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[IFX Darika]

In early European deals on Monday, the euro eased from an early Asian session's multi-day highs against the dollar, the yen and the pound as investors remain concerned about sovereign debt problems.

Research firm DBS said today that the euro's direction this week depends on two key events, namely the Greek bond issue and the Federal Reserve Chairman Ben Bernanke's testimony.

Early this week, Greece is expected to announce details on its plan to issue 10-year bonds, while Bernanke is expected to deliver his semi-annual congressional testimony on February 24 and 25.

The firm is of the view that the euro will resume its depreciation if the Greek bond issue causes widening of Greek credit default swap and if Bernanke relays more optimism about recovery, while also showing patience on rate hikes.

The euro that rose to an 11-day high of 0.8819 against the pound in early Asian deals on Monday showed choppy trading in late Asian deals but fell during the early European session. As of now, the euro-pound pair is worth 0.8795, down from Friday's close of 0.8805.

Against the franc, the euro declined to 1.4649 at 4:25 am ET, from an early Asian session high of 1.4668. As of now, the euro-franc pair is trading near Friday's close of 1.4649.

Monday morning in Asia, the euro strengthened to an 18-day high against the Japanese currency, but pared gains during late trading and extended its slide in early European deals. At 4:30 am ET, the euro-yen pair was worth 124.71, compared to Friday's close of 124.67.

Moving down from an Asian session's multi-day high of 1.3665 against the U.S. dollar, the euro touched a low of 1.3618 at 4:35 am ET. At present, the euro-dollar pair is trading at 1.3617, compared Friday's close of 1.3587.

Looking ahead, San Francisco Federal Reserve President Janet Yellen is scheduled to speak at the University of San Diego at 10:30 am ET.

Meanwhile, the Federal Reserve Chairman Ben Bernanke is scheduled to appear before the House Financial Services Committee hearing on "Prospects for Employment Growth: Is Additional Stimulus Needed?" at 11 am ET.

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[IFX Darika]

China's consumer price inflation rate accelerated more than expected in February, increasing the pressure on its central bank to raise interest rates amid fears the economy may be overheating.

Consumer prices increased 2.7% year-on-year in February, the National Bureau of Statistics said, exceeding expectations for a 2.5% increase following the 1.5% growth in the previous month.

The rise in prices was mainly driven by a 6.2% surge in food prices. Non-food prices climbed 1%.On a monthly basis, the consumer price index rose 1.2% in February.

In the first two months of the year, consumer prices increased 2.1% compared with the same period a year ago. Economists look for the combined inflation data for the first two months as it smoothes the distortion caused by the Chinese New Year holiday.

The pickup in the inflation rate adds to worries that China's economy may be expanding too quickly.

However, a spokesman for the statistical office said inflation will ease in March as weather conditions improve, bringing down food prices.

Figures released today by the People's Bank of China showed that bank lending was down sharply in February, as the government seeks to rein in runaway growth in the economy.

Chinese banks extended CNY 700.1 billion in new local-currency loans in February, down from the CNY 1.39 trillion lent in January.

M2 money supply - the broadest measure of money supply in the country - surged up 25.5% year-on-year in February, slower than the 26% increase in the previous month.

Separately, the statistical bureau said that producer prices surged 5.4% annually in February. The growth exceeded expectations for a 5.1% increase and follows the 4.3% growth in the previous month.

Industrial production in China increased 12.8% year-on-year in February. This came below forecasts for a 19.5% increase.

In the first two months of the year, industrial production increased 20.7% compared to the same period a year ago.

The statistical bureau also announced that retail sales were up 22.1% annually in February, also exceeding expectations for a 18.7% gain. In the first two months, retail sales were up 17.9%.

Meanwhile, urban investments in fixed assets in the first two months of 2010 increased 26.6%, above expectations for 25.6% growth.

A separate real estate report from the statistical office showed that property prices in 70 major cities across the country were up 10.7% year-on-year in February, faster than the 9.5% increase in the previous month.

Housing prices were up 13% year-on-year in February, faster than the 11.3% increase in January, the statistical office said.

Property sales in the first two months of the year soared 70.2% compared to the same period a year ago.

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[IFX Darika]

The dollar was slightly weaker versus other majors Tuesday morning after ratings agency Fitch said Europe's aid deal for Greece was a net positive for the debt-ridden nation.

The Dow continued its push toward 11,000 on Monday, but stocks appear poised for a lackluster start to today's session.

Traders were looking ahead to the day's economic news from the US.

