DAILY MARKET COMMENTARY
21 October 2009
Wednesday
Fundamental Outlook at 1400 GMT (EDT + 0400)
€
The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.5045 level and was supported around the $1.4890 level. The common currency reached its highest level since August 2008 but moved lower from multi-month highs after U.S. equity markets slipped late in the North American session. The Federal Reserve released its October Beige Book and noted the U.S. economy is stabilizing with "modest" improvements, adding "reports of gains in economic activity generally outnumber declines, but virtually every reference to improvement was qualified as either small or scattered." The euro's test of the psychologically-important $1.50 figure will likely result in increased verbal intervention from eurozone monetary and financial officials who have recently been espousing the benefits of the U.S.'s long-standing strong dollar policy. Eurozone exports have slumped along with the global economy and officials there will be keep to promote a growth in efforts. In other eurozone news, Luxembourg is positioning its central bank governor and ECB member, Yves Mersch, to success ECB Vice President Papadempos in May. In U.S. news, MBA mortgage applications were off 13.7% in the latest week, down from -1.8%. Data to be released in the U.S. tomorrow include weekly initial jobless claims and continuing jobless claims. The Federal Reserve received US$ 2.1 billion in loans against commercial mortgage securities sold before 1 January, up from US$ 1.4 billion in September. Boston Fed President Rosengren asked regulators to find new ways to avert a "firestorm" while Richmond Fed President Lacker said he is "confident" the economy would "continue to see positive growth in the first half of 2010." Lacker also said his "best estimate" for growth rates in 2010 is a range between 2.5% and 3.0%. Dallas Fed President Fisher said "bad economic numbers" are getting "less worse" and said he sees 2010 economic growth "significantly below potential." It is very clear that there is a wide range of opinions among Fed leadership and even on the Federal Open Market Committee and this diversity in opinions may mean the Fed lacks enough of a consensus to materially change monetary policy for the foreseeable future. Euro bids are cited around the US$ 1.4445 level.
¥/ CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥91.25 level and was supported around the ¥90.50 level. Bank of Japan Deputy Governor Nishimura warned against extending the central bank's emergency credit programs. Nishimura noted "Excessive concerns are easing considerably and market functions are improving significantly. Prolonging safety net measures may cause the problem of moral hazard." It is expected the central bank will allow some BoJ programs to expire at the end of the year but it is generally believed interest rates will not move higher before next year at the earliest. Nishimura added the "road to recovery will be very bumpy" and said consumer prices may continue to decline before moving to a "desirable" level. Japan continues to experience disinflationary or deflationary pressures and these continue to lessen corporate profits and wages. Bank of Japan Governor Shirakawa reported Japan's economy remains "far below" last year's level. The central bank and the government remain at odds about the implications for the economic recovery on policy. Finance minister Fujii continues to suggest the central bank's emergency programs should be maintained to support the economic recovery. Fujii yesterday reiterated the yen's strength is on account of the Federal Reserve's "easy" monetary policy – less of an indication that current currency movements are misalignments that will require actual intervention. Minutes from the BoJ Policy Board's 16-17 September meeting were released this week in which policymakers concluded "A few members were of the view that the positive effects these measures could producer were on the wane." The central bank is likely to not renew some of its emergency spending programs when they expire at the end of the month. The Nikkei 225 stock index lost 0.03% to close at ¥10,333.39. U.S. dollar offers are cited around the ¥94.75 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥136.95 level and was supported around the ¥135.20 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥151.55 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥90.70 level. In Chinese news, the U.S. dollar strengthened vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8241 in the over-the-counter market, down from CNY 6.8241. People's Bank of China Deputy Governor Ma yesterday reported China's economic growth accelerated in Q3 from the previous three months. Ma also reported further dollar weakness may fuel expectations of more yuan appreciation.
Technical Outlook at 1230 GMT (EDT + 0400)
(Bid Price) (Today's Intraday Range)
EUR/ USD 1.4997 1.5045, 1.4888
USD/ JPY 90.87 91.27, 90.48
GBP/ USD 1.6582 1.6635, 1.6345
USD/ CHF 1.0070 1.0154, 1.0033
AUD/USD 0.9259 0.9329, 0.9191
USD/CAD 1.0459 1.0582, 1.0377
NZD/USD 0.7577 0.7634, 0.7462
EUR/ JPY 136.28 136.96, 135.18
EUR/ GBP 0.9045 0.9124, 0.8996
GBP/ JPY 150.69 151.54, 148.43
CHF/ JPY 90.21 90.69, 89.41
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, 21 October 2009
all times GMT
(last release in parentheses)
0000 Australia August Westpac leading index (1.1% m/m)
0000 US Philadelphia Federal Reserve President Plosser speaks
0200 NZ September credit card spending (0.1% y/y)
0700 CH September M3 money supply (7.7% y/y)
0830 UK October Bank of England MPC meeting minutes
1000 UK CBI quarterly industrial trends, total orders
1100 US MBA mortgage applications
1600 US Federal Reserve Bank of Richmond President Lacker speaks
1800 US Federal Reserve Beige Book
2030 US Federal Reserve Bank of Boston President Rosengren speaks
2350 Japan September merchandise trade balance (¥185.7 billion)
Thursday, 22 October 2009
all times GMT
(last release in parentheses)
0430 Japan August all-industry activity index (0.5% m/m)
0500 Japan September supermarket sales (-3.4% y/y)
0615 CH September trade balance (CHF 1.79 billion)
0645 France October business confidence (85)
0800 Eurozone August current account (€ 6.6 billion)
0800 Italy August retail sales
0830 UK September retail sales (0.0% m/m)
0830 UK September retail sales (2.1% y/y)
1230 US Weekly initial jobless claims
1230 US Continuing jobless claims
1230 Canada August retail sales (-0.6% m/m)
1230 Canada August retail sales, ex-autos (-0.8% m/m)
1400 US September leading indicators (0.6%)
1400 US August house price index (0.3% m/m)
1430 US Federal Reserve Bank of Boston President Rosengren speaks
1430 Canada Bank of Canada Monetary Policy Report
1730 US Federal Reserve Bank of New York President Dudley speaks
Friday, 23 October 2009
all times GMT
(last release in parentheses)
0030 Australia Q3 import price index (-6.4% q/q)
0645 France September consumer spending (-1.3% y/y)
0800 Germany October Ifo, expectations (95.7)
0800 Germany October Ifo, business climate (91.3)
0800 Germany October Ifo, current assessment (87.0)
0830 UK Q3 gross domestic product (-0.6% q/q)
0830 UK Q3 gross domestic product (-5.5% y/y)
0830 UK September BBA house purchase loans
0900 Eurozone August industrial new orders (-24.3% y/y)
1230 US Federal Reserve Chairman Bernanke speaks
1400 US September existing home sales (5.10 million)
1400 US September existing home sales (-2.7% m/m)
1530 US Federal Reserve Vice Chairman Kohn speaks
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