DAILY MARKET COMMENTARY
12 January 2010
Tuesday
Fundamental Outlook at 1500 GMT (EDT + 0500)
€
The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4450 level and was capped around the $1.4520 level. The common currency was pressured during Australian dealing after a Chinese official reported the U.S. dollar has likely hit the bottom while adding the yen still had room to decline. There is growing dissent apparent at the Federal Reserve. Kansas City Fed President Hoenig reported the Fed should conclude in March its program to purchase mortgage debt, as planned, because the private securities market is "healing." Hoenig is calling for a "modest" and "persistent" economy despite last week's lackluster December non-farm payrolls number. In contrast to Hoenig, St. Louis Fed President Bullard – speaking in China – suggested the U.S. may want to continue some of its expansionary policies, including the securities purchasing programs. Bullard also noted U.S. interest rates "may remain low for quite some time." Friday's weaker-than-expected and disappointing U.S. December non-farm payrolls data dented the view that the Fed may raise interest rates by the middle of the year. European Central Bank President Trichet yesterday called on global governments to reduce excessive budget deficits to satisfy investors. Trichet noted he sees a "progressive normalization of the economy" but called on market participants to "strengthen risk management significantly." ECB member Nowotny yesterday said new risk-taking by some market participants is a concern for central bankers and regulators and that risk-taking needs to be limited by increases in capital requirements. Nowotny also confirmed there will be "sluggish" economic growth in the eurozone this year. Data released in the eurozone yesterday saw French November industrial output climb +1.1% and October's print was upwardly revised. In U.S. news, data to be released in the U.S. today include November trade balance figures with estimates running around –US$ 34.5 billion. 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 ¥92.40 level and was supported around the ¥91.80 level. Traders moved out of yen after shares in Japan Airlines declined 45% on speculation that the ailing airline is to file for bankruptcy imminently. Data released in Japan overnight saw the November current account surplus expand 76.9% y/y to ¥1.103 trillion, better-than-expected. Also, December bank lending was off 1.3% m/m and 3.1% y/y. Bank of Japan official Shinobu Nakagawa yesterday reported it is "possible" that official Japanese interest rates will remain near zero per cent until 2011 on account of the poor economic outlook. Nakagawa also reported the appreciating yen helps to support demand for Japanese government bonds. There is increasing speculation BoJ could increase its bond purchase activity to avert a relapse into another recession. Currently, the central bank purchases around ¥1.8 trillion in Japanese government bonds every month and it may decide to up its purchases to counter intense deflationary pressures. A new announcement could be made as early as H1 2010. An anonymous Ministry of Finance official reported finance minister Kan and U.S. Treasury Secretary Geithner agree on exchange rate policy. New finance minister Kan last week said it is his responsibility to respond to moves in the currency market but added the markets should determine rates. Last Thursday, Kan indicated the yen should be weaker whereas his predecessor, Fujii, green-lighted a stronger yen when he first took office last year. Chief Cabinet Secretary Hirano said the government should not make any comments that could impact the markets. Prime Minister Hatoyama last week said rapid exchange rate moves are "not good" and "unwelcome." Most traders believe the Japanese government will probably try to orchestrate a weaker yen to help counter deflationary pressures and stimulate foreign trade. The Nikkei 225 stock index climbed 1.09% to close at ¥10,798.32 yesterday. 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 ¥133.75 level and was supported around the ¥132.95 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥147.65 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥90.20 level. In Chinese news, the U.S. dollar appreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8275 in the over-the-counter market, up from CNY 6.8263. The pair was volatile overnight as a Chinese sovereign wealth fund official reported the U.S. dollar reached "rock bottom" but added the yen still has room to decline. The official quickly noted these were his own opinions and not official public policy. He did, however, suggest that both the U.S. and China are likely to raise rates in H2 2010. Last week, People's Bank of China guided interest rate expectations higher by selling three-month bills at higher rates for the first time in nineteen weeks. This evidences the central bank's attempt to tighten liquidity. PBoC-watchers believe the central bank may lift interest rates for the first time in three years by September. There is increasing speculation that China's economy could slow dramatically this year. People's Bank of China yesterday reported it will support "relatively fast" economic growth and manage inflation expectations. Additionally, PBoC noted it will target "moderate" loan growth in 2010.
₤
The British pound depreciated sharply vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.6060 level and was capped around the $1.6120 level. Many data were released overnight. First, the December RICS house price balance declined to +30 from +35 in November, the first decline since February. Second, BRC December retail sales surged to a five-month high. Third, RICS reported house prices moderated last month. BCC noted the U.K. economy is improving but is "struggling to enter a recovery phase." Former Bank of England Monetary Policy Committee member Buiter yesterday reported the central bank may start to raise interest rates by the middle of the year, possibly taking the Bank Rate to 0.75% to 1.00%. Buiter suggested the BoE's rate hike could come before the European Central Bank contemplates one. The big news in the U.K. remains the general election that is scheduled to be called before June. Prime Minister Brown is attempting to rally the Labour Party following widespread discontent from within his own ranks. Tory opposition leader Cameron is pledging earlier and deeper deficit reductions. Cable bids are cited around the US$ 1.5730 level. The euro gained ground vis-à-vis the British pound as the single currency tested offers around the ₤0.9010 level and was supported around the ₤0.8995 level.
