WEBODIGY Business & Finance Journal

The economic recovery is unfolding in the United States, but it remains fragile and setbacks are possible. In Europe, sovereign concerns are still weighing on the Euro currency, albeit the manufacturing and service sectors are expanding further into the growth territory.

Signs of recovery are adding up in the United States, even though consumes are still weak and credit tight. In November, industrial production rose 0.8% from the expected 0.5% gain. This time, the advance was broad-based with about 80% of total industries registering some profits. Mining and manufacturing led the way, while vehicles and parts moved up 1.8%, after having declined in October. Finally, utilities output fell 1.8%. Capacity utilization increased instead to 71.3% from 70.6% in October. It was the highest level since December of last year and the fifth straight month of recovery, but still far away from the level of productivity seen during the credit era. New orders activity and the increase of foreign demand, will keep the positive momentum going in the next months as well. However, the recovery should be bumpy and set backs are possible, albeit the housing market might continue its positive trend. Housing starts rose almost 9.0% month-on-month in November, pairing most of the decline (10.1%) from the previous month, and moving real close to the positive territory on a year-on-year basis for the first time in many months. As a result, the Gross Domestic Product (GDP) should build up nicely during the fourth quarter of this year, after having been practically flat so far.

Angelo Airaghi is a Commodity Trading Advisor, registered with the National Futures Association and the Commodity Futures Trading Commission. He has been an active professional since 1990 working for major international financial companies. In the past 10 years, Angelo Airaghi has been an analyst and commentator for national and international media.

The Mexican peso is benefiting from the U.S. economic outlook for 2010, as Mexico has the U.S. as the main destination for its exports, both raw and manufactured, and an accelerated growth of its neighbor is helping Mexico’s currency to gain in foreign-exchange markets.

The peso continued to profit today from a better confidence towards its main trading partner, the U.S., as well as for increased crude oil rates, since the Latin American nation is one of the main oil suppliers for the U.S. together with Canada, helping the peso and the loonie to trade high in the beginning of 2010.

USD/MXN traded at 12.8190 as of 20:13 GMT from an opening rate of 12.8750.

The Romanian leu rallied today versus the euro and the U.S. dollar as interest rates were unexpectedly cut in the country after a political crisis that delayed an IMF bailout finally ended, adding confidence that stability in the parliament will lead the nation towards a faster recovery.

After interest rates were cut today to 7.5 percent at the lowest level in a year, the leu rose versus most of the main currencies, as a political crisis ended regarding disputes that affected the process of obtaining and using a $30 billion bailout provided by the International Monetary Fund to the Eastern European nation. The optimism regarding better economic days for Romania with political stabilization helped the leu to rally today.

EUR/RON closed at 4.1838 from an opening rate of 4.2137. USD/RON ended the day at 2.9033 from 2.9139.

The pound lost versus several key-currencies today and specially versus its regional rival, the euro, as traders speculate that U.K.’s financial authorities will insist in quantitative easing measures to stimulate the British economy, affecting the sterling outlook in currency markets.

The British currency posted a declining session versus most of the 16 main traded currencies two days before a Bank of England policy makers meeting, where, according to analysts, the current asset purchasing program will not be suspended, declining even further attractiveness for the pound, as the recession in the U.K. remains rather significant and measures are necessary to attempt starting a faster economic acceleration in the country. Even if the real estate market is providing positive data in the U.K. since November, the sentiment regarding the economic future in the nation is rather misty, stopping the pound to advance in foreign-exchange markets.

U.K.’s central bank strategy is following a different, and dovish, path than most of the wealthy nation’s policy makers. While interest rate hikes talks are a global trend, in the U.K., quantitative easing extensions are still possible, and this has a intense impact in the pound’s rates.

EUR/GBP traded at 0.8979 as of 19:10 GMT from a previous reading of 0.8945 yesterday. GBP/USD traded at 1.5983 from 1.6090.

The yen managed to gain versus most of the 16 main traded currencies today after a negative U.S. housing report brought risk aversion up among investors, which opted for the safety provided by the Japanese currency.

The Japanese currency gained the most in four weeks versus the greenback as a pending home sales report frustrated forecasts and indicated a monthly drop of 16 percent, declining risk appetite and favoring the Japanese currency, even if the actual figures are still positive in the annual comparison. The only currency that manage to contain the yen’s advance was its neighboring South Korean won, as the emerging market currency is rated among the best bets for 2010 according to analysts. Speculations that Japanese investors would be repatriating assets today also helped the nation’s currency to post a splendid performance today.

U.S. housing data affected both the greenback and risk sentiment in trading markets, which is good for the yen, according to traders. Bets that the Federal Reserve will raise interest rates also declined, allowing the yen to become more attractive among the 6 main traded currencies in the short term.

USD/JPY dropped to 91.45 as of 17:00 GMT from a previous rate of 92.60 in the intraday chart. EUR/JPY touched 131.71 from 133.61.