Forex Investment and Currency Trading

Japan saw some more weak price data overnight with the corporate service price index down 2.1% Y/Y in March, though that wasn’t quite as soft as the -2.6% reading that was expected. The all industry activity index was also released, where we saw a 2.0% drop in February after the 1.7% decline in the prior month.

This morning’s Eurozone surveys followed the recent trend, and continued to improve. Germany’s IFO survey improved from 82.1 to 83.7 in April. But unlike the ZEW earlier this week, we actually saw an improvement in the current assessment, which increased from 82.7 to 83.6.

Expectations were even better, rising from 81.6 to 83.9. While these are still extremely low levels for the IFO, it’s no longer making new record lows. We also saw some good news out of France, with consumer spending undoing some of the prior months losses – spending was up 1.1% M/M in March after falling by 1.8% in February.

UK GDP was worse than expected in Q1, contracting by 1.9% Q/Q (or 7.4% Q/Q annualized). This was the fourth straight quarter of contraction, and puts the peak to trough decline in GDP at 4.1% so far. The better than expected retail sales numbers (up 0.3% in March, with broad-based gains) were completely overshadowed by the dire GDP report.

Yesterday’s US data showed that the housing sector continues to struggle. Not only were sales of existing homes down 3.0% in March, double the drop expected, but the NAR is now reporting that half of sales are due to distressed properties. And now that Fannie/Freddie and several US banks have lifted their foreclosure moratoriums, we should be seeing another wave of foreclosures, which will put further downward pressure on prices, driving away more buyers.

Yesterday’s Canadian retail sales data for February were probably as good as we could expect, given the depth of the recession and the recent job losses. Total sales were up 0.2%, although that was largely a price story since real sales dropped by 0.3%. The best-performing category in February was building and outdoor supplies stores, which reported a 3.0% gain. This may have been at least partially due to the home renovation tax credit that the federal government announced in its annual budget in January.

However, the highlight yesterday was the Bank of Canada’s semi-annual MPR, where the BoC set a very high bar for moving into quantitative easing and credit easing. Although the Bank is keeping its options open in this volatile environment, market thinks that the odds of it employing QE are a lot lower than before we saw the MPR.