DAILY MARKET COMMENTARY
25 November 2009
Wednesday
Fundamental Outlook at 1500 GMT (EDT + 0500)
€
The euro gained ground vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.5095 level and was supported around the $1.4955 level. The common currency reached its highest level since August as traders continued to speculate that global monetary authorities will not back up their dollar-supportive verbal intervention with actual dollar-buying intervention. The Federal Open Market Committee yesterday released minutes from its 3-4 November policy-setting meeting. The minutes revealed policymakers believe the maintenance of low rates could prompt "excessive risk-taking" or an "unanchoring of inflation expectations." Additionally, Fed policymakers noted further dollar depreciation could "put significant upward pressure on inflation" and "bear close watching." Fed Chairman Bernanke, Treasury Secretary Geithner, and European Central Bank President Trichet have also recently verbally intervened to support the U.S. dollar. The continued release of decent U.S. economic data also worked against the greenback as traders speculated the global economic recovery will continue. Data released in the U.S. today saw October personal income print at +0.2%, unchanged from September's revised print, while October personal spending climbed +0.7%, a sharp reversal from September's revised reading of -0.6%. October core personal consumption expenditures were up 0.2% m/m and 1.4% y/y and the October PCE deflator was up 0.2% y/y. Additionally, October durable goods orders fell 0.6% from a revised +2.0% in September while the ex-transportation component was off 1.3% , down from a revised +1.8% in September. Other data saw weekly initial jobless claims decline to 466,000 while continuing claims moved lower to 5.423 million. Moreover, October new home sales printed at an annualized 430,000, up from a revised 405,000 in September – a +6.2% m/m climb. Finally, the final November University of Michigan consumer sentiment indicator printed at 67.4, up from the prior reading of 66.0. With the exception of durable goods orders, today's data evidenced a U.S. economy that remains positively on the mend, especially with regard to the U.S. housing market. In eurozone news, German GfK December consumer confidence fell to 3.7 from 4.0 in November. Reserve Bank of Australia Deputy Governor Battellino talked up global economic sentiment, reporting "With the economy having only recently entered a new upswing, it is reasonable to assume that we will see this growth extended for a few more years yet." Russia's central bank today said it will diversify its currency holdings by adding Canadian dollars, probably at the expense of the U.S. dollar. Euro bids are cited around the US$ 1.4720 level.
¥/ CNY
The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥87.40 level and was capped around the ¥88.65 level. The pair came within about 25 pips of testing a year-long low. Bids from semi-official names – possible overt intervention – were cited overnight but they have done little to stop this latest round of extreme dollar-selling. There was massive verbal intervention overnight by Japanese monetary authorities. Finance minister Fujii reported China's currency is clearly undervalued and said the yuan's dollar peg is "not necessarily good." Bank of Japan Deputy Governor Yamaguchi reported "The global economy is improving, supported by fiscal and monetary measures. Balance sheets of U.S. and European lenders are still deteriorating and their adjustment will take more time. The global financial system still remains fragile." Data released in Japan overnight saw the October corporate service price index climb +0.1% m/m and decline 2.2% y/y. Also, the October trade surplus printed at ¥807.1 billion. Bank of Japan yesterday upgraded its economic assessment for the third consecutive month, noting the economy is "picking up...Japan's economic conditions are likely to continue improving, although the pace of improvement is likely to remain moderate for the time being." Notably, the central bank reported the decline in business investment is decelerating and private consumption is improving. Core consumer price inflation data will be released later this week and are likely to show the October reading was off 2.2% y/y. There is increasing speculation BoJ will actually expand its quantitative easing policies by increasing its debt purchases. Most BoJ-watchers believe the central bank will keep interest rates unchanged through at least most of 2010. BoJ's Policy Board recently predicted core consumer prices will decline 1.5% in the year ending March 2010, decline 0.8% in the fiscal year ending March 2011, and decline 0.4% in the fiscal year ending March 2012. The Nikkei 225 stock index climbed 0.43% to close at ¥9,441.64. U.S. dollar offers are cited around the ¥94.75 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥131.50 level and was capped around the ¥132.70 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥145.80 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥87.15 level. In Chinese news, the U.S. dollar appreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8290 in the over-the-counter market, up from CNY 6.8260. People's Bank of China Deputy Governor reported the yuan will become a "more attractive currency" and added the central bank will increase surveillance of hot money flows. Vice Foreign Minister Zhang Zhijun yesterday said China will "increase the flexibility of the yuan exchange rate while maintaining stability in the market," adding the increase will be "incremental and balanced." Zhang added China is moving toward a system "that is market-based and is a managed floating mechanism with respect to a basket of currencies." Chinese Premier Wen Jiabao will meet European Central Bank President Trichet and Ecofin head Juncker on 29 November. China's banking regulator informed Chinese lenders they must comply with capital requirements or risk sanctions. There is increasing speculation China will strengthen its strict capital requirements. Vietnam devalued its dong currency overnight for the third time in two years – the opposite direction that global policymakers want to see Asian currencies moving in.
₤
The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.6745 level and was supported around the $1.6575 level. Bank of England Monetary Policy Committee member Sentance dovishly said "I think it's premature at the moment to talk about policy tightening, we'll have to judge that against the pace of growth and the outlook for inflation as we go through next year and beyond. I believe we are in the early phases of recovery, but I would say that these are very early phases, business confidence and business sentiment are very fragile, and it'll only perhaps be when the recovery is more well established that I think there'll be a more widespread feeling that yes, the economy's back on a growth track. Most traders believe the BoE will keep interest rates unchanged for several months. Data released in the U.K. today saw Q3 gross domestic product off 0.3% q/q and off 5.1% y/y. On the political front, Chancellor Darling defended secret emergency lending provided to Royal Bank of Scotland and HBOS last year in the amount of ₤61.6 billion through BoE. Cable bids are cited around the US$ 1.6430 level. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.9055 level and was supported around the ₤0.8975 level.
