Richard Lee | Foreign Exchange and Currency Strategist 2009-01-26T17:03:55Z WordPress http://www.richardleefx.com/feed/atom/ Richard Lee http://www.richardleefx.com <![CDATA[Another One Bites The Dust: Home Depot and Sprint Announce Layoffs]]> http://www.richardleefx.com/blog/?p=200 1999-11-30T00:00:00Z 2009-01-26T17:03:55Z In announcements that have become somewhat of a mainstay in US economics for now, both Home Depot Inc. and Sprint released layoff intentions that are in the thousands.  The move follows a release by Microsoft Corp. last week of 5,000 workers as the company looks to cut costs and boost the bottom line, one that has softened as the economy continues to weaken.

Although Sprint’s move was widely seen as a harbinger of potentially more negative things to come, the Home Depot Inc. decision was received well, boosting up equity markets and a sense of risk taking in the broader market.  Aside from layoffs, Home Depot looks to shed its unprofitable Expo design centers that have been spread mostly throughout the Atlantic states and freeze salaries of some of the company’s officers.

As a result, plenty of US dollar selling looks to be in the works in the New York morning trade with Euro and British pound higher as traders are looking to put at least some skin in the game.  Currently the Euro is higher, trading at $1.3150 compared to the session low of $1.2860.  A boost in existing home sales also looks to be supporting at least some interim risk taking as sales rose an optimistic 6.5 percent in the month of December according to the National Association of Realtors.  According to the report, the steep increase from a record low was mostly attributed to a rise in the purchase of properties out West, notably in California and Nevada as distressed buyers targeted single family homes.  Although the figure still does not reverse a roughly 20 percent annual slide in US home prices since 2006, it gives temporary relief to the markets which have for the most part been continually in the red.

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]]> 0 Richard Lee http://www.richardleefx.com <![CDATA[What Microsoft Layoffs Spell For Currencies]]> http://www.richardleefx.com/blog/?p=195 1999-11-30T00:00:00Z 2009-01-23T01:23:57Z Announced before the scheduled afternoon conference call, Microsoft officials released the finer details of the company’s quarterly report.  Falling slightly short of analysts’ estimates, the dour news came when it was revealed that the software company would be laying off 5,000 employees or slightly above 5 percent of its total work force.  Granted, the release is nothing of a surprise compared to the myriad of US firms announcing cutbacks in recent months.  However, this announcement carries significant weight as it is the first companywide campaign in the firm’s 30 plus year history.

Now, the figure may well not make or break a non-farm payroll Friday, but it continues to hammer at the increasingly pessimistic employment environment that is currently hovering over the world’s largest economy.  The sentiment will likely play out against the major currencies, especially the Euro.

Against the Euro

Given the bleak US outlook, interest rate speculation will more than likely be expected as the Federal Reserve will once again need to turn to the numerous options that can be employed in supporting economic growth.  With the possibility of a zero interest rate policy, greenback bearishness would be likely as the move could be seen as more of a sign of weakness rather than strength in these troubled times.  Additionally, Euro policy heads will likely look towards the second quarter of 2009 for any further rate cuts, as they await any positive or negative results from the recent spate of reductions in 2008.  The notion should keep temporary demand for euros healthy as rates continue to remain lofty in comparison to other G7 economies.  The caveat, however, remains in the recent credit downgrades in euro partners (ie Greece, Ireland, Spain and Portugal) and continued weakness in German manufacturing activity.  Further downgrades in national credit ratings will likely shift emphasis on the fact that the ECB shouldn’t be concerned with inflation but with overleveraged economies.

microsoft pic1 300x179 What Microsoft Layoffs Spell For Currencies

Technically

Euro bullishness remains supported above the 1.2432 November 20th low, currently trading at 1.2981.  Should the barrier hold, it would coincide with a building convergence in the MACD and a creeping golden cross via stochastics that support the notion of short term euro demand.  The idea would keep short term targets at the 1.3256 January 6th spike low intact with secondary sites on the 1.3242 October 5th low.

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]]> 0 Richard Lee http://www.richardleefx.com <![CDATA[What Microsoft Layoffs Spell For Currencies]]> http://www.richardleefx.com/blog/?p=190 1999-11-30T00:00:00Z 2009-01-23T01:23:57Z Announced before the scheduled afternoon conference call, Microsoft officials released the finer details of the company’s quarterly report.  Falling slightly short of analysts’ estimates, the dour news came when it was revealed that the software company would be laying off 5,000 employees or slightly above 5 percent of its total work force.  Granted, the release is nothing of a surprise compared to the myriad of US firms announcing cutbacks in recent months.  However, this announcement carries significant weight as it is the first companywide campaign in the firm’s 30 plus year history.

