DAILY MARKET COMMENTARY
16 December 2009
Wednesday
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$ 1.4505 level and was capped around the $1.4590 level. As expected, the Federal Open Market Committee kept monetary policy unchanged today. The FOMC's statement read "Information received since the Federal Open Market Committee met in November suggests that economic activity has continued to pick up and that the deterioration in the labor market is abating. The housing sector has shown some signs of improvement over recent months. Household spending appears to be expanding at a moderate rate, though it remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment, though at a slower pace, and remain reluctant to add to payrolls; they continue to make progress in bringing inventory stocks into better alignment with sales. Financial market conditions have become more supportive of economic growth. Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability. With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve is in the process of purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. In order to promote a smooth transition in markets, the Committee is gradually slowing the pace of these purchases, and it anticipates that these transactions will be executed by the end of the first quarter of 2010. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. In light of ongoing improvements in the functioning of financial markets, the Committee and the Board of Governors anticipate that most of the Federal Reserve's special liquidity facilities will expire on February 1, 2010, consistent with the Federal Reserve's announcement of June 25, 2009. These facilities include the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, and the Term Securities Lending Facility. The Federal Reserve will also be working with its central bank counterparties to close its temporary liquidity swap arrangements by February 1. The Federal Reserve expects that amounts provided under the Term Auction Facility will continue to be scaled back in early 2010. The anticipated expiration dates for the Term Asset-Backed Securities Loan Facility remain set at June 30, 2010, for loans backed by new-issue commercial mortgage-backed securities and March 31, 2010, for loans backed by all other types of collateral. The Federal Reserve is prepared to modify these plans if necessary to support financial stability and economic growth." The FOMC's decision was unanimous and was mixed in its temperament. Data released in the U.S. today saw the November consumer price index up 0.4% m/m and 1.8% y/y while the core readings were up 0.0% m/m and 1.7% y/y. Also, the Q3 current account balance widened to –US$ 108.0 billion. Additionally, November housing starts improved to an annualized 574,000 and November building permits improved to an annualized 584,000. In eurozone news, the EMU-16 purchasing managers indices improved in December, indicating the economy expanded in Q4. Also, EMU-16 consumer price inflation was up 0.1% m/m and 0.5% y/y.
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 ¥89.95 level and was supported around the ¥89.40 level. Bank of Japan's Policy Board is expected to keep its unsecured overnight call rate target unchanged at 0.10%. Data released in Japan overnight saw November revised machine tools up 0.9% m/m and off 8.4% y/y, an upward revision from provisional data. Banking minister Kamei warned the economy and deflation are worsening, the latest attempt by the government to pressure the central bank into maintaining its emergency lending programs. Other data saw the October tertiary activity index increase 0.5% m/m. Finance minister Fukii yesterday reported the government must keep bond issuance below ¥44 trillion for the fiscal year that begins in April 2010. Today, he noted the government may postpone some planned tax reforms. The Bank of Japan December quarterly Tankan survey was released on Monday and evidenced an improvement in corporate sentiment among large manufacturers. The headline diffusion index improved to -24 from -33 in the September quarterly survey, marking the third consecutive quarterly improvement. Sentiment among large non-manufacturers improved to -22 in December from -24. On a negative note, it was reported that large firms plan to reduce capital spending by 13.8% in the fiscal year ending in March, a downward revision from the 10.8% decline expected in the September tankan. Collectively, these data paint a mixed picture that evidences some improvement in current sentiment but a less-than-sanguine outlook for the future. Traders cite an increasing chance of actual yen-selling intervention by Japanese monetary authorities if the yen remains at elevated levels. The Nikkei 225 stock index gained 0.93% to close at ¥10,177.41. 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 ¥130.75 level and was supported around the ¥129.90 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥146.90 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥86.60 level. In Chinese news, the U.S. dollar appreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8290 in the over-the-counter market, up from CNY 6.8270. 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.
Technical Outlook at 1330 GMT (EDT + 0500)
(Bid Price) (Today's Intraday Range)
EUR/ USD 1.4577 1.4589, 1.4511
USD/ JPY 89.61 89.87, 89.38
GBP/ USD 1.6370 1.6391, 1.6229
USD/ CHF 1.0366 1.0424, 1.0357
AUD/USD 0.9009 0.9069, 0.8954
USD/CAD 1.0592 1.0627, 1.0570
NZD/USD 0.7216 0.7224, 0.7154
EUR/ JPY 130.57 130.76, 129.92
EUR/ GBP 0.8898 0.8960, 0.8882
GBP/ JPY 146.72 146.84, 145.24
CHF/ JPY 86.46 86.47, 85.86
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, 16 December 2009
all times GMT
(last release in parentheses)
N/A Germany November wholesale price index (-0.4% m/m)
N/A Germany November wholesale price index (-7.0% y/y)
0000 Australia December DEWR skilled vacancies (2.4% m/m)
0030 Australia Q3 gross domestic product (0.6% q/q)
0030 Australia Q3 gross domestic product (0.6% y/y)
0600 Japan November machine tool orders (-8.6% y/y)
0900 Italy November consumer price index
0930 UK November claimant count rate (5.1%)
0930 UK November jobless claims, net change (12,900)
0930 UK October average earnings, bonus (1.2%)
0930 UK October ILO unemployment rate (7.8%)
1000 Eurozone October trade balance (-€897.0 million)
1000 Eurozone November consumer price index (0.2% m/m)
1000 Eurozone November consumer price index (0.6% y/y)
1000 Eurozone November consumer price index, core (1.2% y/y)
1200 US MBA mortgage applications
1330 US November consumer price index (0.3% m/m)
1330 US November CPI, ex-food and energy (0.2% m/m)
1330 US November consumer price index (-0.2% y/y)
1330 US November CPI, ex-food and energy (1.7% y/y)
1330 US Q3 current account balance (-US$ 98.8 billion)
1330 US November housing starts (529,000)
1330 US November building permits (551,000)
1330 Canada October manufacturing sales (1.4% m/m)
1530 Japan Bank of Japan Policy Board meeting
1915 US Federal Open Market Committee interest rate decision
Thursday, 17 December 2009
all times GMT
(last release in parentheses)
N/A Japan Bank of Japan Policy Board interest rrate decision
0000 Australia November HIA new home sales (-6.0% m/m)
0200 NZ December NBNZ business confidence (43.4)
0500 Japan October leading index (89.7)
0500 Japan October coincident index (94.3)
0900 Italy Q3 unemployment rate
0930 UK November retail sales (0.4% m/m)
0930 UK November retail sales (3.4% y/y)
1000 CH December Credit Suisse ZEW survey, expectations (56.4)
1000 Eurozone October construction output
1100 UK December CBI distributive trades
1200 Canada November consumer price index (-0.1% m/m)
1200 Canada November consumer price index (0.1% y/y)
1200 Canada November CPI, core (0.1% m/m)
1200 Canada November CPI, core (1.80% y/y)
1330 US Weekly initial jobless claims
1330 US Continuing jobless claims
1330 Canada October international securities transactions (C$ 13.59 billion)
1500 US November leading indicators (0.3%)
1500 US December Philadelphia Fed index
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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