Bush maintains 'strong dollar' view ahead of G8
WASHINGTON (Thomson Financial) - US President George Bush said Wednesday that he would reiterate a "strong dollar" policy at the upcoming Group of Eight summit while opposing moves toward protectionism. "We're strong dollar people in this administration and have always been for a strong dollar," Bush told journalists at the White House when asked about the troubles of the US currency.
"And (we) believe that the relative strengths of our economy will reflect that. One thing we need to make clear when I'm with our partners is that we're not going to become protectionists. We believe in free trade and open markets. One of the fears around the world is that the United States becomes a protectionist nation."
tf.TFN-Europe_newsdesk@thomsonreuters.com
02 Jul 2008 15:16 GMT
Forex - Euro extends gains after weak U.S. ADP data, ahead of ECB rate decision
LONDON (Thomson Financial) - The euro extended gains against the dollar, hitting a two-month high after weak U.S. ADP jobs data, with market players looking ahead to Thursday's interest rate decision by the European Central Bank.
The ADP data -- seen as an indicator of how the closely watched non-farm payrolls figures on Thursday might look -- showed U.S. companies shed 79,000 jobs in June, far more than had been forecast.
The news provided further excuse to sell the U.S. dollar, with the euro bolstered ahead of what is widely expected to be a quarter point euro zone interest rate hike on Thursday.
"The prevailing short dollar bias heading into tomorrow's ECB decision helped to explain the sizable reaction to the ADP report this morning," said Michael Woolfolk at the Bank of New York Mellon.
The market will be keeping a close eye on ECB president Jean-Claude Trichet's accompanying press conference for clues as to whether the central bank will have room for further rate hikes later in the year. Although recent statistics have suggested that the euro zone economy is starting to falter, very strong producer price data earlier on Wednesday showed that inflationary pressures -- the ECB's main concern -- continue to mount.
The combination of a rate hike and weak non-farm payrolls data on Thursday could take the euro back up towards the key $1.60 mark, some believe.
"The 'trifecta' of an ECB rate hike, hawkish comments by Trichet and a negative non-farm payrolls report should provide sufficient ammunition for speculators to mount an attack on the 1.6000 level in the euro/dollar," Woolfolk said.
Elsewhere, the pound remained weak, hitting 23-day lows against the euro, which came close to the 0.80 pound mark, as UK data pointed to a very bleak outlook for the UK housing and construction sectors.
The latest UK construction PMI showed activity in the sector declining at the fastest pace since the series began in 1997. At the same time, housing equity withdrawal slumped to its lowest level since the first quarter of 2001, according to figures released by the Bank of England.
The news comes amid major concerns about the outlook for the housebuilding sector, as shares in Taylor Wimpey Plc lost more than half their value after the company announced it had failed to raise equity and will cut 900 jobs amid deteriorating conditions in the housebuilding market.
London 1449 GMT London 1144 GMT
U.S. dollar
yen 106.05 down from 106.68
Swiss franc 1.0167 down from 1.0216
Euro
U.S. dollar 1.5859 up from 1.5801
pound 0.7961 up from 0.7952
yen 168.20 down from 168.52
Swiss franc 1.6126 down from 1.6145
Pound
U.S. dollar 1.9926 up from 1.9870
yen 211.34 down from 211.87
Swiss franc 2.0253 down from 2.0295
Australian dollar
U.S. dollar 0.9631 up from 0.9595
pound 0.4832 up from 0.4827
yen 102.19 down from 102.30
jessica.mortimer@thomsonreuters.com
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European govt bonds pare losses on U.S. ADP, but still weak ahead of ECB outcome
LONDON (Thomson Financial) - European government bonds pared losses, supported by the stronger performance of their U.S. counterparts following a much bigger-than-expected drop in private payrolls figures.
The ADP National Employment Report showed that private sector non-farm employment shed 79,000 jobs in June from a downwardly revised rise of 20,000 in May, confounding market expectations that varied between a smaller drop of 20,000 and a rise of 10,000.
The weakness of the figures have led some analysts to believe that their estimates may be too optimistic for official non-farm payrolls figures, which are due Thursday.
"These figures suggest there is a downside risk to our already below-consensus forecast of a 100,000 drop in those official figures," said Paul Ashworth, U.S. economist at Capital Economics.
"This weaker ADP figure backs up what most of the other indicators have been telling us: conditions in the labour market are still weakening, albeit gradually," said Ashworth.
Prior to the release of ADP's report, analysts' consensus expectations had been for non-farm payrolls to drop by 50,000 in June, after declining 49,000 in May.
Bonds in the euro zone were unable to reverse losses entirely though due to persistent concerns over inflation, which were reignited after data in the single currency area revealed a sharper-than-expected rise in euro zone factory gate prices.
The producer price index for May rose by 1.2 percent from April, and was up 7.1 percent year-on-year, well above Thomson Financial News' forecast for a 0.7 percent monthly rise, and a 6.6 percent annual increase.
The faster-than-expected rise in producer prices has reinforced expectations that the European Central Bank will raise interest rates Thursday in an attempt to control inflation.
"There is no doubt that ECB President Jean-Claude Trichet on Thursday will execute the 25 basis point interest hike which he hinted at in a speech in early June and which markets consider a done deal," said Katrin Robeck, economist at Moody's Economy.com
Analysts will be closely scrutinising Trichet's subsequent comments at the accompanying press conference for hints that the central bank remains concerned about inflation.
"The point of Thursday's interest rate hike will be mainly to remind market players that the ECB will stay vigilant against inflation," said Robeck.
In the United Kingdom, gilts were tracking their U.S. counterparts higher, reversing the losses seen earlier.
Gilts fell earlier after the Chartered Institute of Purchasing and Supply's survey of the construction sector showed that though activity fell at a record pace, raw material costs hit new highs.
CIPS said the purchasing managers index for the construction sector slumped to 38.8 in June, its lowest ever, from 43.9 in May. A reading below 50 indicates contraction and the lower the reading the greater the contraction.
However, there was evidence inflationary pressures have continued to accelerate sharply due to significant increases in oil and steel prices, with the input price sub-index spiking to 81.5, its highest ever, from 72.6 in May.
At Yield Change on
1504 GMT pct previous close
Sept euribor future (Liffe) 94.900 dn 0.015
Dec euribor future (Liffe) 94.725 dn 0.035
GERMANY
Sept bund future (Eurex) 110.15 dn 0.25
4.25 pct July 2018 govt bond 96.80 4.66 dn 0.39
FRANCE
4.00 pct April 2018 govt bond 93.58 4.84 dn 0.17
ITALY
4.50 pct Feb 2018 govt bond 94.73 5.24 dn 0.08
UK
Sept gilt future 104.47 up 0.20
5.00 pct March 2018 govt bond 99.04 5.13 up 0.05
Sept short sterling future 93.96 up 0.04
Dec short sterling future 93.86 up 0.06
chinny.li@thomsonreuters.com
cml/jfr/cml/jfr
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