DAILY MARKET COMMENTARY
18 December 2009
Friday
Fundamental Outlook at 1500 GMT (EDT + 0500)
€
The euro moved lower vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4260 level and was capped around the $1.4410 level. The common currency continues to unwind on credit-related concerns stemming from Greece's massive fiscal deficit and the continued improvement in U.S. economic performance. The U.S. dollar has rallied recently on positive news, a shift from its recent underperformance on improving U.S. economic fundamentals. The Federal Open Market Committee this week voted to keep interest rates unchanged and acknowledged improvements in the U.S. labour market. The Fed also reported that it will continue to unwind its emergency spending programs in 2010. Fed funds futures are currently pricing in monetary tightening by June 2010. The FOMC's next interest rate decision is scheduled for 27 January. Data to be released in the U.S. next week include the Chicago Fed's national activity index, Q3 gross domestic product, and the GDP price index, personal income, personal spending, durable goods orders, new home sales, and University of Michigan consumer sentiment. In eurozone news, German Chancellor Merkel won approval from the upper house of parliament to enact the Rapid Economic Stimulus Law, an initiative to cut taxes in the new year and provide at least €8.5 billion in fiscal stimulus. Data released in the eurozone today saw an EMU-16 trade surplus of €8.8 billion in October, up from a revised €0.9 billion in September, while the October current deficit narrowed to -€4.6 billion. Also, the German Ifo business climate index expanded to 94.7 in December from an unrevised estimate of 93.9 in November. Additionally, German factory gate prices were up 0.1% m/m and off 5.9% y/y in November. Euro bids are cited around the US$ 1.3885 level.
¥/ CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥90.90 level and was supported around the ¥88.95 level. As expected, Bank of Japan's Policy Board kept the unsecured overnight call rate unchanged at 0.1%. The central bank reemphasized its commitment to stopping Japan's deflationary pressures through policy actions. Some traders believe the central bank will eventually move to increase its rinban operations in which it outright purchases Japanese government bonds. The yen was given across the board on rampant speculation the central bank will take actions because it "does not tolerate a year-on-year rate of change in the consumer price index equal to or below zero per cent." Aggressive action by the central bank – favoured by some in the Hatoyama administration – could lead to a weaker yen. The BoJ also indicated the economic improvement is likely to be moderate until 2010. The Nikkei 225 stock index lost 0.21% to close at ¥10,142.05. 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 bids around the ¥130.00 figure and was supported around the ¥127.30 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥146.55 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥86.90 level. In Chinese news, the U.S. dollar depreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8330 in the over-the-counter market, down from CNY 6.8335. China reported it attracted US$ 7 billion in foreign direct investment in November. A People's Bank of China household inflation survey reported many believe prices are escalating too quickly during the economic recovery. The State Administration of Foreign Exchange reiterated it will manage foreign reserves for "safety, liquidity, and return."
₤
The British pound came off vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.6050 level and was capped around the $1.6250 level. Bank of England reported the U.K. financial system is "significantly" more stable and noted U.K. banks plan to increase business lending in 2010 after net business lending fell in October. On the residential loan front, the central bank reported mortgages remain much weaker than before the credit crisis. Data released in the U.K. today saw Q3 business investment growth decelerate to +0.6% q/q and GfK December consumer confidence worsened to -19 from -17 in November. Additionally, CML November gross mortgage lending fell to a six-month low of ₤12.0 billion in November. Cable bids are cited around the US$ 1.5955 level. The euro moved higher vis-à-vis the British pound as cable tested offers around the ₤0.8955 level and was supported around the ₤0.8855 level.
Technical Outlook at 1330 GMT (EDT + 0500)
(Bid Price) (Today's Intraday Range)
EUR/ USD 1.4346 1.4410, 1.4305
USD/ JPY 90.41 90.46, 88.97
GBP/ USD 1.6173 1.6248, 1.6109
USD/ CHF 1.0431 1.0495, 1.0386
AUD/USD 0.8872 0.8910, 0.8809
USD/CAD 1.0659 1.0724, 1.0632
NZD/USD 0.7086 0.7132, 0.7063
EUR/ JPY 129.69 130.01, 127.32
EUR/ GBP 0.8867 0.8897, 0.8858
GBP/ JPY 146.22 146.54, 143.61
CHF/ JPY 86.76 86.80, 85.28
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
Friday, 18 December 2009
all times GMT
(last release in parentheses)
N/A Japan November Nationwide department store sales (-10.5% y/y)
N/A Japan November Tokyo-area department store sales (-13.1% y/y)
0700 Germany November producer prices (0.0% m/m)
0700 Germany November producer prices (-7.6% y/y)
0745 France December business confidence (89)
0900 Italy October industrial orders
0900 Italy October industrial sales
0900 Germany December Ifo, business climate (93.9)
0900 Germany December Ifo, current assessment (89.1)
0900 Germany December Ifo, expectations (98.9)
0900 Eurozone October current account (-€ 5.4 billion)
0930 UK November mortgage approvals (61,000)
0930 UK Q3 total business investment (-3.0% q/q)
0930 UK Q3 total business investment (-21.7% y/y)
0930 UK November public sector net cash requirement (₤5.9 billion)
0930 UK November public sector net borrowing (₤11.4 billion)
0930 UK November M4 money supply
1000 Eurozone October trade balance (€3.7 billion)
1000 Eurozone October trade balance (₤6.8 billion)
1030 CH December KOF economic forecast
1330 Canada October wholesale sales (0.2% m/m)
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