Forex News and Events:
US equity are still on shaky ground, despite the benign close, as the prospect of a government sponsored solution seems remote. Asian equity markets received a boost from rumors that China would announce a new stimulus package aimed at infrastructure and manufacturing as early as tomorrow and rise in the official manufacturing PMI from 49 from 45.3. The Shanghai Composite Index climbed more than 6% on the back of the story. Yesterday, markets were focused on the Fed's Chairman and Treasury Secretary Geithner testifying in front of Congress. However, the lack of details rattled more nerves than calmed. Bernanke’s testimony was similar to remarks last week and provided no additional clarity. He did mention his frustration with the conduct of a major insurer before the government bailout and the potential need to increase the size of the $700bn bank rescue fund, depending on the banks stress test results. In Geithner's testimony, he commented that the stabilization of the financial system could cost more than the $250bn allocated to the Financial Stability Plan. In addition, Bernanke and Geithner specified that rigorous oversight and regulation of financial institutions would be required to move forward. Today brings critical PMI data from Europe and US and the always interesting ADP employment report. In general we believe the market environment remains constructive for the USD. Yesterday, the Bank of Canada cut its key interest rate by 50bp to a record low of .50%. But the bigger surprise was that fact the accompanying statement mentioned quantitative easing for the first time. With the Canadian economy being dragged down by the global slowdown and the official rate poised to move to zero, policy officials are now forced to entertain unconventional policy measures. The UsdCad continued to push higher toward the 1.3000 resistance level. Considering the slowdown in growth (Q4 GDP had a larger than expected m/m decline -1.0% vs. -0.7% exp), deterioration in global economy and commodity prices, a break of 1.3000 will give scope to 1.3370. In Australia, the fourth quarter GDP was released considerably below market expectations, printing at -0.5% q/q vs. 0.2% q/q exp. The weak contribution was mainly due to exports and inventories and was the first negative reading in eight years. Treasurer Swan noted that the effect of the global slowdown was clearly evident. However, in
Forex - China's Potential Stimulus & Rise in Manufacturing PMI Creates Optimismrelation to other countries Australia is holding up reasonably well
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