Improvement in diversified sectors of market is full on in major economies

This afternoon, the ADP Non-Farm Employment Change will be released. Economists predict that the ADP will show that companies hired 29,000 workers last month, a substantial improvement over a 23,000 decline in March. This ADP figure is widely considered a predictive index for Friday’s high anticipated Non-Farm payrolls. Later in the US, The Institute for Supply Management Non-Manufacturing PMI measuring the Level of a diffusion index based on surveyed purchasing managers, excluding the manufacturing industry is expected to rise from 55.4 points to 56.2- another positive indicator for the U.S. market.

Yesterday, the U.S Dollar received a boost as reports showed an unexpected increase in both the housing and manufacturing sectors. A report, showing that more Americans signed contracts in March to buy previously owned homes before the expiration of a tax credit, has helped support the housing market. According the National Association of Realtors pending home sales increased an unexpected 5.3%, after rising 8.3% in February. The housing market, which triggered the worst recession since the Great Depression, has received a boost from a tax incentive of as much as $8,000 for buyers who signed the contracts by the end of April. Job gains are needed to help sustain demand and limit foreclosures in the absence of government aid, broadening the economic recovery.

Meanwhile orders placed with U.S. factories unexpectedly rose in March, propelled by demand for business equipment and petroleum, signaling the economic expansion gained speed at the end of the first quarter. The 1.3% increase in bookings matched the prior month’s gain, which was more than twice as large as previously estimated, the Commerce Department yesterday. Sales rose 2.2%, the most since November 2007.

In The U.K. the pound strengthened against its most-active counterparts as polls show David Cameron’s Conservative Party may come closest to winning tomorrow’s election. Yesterday in the forex online market the GBP/USD hit $1.51047, its lowest level since March 31st. The pair lost 0.79% yesterday to close at 1.52472, but has managed to rebound in this morning’s trading session to touch on a high of 1.51640.

The U.K.'s manufacturing sector expanded at the fastest pace in 15-and-a-half years in April, boosted by a record high level of new export orders due to continuing sterling weakness, data showed yesterday. Markit and the Chartered Institute of Purchasing and Supply reported that the PMI for the manufacturing rose to 58.0 from March's revised 57.3. Later today, the Markit will release the construction PMI. Last month, the construction sector posted unexpected figure of 53.1 - a jump above the all-important 50 point mark. Analysts expected that this construction figure to stay constant, increasing slightly to 53.5.

In Australia, home-building approvals rose in March at the fastest pace since 2002, a sign that housing demand hasn’t been damped by the central bank’s world- leading round of interest-rate increases. According the Bureau of Statistics the number of permits granted to build or renovate houses and apartments rose 15.3 %from February, when it previously dropped a revised 2.7%.
Yesterday, the RBA opted to increase the benchmark lending rate for the sixth time in seven meetings, pushing borrowing costs to what Governor Glenn Stevens referred to as “average” levels. The moves are partly aimed at preventing a property bubble after housing prices surged 20% in the 12 months through March. According to economists, this report is encouraging as it is a leading indicator for employment, particularly for workers in the construction industry.
After plunging 1.88% against the greenback yesterday, to close at 0.90930USD, the Aussie rose slightly this morning, toughing on a high of 0.91167USD.

Mounting US Consumer spending, good sign of trade mending

The U.S Dollar rose against the Euro and Yen yesterday on growth in U.S. manufacturing and doubts about Greece's ability to honor a pledge for further austerity measures in return for an aid package.

The Euro continued to fall against the U.S Dollar yesterday as longer term concern over the Euro-Zone sovereign debt contrasted with solid U.S economic data. The U.S data, which showed a strong reading in manufacturing and construction spending, illustrate a U.S economy that continues to drag itself out of the worst recession since the Great Depression. This compares with the Euro Zone where investors remain worried about the implementation of the unprecedented €110billion aid package for Greece. In the forex online market the EUR/USD closed at 1.31974 yesterday, after hitting a low of 1.31530.

The U.S. manufacturing sector grew in April at its fastest pace in almost six years and at a rate that was above expectations, according to an industry report released Monday. The Institute for Supply Management’s said its index of national factory activity rose to 60.4 in April from 59.6 a month earlier. The data represents a ninth straight month of gains, with the headline index at its highest since June 2004.

The U.S Dollar hit an 8-1/2 month high against the Yen as U.S. manufacturing data boosted optimism about the economic recovery. Following the release of the report, the USD/JPY struck a high of 94.774, up 0.82% from yesterday’s opening price. Strong U.S. data has increased expectations the Federal Reserve will raise interest rates later this year, while the Bank of Japan is seen keeping rates low indefinitely. The USD continued to appreciate against the Japanese currency this morning as signs the global economic recovery is gaining momentum damped demand for Yen as a refuge. The USD/JPY rose to a trading high of 94.970, up 0.30% from today’s opening price of 94.689.

Consumer spending in the U.S. rose in March by the most in six months, pointing to a recovery that may accelerate when the economy creates more jobs. Boosted by spending on autos and other durable goods, real U.S. consumer spending increased 0.6% to reach a record high level in March, at last surpassing the pre-recession peak set in November 2007, the Commerce Department reported yesterday. With spending growing much faster than incomes in March, the personal savings rate fell to 2.7%, the lowest since September 2008.

Multi-billion aid pack deal finalized by Greece

The Euro fell from a one-week high against the U.S Dollar on concern that the €110 billion-euro ($146 billion) bailout package for Greece will fail to contain the region’s sovereign-debt crisis. The single European currency declined for the first time in four days against the U.S Dollar and Japanese Yen as EU leaders prepare to meet on May 7th to discuss the timeline of the parliamentary approval for loans to Greece, and as Germany plans to debate the plan on the same day. In the Asian forex online trading session this morning, the Euro dropped to $1.32047 from $1.32934 on Friday’s close, and down as much as 1.12% from yesterday’s high of $1.33595. The EUR/JPY struck a low of 123.977, down 1.17% from yesterday’s high of 125.450, and down 0.63% from Friday’s close.

Yesterday, Greek officials finalized a deal with the European Union and the IMF that will give Greece access to a muti-billion euro financial bailout. Greek officials agreed to budget cuts worth €30 billion ($40 billion), on top of measures already agreed and aimed at reducing the nation’s colossal budget deficit. The aid package, expected to total up to €110 over three years, represents the first rescue of a member of the 16-nation euro zone. On Sunday, the finance ministers of 16-euro nations agreed that the 15 other countries would lend €80 billion over three years. The IMF will, in parallel, offer a €30 billion package.

The Euro dropped for a fifth month versus the greenback in April, the longest stretch of losses since November 2008 as fear escalated that Europe’s deficit crisis would spread. Last week, the 16-nation Euro touched $1.311531, the lowest level since April 2009, when Standard & Poor’s cut Spain’s credit rating was cut from AA+ to AA, a sign that the debt crisis is spreading. It fell below $1.32 the previous day for the first time in a year after S&P sliced Greece’s credit rating to junk and lowered Portugal’s to the third-lowest investment grade.

In the United States, a report showing the economy grew at a slightly slower-than-expected pace in the first quarter had little impact on the greenback. Despite the below-forecast headline number, analysts said the GDP report shows signs of an improving economy. On Friday, the Advance GDP showed that the economy expanded by 3.2%, slightly slower than the predicted 3.4%, and significantly smaller than the 5.6% growth seen in the last quarter of 2009. On Friday, the USD/JPY hit a high of 94.569, before settling back down to close the week at 93.837, 0.17% below its opening price. The USD was up against the British Pound, closing the week at $1.52584, up 0.55% from the day’s opening price.