DAILY MARKET COMMENTARY
8 December 2009
Tuesday
Fundamental Outlook at 1500 GMT (EDT + 0500)
€
The euro extended losses vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4680 level and was capped around the $1.4865 level. The common currency was hampered by new global credit concerns today, events that led to appreciation in the U.S. dollar and the yen. First, Dubai World's credit rating was lowered to junk status about two weeks after the large Middle Eastern development and real estate concern asked for a six-month standstill agreement with creditors. More importantly today, perhaps, Fitch cut Greece's credit rating to BBB+ from A- and cited concerns over Greece's medium-term outlook for public finances. This downgrade in sovereign credit risk impacted the common currency and this could put a small amount of upward pressure on eurozone interest rates, especially if there are concerns that other eurozone countries face a similar action from the ratings agencies. A further decline in corporate and sovereign credit ratings or credit outlooks could negatively impact the markets and lead to additional safe-haven buying. These credit actions come at a time when the U.S., U.K., and Japan face immense questions over their public finances with some speculators guessing at least one of those sovereign names could experience a credit downgrade in due course. European Central Bank member Draghi said a major risk to the global econmic recovery is the chance that interest rates will need to increase before banks' balance sheets have been sufficiently improved. Draghi noted "They may rise for monetary policy reasons, and if you think (about it), it's going to be very likely, because the process whereby banks will repair their balance sheets is a lengthy one. It's going to take several years." Last week, the European Central Bank announced some measures to remove some monetary policy accommodation in 2010 but ECB President Trichet was careful to note they were "not in any way" a move towards exiting the monetary stimulus. Data released in the eurozone today saw German industrial production decline 1.8% in October, defying expectations of an increase. In U.S. news, Fed Chairman Bernanke yesterday indicated the U.S. economic expansion is likely to remain "subdued." Euro bids are cited around the US$ 1.4505 level.
¥/ CNY
The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥88.15 level and was capped around the ¥89.45 level. The Japanese government announced a new fiscal spending stimulus package that will increase expenditures by ¥100 billion to ¥7.2 trillion. Part of the plan is clearly designed to increase spending to jump-start the economy while another objective of the policy announcement is to counter deflationary pressures and stop the yen's ascent. This follows Bank of Japan's announcement last week that it is increasing its provision of funds, also its latest attempt to reverse the yen's strength and deflationary pressures. Data released in Japan overnight saw the October current account surplus print at ¥1.398 trillion, lower than the expected surplus of ¥1.490 trillion. Also, November bank lending was up +0.7% m/m and off 1.3% y/y. It was also reported that service sector sentiment declined to 33.9 from 40.9 in October. The Nikkei 225 stock index lost 0.26% to close at ¥10,140.47. 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 ¥129.65 level and was capped around the ¥132.70 level. The British pound moved higher vis-à-vis the yen as sterling tested bids around the ¥143.55 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥85.85 level. In Chinese news, the U.S. dollar depreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8280 in the over-the-counter market, down from CNY 6.8291. People's Bank of China official Zhu Min reported China can experience more than 8% economic growth. The State Administration for Foreign Exchange said China will continue to implement foreign exchange reforms and PBoC indicated it will "improve" policy flexibility.
₤
The British pound came off vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.6255 level and was capped around the $1.6475 level. Data released in the U.K. today saw HBOS November house prices escalate for the fifth consecutive month, up 1.4% m/m and off 1.6% y/y. Also, the December CBI industrial trends survey showed orders increased to -42 from -45 in November. Also, NIESR reported the U.K. economy expanded 0.2% in the three months to November. Cable bids are cited around the US$ 1.5985 level. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.9095 level and was supported around the ₤0.9005 level.
