DAILY MARKET COMMENTARY
26 November 2009
Thursday
Fundamental Outlook at 1500 GMT (EDT + 0500)
€
The euro lost ground vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4960 level and was capped around the $1.5140 level. The dollar rallied hard across higher-yielding currencies such as the euro, British pound, Canadian dollar, Swiss franc, Australian dollar, and New Zealand dollar following an announcement from Dubai corporate real estate giant Dubai World that it is seeking a six-month moratorium and possible restructuring on US$ 60 billion in debt. Credit default swaps on emerging market names widened substantially and investors moved sharply away from higher-yielding assets. Liquidity was reduced during the North American session for the U.S. Thanksgiving holiday and will normalize overnight. Moody's Investors Service and Standard & Poors heavily downgraded the debt of Dubai entities. There is a fear that contagion could spill over to other markets and areas of the world and this could result in further U.S. dollar appreciation. In eurozone news, European Central Bank member Weber called for prudence in trying to jump-start the asset-backed debt securities market. Weber also noted Bundesbank wants Germany to reduce its budget deficit to 3% of GDP by 2012 as opposed to the government's plan of 2013. The European Central Bank is not expected to change monetary policy when it convenes next Thursday. Data released in Germany today saw the November provisional consumer price index off 0.2% m/m and climb 0.3% y/y. Also, it was reported that EMU-16 October lending to businesses and households fell to a new record low, off 0.8% y/y. 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 ¥86.30 level and was capped around the ¥87.50 level. The pair fell to its lowest level since July 1995 as traders doubted the resolve of Japanese and U.S. authorities to arrest the yen's ascent. Minutes from Bank of Japan Policy Board's meeting on 30 October were released overnight and they "expressed the view that, when judged necessary, the bank should employ appropriate measures--including reutilization of special funds-supplying operations to facilitate corporate financing--in a flexible and timely manner. All other members agreed with this view." This statement suggests emergency lending facilities will be reinstated as necessary, mostly to counter deflationary pressures. Regarding deflation, the central bank added "Many members said that attention should continue to be paid to the risk that, in a situation where the substantial slack in the economy was likely to persist, prices might become weaker than expected if firms' and households' medium- to long-term inflation expectations declined." Deflation prospects have worsened since the October meeting and many traders believe BoJ will resume commercial paper purchases and corporate bond purchases after the current planned expiry at the end of December. Finance minister Fujii reported the Chinese yuan remains too weak and reiterated he supports U.S. Treasury Secretary Geithner's dollar-supportive comments. The big question on traders' minds is if and when Japan will conduct unilateral intervention to support the yen and whether or not they have enough political capital to encourage the U.S. and European officials to sell the yen through actual intervention. Fujii added "We are currently monitoring (the yen's appreciation), and I think now is the time to be vigilant." 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 lost 0.62% to close at ¥9,383.24. 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 ¥129.50 level and was capped around the ¥132.30 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥142.50 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥85.95 level. In Chinese news, the U.S. dollar depreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8270 in the over-the-counter market, down from CNY 6.8290. People's Bank of China Deputy Governor yesterday 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 this week 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.
Technical Outlook at 1330 GMT (EDT + 0500)
(Bid Price) (Today's Intraday Range)
EUR/ USD 1.4984 1.5141, 1.4958
USD/ JPY 86.48 87.48, 86.28
GBP/ USD 1.6493 1.6725, 1.6466
USD/ CHF 1.0055 1.0069, 0.9918
AUD/USD 0.9112 0.9321, 0.9092
USD/CAD 1.0605 1.0619, 1.0449
NZD/USD 0.7142 0.7330, 0.7127
EUR/ JPY 129.58 132.30, 129.52
EUR/ GBP 0.9084 0.9128, 0.9037
GBP/ JPY 142.65 146.21, 142.54
CHF/ JPY 86.02 87.82, 85.94
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
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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