Now, the figure may well not make or break a non-farm payroll Friday, but it continues to hammer at the increasingly pessimistic employment environment that is currently hovering over the world’s largest economy.  The sentiment will likely play out against the major currencies, especially the Euro.

Against the Euro

Given the bleak US outlook, interest rate speculation will more than likely be expected as the Federal Reserve will once again need to turn to the numerous options that can be employed in supporting economic growth.  With the possibility of a zero interest rate policy, greenback bearishness would be likely as the move could be seen as more of a sign of weakness rather than strength in these troubled times.  Additionally, Euro policy heads will likely look towards the second quarter of 2009 for any further rate cuts, as they await any positive or negative results from the recent spate of reductions in 2008.  The notion should keep temporary demand for euros healthy as rates continue to remain lofty in comparison to other G7 economies.  The caveat, however, remains in the recent credit downgrades in euro partners (ie Greece, Ireland, Spain and Portugal) and continued weakness in German manufacturing activity.  Further downgrades in national credit ratings will likely shift emphasis on the fact that the ECB shouldn’t be concerned with inflation but with overleveraged economies.

microsoft pic1 300x179 What Microsoft Layoffs Spell For Currencies

Technically

Euro bullishness remains supported above the 1.2432 November 20th low, currently trading at 1.2981.  Should the barrier hold, it would coincide with a building convergence in the MACD and a creeping golden cross via stochastics that support the notion of short term euro demand.  The idea would keep short term targets at the 1.3256 January 6th spike low intact with secondary sites on the 1.3242 October 5th low.

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]]> 7 Richard Lee http://www.richardleefx.com <![CDATA[Euro, British Pound Slide Ahead of Inauguration Weekend]]> http://www.richardleefx.com/blog/?p=196 1999-11-30T00:00:00Z 2009-01-13T17:19:55Z It’s the last full week of the Bush administration and the US dollar continues to grind higher against the Euro, British pound and Japanese Yen.  Compared to yesterday’s $1.4820 close in the British Pound, the greenback has made substantial gains trading at $1.4547 heading into New York afternoon trading.  However, there’s plenty that market participants continue to anticipate with a slew of economic data set for the next two days.

Key Events To Consider


Advanced Retail Sales - Expected to improve upon the dismal 1.6 percent slump, forecasts are ranging around an improvement of a minor decline of 1.3 percent.  The anticipation is justified as the figures will likely see some additions from the holiday season, excluding any damaging shortfalls in automobile spending.

European Central Bank Announcement - Continued reduction in the European interest rate is expected as central banks have essentially taken on a global quantitative easing stance.  With the rate currently standing at 2.50 percent, traders continue to expect a reduction of 50 basis points to 2 percent after it is all said and done.  Analysts will be on the look out for further easing hints as ECB President Trichet is likely to comment on economic health and inflationary outlooks following the decision.

Philly & Empire Manufacturing Surveys - Although manufacturing activity will be evaluated in both reports, more emphasis may be pointed towards the employment components of the surveys.  A rebound from a seven year low in the employment component of the Empire survey can be expected.  But don’t hold your breath over it.

With all the hoopla surrounding the inaugural events on January 20th, markets may look to pare back some of the action towards the end of this week.  Incidentally, traders will also be preparing for a three day weekend on the US equity side, which may keep currency markets a bit muted.

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]]> 0 Richard Lee http://www.richardleefx.com <![CDATA[Euro, British Pound Slide Ahead of Inauguration Weekend]]> http://www.richardleefx.com/blog/?p=191 1999-11-30T00:00:00Z 2009-01-13T17:19:55Z It’s the last full week of the Bush administration and the US dollar continues to grind higher against the Euro, British pound and Japanese Yen.  Compared to yesterday’s $1.4820 close in the British Pound, the greenback has made substantial gains trading at $1.4547 heading into New York afternoon trading.  However, there’s plenty that market participants continue to anticipate with a slew of economic data set for the next two days.

Key Events To Consider


Advanced Retail Sales - Expected to improve upon the dismal 1.6 percent slump, forecasts are ranging around an improvement of a minor decline of 1.3 percent.  The anticipation is justified as the figures will likely see some additions from the holiday season, excluding any damaging shortfalls in automobile spending.

European Central Bank Announcement - Continued reduction in the European interest rate is expected as central banks have essentially taken on a global quantitative easing stance.  With the rate currently standing at 2.50 percent, traders continue to expect a reduction of 50 basis points to 2 percent after it is all said and done.  Analysts will be on the look out for further easing hints as ECB President Trichet is likely to comment on economic health and inflationary outlooks following the decision.

