVA 47.09, +1.36) for $81.50 per share, which is a premium of almost 6% over its closing price from last week.

Economists expect the April ISM index will fall to a reading of 58.5 from March's 61.2, while construction spending figures are expected to fall 0.5%.

U.S. stocks were poised for a higher open Monday, as investors cheer news that Osama bin Laden was killed by U.S. forces.
The founder and leader of al Qaeda, Osama bin Laden, was killed by U.S. forces in Abbottabad, north of Pakistani capital of Islamabad.
Meanwhile, oil prices retreated with crude for June delivering sliding $1.37, or more than 1%, to $112.56 a barrel.
Gold prices also backed off their highs Monday. Gold futures for June delivery fell $5.70 to $1,550.70 an ounce, after hitting an intraday high of $1,577.40 an ounce.
World markets:

Economy: Wall Street will get the Institute for Supply Management's April manufacturing index, as well as construction spending figures from the Commerce Department, both out at 14:00 GMT.
Economists expect the April ISM index will fall to a reading of 58.5 from March's 61.2, while construction spending figures are expected to fall 0.5%.
Companies: The Nasdaq-100 index will be rebalanced to reduce the weight of Apple's stock by about 40%. Apple (AAPL, Fortune 500) currently represents 20.5% of the index. After the rebalancing, Apple's weight will be reduced to 12.3%.
Shares of TiVo (TIVO) were up almost 18% in premarket trade after DISH Network Corporation (DISH, Fortune 500) and EchoStar Corporation (SATS) announced they will pay TiVo $500 million to settle an ongoing patent dispute.
Separately, DISH reported earnings per share of $1.22 for the quarter ended in March, easily topping forecasts. Also, DISH said it gained approximately 58,000 net subscribers during the quarter. Shares of DISH were up almost 8% in premarket trade.
The price on the benchmark 10-year U.S. Treasury dipped, pushing the yield up to 3.31%

The Dollar Index snapped a nine-day decline, while oil dropped and equities climbed after President Barack Obama said al-Qaeda leader Osama bin Laden was killed by U.S. operatives in Pakistan.
The Swiss franc weakened versus a majority of its most- traded peers. The yen snapped two-day gains versus the euro and the dollar following reports of bin Laden’s death and data that showed European manufacturing accelerated.
Oil futures fell 2.2 percent to $111.46 a barrel on the New York Mercantile Exchange after President Obama said Bin Laden was killed by a team of U.S. operatives after a firefight at a house in Pakistan.
The MSCI Asia Pacific Index of shares added 0.7 percent, the Stoxx Europe 600 Index rose 0.3 percent and futures on the Standard & Poor’s 500 Index increased 0.7 percent. The yield on the 10-year Treasury note rose almost two basis points.
A gauge of manufacturing in the 17-nation euro area rose to 58 from 57.5 in March, London-based Markit Economics said today. That’s above an initial estimate of 57.7 on April 19. A reading above 50 indicates growth.

European shares hit a two-month high in holiday-thinned trade on Monday on optimism the earnings season will stay strong in the near-term and in a knee-jerk reaction to news al Qaeda leader Osama bin Laden was killed.

Pair breaks back above $1.4800 to $1.4850 as the pair reqacts to the strong data and pares some of the greenback's Osama-related gains from earlier in the session. Modest offers seen at $1.4875/80. Support back at session low $1.4760.

• To continue with Bundesbank's clear stability orientation

The dollar fell again this week after the Federal Reserve confirmed market suspicions that it would not be ready to tighten monetary policy for some time to come.
Extending its run of weekly losses to five – the dollar index, which tracks the US unit’s performance against a basket of other major currencies, fell 3.8 per cent in April, hitting a three year low of 72.83. The trade-weighted index has now fallen 7.6 per cent since the beginning of the year and has not enjoyed a positive month since November.
Following the Fed meeting on Wednesday, when chairman Ben Bernanke confirmed the federal funds rate would remain at exceptionally low levels for an extended period, first-quarter GDP on Thursday did little to counter expectations that the central bank would continue its easy monetary policy for the foreseeable future. Growth in the first three months of the year came in at an annual 1.8 per cent, down from 3.1 per cent in the final quarter of 2011.
This combination of low interest rates and steady, but unspectacular growth, proved to be a perfect mix to feed risk appetite.
The Swiss franc pushed to a record high against the dollar at SFr0.8666 this week. Traditionally sought out during periods of uncertainty, the Swissie began its kick higher at the height of the eurozone debt crisis in June last year. In recent weeks, however, strong economic data and robust corporate performances have driven the franc further still. It climbed nearly 2 per cent to SFr0.8683 versus the dollar this week.
One of the best performances over the five sessions was from the euro, as concerns over the debt crisis faded. “Provided the European debt crisis remains confined to Greece, Ireland and Portugal, and the spillover to Spain is minor, the divergent monetary policy stances between the Fed and European Central Bank will remain the main driver,” said Marc Chandler at Brown Brothers Harriman.
The euro climbed 0.9 per cent to £0.8908 versus the pound and gained 1.1 per cent to Y120.10 on the yen.
Sterling was buoyed against the dollar and the yen after the UK economy was shown on Wednesday to have returned to growth. Although at just 0.5 per cent, many called it a pitiable return to growth, investors were at least glad that the economy had not gone back into recession. The pound gained 0.2 per cent to Y135.93 against the yen.