DAILY MARKET COMMENTARY
3 December 2009
Thursday
Fundamental Outlook at 1500 GMT (EDT + 0500)
€
The euro gained ground vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.5140 level and was supported around the $1.5040 level. The common currency came off intraday and near multi-month highs after European Central Bank President Trichet verbally intervened again to support the dollar, noting Europe has a "very strong stake" in a strong dollar. This follows recent intervention from him, U.S. Federal Reserve Chairman Bernanke, and U.S. Treasury Secretary Geithner. As expected, the ECB kept interest rates unchanged at 1% today and announced it will gradually phase out special liquidity measures. Specifically, the central bank will begin to index its lending operations to market rates instead of providing liquidity at a fixed rate as they have been. Despite the ECB's slight change in overall monetary policy, officials there want to make sure they adequately manage interest rate expectations. ECB member Weber called on Germany to adopt new insolvency requirements to protect itself from systemically relevant banks. Data released in the eurozone today saw October retail sales remain flat m/m and decline 1.9% y/y while Q3 gross domestic product was up 0.4% q/q and off 4.1% y/y. Economists expressed concern that consumer spending contracted 0.2% in the third quarter and was a net drag on overall economic growth. Additionally, November PMI services moved higher to 53.0 from 52.6 and German November services PMI rallied improved to 51.4 from 50.7. In U.S. news, Q3 non-farm productivity fell to 8.1% from the prior reading of 9.5% while Q3 unit labour costs improved to -2.5% from the prior reading of -5.2%. Also, weekly initial jobless claims fell to 457,000 from a revised 462,000 and continuing jobless claims climbed to 5.465 milion from 5.437 million. Also, the November ISM services survey fell to 48.7 from 50.6 in October. Fed Chairman Bernanke's renomination hearings started today in Congress and Bernanke defended the Fed's record on regulation and bailouts. Treasury Secretary Geithner today indicated "deficits do matter" and said global trade flows are "critical" for the U.S.'s future. Geithner also said the largest challenge for the U.S. is reviving economic growth. Euro bids are cited around the US$ 1.4720 level.
¥/ CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥88.45 level and was supported around the ¥87.35 level. Traders continued to unwind long yen positions on the premise that Japanese monetary authorities could conduct yen-selling intervention to prevent further yen appreciation. Bank of Japan this week announced a plan to offer three-month loans to commercial banks at 0.1%, a ¥10 trillion program designed to counter deflationary pressures and reverse the yen's strength. Data released in Japan today confirmed corporate capital spending was off 24.8% y/y in the July-September quarter, lower than the 21.7% decline in the April-June quarter. BoJ Governor Shirakawa and Prime Minister Hatoyama met yesterday and the markets are viewing the meeting as a positive. Some private forecasters are indicated the dollar could fall to the ¥75 level by 2011. Bank of Japan Policy Board member Suda verbally intervened yesterday, indicating the yen's rise may impact Japan's economic growth. Suda also indicated no policy options were being ruled out, a signal that policymakers are not content with recent yen movements. The Nikkei 225 stock index gained 3.83% to close at ¥9,977.67. 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 ¥133.55 level and was supported around the ¥131.40 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥146.85 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥88.55 level. In Chinese news, the U.S. dollar appreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8280 in the over-the-counter market, up from CNY 6.8233. Chinese Commerce Minister reported "The focus of global attention shouldn't be on the yuan's exchange rate, but the dollar's stability."
₤
The British pound depreciated vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.6530 level and was capped around the $1.6720 level. Data released in the U.K. today saw the seventh consecutive monthly expansion in the U.K. services sector as PMI services printed at 56.6, down from 56.9 in October but above the boom-or-bust 50.0 level. Bank of England Chief Economist Dale yesterday reported the economy "appears to have turned" but warned some factors could inhibit the economic recovery. BoE Monetary Policy Committee member Posen this week said new monetary policymaking tools are required to stop asset bubbles and reiterated inflation-targeting will continue. Cable bids are cited around the US$ 1.6430 level. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.9115 level and was supported around the ₤0.9040 level.
Technical Outlook at 1330 GMT (EDT + 0500)
(Bid Price) (Today's Intraday Range)
EUR/ USD 1.5087 1.5140, 1.5041
USD/ JPY 88.20 88.47, 87.36
GBP/ USD 1.6566 1.6719, 1.6555
USD/ CHF 0.9985 1.0018, 0.9959
AUD/USD 0.9275 0.9321, 0.9245
USD/CAD 1.0532 1.0582, 1.0460
NZD/USD 0.7242 0.7299, 0.7210
EUR/ JPY 133.08 133.54, 131.42
EUR/ GBP 0.9105 0.9114, 0.9038
GBP/ JPY 146.12 146.85, 145.26
CHF/ JPY 88.30 88.53, 87.17
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, 2 December 2009
all times GMT
(last release in parentheses)
0930 UK November PMI, construction (46.2)
1000 Eurozone October producer price index (-0.4% m/m)
1000 Eurozone October producer price index (-7.7% y/y)
1315 US November ADP employment change (-203,000)
1730 US Richmond Fed President Lacker speaks
1900 US Fed Beige Book
2330 Australia November performance of service index (54.8)
2350 Japan Q3 capital spending (-21.7%)
Thursday, 3 December 2009
all times GMT
(last release in parentheses)
0130 Australia October retail sales (-0.2% m/m)
0200 Australia November ANZ commodity prices (4.6%)
0745 France Q3 ILO unemployment rate (9.5%)
0845 Italy November PMI, services
0850 France November PMI, services
0855 Germany November PMI, services
0900 Eurozone November PMI, services
0930 UK November PMI, services (56.9)
1000 Eurozone Q3 gross domestic product (0.4% q/q)
1000 Eurozone Q3 gross domestic product (-4.1% u/u)
1000 Eurozone October retail sales (-0.7% m/m)
1000 Eurozone October retail sales (-3.6% y/y)
1245 Eurozone European Central Bank interest rate decision
1330 US Q3 non-farm productivity (9.5%)
1330 US Weekly initial jobless claims
1330 US Continuing jobless claims
1500 US November ISM, non-manufacturing (50.6)
Friday, 4 December 2009
all times GMT
(last release in parentheses)
N/A UK November Halifax house prices (1.2% m/m)
N/A Canada November employment, net change (-43,200)
N/A Canada November unemployment rate (8.6%)
0815 CH November consumer price index (0.6% m/m)
0815 CH November consumer price index (-190,000)
1330 US November non-farm payrolls, net change (-190,000)
1330 US November unemployment rate (10.2%)
1330 US November average hourly earnings (0.3% m/m)
1330 US November average hourly earnings (2.4% y/y)
1330 US November average weekly hours (33.0)
1500 US October factory orders (0.9%)
1500 US Philadelphia Fed President Plosser speaks
1500 Canada November Ivey purchasing managers index (61.2)
1815 US St. Louis Federal Reserve President Bullard speaks
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