DAILY MARKET COMMENTARY
22 December 2009
Tuesday
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$ 1.4215 level and was capped around the $1.4330 level. Many data were released in the U.S. today. First, Q3 gross domestic product growth printed at a lower-than-expected +2.2% q/q, down from the prior reading of +2.8%. The GDP price index came in lower-than-expected at +0.4% and core personal consumption expenditures grew a less-than-expected 1.2%. These data suggest the U.S. economic recovery is not as strong as previously believed. Other data released today saw the December Richmond Fed manufacturing index print at -4, down from +1 in November. Also, November existing home sales were up 7.4% m/m to an annualized 6.54 million, up from the revised prior reading of 6.09 million. The recovery in the U.S. housing market continues to expand and the house price index also grew, up 0.6% m/m. Many data will be released tomorrow including November personal income and spending, new home sales, PCE, and final December University of Michigan consumer sentiment. Data to be released on Thursday include durable goods, weekly initial jobless claims, and continuing claims. Traders are paying very close attention to U.S. Treasury yields as the markets are speculating U.S. interest rates may be on the rise. The yield on the benchmark 10-year U.S. Treasury note is now around the 3.74% level. In eurozone news, Moody's Investors Service downgraded Greece's sovereign debt rating overnight, following recent moves by Fitch and Standard & Poor's. Data released in the eurozone today saw the December GfK consumer confidence survey decline to 3.3 in December from 3.7 in November. Euro bids are cited around the US$ 1.3885 level.
¥/ CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥91.85 level and was supported around the ¥91.00 figure. Finance minister Fujii reiterated the government will cap its new debt issuance at ¥44 trillion in the next fiscal year. This figure includes a ¥2 trillion fund to support jobs that Prime Minister Hatoyama recently described. Final budget negotiations for the 2010 – 2011 fiscal year are expected by the end of this week. Bank of Japan Governor Shirakawa today said economic policymaking should not be guided by short-term price movements. Yesterday, Shirakawa reported the central bank will "persistently" keep interest rates at "virtually zero" per cent to combat deflation. Shirakawa pledged "to supply ample liquidity and maintain stability within the financial system…if it is deemed necessary to achieve that, we are always prepared to act swiftly and decisively." Last week, Shirakawa stepped up the verbal rhetoric noting the BoJ "does not tolerate a year-on-year rate of change in the consumer price index equal to or below zero per cent." Former finance ministry official Sakakibara warned the dollar could fall to ¥80 and "cause stock losses and enhance deflation." The government today reported the economy is "picking up" and kept its economic assessment unchanged for the fifth consecutive month. Notably, the government reduced its assessment of capital spending. Data released in Japan yesterday saw the November trade surplus come in stronger-than-expected at ¥373.9 billion with exports off 6.2% y/y – marking the fourteenth consecutive monthly decline but up from October's significant 23.2% y/y decline. Shirakawa also warned consumer prices will continue to decline "for some time" and noted economic improvements "will be moderate." The Nikkei 225 stock index climbed 1.91% to close at ¥10,378.03. 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 ¥131.05 level and was supported around the ¥129.95 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥147.05 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥87.60 level. In Chinese news, the U.S. dollar depreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8295 in the over-the-counter market, down from CNY 6.8296. People's Bank of China Governor Zhou 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 yesterday 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 came off vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.5920 level and was capped around the $1.6100 figure. Data released in the U.K. today saw third quarter gross domestic product upwardly revised to -0.2% from the previous estimate of -0.3%. The U.K. savings rate is now at its highest level in eleven years as final private demand remains dented by the lingering economic concerns. The GDP data mean the U.K. economy has contracted for six consecutive quarters and remained in a recession in Q3. Other data released today saw the Q3 current account deficit widen to -₤4.7 billion from a revised -₤4.4 billion in Q2. Bank of England announce trading conditions in the secondary market remain "somewhat restricted" and will expand its corporate bond asset purchase facility in the first week of the year. Cable bids are cited around the US$ 1.5755 level. The euro moved higher vis-à-vis the British pound as cable tested offers around the ₤0.8945 level and was supported around the ₤0.8885 level.
CHF
The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0505 level and was supported around the CHF 1.0440 level. There remains ongoing talk the Swiss National Bank is conducting franc-selling intervention. Swiss National Bank released its quarterly report yesterday 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. Yesterday, 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 higher vis-à-vis the Swiss franc as the single currency tested offers around the CHF 1.4990 level while the British pound depreciated vis-à-vis the Swiss franc and tested bids around the CHF 1.6705 level.
Technical Outlook at 1330 GMT (EDT + 0500)
(Bid Price) (Today's Intraday Range)
EUR/ USD 1.4278 1.4331, 1.4258
USD/ JPY 91.74 91.80, 90.99
GBP/ USD 1.5970 1.6099, 1.5951
USD/ CHF 1.0485 1.0503, 1.0441
AUD/USD 0.8783 0.8833, 0.8763
USD/CAD 1.0588 1.0634, 1.0554
NZD/USD 0.7031 0.7073, 0.7027
EUR/ JPY 130.97 131.00, 129.95
EUR/ GBP 0.8937 0.8945, 0.8884
GBP/ JPY 146.53 147.03, 146.00
CHF/ JPY 87.50 87.52, 86.97
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, 22 December 2009
all times GMT
(last release in parentheses)
N/A Germany January GfK consumer confidence (3.7)
0500 Japan November supermarket sales (-5.2%)
0700 Japan Bank of Japan Governor Shirakawa speaks
0715 CH November trade balance (CHF 2.44 billion)
0845 France November producer prices (0.8% m/m)
0900 Italy November hourly wages (0.2% m/m)
0900 Italy November hourly wages (3.2% y/y)
0930 UK Q3 gross domestic product (-0.3% q/q)
0930 UK Q3 gross domestic product (-5.1% y/y)
0930 UK Q3 current account (-₤11.4 billion)
1330 US Q3 gross domestic product, annualized (2.8%)
1330 US Q3 gross domestic product price index (0.5%)
1330 US Q3 PCE, core (1.3% q/q)
1500 US December Richmond Fed manufacturing index (1.0%)
1500 US October house price index (0.0% m/m)
1500 US November existing home sales (6.10 million)
1500 US November existing home sales (10.1% m/m)
2145 NZ Q3 gross domestic product (0.1% q/q)
2145 NZ Q3 gross domestic product (-2.1% y/y)
Wednesday, 23 December 2009
all times GMT
(last release in parentheses)
0745 France November consumer spending (1.1% m/m)
0745 France November consumer spending (3.5% y/y)
0830 Italy December consumer confidence
0900 Italy October retail sales
0930 UK Bank of England MPC meeting minutes
0930 UK November BBA house purchase loans
1200 US MBA mortgage applications
1330 US November personal income (0.2%)
1330 US November personal spending (0.7%)
1330 US November PCE deflator (0.2% y/y)
1330 US November PCE, core (1.4% y/y)
1330 Canada October gross domestic product (0.4% m/m)
1500 US December University of Michigan consumer sentiment (73.4)
1500 US November new home sales (430,000)
1500 US November new home sales (6.2% m/m)
2350 Japan Bank of Japan Policy Board meeting minutes
2350 Japan Q4 BSI large all-industry
2350 Japan Q4 BSI large manufacturing
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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