DAILY MARKET COMMENTARY
27 October 2009
Tuesday
Fundamental Outlook at 1400 GMT (EDT + 0400)
€
The euro came off vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4770 level and was capped around the $1.4925 level. Technically, today's intraday high was right around the 23.6% retracement of the move from $1.4480 to $1.5060 while today's intraday low was right around the 50% of the same range. Traders reduced exposure to the common currency after U.S. October consumer confidence printed at 47.7, far below the revised 53.4 result from September. Waning U.S. consumer sentiment also resulted in an unimpressive day for U.S. equities, further resulting in greater demand for the U.S. dollar. The employment outlook sub-index of the consumer confidence reported worsened. Next week's October non-farm payrolls report will be closely scrutinized to see if the deceleration in job losses continues. Other data released in the U.S. today saw September building permits revised to -0.9% from -1.2. Additionally, the S&P/ Case-Shiller home price index was off 11.32% y/y, better than July's revised -13.26% reading, and the October Richmond Fed manufacturing index printed at +7, down from a revised +14 in October. Treasury Secretary Geithner spoke today and said the U.S. economy will become stronger the more quickly Europe recovers. Speaking about the U.S. dollar, Geithner added the U.S. needs to maintain confidence in the U.S. dollar. In eurozone news, EMU-16 September private sectoe lending fell 0.3% y/y, down from August's growth rate of +0.1%, and this marked the first decline in private-sector lending since the advent of the euro. Other data released in the eurozone today saw the M3 money supply rise 1.8% y/y. Euro bids are cited around the US$ 1.4445 level.
¥/ CNY
The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥91.70 level and was capped around the ¥92.30 level. An unexpected sharp decline in U.S. consumer confidence led to less demand for higher-yielding assets and to gains in the yen. The possibility of a double-dip recession could have a broad impact the yen and U.S. dollar, particularly if global investors are less willing to continue diversifying into riskier assets that offer more yield. Finance minister Fujii reported he will decide in December on whether additional economic measures are needed and said exports "should not drive" economic policymaking. Fujii added it is "appropriate" to have strong foreign exchange assets in its reserves portfolio, reiterated low U.S. interest rates are behind the dollar's weakness, and suggested the Group of Seven "shares the view" that the U.S. dollar is weak – not the view that the yen is strong. Moreover, Fujii said he never voiced support for a stronger yen and said the "given state of the economy" means it is too early to discuss an exit policy from quantitative easing programs. The yen also gained ground on news that some overseas investment trusts are maturing, possibly leading to repatriation of yen assets. The big news involving Bank of Japan over the past few trading sessions is that Bank of Japan believes deflationary pressures will remain in Japan through at least 2011. The central bank now sees core consumer prices excluding fresh food falling 0.5% in the year starting 1 April 2011 with economic growth ramping up to 1.2%. It remains probable the central bank will not increase interest rates anytime soon. The discontinuation of BoJ's emergency liquidity programs is sleighted for the end of December and any indication of a change in that time frame could impact the yen. It is also possible the BoJ will indicate its schedule for these changes as early as this week. In addition, Japan's Policy Board may release its latest round of economic forecasts this week. The Nikkei 225 stock index lost 1.45% to close at ¥10,212.46. 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 ¥135.65 level and was capped around the ¥137.35 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥149.90 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥89.65 level. In Chinese news, the U.S. dollar weakened vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8255 in the over-the-counter market, down from CNY 6.8275. People's Bank of China deputy governor Yi Gang today said "inflation is not a big risk for the nation in the foreseeable future." Yesterday, Zhou Hai, a division chief at People's Bank of China in Harbin, released a report indicating the central bank should sell dollars for euro and yen and diversify its massive foreign reserves portfolio. While this represented Zhou's personal opinion and not PBoC policy, it was enough to move the markets yesterday, especially given the size of China's massive US$ 2.273 trillion foreign reserve war chest. There remains widespread speculation the central bank will accelerate the removal of monetary stimuli and liquidity from the system, possibly resulting in further yuan appreciation.