The S&P/Case-Shiller home price index for January will be released by 9.00 a.m. ET. Economists expect the index, which tracks monthly changes in the value of residential real estate in 20 metropolitan regions across the U.S., to decline 0.6% year-over-year, following the 3.1 % decline in the previous month.

At 10.00 a.m. ET, the Conference Board will release the readings of the Consumer Confidence Index for March. Economists expected the index to increase to 51.0 from 46.0 reported for the previous month.

Yesterday, official data showed that consumer spending rose in February, signaling that shoppers are becoming less shy about making purchases.

The dollar eased to 1.3520 versus the euro, more than two cents from a 10-month peak of 1.3267 set last week.

Despite saying last week's deal between the European Union and IMF to backstop Greek debt was positive, Fitch will keep its negative outlook on Greece's BBB+ debt rating.

"The (EU) statement was positive for Greece's credit profile by enhancing its near-term financing options and flexibility as well as reaffirming the support of euro area member states for economic and fiscal reform in Greece," Fitch said in a statement.

"Nonetheless, the rating outlook remains negative because of continued uncertainty over the medium-term economic and fiscal adjustment, as well as the continuing lack of clarity over the fiscal financing strategy."

Germany's import prices rose at a faster annual pace in February led by higher energy prices, the Federal Statistical Office said Tuesday.

Import prices rose 2.6% year-on-year in February, faster than the 1.4% rise in January. Prices increased for a second straight month after a 1% decline in December. Economists were looking for an increase of 2% for February.

The buck also drifted lower versus the sterling, hitting 1.5070 after testing a 9-month high of 1.4782 last week.

U.K. house prices rose sharply in March, reversing February's surprise dip, a report from Nationwide Building Society showed on Tuesday.

At the same time, the dollar remained stuck in neutral versus the yen, hovering near last week's 2-month high of 92.94.

An index measuring industrial production in Japan was down a seasonally adjusted 0.9 percent in February compared to the previous month, the Ministry of Economy, Trade and Industry said on Tuesday.

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[IFX Darika]

U.K.'s top earners will be forced pay more tax as the rise in the tax rate to 50% from 45% takes effect from today. The new rate will affect 300,000 people in the country, who earn above GBP 150,000 per annum. The increase in the tax rate was intended to boost the country's public finances.

Most business groups responded against the move. The Institute of Directors said the proposal is superficially attractive, but it is foolish when dug deeper. The think tank argued that this policy will not help people by bringing in more tax revenue from high-income people. Nor can it be justified by reference to considerations of fairness.

"Increasing the top rate of income tax to 50% will raise little or no money, but it will send out a very bad message - both domestically and overseas," the IoD said.

Listing out the reasons why the policy should be abandoned, the IoD said one cannot compute the effect of a tax rise simply by applying the increase in the rate to the income that is currently subject to U.K. taxation. Moreover, it is very difficult to predict the effects of rate changes, mainly because of uncertainty about the effects on incomes, and also partly because of uncertainty about the future distribution of incomes.

Subject to these uncertainties, the IoD concluded that the revenue-maximising rate on incomes over GBP 150,000 might well be the current 40% rate, rather than the proposed 50%.

With the new tax rate in force, it is feared that companies may shift their operations to more business-friendly nations, which may hurt the U.K.'s government revenue.

Other changes coming into force today include a rise in child tax credits and an increase in the tax-free allowance that can be put in to individual savings accounts.

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[IFX Darika]

Asia-Pacific nations should employ capital controls to moderate short-term capital inflows that created asset bubbles and inflationary pressures in the region's developing countries, a UN agency said Thursday.

The United Nations Economic and Social Commission for Asia and the Pacific, or ESCAP, also urged governments to increase their social spending to consolidate the region's stronger-than-anticipated economic rebound.

"Governments must embrace this opportunity to secure the gains of the economic rebound by investing in social programs that directly benefit people hardest hit by the crisis," Noeleen Heyzer, UN Under-Secretary-General and Executive Secretary of the ESCAP said.

The Economic and Social Survey of Asia and the Pacific 2010, an annual publication of ESCAP, points out that while monetary tightening may be necessary to rein in inflationary pressures, policy makers must be cautious about withdrawing fiscal stimulus packages, as an early exit would disrupt the fledgling recovery process.

According to the Survey, even at the height of this crisis, Asia and the Pacific was still the fastest growing region in the world, supported mostly by fiscal stimulus packages adopted by the region's biggest economies. The Survey finds that the outlook for 2010 has improved significantly, with Asia-Pacific region's developing economies forecast to grow by 7%, led by China 9.5%, and India 8.3%.

