Analytics, News, and Forecasts for CFD Markets: currency news — 08-02-2011.

The dollar dropped against most of its major counterparts as China’s interest-rate increases failed to quell investors’ appetite for higher-yielding assets.
The benchmark one-year lending rate will increase to 6.06% from 5.81%, effective tomorrow, the People’s Bank of China said on its website today. The one- year deposit rate will rise to 3%, from 2.75%.
“The move by the Chinese was fairly expected, and the currency market is pretty unfazed and is taking it in stride so far,” said Fabian Eliasson, head of U.S. currency sales at Mizuho Financial Group Inc. in New York. “The euro is up from yesterday as you’re seeing a calmer situation in Egypt, and that’s certainly helping the euro. The overall global situation is better.”
Higher consumer spending, along with business investment in equipment and software, point to U.S. growth this year of “pretty close to 4%,” Lacker said today in a speech in Newark, Delaware.
Fed Chairman Ben S. Bernanke testifies tomorrow at a hearing of the House Budget Committee.
Sterling dropped after the U.K. increased a levy on bank balance sheets.

They say despite Jan's bad weather, "the labor market is finally gaining significant traction. This is apparent from the rare 0.8% decline in the unemployment rate over the past two months." So their year-end unemployment rate forecast is now 7.8%, down from previous est 8.8%.  Also should see "significantly more inventory accumulation this qtr" and  strengthening demand.

The headline equity averages are stuck in a fit of choppy trade, but financials have made a strong swing to higher ground in recent action. Financials had been down markedly in the early going, but the sector is now up 0.6%, which puts it comfortably out in front of the broader market.
Within the financial sector, AIG (AIG 42.86, +0.70) shares got a recent lift from news that the company will delay its planned secondary offering. Principal Financial Group (PFG 32.51, -1.19) has had a hard time attracting support, however. The firm posted an earnings miss for its latest quarter.

The broad market has recovered from a slip at the open, but it has taken pause near the neutral line. Meanwhile, the Dow has pushed into positive territory with help from McDonald's (MCD 75.45, +2.00) after the company reported this morning that its global sales during January gained 5.3%. The geographic mix that drove that number included a 3.1 increase in U.S. sales, a 7.0% increase in Europe, and a 5.2% increase in the Asia, Middle East, and Africa region.
Advancing Sectors: Consumer Discretionary (+0.5%), Industrials (+0.3%), Tech (+0.2%), Consumer Staples (+0.2%), Health Care (+0.1%), Financials (+0.1%) Declining Sectors: Energy (-1.0%), Utilities (-0.2%), Telecom (-0.1%), Materials (-0.1%

• Q4 data were disappointing; surveys encouraging

• Recovery from recession always going to be choppy

• Q4 data were disappointing; surveys encouraging

• Recovery from recession always going to be choppy

AUD/USD lifted off earlier lows of $1.0114 as Gold rallys $14 higher to a high of $1365.50. Aussie initially spiked to $1.0157, before easing back around $1.0147.

U.S. stocks were set to open toward the down side Tuesday after China's central bank raised key rates for the third time since October.
The People's Bank of China announced Tuesday that it would raise bank's borrowing and lending rates by a quarter percentage point. The rate change will go into effect Wednesday. The move comes as Chinese policymakers look to gradually cool the nation's robust economy, and avoid a hard landing.
Stocks in Europe turned mixed, and oil prices fell after the announcement.

The deals of the day included AOL's (AOL) acquisition of news blog The Huffington Post for $315 million, and a merger between oil drillers Ensco (ESV) and Pride International (PDE).
Companies: Toyota issued an upbeat financial forecast with three months left in the fiscal year, but the automaker said sales were sluggish in the third quarter.
Toyota (TM) said net income fell to $1.1 billion from $1.87 billion, a 38.9% drop compared to the third quarter of last year.
Shares of Avon (AVP, Fortune 500) fell 3% in premarket trading after the beauty products company said fourth-quarter earnings fell to 50 cents per share from 62 cents a year earlier.
Shares of Akamai Technologies (AKAM) and Urban Outfitters (URBN) were higher following analyst upgrades.

Breaking higher now with stops taken out on the move through $1360 and the 100 day moving average around $1362. The metal has just stalled at $1365.50 and currently trades around $1361.50. Next near term target is $1371.35 the high of Jan20.

GBP/USD dipped to  a day's low of $1.6069 after triggering bids and stops on $1.6080. Cable trades $1.6070.

