Major Currency Pairs Analysis: April 19, 2012

The euro depreciated against the US dollar earlier as IMF said European banks might force to sell as much as $3.8 trillion in assets through 2013 and restrained lending if governments fall short of their pledges to stem the sovereign debt crisis. IMF forecast that under such circumstances, gross domestic product in the 17-country euro region would be 1.4 percent lower than now expected after two years.

Even under its baseline scenario, the IMF sees banks’ combined balance sheets possibly shrinking by as much as $2.6 trillion. It projected a resurgence of Europe’s debt turmoil as the biggest threat to global growth even after steps taken by governments and the European Central Bank helped ease tensions in financial markets. The challenge for policy makers is to make sure banks keep lending to companies and individuals even as they boost capital to comply with regulators’ requests. It recommends governments should complete and extend the measures already agreed upon to reassure investors if they want to limit the impact of banks’ deleveraging.
EUR/USD" title="EUR/USD" width="624" height="370">
GBP/USD

Adam Posen ended backing for further Bank of England stimulus this month and David Miles supported his view and described the need for more as finely balanced as officials said inflation may turn out faster than anticipated. The two-day meeting in April 4 and 5 showed that Posen joined the majority of the nine- member Monetary Policy Committee in seeking no change to the 325 billion-pound ($517 billion) asset-purchase target.

Though Bank of England officials stated that the UK may face a recession in the first half of this year but inflation will turn out faster than forecast. They endorsed a final month of bond purchases to aid growth while preparing the stage possible pause in May when they will consider new quarterly forecasts and debate whether to halt the so-called quantitative-easing program.

Meanwhile, jobless claims surged to 3,600 in March to 1.61 million below analyst anticipated.  Unemployment rate declined to 8.3 percent from 8.4 percent. Out from these optimistic figures, sterling surged against the euro and the greenback. It touched $1.5999 as the strongest level since 3rd of April.
GBP/USD" title="GBP/USD" width="624" height="370">
USD/JPY
 
The yen weakened for a second day against the dollar even before the US data will show improvement in unemployment claims and housing markets. It was mainly due to the strong speculation that Bank of Japan sooner or later would pump more money to support economic growth even if the International Monetary Fund showed optimism and increased its forecast for global economic growth.

It depreciated against most of its major peers as Bank of Japan Deputy Governor Kiyohiko Nishimura expressed sympathy to make efforts to support the upward momentum toward an economic recovery. The BOJ is committed to implement additional easing measures, if deemed necessary, he said. The comment made by the Deputy Governor revived and intensified the expansion of asset-purchase fund by the central bank for the second time in three months on 27th of April meeting. The Japan currency weakened to 81.57 yen per dollar, the weakest after 10th of April.
USD/JPY" title="USD/JPY" width="624" height="370">
USD/CAD
 
Earlier, the Bank of Canada stated that Canada’s economy will be stronger this year compared to its earlier anticipation as companies become more optimistic in US growth and as risks from Europe’s debt woes diminish. They raised their economic outlook from 2 percent and January’s projection up to 2.4 percent in 2012. It raised its outlook for the contribution from corporate investment to 0.9 percentage point from 0.6 percentage point and boosted the consumption estimate to 1.3 points from 1.1 points.

Further, they made their own projection where the global economy will expand 3.2 percent this year, and the US economy will grow 2.3 percent this year up from an earlier forecast of 2 percent, and Europe’s economy will contract 0.6 percent this year, less than an earlier prediction of 1 percent. Their brighter forecast came after the International Monetary Fund raised its global growth outlook and as officials gather in Washington to consider boosting the IMF’s crisis-fighting war chest. Meanwhile, the loonie weakened against the greenback as the country’s number one product for export, crude oil, declined due to much higher stockpiles the week ended 13th of April. It depreciated to 99.23 cents against the greenback.
USD/CAD" title="USD/CAD" width="624" height="370">