The Survey states that the governments have to re-balance the region with greater regional consumption through increased intra-regional trade, accelerating the development of an Asia-Pacific consumer market.

The Survey also recommends that Asia and the Pacific increase efforts to create a more integrated and sustained regional market, benefiting both national economies and a larger consumer class.

Increased social spending directly supports income security for households by providing food security, education and access to health care, reducing the need by poorer families to maintain precautionary savings to protect against adversity. These families will then able to contribute more to local economies and invest more in their own development, the survey stated.

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[IFX Darika]

Europe is bracing for a moderate and uneven recovery, supported by the rebound in global trade and policy stimulus, the International Monetary Fund said Tuesday.

Growth in the region is expected to pick up during 2010-11, but the traditional drivers of recovery are likely to be weaker than usual, the Washington-based global lender said in its latest regional economic outlook for Europe.

However, in the near term, growth will continue to benefit from exports, fiscal support and an upswing in inventories. Improvements in investor and consumer confidence should raise domestic demand.

Nevertheless, with unemployment expected to increase, and with lingering difficulties in the banking sector likely to restrain credit supply, consumption and investment will remain lackluster, IMF added.

Confirming its earlier prediction, the IMF said the Eurozone economy would grow 1% this year and 1.5% in 2011. Risks to this outlook is broadly balanced, it added.

Further, the Fund said emerging Europe will face a key challenge of attracting and harnessing healthy capital inflows to restore economic growth.

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[IFX Darika]

In early European deals on Friday, the U.S. dollar registered strong gains against other major currencies as traders seek refuge in safe-haven currencies on the back of a decline in stock markets on debt crisis in Europe. The dollar rose to near a 1-1/2-year high against the euro, near 1-year high against the franc and more than a 1-year high against the pound.

On the flip side, the dollar pared recent gains against the yen due to across the board rallying of the Japanese currency.

In the upcoming hours, traders will be focusing on economic reports such as the U.S. advance retail sales, capacity utilization, industrial production reports- all for April, University of Michigan's preliminary consumer confidence index for May and the business inventories for March.

Friday in early European deals, the U.S. dollar inched higher against the euro. The dollar rose to near a 1-1/2- year high of 1.2434 against the euro at 5:55 am ET, from a low of 1.2577 hit at 3:00 am ET. On the upside, the dollar may target around the 1.233 level. At present, the greenback is trading at 1.244 against the euro, compared to yesterday's close of 1.2534.

Rising from a low of 1.1155 hit at 1:35 am ET, the dollar rose to near a 1-year high of 1.1268 against the franc at 5:55 am ET. The dollar-franc pair, which was worth 1.1179 at yesterday's close, is now worth 1.1244. On the upside, 1.197 is seen as the target level for the US currency.

The dollar rose to more than a 1-year high of 1.4507 against the pound at 6:00 am ET. As of now, the dollar is trading at 1.4507, compared to yesterday's close of 1.4612. If the dollar gains further, it may target the 1.400 level.

The dollar pared its recent gains against the Japanese currency. Moving down from a high of 93.10 against the yen hit at 2:40 am ET, the dollar fell to a 3-day low of 92.27 at 5:40 am ET. If the dollar weakens further, it may target around the 88.00 level. Currently, the dollar is trading at 92.37 against the yen.

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[IFX Darika]

The global economic recovery is building steam led by strong growth in Asia although considerable risks remain, the Organization for Economic Cooperation and Development says. Its latest economic outlook report projected gross domestic product across OECD countries to rise by 2.7% this year and by 2.8% in 2011. In its last forecast in November, the OECD region was forecast to rise by 1.9% in 2010. The global economy is predicted to grow 4.6% this year.

In the U.S., activity is projected to rise by 3.2% this year and by a further 3.2% in 2011. Euro area growth is forecast at 1.2% this year and 1.8% next while, in Japan, GDP is expected to expand by 3% in 2010 and by 2% in 2011. The U.S. unemployment rate is expected to average 9.7% in 2010 before falling to 8.9% in 2011. The eurozone unemployment rate is forecast to average 10.1% both this year and the next.

"This is a crucial time for the world economy," said OECD secretary-general Angel Gurria. "Coordinated international efforts prevented the recession from becoming more severe but we continue to face huge challenges. Many OECD countries need to reconcile support to a still fragile recovery with the need to move to a more sustainable fiscal path."

