Friday, February 17, 2006
Dollar bounce as yield play increases/ UK disappoints.
The dollar reached a six-week high against the euro yesterday as a report showed U.S. home construction surged last month, reinforcing expectations for two more interest-rate increases this year.
The dollar also gained versus the yen before Federal Reserve Chairman Ben S. Bernanke addresses Congress for a second day, after saying a sustained economic expansion may require higher rates to limit inflation. Traders raised bets the Fed will add to its 14 straight increases in borrowing costs since mid-2004.
Interest-rate futures show traders are pricing in a 98 percent chance the Fed will raise its target rate by a quarter- point to 4.75 percent on March 28. The odds of another increase on May 10 are 65 percent.
Higher interest rates in the U.S. have bolstered the appeal of owning the country's financial assets over those of Europe, where the European Central Bank's key rate is 2.25 percent, and Japan, where borrowing costs are almost zero.
In other news, U.K. retail sales fell the most in 13 months in January as consumers in Europe's second-biggest economy reined in their spending after a holiday splurge.
Sales dropped 1.3 percent from December, after five months of gains, exceeding the median estimate of a 0.2 percent decline. The annual increase in sales slowed to 1.3 percent from a revised 4.3 percent.
The dollar also gained versus the yen before Federal Reserve Chairman Ben S. Bernanke addresses Congress for a second day, after saying a sustained economic expansion may require higher rates to limit inflation. Traders raised bets the Fed will add to its 14 straight increases in borrowing costs since mid-2004.
Interest-rate futures show traders are pricing in a 98 percent chance the Fed will raise its target rate by a quarter- point to 4.75 percent on March 28. The odds of another increase on May 10 are 65 percent.
Higher interest rates in the U.S. have bolstered the appeal of owning the country's financial assets over those of Europe, where the European Central Bank's key rate is 2.25 percent, and Japan, where borrowing costs are almost zero.
In other news, U.K. retail sales fell the most in 13 months in January as consumers in Europe's second-biggest economy reined in their spending after a holiday splurge.
Sales dropped 1.3 percent from December, after five months of gains, exceeding the median estimate of a 0.2 percent decline. The annual increase in sales slowed to 1.3 percent from a revised 4.3 percent.
# posted by Dr Search- Principal Consultant at the Search Clinic @ 9:36 AM 0 comments
links to this post
Thursday, February 16, 2006
Mixed messages for UK and US loans rates rises
The much-anticipated Bank of England quarterly inflation report and accompanying press conference helped drive sterling to a high of 1.7491 as expectations for an interest rate cut were dealt a hefty blow.
The BoE said inflation was likely to remain close to its 2% target during the next two years. The Bank surprised the market by raising its central projection for GDP growth in the near term. The Bank’s central forecast is for the year on year growth rate to edge above 3% by the end of 2006 and to stay at this level for most of 2007.
Over in the States, Ben Bernanke who took over from Alan Greenspan this month as Chairman of the Fed gave his eagerly awaited testimony before congress yesterday afternoon. His testimony was relatively upbeat, "some further firming of monetary policy may be necessary" and was consistent with continued market speculation of a Fed rate hike at the March FOMC meeting.
He also emphasized the degree of monetary tightening that has already been achieved and discussed risks to growth. The implications are that volatility in the interest rate market is likely to be very high should economic data slow in the time leading up to the next FOMC meeting.
Treasury International Capital Data (TICS) came in at a worse than expected USD 56.6 billion for December from USD 91.6 billion in November. The decline was primarily due to less private purchases of Treasuries. Foreigners purchased USD18.3bln in US Treasuries in the last month, down from the strong USD54.5bln result in November. Purchases of other asset classes were barely changed on the previous month.
Overnight the UK RICS housing market survey was released, this rose +9 in January from +8 in December which was the highest rise since June 04 and the third month in a row of improvement in UK house prices.
The BoE said inflation was likely to remain close to its 2% target during the next two years. The Bank surprised the market by raising its central projection for GDP growth in the near term. The Bank’s central forecast is for the year on year growth rate to edge above 3% by the end of 2006 and to stay at this level for most of 2007.
Over in the States, Ben Bernanke who took over from Alan Greenspan this month as Chairman of the Fed gave his eagerly awaited testimony before congress yesterday afternoon. His testimony was relatively upbeat, "some further firming of monetary policy may be necessary" and was consistent with continued market speculation of a Fed rate hike at the March FOMC meeting.
He also emphasized the degree of monetary tightening that has already been achieved and discussed risks to growth. The implications are that volatility in the interest rate market is likely to be very high should economic data slow in the time leading up to the next FOMC meeting.
Treasury International Capital Data (TICS) came in at a worse than expected USD 56.6 billion for December from USD 91.6 billion in November. The decline was primarily due to less private purchases of Treasuries. Foreigners purchased USD18.3bln in US Treasuries in the last month, down from the strong USD54.5bln result in November. Purchases of other asset classes were barely changed on the previous month.
Overnight the UK RICS housing market survey was released, this rose +9 in January from +8 in December which was the highest rise since June 04 and the third month in a row of improvement in UK house prices.
# posted by Dr Search- Principal Consultant at the Search Clinic @ 12:57 PM 0 comments
links to this post
