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Over 10% Unemployment?
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Over 10% Unemployment?
President Barack Obama took center stage during yesterday’s U.S session, turning a mild session into a turbulent one. The U.S stock market opened down, continuing Monday and Tuesday’s momentum, but quickly found support as the president announced a new regulatory scheme that should prevent another collapse of financial system.
The new and creative plan will involve the creation of a unique administration group, consisting of eight members, that will grant the Fed with top authority to intervene and supervise various financial institutions, giving them the authority to provide liquidity if needed. In addition financial institutions will be required to hold lower leveraged standards and will be required to maintain higher capital. While some are disagreeing to the new plan, stating that it will disrupt the free market, others including the president believe that it will help to form a solid structure for the U.S economy, allowing the world’s largest consumer to return to a healthy path of economic growth.
President Obama also mentioned during an interview on Bloomberg that even though the recovery stage has presumable started, unemployment could reach higher levels by the end of the year, especially as companies are still find it hard to stand on their feet due to all the problems, forcing them to cut back on workers. According to certain analysts, earnings should continue to be weak throughout the rest of the year, which will be in line with a gloomy economy and fundamental data.
Investors also felt some relief during yesterday’s session as ten banks including JP Morgan, Goldman Sachs and Morgan Stanley, each paid back TARP money after showing that they were able to raise cash if required. The good news sparked buying on stocks during the second half of the session as investors were pleased that the government now has less control in the companies. By repaying the funds, the banks have now more of a say, allowing them to issue more dividends or bonuses to shareholders and employees.
The U.S stock market closed the session mixed with the S&P500 presenting a loss of -0.14% after finding support on its 200 day moving average. The Nasdaq closed the session with a gain of 0.66%.
Britain Surprises
On the Forex Market the Dollar index continued to linger around recent levels, as it closed at 80.23 points towards the end of the U.S session. BRIC countries continued to have an effect on the Greenback mentioning that a new reserve currency is now required, due to the Dollar’s status. While news headlines have flooded the market over the last couple of days with comments from Russian officials, those headlines are starting to fade, especially as the topic will require a long process, something that might not even be realized in the end.
From a technical point of view yesterday’s analysis on the Dollar index is still intact, as the Dollar continues to trade above trend line support and below major resistance.
Britain surprised analysts during yesterday’s trading session with a better than expected unemployment result of 7.2%. Even though the rate was the highest since July 1997 the result beat analyst’s expectations of 7.3%, providing the Pound with strength during the session. According to statistics the younger age group is feeling most of the pressure in England due to the economic situation, finding it hard get employed.
The EUR/USD also presented a volatile session increasing against the USD, while the Dollar/ Yen pair finished the session flat. Movement on all the pairs will occur once the Dollar receives a clearer direction.
Economic Data to Watch Out ForEconomic data should continue to affect the currency pairs today, but the data could yet again only lead to intraday volatility. The U.K is expected to release its retail sales shortly showing a slow increase compared to last month’s jump of 0.9%. In addition Canada is scheduled to release its inflation data showing an increase of 0.4%. To finish the session the U.S will release its Philadelphia manufacturing index and Initial Claims, two figures that tend to have an impact on various traded assets. The Initial Claims Figure is expected to show an increase of 610k compared to last week’s 601k.
To view the full economic calendar click here.
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