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[IFX Darika]

The US dollar and the Japanese yen gained ground against their major opponents on Tuesday morning in Asia as a decline in most Asian stocks prompted traders to seek safe-haven currencies.
The yen and the dollar are viewed as safe haven currencies and they often rally when the stock markets slide and conversely lose ground when the stock market's appetite for risk is more robust.
Asian stock markets declined on renewed concerns over the global economic recovery. As of 9:50 pm ET, Japan's benchmark Nikkei 225 stock index dropped 1.46 percent, South Korea's Kospi declined 1.2 percent, Australia's S&P/ASX 200 was down 0.30 percent, New Zealand's NZSE-50 fell 0.39 percent and Taiwan's weighted average fell 0.16 percent.
The yen advanced to a 5-day high of 131.92 against the pound and 109.18 against the euro by 8:45 pm ET and the next likely resistance levels are seen at 131.20 and 109.10, respectively. The Japanese currency is currently quoted at 109.50 against the euro and 132.44 versus the pound.
The yen also climbed to a 5-day high of 72.76 against the Australian dollar, 81.92 against the Canadian dollar and 59.76 against the NZ dollar at this time and if the domestic unit strengthens further, likely resistance levels are seen at 71.90, 81.60 and 59.50, respectively. The yen is currently quoted at 59.9 against the kiwi, 82.20 versus the loonie and 73.14 against the aussie.
The Reserve Bank of Australia is set to conclude its monetary policy meeting today and then announce its decision on interest rates at 12:30 am ET. Analysts are expecting the bank to keep rates on hold at the current level of 4.50 percent.
The Japanese yen rose to a 4-day high of 87.43 against the US dollar and 82.03 against the Swiss franc around 8:45 pm ET. The yen is presently worth 87.55 against the greenback and 82.33 versus the Swiss franc with 87.0 and 81.80, respectively seen as the next likely target levels.
The greenback rose to a 5-day high of 1.2482 against the euro and 1.5084 against the pound before reversing its direction around 8:55 pm ET. If the greenback strengthens further, likely resistance levels are seen at 1.2240 against the euro and 1.4860 against the pound.
The US currency reversed its course after edging higher to 1.0669 against the Swiss franc at this time. The greenback-franc pair is presently quoted at 1.0640.
Looking ahead, Japan will provide preliminary May numbers for its leading and coincident indexes at 1:00 am ET. The leading index is expected to come in at 98.9, down from 101.7 in April. The coincident is forecast to show a score of 101.2, down barely from 101.3 in the previous month.
Switzerland is set to release its consumer price index for June at 3:15 am ET. The CPI is expected to rise 0.9% on year, while a 0.1 percent decline is expected on the month.
Canadian building permits for May and the US ISM non-manufacturing composite index for June are expected in the New York session.

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[IFX Darika]

During early European deals on Monday, the British pound showed mixed trading against other currencies. While the pound fell to new multi-day lows against the dollar and the yen, it recovered from a new multi-month low against the franc and an 11-day low against the euro.
The U.K. revised first quarter GDP report released at 4:30 am ET weakened the pound against all majors. But the pound recouped its losses against the euro and the franc shortly.
The U.K. economy expanded 0.3% sequentially in the first quarter, the Office for National Statistics showed. The first quarter growth figure was unchanged from the estimate published in May, but smaller than the 0.4% growth seen in the fourth quarter of 2009.
The pound declined to an 11-day low of 1.4951 against the US dollar at 4:35 am ET Monday. Since then, the pound-dollar pair has been moving sideways and is currently worth 1.4970. If the pound weakens further, it may likely target the 1.488 level. At last week's close, the pair was quoted at 1.5071.
The pound that strengthened against the yen in early Asian deals on Monday pared its gains in the latter part of the session and extended its slide in early European trading. The pound-yen pair that closed last week's trading at 133.58 fell to a 5-day low of 132.62 by about 5:00 am ET. On the downside, 131.3 is seen as the next support level for the UK currency. The pair is currently worth 132.80.
The British pound that fell to a new multi-month low of 1.5839 against the Swiss franc at 2:40 am ET Monday recovered thereafter. As of now, the pound-franc pair is worth 1.5980, up from last week's close of 1.5909. If the pound advances further, it may target the 1.606 level.
The pound rose against the euro after touching an 11-day low of 0.8421 at 4:35 am ET Monday. The euro-pound pair is presently trading near last week's close of 0.8394. The next upside target level for the pound is seen at 0.8335.
Looking ahead, finance ministers from the 16 euro area countries are scheduled to begin a meeting today, where stress tests being conducted on the region's lenders are likely to be high on the agenda.
Also, traders will be looking to second quarter company earnings report this week for clues about the strength of the U.S. economy.

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