US: Job Growth In Auto And Housing Industries; Euro Trades At 6 Week Low

Manufacturing in the U.S. possibly expanded for a third month in February, as the global economy stabilized and businesses invested more in new equipment, economists said before reports this week. A reading of 52.5 is projected for the Institute for Supply Management’s factory index after a nine-month high of 53.1 in January, according to the median estimate of 64 economists surveyed by Bloomberg. A number greater than 50 shows growth in the industry that accounts for approximately 12 percent of the economy. Other data may show consumer spending and orders for durable goods excluding transportation equipment rose in January.

Federal Reserve Chairman Bernanke has something to tout before Congress in hearings this week: job growth in the auto and housing industries. Consumers rely on loans to buy cars and homes, so these segments of the economy are among the most responsive to Bernanke’s strategy of holding interest rates low and pressing on with bond purchases of $85 billion a month.

A private survey indicated that China’s manufacturing is expanding at the slowest pace in four months, underscoring the headwinds faced by policy makers in the world’s second-biggest economy. The preliminary reading of a Purchasing Managers’ Index was 50.4 in February, according to a statement from HSBC Holdings Plc and Markit Economics today.

George Osborne, the U.K's Chancellor of the the Exchequer, said he won’t bow to opposition calls to change economic policy after the decision by Moody’s Investors Service to strip the U.K. of its Aaa status. In an article for the Sun, Osborne yesterday said that the government should “stick to its course” to reduce Britain’s debt. The opposition Labour Party called on him to switch his emphasis from deficit reduction to growth, following what it called Moody’s “humiliating” decision.

EUR/USD: The Euro traded at a six-week low against the dollar on Friday after the European Central Bank said lenders would repay less than half of the expected amount in emergency loans. In addition, concerns over the general elections in Italy weighed on the pair. Today, the pair was trading at 1.31912 at the time of writing ahead of the outcome of the general elections in Italy. There are speculations that former Prime Minister Silvio Belusconi could retake his old job. Berlusconi has promised to unwind current Prime Minister Mario Monti’s austerity efforts, a move that some view as possibly hastening Italy’s departure from the eurozone. The country is the eurozone’s third-largest economy behind Germany and France. Market sentiments remain fragile on the Euro. In the week ahead events likely to affect the movement of the pair are: Tuesday, the U.S. will release a report on consumer confidence, as well as official data on new home sales. The U.S. will also release industry data on house price inflation and the Fed Chairman Ben Bernanke will testify on monetary policy before the Senate Banking Committee, in Washington DC. Wednesday; the euro zone will produce official data on M3 money supply, as well as the Gfk report on German consumer climate. Italy will hold an auction of 10-year government bonds.

The U.S. will produce official data on durable goods orders, pending home sales and crude oil inventories. Meanwhile, Fed Chairman Ben Bernanke will testify on monetary policy before the Senate Banking Committee for a second day, in Washington DC. Thursday; the euro zone will release official data on consumer price inflation. Meanwhile, Germany will produce data on CPI and data on the change in the number of people unemployed in the previous month. France will release government data on consumer spending. Later in the day, the U.S. will release revised data on fourth quarter economic growth, in addition to the weekly government report on initial jobless claims and official data on manufacturing activity in Chicago. Friday; Germany will publish official data on retail sales. On the other hand, the U.S. will release a report from the Institute of Supply Management on manufacturing activity, official data on personal spending and revised data on consumer sentiment from the University of Michigan. Moreover, the Fed Chairman Ben Bernanke will speak in San Francisco; his comments will be closely watched for indications on the future possible direction of monetary policy. Investors should stay cautious as volatility is expected on the pair this week. A wait and see approach will be a good strategy on the pair. The resistance level is at 1.33629 and the support level is at 1.30087 on the weekly chart.
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USD/JPY: The JPY traded at almost three-year low against the USD, as Japan’s government narrowed down candidates to run the central bank and pursue the prime minister’s plan for expanded monetary stimulus. Abe is also likely to tap Kikuo Iwata, an academic who has advocated a ramping up in Japan’s monetary base, and Hiroshi Nakaso, a senior BOJ official, as deputy governors, according to a government official with knowledge of the matter who asked to remain anonymous. This news was reported by Bloomberg . Citigroup Inc. analysts wrote in a report dated Feb. 22 that, while it is well known that Kazumasa Iwata is the most yen-negative governor candidate, a combination of Governor candidate Haruhiko Kuroda and Deputy Governor candidate Kikuo Iwata would be just as yen-negative. The USD/JPY was trading at 94.170 at the time of writing as market sentiments are weak on the JPY. Trading is likely to remain sticky today, as no major events are expected both in the U.S and Japan.

In the week ahead, events likely to affect the market are, Tuesday: the U.S. will release a report on consumer confidence, as well as official data on new home sales. The U.S. will also release industry data on house price inflation. In addition, Fed Chairman Ben Bernanke will testify on monetary policy before the Senate Banking Committee, in Washington DC. Wednesday: Japan will release official data on retail sales. Later in the day, the U.S. will produce official data on durable goods orders, pending home sales and crude oil inventories. Meanwhile, Fed Chairman Ben Bernanke will testify on monetary policy before the Senate Banking Committee for a second day, in Washington DC. Thursday: Japan will release preliminary data on industrial production. On the other hand, the U.S. will release revised data on fourth quarter economic growth, in addition to the weekly government report on initial jobless claims and official data on manufacturing activity in Chicago. Friday: Japan will release official data on household spending, capital spending and inflation. Later, the U.S. will release a report from the Institute of Supply Management on manufacturing activity, official data on personal spending and revised data on consumer sentiment from the University of Michigan. Moreover, Fed Chairman Ben Bernanke will speak in San Francisco: his comments will be closely watched for indications on the future possible direction of monetary policy. The resistance level is at 94.941 and the support level is at 92.761 on the weekly chart.
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WTI (Oil): Oil traded higher on Friday on market corrections, as traders saw an opportunity to perhaps grab crude on the cheap. However market sentiments remain fragile after minutes of the Fed’s January meeting showed that policymakers discussed the slowing or stopping of bond purchases even before the job market improves, amid concerns that the policy could cause instability in financial markets. Oil was trading in the narrow range of 93.270 and 92.970 at the time of writing as market sentiment remain mixed ahead of the Fed Chairman Ben Bernanke’s testimony on monetary policy in Congress and international talks with Iran on its nuclear program.

Iran, which is under a Western embargo on its oil exports, will meet the U.S., China, France, Germany, Russia and the U.K. tomorrow in Almaty, Kazakhstan, after an eight-month lapse in negotiations. In the week ahead, oil traders will be focusing on testimony on monetary policy by Fed Chairman Ben Bernanke in Congress, while data on economic growth from the U.S., U.K., Switzerland and Canada will also be in focus. Investor should stay focus and adopt a wait and see strategy on the commodity. The resistance level is at 97.449 and the support level is at 89.894 on the weekly chart.