Technical Outlook at 1330 GMT (EDT + 0500)
(Bid Price) (Today's Intraday Range)
EUR/ USD 1.5062 1.5093, 1.4954
USD/ JPY 87.55 88.63, 87.38
GBP/ USD 1.6700 1.6745, 1.6574
USD/ CHF 1.0115 1.0094, 0.9993
AUD/USD 0.9265 0.9303, 0.9189
USD/CAD 1.0474 1.0581, 1.0448
NZD/USD 0.7275 0.7331, 0.7248
EUR/ JPY 131.87 132.68, 131.50
EUR/ GBP 0.9019 0.9032, 0.8976
GBP/ JPY 146.17 147.65, 145.93
CHF/ JPY 87.35 87.89, 87.13
Support Resistance Support Resistance
EUR/ USD USD/ JPY
L1. 1.4470 1.4915 88.60 93.30
L2. 1.4355 1.5140 87.10 95.50
L3. 1.4175 1.5360 86.10 98.85
GBP/ USD USD/ CHF
L1. 1.6115 1.6685 1.0275 1.0580
L2. 1.5720 1.6830 1.0040 1.0695
L3. 1.5405 1.7040 0.9750 1.0885
AUD/ USD USD/ CAD
L1. 0.8450 0.8830 1.0535 1.0945
L2. 0.8300 0.9050 1.0365 1.1125
L3. 0.8070 0.9120 1.0155 1.1355
NZD/ USD EUR/ JPY
L1. 0.6880 0.7125 131.45 135.75
L2. 0.6750 0.7260 129.75 136.90
L3. 0.6535 0.7395 127.00 138.75
EUR/ GBP EUR/ CHF
L1. 0.8795 0.8995 1.5110 1.5380
L2. 0.8675 0.9105 1.4905 1.5580
L3. 0.8320 0.9225 1.4670 1.5880
GBP/ JPY CHF/ JPY
L1. 146.10 152.50 86.30 88.65
L2. 142.05 157.75 85.40 90.10
L3. 135.70 161.70 81.55 91.60
SCHEDULE
Wednesday, 25 November 2009
all times GMT
(last release in parentheses)
N/A Japan November small business confidence (43.4)
0000 Australia November DEWR skilled vacancies (1.9% m/m)
0030 Australia Q3 private capital expenditure (3.3%)
0030 Australia Q3 construction work done (-0.1%)
0200 NZ November NBNZ business confidence (48.2)
0700 Germany December GfK consumer confidence (4.0)
0830 Italy November consumer confidence
0900 Italy September retail sales
0930 UK Q3 gross domestic product (-0.4% q/q)
0930 UK Q3 gross domestic product (-5.2% y/y)
0930 UK September index of services (-0.1%)
1200 US MBA mortgage applications
1330 US October durable goods orders (1.4%)
1330 US October durable goods, ex-transportation (1.2%)
1330 US October personal income (0.0%)
1330 US October personal spending (-0.5%)
1330 US October PCE deflator (-0.5% y/y)
1330 US October PCE, core (0.1% m/m)
1330 US October PCE, core (1.3% y/y)
1330 US Weekly initial jobless claims (505,000)
1330 US Continuing jobless claims (5.611 million)
1500 US November University of Michigan consumer sentiment (66)
1500 US October new home sales (402,000)
1500 US October new home sales (-3.6% m/m)
1900 US Federal Open Market Committee meeting minutes
2350 Japan Bank of Japan Policy Board meeting minutes
Thursday, 26 November 2009
all times GMT
(last release in parentheses)
N/A Germany November consumer price index (0.1% m/m)
N/A Germany November consumer price index (0.0% y/y)
N/A Germany November CPI, harmonized (0.1% m/m)
N/A Germany November CPI, harmonized (-0.1% y/y)
0200 NZ October M3 money supply (2.7% y/y)
0900 Eurozone October M3 money supply (1.8% y/y)
1100 UK CBI quarterly distributive trades survey
1700 France October total jobseekers
2145 NZ October trade balance (-NZ$ 424 million)
2350 Japan October jobless rate (5.3%)
2350 Japan October household spending (1.0% y/y)
2330 Japan November Tokyo-area consumer price index (-2.4% y/y)
2330 Japan November Tokyo CPI, ex-food and energy (-1.4% y/y)
2330 Japan October consumer price index (-2.2% y/y)
2330 Japan October CPI, ex-food and energy (-1.0% y/y)
2350 Japan October large retailers' sales (-5.6%)
2350 Japan October retail trade (0.9% m/m)
2350 Japan October retail trade (-1.3% y/y)
Friday, 27 November 2009
all times GMT
(last release in parentheses)
N/A Germany October import price index (-0.9% m/m)
N/A Germany October import price index (-11.0% y/y)
N/A Eurozone November Ifo business climate survey
0745 France November consumer confidence (-35)
0900 Italy October hourly wages
1000 Eurozone November economic confidence (86.2)
1000 Eurozone November business climate indicator (-1.78)
1000 Eurozone November consumer confidence (-18.0)
1000 Eurozone November industrial confidence (-21.0)
1000 Eurozone November services confidence (-7.0)
1030 CH November KOF leading indicator (1.45)
1330 Canada Q3 current account (-C$ 11.2 billion)
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