DAILY MARKET COMMENTARY
24 December 2009
Thursday
Fundamental Outlook at 1500 GMT (EDT + 0500)
€
The euro moved higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4415 level and was supported around the $1.4320 level. Traders lifted the common currency after Greece approved a plan to reduce its budget deficit. Greece's move allayed some recent sovereign credit concerns that had been mounting in recent weeks and impacting the common currency negatively. Greece plans to reduce its budget deficit in 2010 to a level equal to 9.1% of gross domestic product, a move that may prevent the deficit from exceeding 12% of GDP. Nonetheless, Greece's budget deficit will remain more than three times above the permissible limits of the European Union. European Central Bank member Wellink said the eurozone's economic recovery remains fragile and said the euro's strong level is negatively impacting Dutch exports. It is likely other policymakers will assail the euro's relative strength if it persists in the New Year. Data released in the eurozone today saw the CEPR Eurocoin activity indicator rise to 0.68 in December, the highest level in two years and an indication of a further increase in consumer and business confidence. In U.S. news, data released in the U.S. today saw November durable goods orders climb 0.2%, up from the October reading of -0.6%, while the ex-transportation component exceeded expectations at +2.0%, above the upwardly revised October reading of -0.7%. Also, weekly initial jobless claims fell to 452,000 from 480,000 and continuing jobless claims slumped to 5.076 million from a revised 5.203 million. Euro bids are cited around the US$ 1.3885 level.
¥/ CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥91.75 level and was supported around the ¥91.10 level. Minutes from Bank of Japan's latest Policy Board meeting were released in which the government asked the central bank to monitor deflation. The minutes revealed "many" Policy Board members agreed "the bank would maintain its stance of responding promptly to changes in the market situation." Policymakers said the central bank "would adopt the most effective method for money-market operations that conformed to changes in financial markets." After an emergency meeting on 1 December, the central bank introduced a ¥10 trillion fixed-rate lending facility that was designed to arrest the yen's advances and counter deflation. The central bank also characterized the most recent bout of deflation as "mild." Data released in Japan overnight saw the finance ministry's October – December company sentiment survey released with sentiment falling back to -1.9 from +0.3 in the July – September period. Big manufacturers and big non-manufacturers all experienced a pullback in sentiment during the last business quarter of the year. Interestingly, this report is at odds with Bank of Japan's recently-released quarterly Tankan survey of corporate sentiment. The Nikkei 225 stock index climbed 1.53% to close at ¥10,536.92. 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 ¥131.85 level and was supported around the ¥130.90 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥146.45 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥88.60 level. In Chinese news, the U.S. dollar depreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8290 in the over-the-counter market, down from CNY 6.8294. People's Bank of China reaffirmed its plans to maintain a "moderately loose" policy stance in 2010 and to restrict credit for industries that have excess capacity. PBoC also asked Chinese banks to improve management of interest rates risks. China appears poised to register economic growth of 8% this year. Chinese lenders provided US$ 1.3 trillion in loans in the first eleven months of the year. Monetary policy adjustments are expected in 2010 to slow the pace of economic growth and inflationary pressures. People's Bank of China Governor Zhou this week reported reserve ratios are an important policymaking tool and there is widespread speculation the central bank will lift reserve requirements for banks when policy is tightened further. People's Bank of China advisor Fan Gang this week said the U.S. dollar may decline in the "very long term" and fluctuate in the short term. State Information Center member Zhu Baoliang reported "the yuan shouldn't move against the dollar next year." The Chinese government reported industrial output will have expanded 11% in 2009 when final data are tallied. A government think tank reported retail sales will likely expand 18.5% in 2010 with exports up 6% next year.
₤
The British pound depreciated vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.5925 level and was capped around the $1.6020 level. Many traders believe Bank of England's Monetary Policy Committee will keep monetary policy unchanged until at least February when fourth quarter gross domestic product data are available along with the latest quarterly inflation forecast. BBA yesterday reported net mortgage lending by U.K. banks increased ₤3.3 billion in November, up from a ₤3.2 billion rise in October. Demand for consumer credit weakened last month as ₤300 million was repaid by borrowers, up from ₤200 million in October. BBA also reported that mortgage approvals rose to a two-year high of 44,713 in November. Minutes from Bank of England's 9-10 December Monetary Policy Committee meeting were released yesterday in which policymakers unanimously voted to keep the BoE's asset purchase facility unchanged at ₤200 billion and its main Bank Rate unchanged at a record-low of 0.5%. Cable bids are cited around the US$ 1.5755 level. The euro moved higher vis-à-vis the British pound as cable tested offers around the ₤0.9015 level and was supported around the ₤0.8965 level.
CHF
The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0320 level and was capped around the CHF 1.0400 figure. There remains ongoing talk the Swiss National Bank is conducting franc-selling intervention. Swiss National Bank released its quarterly report on Monday and said it would be "premature" to begin raising borrowing costs, noting there are "downside risks" to the inflation outlook." Trying to provide a balanced outlook, however, SNB reported "expansionary monetary policy cannot be maintained indefinitely." On 10 December, SNB voted to keep its benchmark rate unchanged at 0.25% and noted it will end its corporate bond purchases as a first step to withdraw its emergency measures. On Monday, SNB reported it will "continue to act decisively to prevent any excessive appreciation." U.S. dollar offers are cited around the CHF 1.0615 level. The euro moved lower vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.4875 level while the British pound depreciated vis-à-vis the Swiss franc and tested bids around the CHF 1.6495 level.
Technical Outlook at 1330 GMT (EDT + 0500)
(Bid Price) (Today's Intraday Range)
EUR/ USD 1.4368 1.4417, 1.4322
USD/ JPY 91.70 91.73, 91.12
GBP/ USD 1.5953 1.6021, 1.5942
USD/ CHF 1.0371 1.0398, 1.0319
AUD/USD 0.8821 0.8859, 0.8781
USD/CAD 1.0479 1.0495, 1.0447
NZD/USD 0.7042 0.7081, 0.7027
EUR/ JPY 131.82 131.87, 130.88
EUR/ GBP 0.9008 0.9017, 0.8966
GBP/ JPY 146.29 146.43, 145.69
CHF/ JPY 88.41 88.58, 87.78
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, 24 December 2009
all times GMT
(last release in parentheses)
N/A Germany November German import price index (0.5% m/m)
N/A Germany November German import price index (-8.1% y/y)
N/A Germany December Ifo business climate
0615 Japan Bank of Japan Governor Shirakawa speaks
1330 US November durable goods orders (-0.6%)
1330 US November durable goods, ex-transportation (-1.3%)
1330 US Weekly initial jobless claims (480,000)
1330 US Continuing jobless claims (5.186 million)
1700 France November total jobseekers
2330 Japan November jobless rate (5.1%)
2330 Japan November household spending (1.6% y/y)
2330 Japan December Tokyo-area CPI (-2.2% y/y)
2330 Japan December Tokyo-area CPI, ex-food, energy (-1.3% y/y)
2330 Japan November consumer price index (-2.5% y/y)
2330 Japan November CPI, ex-food, energy (-1.1% y/y)
2350 Japan November corporate services prices (-2.2% y/y)
Friday, 25 December 2009
all times GMT
(last release in parentheses)
0500 Japan November housing starts (-27.1% y/y)
0500 Japan November housing starts, annualized (762,000)
0500 Japan November construction orders (-40.1% y/y)
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