Excel Currencies Daily FX Market Rates 8th

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Main News Daily Update

It is a quiet start to the week, but German industrial production and Canadian housing starts are due, while Bank of England MPC member Kate Barker is scheduled to speak at 13:00. We look for a rebound of 1.8% (consensus: 1.0%) in January for German IP, following a 2.6% fall in December. Financial markets will continue to watch the Greek economic situation closely, but strong demand for the country’s €5bn 10-year bond issue has allayed fears of a funding crisis, at least for now.

In Germany, Rebound in manufacturing orders in January (+4.3% m/m). New manufacturing orders rose by 4.3% m/m in January (-1.6% m/m). They increased thanks to a rebound in domestic orders (+7.1% m/m, after -1.3% m/m in December). Foreign orders increased by 1.9% m/m. The rebound in domestic capital goods orders suggests that investment could rise at the beginning of the year. Nevertheless, the low increase in consumer goods orders showed that household spending remained weak (-1% q/q in Q3 2009 and in Q4 2009). Germany’s Industrial Production is set to rise 0.9 percent in the year to January – the first positive reading in 17 months – as output remains supported by the lingering effects of last years’ global stimulus measures on foreign demand for the country’s manufactured goods. While the outcome may not be particularly market-moving in its own right given the themes behind it have been priced in for some time, it certainly won’t hurt an environment that seems already supportive of a near-term rebound in the Euro amid tempered concerns about the Greek budget crisis. Indeed, Greek credit default swaps dropped 79.7 basis points last week to reach the lowest level since mid-January while an auction of 5 billion euro in 10-year Greek government bonds drew three times more bidders than necessary to absorb the number of securities on offer. Investors were reassured after Athens announced another 4.8 billion euros in austerity measures and as Germany (the natural leader of any bailout effort) threw their support behind the troubled nation’s efforts while “leaking” plans for a contingency plan to funnel 25-30 billion euros through western European state-owned banks should PM George Papandreou and company fail to get their own house in order.

In US, Slight decline in payrolls in February (-36,000). Non-farm payrolls contracted by 36,000 in February. This outcome underlines the gradual moderation in job losses, as it is slightly more favourable than the 3-month average (-57,000). This report was not affected markedly by bad weather conditions. However, snow storms surely contribute to explain the slight decrease in the average number of hours worked per week (to 33.8 from 33.9 hours) as well as the marked increase in part-time work for economic reasons. The unemployment rate was stable at 9.7% in February. Unemployment data may well become less favourable in the months ahead, as a significant gain in employment is generally necessary to stabilise the unemployment rate. Hourly wages edged up by 0.1% m/m in February, so that their year-on-year pace of growth was unchanged at 1.9%.

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