Philly & Empire Manufacturing Surveys - Although manufacturing activity will be evaluated in both reports, more emphasis may be pointed towards the employment components of the surveys.  A rebound from a seven year low in the employment component of the Empire survey can be expected.  But don’t hold your breath over it.

With all the hoopla surrounding the inaugural events on January 20th, markets may look to pare back some of the action towards the end of this week.  Incidentally, traders will also be preparing for a three day weekend on the US equity side, which may keep currency markets a bit muted.

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]]> 2 Richard Lee http://www.richardleefx.com <![CDATA[Highest Unemployment in 15 Years, US Non-Farm Payrolls In Line]]> http://www.richardleefx.com/blog/?p=197 1999-11-30T00:00:00Z 2009-01-09T13:53:05Z The numbers are in and they aren’t that great.  Although the US non-farm payrolls employment report showed a loss close to previous estimates of 525,000, what is even more disconcerting is the rise in the unemployment rate.  For the month of December, unemployment in the world’s largest economy rose to a whopping 7.2 percent, the highest rate not seen since 1993.  The rise stems from losses in every sector category including financial services and manufacturing, the latter which incidentally showed a trimming of 149,000 positions.  Additionally weighing heavily in the market are the massive downward revisions in the last two months.  Report findings for November were revised to a lower loss of 584,000 positions from 533,000 while October’s shortfall was revised wider to 423,000.  Ultimately, with all things considered, the figure adds to 2.6 million jobs that were lost in 2008, the most in 64 years. 

Market Reactions

Although the report does dole out a good deal of pessimism, the fact that the actual figure was relatively in line with market estimates will likely give the US dollar at least some support in the week’s end session.  With plenty of anticipation of a 600,000 plus figure, attributed by the most recent ADP report, it may be a breath of fresh air for a piece of economic data to be in line with expectations.  As a result, Euro and Pound weakness may likely return to focus as traders pare back profitable weekly runups before the weekend.

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]]> 0 Richard Lee http://www.richardleefx.com <![CDATA[Highest Unemployment in 15 Years, US Non-Farm Payrolls In Line]]> http://www.richardleefx.com/blog/?p=192 1999-11-30T00:00:00Z 2009-01-09T13:53:05Z The numbers are in and they aren’t that great.  Although the US non-farm payrolls employment report showed a loss close to previous estimates of 525,000, what is even more disconcerting is the rise in the unemployment rate.  For the month of December, unemployment in the world’s largest economy rose to a whopping 7.2 percent, the highest rate not seen since 1993.  The rise stems from losses in every sector category including financial services and manufacturing, the latter which incidentally showed a trimming of 149,000 positions.  Additionally weighing heavily in the market are the massive downward revisions in the last two months.  Report findings for November were revised to a lower loss of 584,000 positions from 533,000 while October’s shortfall was revised wider to 423,000.  Ultimately, with all things considered, the figure adds to 2.6 million jobs that were lost in 2008, the most in 64 years. 

Market Reactions

Although the report does dole out a good deal of pessimism, the fact that the actual figure was relatively in line with market estimates will likely give the US dollar at least some support in the week’s end session.  With plenty of anticipation of a 600,000 plus figure, attributed by the most recent ADP report, it may be a breath of fresh air for a piece of economic data to be in line with expectations.  As a result, Euro and Pound weakness may likely return to focus as traders pare back profitable weekly runups before the weekend.

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]]> 0 Richard Lee http://www.richardleefx.com <![CDATA[ADP Employment Report, A Bad Sign?]]> http://www.richardleefx.com/blog/?p=198 1999-11-30T00:00:00Z 2009-01-07T17:32:13Z Definitely, at least this time around.  According to this morning’s report, US private sector jobs were reduced by a staggering 693,000 positions in the month of December, 40 percent higher than previous estimates.  The number dominates an earlier figure in November of 476,000 and sets up for another dramatic non farm payrolls figure this Friday.  Aside from the relationship that the ADP report has with the government release, the sheer number of job losses in the last month of 2008 is greatest seen since the survey began in 2001.

Report Findings

Specifically, the survey continued to show severe weakness in the manufacturing sector as a slowing economy continues to give small and medium sized businesses a reason to shed labor.  If a firm’s bottom line is rapidly decelerating, labor is the first to go.  This is especially true in the services industry which showed the majority of the cuts.  The currently reality is contrary to previous years where December has fared better on seasonal and holiday hiring. For the month, the services sector produced 450,000 plus job losses with a good percentage stemming from financial services.  Unfortunately, as alarming as the report findings are, it tells us that conditions may become worse as a slew of further cuts are expected to arrive in the coming months.  In particular, the announced job reductions from firms outside the financial arena are expected take place in the next two quarters.