Technical Outlook at 1330 GMT (EDT + 0500)
(Bid Price) (Today's Intraday Range)
EUR/ USD 1.4704 1.4867, 1.4679
USD/ JPY 88.38 89.47, 88.17
GBP/ USD 1.6287 1.6476, 1.6255
USD/ CHF 1.0266 1.0285, 1.0163
AUD/USD 0.9046 0.9163, 0.9019
USD/CAD 1.0631 1.0670, 1.0486
NZD/USD 0.7073 0.7171, 0.7046
EUR/ JPY 129.98 132.68, 129.65
EUR/ GBP 0.9026 0.9093, 0.9007
GBP/ JPY 143.99 147.15, 143.57
CHF/ JPY 86.07 87.75, 85.84
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, 8 December 2009
all times GMT
(last release in parentheses)
N/A Japan November economy watchers' survey, current (40.9)
N/A Japan November economy watchers' survey, outlook (42.8)
0001 UK November BRC retail sales monitor
0001 UK November RICS house price balance (34.0%)
0030 Australia November NAB business conditions (12)
0030 Australia November NAB business confidence (16)
0030 Australia Q3 current account balance (-A$ 13.347 billion)
0500 Japan October leading index (86.4)
0500 Japan October coincident index (92.7)
0815 Australia Reserve Bank of Australia Governor Stevens speaks
0930 UK October industrial production (1.6% m/m)
0930 UK October industrial production (-10.3% y/y)
0930 UK October manufacturing production (1.7% m/m)
0930 UK October manufacturing production (-9.3% y/y)
1100 Germany October industrial production (2.7% m/m)
1100 Germany October industrial production (-12.9% y/y)
1300 Australia Q1 manpower survey
1315 Canada November housing starts (157,400)
1400 Canada Bank of Canada interest rate decision
2145 NZ November credit card spending (-0.2% m/m)
2330 Australia December Westpac consumer confidence (-2.50%)
2350 Japan Q3 gross domestic product (1.20% q/q)
2350 Japan Q3 gross domestic product, annualized (4.80%)
2350 Japan Q3 GDP deflator (0.20% y/y)
2350 UK November Nationwide consumer confidence (72)
Wednesday, 9 December 2009
all times GMT
(last release in parentheses)
N/A UK November NIESR gross domestic product, estimate (-0.4%)
0030 Australia October home loans (5.10%)
0030 Australia October trade balance (-A$ 1.894 billion)
0030 Australia October investment lending (-0.1%)
0030 UK Pre-Budget report
0645 CH November unemployment rate (4.0%)
0700 Germany October trade balance (€10.6 billion)
0700 Germany November consumer price index (-0.2% m/m)
0700 Germany October current account (€9.4 billion)
0700 Germany November consumer price index (0.3% y/y
0700 Germany October imports (5.8% y/y)
0700 Germany November CPI, harmonized (0.4% y/y)
0930 UK October trade balance (-₤7.194 billion)
1030 UK November BRC shop price index
1200 US MBA mortgage applications (2.1%)
1500 US October wholesale inventories (-0.9%)
2000 NZ Reserve Bank of New Zealand interest rate decision
2145 NZ Q3 terms of trade index (-9.0% q/q)
2350 Japan October machine orders (10.5% m/m)
2350 Japan October machine orders (-22.0% y/y)
2350 Japan November domestic corporate goods price index (-0.7% m/m)
2350 Japan November domestic corporate goods price index (-6.7% y/y)
Thursday, 10 December 2009
all times GMT
(last release in parentheses)
N/A Japan Q1 manpower survey
0000 Australia December consumer inflation expectations (3.2%0
0030 Australia November employment change (24,500)
0030 Australia November unemployment rate (5.8%)
0100 Australia Reserve Bank of Australia official speaks
0745 France November non-farm payrolls
0750 France October industrial production (-1.5% m/m)
0750 France October industrial production (-10.4% y/y)
0750 France October manufacturing production (-1.6% m/m)
0750 France October manufacturing production (-11.0% y/y)
0830 CH Swiss National Bank interest rate decision
0900 Eurozone European Central Bank monthly report
0900 Italy October industrial production (-5.3% m/m)
1000 Italy Q3 gross domestic product
1200 UK Bank of England interest rate decision
1200 UK Bank of England asset purchase program decision
1330 Canada October international merchandise trade (-C$ 900 million)
1330 US October trade balance (-US$ 36.5 billion)
1330 US Weekly initial jobless claims (457,000)
1330 US Continuing jobless claims (5.465 million)
2145 NZ November food prices (-1.5% m/m)
Friday, 11 December 2009
all times GMT
(last release in parentheses)
0000 Japan November consumer confidence (40.5)
0930 UK November PPI, input (2.6% m/m)
0930 UK November PPI, input (0.1% y/y)
0930 UK November PPI, output (0.2% m/m)
0930 UK November PPI, output (1.7% y/y)
0930 UK November PPI, core output (0.3% m/m)
0930 UK November PPI, core output (2.0% y/y)
1330 Canada October new housing price index (0.5% m/m)
1330 US November import price index (0.7% m/m)
1330 US November import price index (-5.7% y/y)
1330 US November advance retail sales (1.4%)
1330 US November retail sales, ex-autos (0.2%)
1500 US University of Michigan consumer sentiment (67.4)
1500 US October business inventories (-0.4%)
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