Technical Outlook at 1230 GMT (EDT + 0400)
(Bid Price) (Today's Intraday Range)
EUR/ USD 1.4777 1.4926, 1.4769
USD/ JPY 91.87 92.32, 91.79
GBP/ USD 1.6338 1.6437, 1.6284
USD/ CHF 1.0239 1.0250, 1.0148
AUD/USD 0.9136 0.9217, 0.9130
USD/CAD 1.0665 1.0717, 1.0626
NZD/USD 0.7423 0.7514, 0.7411
EUR/ JPY 135.76 137.37, 135.70
EUR/ GBP 0.9042 0.9135, 0.9041
GBP/ JPY 150.10 151.15, 149.95
CHF/ JPY 89.72 90.66, 89.64
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
Tuesday, 27 October 2009
all times GMT
(last release in parentheses)
0700 CH September UBS consumption indicator (0.658)
0745 France October consumer confidence
0830 Italy October consumer confidence
0900 Eurozone September M3 money supply (3.0%)
0900 Eurozone September M3 money supply (2.5% y/y)
1100 UK October CBI distributive trades
1300 US August S&P/ Case-Shiller home price index (-13.30% y/y)
1400 US October consumer confidence (53.1)
1400 US October Richmond Fed manufacturing index (14)
1600 US Treasury Secretary Geithner speaks
2350 Japan September large retailers' sales (-6.8%)
2350 Japan September retail trade (1.0% m/m)
2350 Japan September retail trade (-1.8% y/y)
Wednesday, 28 October 2009
all times GMT
(last release in parentheses)
0000 Germany October consumer price index (-0.4% m/m)
0000 Germany October consumer price index (-0.3% y/y)
0000 Germany October CPI, harmonized (-0.5% m/m)
0000 Germany October CPI, harmonized (-0.5% y/y)
0030 Australia Q3 consumer price index (0.5% q/q)
0030 Australia Q3 consumer price index (1.5% y/y)
0030 Australia October DEWR skilled vacancies (1.2% m/m)
0200 NZ October NBNZ business confidence (49.1)
0500 Japan October business confidence (43.5)
0830 Italy October business confidence
0830 Italy October services survey
1100 US October MBA mortgage applications
1230 US September durable goods orders (-2.6%)
1230 US September durable goods, ex-transportation (-0.3%)
1400 US September new home sales (0.7% m/m)
1400 US September new home sales (429,000)
2000 NZ Reserve Bank of New Zealand interest rate decision
2145 NZ September trade balance (-NZ$ 725 million)
2315 Japan October PMI, manufacturing (54.5)
2350 Japan September industrial production (1.8% m/m)
2350 Japan September corporate service prices (-3.5% y/y)
Thursday, 29 October 2009
all times GMT
(last release in parentheses)
0000 Australia August leading index (0.7%)
0000 Germany September import price index (1.3% m/m)
0000 Germany September import price index (-10.9% y/y)
0100 Australia September HIA new home sales (11.4% m/m)
0200 NZ September M3 money supply (3.5% y/y)
0855 Germany October unemployment change (-12,000)
0900 Italy September hourly wages
0930 UK September mortgage approvals (52,300)
0930 UK September new consumer credit (-₤300 million)
0930 UK September net lending secured on dwellings (₤1.0 billion)
0930 UK September M4 money supply (0.7% m/m)
0930 UK September M4 money supply (11.3% y/y)
1000 Eurozone October economic confidence (82.8)
1000 Eurozone October business climate indicator (-2.07)
1000 Eurozone October consumer confidence (-19)
1000 Eurozone October industrial confidence (-24)
1000 Eurozone October services confidence (-9)
1230 US Q3 gross domestic product, annualized (-0.7%)
1230 US Q3 PCE, core (2.0% q/q)
1230 US Weekly initial jobless claims (531,000)
1230 US Continuing jobless claims (5.923 million)
1230 Canada September industrial product prices (0.5% m/m)
1230 Canada September raw materials price index (3.7% m/m)
1500 US Bank of Japan Policy Board meeting
1500 US Bank of Japan economic outlook
2145 NZ September building permits (1.7% m/m)
2330 Japan September jobless rate (5.5%)
2330 Japan September household spending (2.6% y/y)
2330 Japan October Tokyo-area consumer price index
2330 Japan October Tokyo-area CPI, ex-food, energy (-1.4% y/y)
2330 Japan September national consumer price index (-2.2% y/y)
2330 Japan September CPI, ex-food, energy (-0.9% y/y)
Friday, 30 October 2009
all times GMT
(last release in parentheses)
N/A Eurozone October Ifo business climate
N/A Germany September retail sales (-1.5% m/m)
N/A Germany September retail sales (-2.6% y/y)
0000 Australia Q3 NAB business confidence (-4)
0000 UK October Nationwide house prices (0.9% m/m)
0000 UK October Nationwide house prices (0.0% y/y)
0001 UK October GfK consumer confidence (-16)
0030 Australia September private sector credit (0.1% m/m)
0030 Australia September private sector credit (2.5% y/y)
0500 Japan September housing starts (-38.3% y/y)
0500 Japan September housing starts, annualized (676,000)
0500 Japan September construction orders (-25.2% y/y)
0745 France September producer prices (0.4% m/m)
0745 France September producer prices (-8.5% y/y)
0900 Italy September producer price index
1000 Eurozone October consumer price index (-0.3% y/y)
1000 Eurozone September unemployment rate (9.6%)
1030 CH October KOF leading indicator (0.85)
1230 US September personal income (0.2%)
1230 US September personal spending (1.3%)
1230 US September PCE, core (0.1% m/m)
1230 US September PCE, core (1.3% y/y)
1230 US September PCE deflator (-0.5% y/y)
1230 US Q3 employment cost index (0.4%)
1230 Canada August gross domestic product (0.0% m/m)
1345 US October Chicago PMI (46.1)
1400 US October University of Michigan consumer sentiment (69.4)
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