ADP v. NFP

Now although there may be some contention on the issue, a relationship does exist between the ADP employment report and the government’s non farm payroll employment report.  Incidentally, the calculations have recently been changed to tighten the correlation between the two.  What does this mean?  It means that the previous estimate of 500,000 or so job loss may be understating the matter and setting the NFP report up to coincide with “whisper numbers” already pitting for a far greater shortfall.  Dare we say a potential 750,000 for the month?  Either way, Friday’s figure will no doubtedly support job losses in the area of 2 million for 2008 and help to set the likelihood of the highest unemployment rate in almost 15 years.

Ramifications for the FX Market

As a result, given the current market dynamic, the pessimistic expectations of the upcoming release are likely to add further downward pressure on the US dollar, giving plenty of support for the Euro and British pound in the near term.  However, given the already pricey runup that has taken place this week, traders will likely not be anticipating explosive upside in either currency.  Rather continued momentum to a more extended intermediate trend.

Other Articles

]]> 0 Richard Lee http://www.richardleefx.com <![CDATA[ADP Employment Report, A Bad Sign?]]> http://www.richardleefx.com/blog/?p=193 1999-11-30T00:00:00Z 2009-01-07T17:32:13Z Definitely, at least this time around.  According to this morning’s report, US private sector jobs were reduced by a staggering 693,000 positions in the month of December, 40 percent higher than previous estimates.  The number dominates an earlier figure in November of 476,000 and sets up for another dramatic non farm payrolls figure this Friday.  Aside from the relationship that the ADP report has with the government release, the sheer number of job losses in the last month of 2008 is greatest seen since the survey began in 2001.

Report Findings

Specifically, the survey continued to show severe weakness in the manufacturing sector as a slowing economy continues to give small and medium sized businesses a reason to shed labor.  If a firm’s bottom line is rapidly decelerating, labor is the first to go.  This is especially true in the services industry which showed the majority of the cuts.  The currently reality is contrary to previous years where December has fared better on seasonal and holiday hiring. For the month, the services sector produced 450,000 plus job losses with a good percentage stemming from financial services.  Unfortunately, as alarming as the report findings are, it tells us that conditions may become worse as a slew of further cuts are expected to arrive in the coming months.  In particular, the announced job reductions from firms outside the financial arena are expected take place in the next two quarters.

ADP v. NFP

Now although there may be some contention on the issue, a relationship does exist between the ADP employment report and the government’s non farm payroll employment report.  Incidentally, the calculations have recently been changed to tighten the correlation between the two.  What does this mean?  It means that the previous estimate of 500,000 or so job loss may be understating the matter and setting the NFP report up to coincide with “whisper numbers” already pitting for a far greater shortfall.  Dare we say a potential 750,000 for the month?  Either way, Friday’s figure will no doubtedly support job losses in the area of 2 million for 2008 and help to set the likelihood of the highest unemployment rate in almost 15 years.

Ramifications for the FX Market

As a result, given the current market dynamic, the pessimistic expectations of the upcoming release are likely to add further downward pressure on the US dollar, giving plenty of support for the Euro and British pound in the near term.  However, given the already pricey runup that has taken place this week, traders will likely not be anticipating explosive upside in either currency.  Rather continued momentum to a more extended intermediate trend.

Other Articles

]]> 3 Richard Lee http://www.richardleefx.com <![CDATA[2009 Stimulus Package Buoys US Dollar]]> http://www.richardleefx.com/blog/?p=199 1999-11-30T00:00:00Z 2009-01-06T22:42:06Z Rising against the Euro, Yen and Swiss Franc, the greenback sought strength in the release of preliminary plans for the Obama administration’s anticipated stimulus package.  Totaling $775 billion over two years, with additional costs pushing the final billing to over $800 billion, the current package is expected to deliver more aid to individuals and businesses.  In particular, the package would allow businesses larger tax incentives to retain employment and boost reinvestment.  The notion helped keep dollar prospects alive as supported, yet tepid growth, could be expected for the future.  

In addition, helping the greenback gain against the Euro was an early morning report showing prices dropping in the European Union.  Declining to the lowest level in almost two years, inflation across the Atlantic slowed to a tepid 1.6 percent on falling commodity prices and thin consumer spending.  The figure is significantly lower than the 4 percent acceleration witnessed in mid 2007 and increases the likelihood that interest rates will be cut again next time European policy makers meet.  The sentiment is widely supported by comments made over the weekend by ECB Vice President Lucas Papademos. Currently the Euro is continuing its decline into the late New York evening, trading down at 1.3502 from the 1.3633 open.

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