Fundamental Analysis


EUR


“The stability of the euro against the dollar shows that people trust what the ECB has done so far to resolve the crisis”


– James Kwok, the London-based head of currencies at Amundi Asset Management


Confidence among consumers in the 17-nation economy improved unexpectedly in April, adding to signs that the region’s economy will soon start to recover, the European statistics office Eurostat said on Monday. A gauge of consumer confidence jumped to -22.3 this month, up from -23.5 in March, and beating analysts’ expectations, which called for a reading around -24.0. In the meantime, consumer sentiment in the wider 27-member European Union also improved in April, reaching -20.4, compared to -21.6 last month. As consumer spending accounts for more than half of Eurozone economic output, the improvement in the mood may signal that even despite effects of the debt crisis, which has cut disposable income, consumers will soon show willingness to increase their spending, boosting economic growth.


“We expect a gradual recovery in the euro area economic activity for the second half of this year, but this scenario is subject to downside risks,” Draghi said at a plenary debate at the parliament in Strasbourg.


“The stability of the euro against the dollar shows that people trust what the ECB has done so far to resolve the crisis,” James Kwok, the London-based head of currencies at Amundi Asset Management, which oversees $947 billion, said in a phone interview.


USD


“Inventories are still very tight”


– Gus Faucher, senior economist at PNC Financial Services Group Inc.


The number of sales of previously owned homes in the world’s largest economy unexpectedly tumbled in March, underlining uneven progress in the sector. Purchases of existing homes edged down 0.6% last month to a seasonally adjusted annual rate of 4.92 million units, down from 4.95 million in the preceding month, the National Association of Realtors showed Monday. Analysts, however, expected a reading of 5.02 million. The U.S. housing market was mended by the historically low mortgage rates, constantly rising property values and some gains in the labour market, however a drop in the inventory of cheaper properties for sale may be restraining the pace of progress in the industry.


“Inventories are still very tight,” said Gus Faucher, senior economist at PNC Financial Services Group Inc. in Pittsburgh, who projected a 4.95 million pace. “As potential sellers respond to higher prices we will see inventories improve and sales go up.”


“We’re encouraged by the sustained improvement in h ousing sales, new home construction, rising housing prices, reduced inventories, historically low mortgage rates, and the best housing affordability in years, all of which combined to create a positive environment for our company and our industry,” said Paul Toms, chief executive officer at Martinsville, furniture maker Hooker Furniture Corp.


GBP


“In reality, it makes very little difference whether the economy expanded modestly in the first quarter, contracted marginally or was flat”


– Howard Archer, Chief European and UK Economist at IHS Global Insight


Britain is likely to avoid from falling into a triple-dip recession, senior Conservatives believe. Official figures, to be published later this week are expected to show that hat the economy grew 0.1% in the first three months of the year, following a 0.3% contraction at the end of 2012. However, experts are cautioning that it may be a very close-run result as snowstorms in January and March, and ongoing pressure in the construction sector, will weighed on the recovery. Last week, the IMF slashed nation’s growth forecasts from 1% to 0.7% for this year, while the 2014 projection were cut from 1.9% to 1.5%, as the private sector was hampered by a lack of credit and economic uncertainty.


“No one is talking about green shoots, but there are reasons to think that the worst might be over and a recovery can now begin,” a senior Conservative told The Daily Telegraph.


Howard Archer, Chief European and UK Economist at IHS Global Insight told HuffPost UK: “In reality, it makes very little difference whether the economy expanded modestly in the first quarter, contracted marginally or was flat. However, it would be good for psychological and confidence reasons if the economy could dodge contraction in the first quarter and therefore avoid nasty and potentially damaging headlines about “triple dip recession”.”


JPY


“Concerns resurfaced once again recently when looser monetary policy in Japan and other factors prompted a large depreciation of the yen”


-The International Monetary Fund


The world’s third largest economy is expected to grow 1.6% this year, as the central bank’s new monetary easing policy will provide substantial stimulus. The International Monetary Fund sharply raised its growth forecast, up from 1.2% estimated in January. At the same time, the Washington-based organization doubled its forecast for the next year for Japan to 1.4%, up from the earlier projected 0.7%. Latest announcement made by the BoJ Governor Haruhiko Kuroda and the introduction of the aggressive monetary easing, have driven the value of the Japanese Yen sharply lower against the U.S. Dollar, causing several other major economies to complain that the country is trying to depreciate its currency.


“In Japan, the new quantitative and qualitative easing framework of monetary policy adds substantial further monetary stimulus and should help accelerate the achievement of the Bank of Japan’s new 2 per cent inflation target,” the report said. “Concerns resurfaced once again recently when looser monetary policy in Japan and other factors prompted a large depreciation of the yen,” the IMF report said.


“Global economic prospects have improved again but the road to recovery in the (world’s leading) advanced economies will remain bumpy,” the report said.


CHF


“The latest economic surveys indicate a more positive mood on a broad front over recent months”


– Economists at the State Secretariat for Economics


The amount of money hold in circulation in Switzerland increased for the second month in a row in March, the Swiss National Bank said Monday. According to the report, M3 money supply, which is the broadest measure of money and used by economists to estimate the entire supply of money within an economy, grew at a rate of 9.9% last month from a year earlier, compared to an increase of 9.8% in February. At the same time, M2 expanded 10.7% compared to a growth of 10.4% in the preceding month. The report also showed that official foreign reserves in March stood at $522.19 billion.


“The latest economic surveys indicate a more positive mood on a broad front over recent months,” economists at the State Secretariat for Economics (SECO) said. “In view of the continuing stability in the domestic economy and a brighter outlook for exports, the opportunities for a further increase in economic growth during the course of this and next year look good.”


“The story in my view is that prices for imported goods are still falling, despite the Swiss National Bank’s defense of the 1.20 floor,” said David Marmet, economist at Zuercher Kantonalbank. “This helps the SNB maintain its monetary policy, and I see no signs of it changing. We believe the SNB will maintain the cap well into 2014.”