Data released
11:00     Germany     Industrial production (December) seasonally adjusted    -1.5%    -0.1%    -0.6 (-0.7)%
11:00     Germany     Industrial production (December) not seasonally adjusted, workday adjusted Y/Y    10.0%    12.9%    11.1%

The dollar fell against higher-yielding currencies as Asian stocks gained and U.S. equity futures fluctuated.
The U.S. currency stayed lower after China raised key interest rates by 25 basis points.
The greenback slid before Federal Reserve Chairman Ben S. Bernanke testifies tomorrow at a hearing of the House Budget Committee.
Fed Bank of Dallas President Richard W. Fisher said yesterday he’s unlikely to support further monetary accommodation and he’ll vote against any new quantitative easing beyond the $600 billion program of Treasury purchases.
A government report last week showed the U.S. unemployment rate unexpectedly dropped to 9% in January from 9.4% the previous month.
The pound weakened after the U.K. increased a levy on bank balance sheets. South
The pound slipped against 14 of its 16 most actively traded counterparts as U.K. Chancellor of the Exchequer George Osborne increased a tax on banks’ balance sheets to raise an extra 800 million pounds ($1.3 billion) as he continues to negotiate lending targets and curbs on pay.
The euro stayed higher against the majority of its most-traded peers after the National Federation of Independent Business said German industrial production unexpectedly contracted in December. The gauge fell 1.5%, compared with a median estimate for a 0.2% gain.

EUR/USD fell to a session lows at $1.3590 before recovered to $1.3660, where offers were mentioned. Later rate retreated to $1.3642.

GBP/USD weakened from $1.6160 to $1.6080, where bids are.

USD/JPY trades within the Y82.00/Y82.30 range.

Canada Housing Starts s.a (YoY) (Jan) 171.0K 171.5K

EUR/USD resumes decline after testing $1.3660 where offers were mentioned. Stops reportedly placed on a break at $1.3680 (Fri high) but meanwhile contesting offers above $1.3660. Spot trades $1.3638.

The Chinese rate hike from the PBOC sent the March Nymex WTI oil price through the 100 day MA at $86.99 to $85.85 support before bouncing back towards $86.50. Support remains at $85.85 and $84.21 with resistance at $86.99 and $87.48. the focus is on the API Inventory data tonight and the DOE report tomorrow.

The euro edged off a two-week low on Tuesday but lacked momentum after a drubbing the previous day when weak German industrial data further dampened expectations for a near-term euro zone rate hike.
Surprisingly weak German industrial orders data for December had triggered selling of the euro, although analysts said the soft figures partly reflected a strong reading in November.
But the single currency was holding above major supports, including $1.3535, which had been a key resistance level in late January and is its 100-day moving average, as well as $1.3480, a 38.2 percent retracement of its January-February rally.
"I think the euro will be supported but it will need a dose of hawkishness from the European Central Bank to rise," said Koji Fukaya, chief FX strategist at Credit Suisse.

Last week, the euro started descending from a 12-week high of $1.3862 after European Central Bank President Jean-Claude Trichet doused expectations for an imminent rate increase, saying inflation would remain contained. That was followed by an unexpected fall in the U.S. jobless rate, which sparked a rise in U.S. debt yields, further helping the dollar against the euro.
Still, traders are reluctant to buy the dollar aggressively after Federal Reserve Chairman Ben Bernanke said last week that the U.S. economy still needs the Fed's help - a stance many traders expect him to repeat when he speaks on Wednesday.
"The market seems to be in limbo. I don't think Bernanke's comments will change that," said a trader at a Japanese brokerage.
One currency that is benefiting from expectations of an early rate hike is the British pound, as chances of an early rate hike still smouldered ahead of the Bank of England's policy announcement on Thursday.
Financial markets are expecting a BoE rate hike by May, with a small chance of a hike this week priced in, but analysts' expectations are quite different with many not expecting one until the end of the year.

Daily studies bullish as gold moves above the 21-DMA at $1351.80 but remains in rising channel trend drawn from Jan 28. The 5-DMA suggests possible upcoming golden-cross of 21-DMA adding risk to the upside. Resistance seen from the 100-DMA at $1362.40, the former 23.6% Fibonacci level at $1366.30 and the 55-DMA and rising channel top at $1373.8/1376.4. Initial support seen from the 5-DMA at 1347.90.

• PBOC raises one-year deposit rate by 25bps

• Rate hike effective from Wednesday.