CHF
The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0205 level and was supported around the CHF 1.0150 level. Data released in Switzerland yesterday saw November real retail sales up 0.6%. Swiss National Bank is expected to keep interest rates unchanged for at least the next couple of months. 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 1.4765 level while the British pound moved higher vis-à-vis the Swiss franc and tested offers around the CHF 1.6400 figure.
Technical Outlook at 1330 GMT (EDT + 0500)
(Bid Price) (Today's Intraday Range)
EUR/ USD 1.4483 1.4520, 1.4452
USD/ JPY 92.22 92.42, 91.81
GBP/ USD 1.6088 1.6119, 1.6061
USD/ CHF 1.0186 1.0207, 1.0152
AUD/USD 0.9273 0.9302, 0.9235
USD/CAD 1.0349 1.0359, 1.0331
NZD/USD 0.7401 0.7422, 0.7376
EUR/ JPY 133.62 133.75, 132.97
EUR/ GBP 0.9002 0.9012, 0.8994
GBP/ JPY 148.37 148.52, 147.65
CHF/ JPY 90.54 90.68, 90.20
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
Sunday, 3 January 2010
all times GMT
(last release in parentheses)
2330 Australia December TD Securities inflation (0.3% m/m)
2330 Australia December TD Securities inflation (2.1% y/y)
Monday, 4 January 2010
all times GMT
(last release in parentheses)
0500 China Federal Reserve Bank of St. Louis President Bullard speaks
0745 France November industrial production (-0.8% m/m)
0745 France November industrial production (-8.4% y/y)
0745 France November manufacturing production (-0.8% m/m)
0745 France November manufacturing production (-8.8% y/y)
0815 CH November retail sales (3.1% y/y)
1315 Canada December housing starts (158,500))
1330 Canada November building permits (18.0% m/m)
1745 US Federal Reserve Bank of Atlanta President Lockhart speaks
2200 NZ Q4 NZIER business opinion survey (36.0)
2350 Japan November trade balance (¥949.0 billion)
2350 Japan November current account (¥1.376 trillion)
2350 Japan December bank lending (0.2% y/y)
2350 Japan December M2 + CD money supply (3.3% y/y)
Tuesday, 5 January 2010
all times GMT
(last release in parentheses)
N/A Japan December economy watchers' survey, current (33.9)
N/A Japan December economy watchers' survey, outlook (34.5)
0001 UK December BRC retail sales monitor (4.1%)
0001 UK December RICS house price balance (35.0%)
0030 Australia November home loans (-1.4%)
0030 Australia November investment lending (-0.6%)
0730 France December Bank of France business sentiment (99.0)
0930 UK November visible trade balance (-₤7.108 billion)
0930 UK November total trade balance (-₤3.213 billion)
0930 UK November DCLG house prices (-2.2% y/y)
1230 US December NFIB small business optimism (88.3)
1330 US November trade balance (-US$ 32.9 billion)
1330 Canada November international merchandise trade (C$ 400 million)
1330 Canada November new housing price index (0.3% m/m)
Wednesday, 6 January 2010
all times GMT
(last release in parentheses)
N/A UK December NIESR gross domestic product estimate (0.2%)
N/A US MBA mortgage applications (0.5%)
N/A US Federal Reserve Bank of Philadelphia President Plosser speaks
0430 UK December bankruptcies (-11.4% y/y)
0600 Japan December machine tool orders (-8.4% y/y)
0745 France December consumer price index (0.1% m/m)
0745 France December consume price index (0.4% y/y)
0745 France December CPI, harmonized (0.2% m/m)
0745 France December CPI, harmonized (0.5% y/y)
0745 France November current account (-€4.5 billion)
0815 Germany December GDP growth (1.3%)
0900 Italy November industrial production
0930 UK November industrial production (0.0% m/m)
0930 UK November industrial production (-8.4% y/y)
0930 UK November manufacturing production (0.0% m/m)
0930 UK November manufacturing production (-7.8% y/y)
1000 Eurozone November industrial production (-0.6% m/m)
1000 Eurozone November industrial production (-11.1% y/y)
1900 US Federal Reserve Beige Book
2145 NZ November building permits (11.7% y/y)
2350 Japan November machine orders (-4.5% m/m)
2350 Japan November machine orders (-21.0% y/y)
2350 Japan December domestic corporate goods price index (0.1% m/m)
2350 Japan December domestic corporate goods price index (-4.9% y/y)
Thursday, 7 January 2010
all times GMT
(last release in parentheses)
N/A NZ December REINZ housing price index (0.2% m/m)
N/Z NZ December REINZ housing price index (41.5% y/y)
0030 Australia December employment change (31,200)
0030 Australia December unemployment rate (5.7%)
0700 Germany December consumer price index (0.7% m/m)
0700 Germany December consumer price index (0.8% y/y)
0700 Germany December CPI, harmonized (0.9% m/m)
0700 Germany December CPI, harmonized (0.8% y/y)
1245 Eurozone European Central Bank interest rate decision
1330 US December advance retail sales (1.3%)
1330 US December retail sales, ex-autos (1.2%)
1330 US Weekly initial jobless claims (434,000)
1330 US Continuing jobless claims (4.802 million)
1330 US December import price index (1.7% m/m)
1330 US December import price index (3.7% y/y)
1500 US November business inventories (0.2%)
2145 NZ December credit card spending (0.7% m/m)
Friday, 8 January 2010
all times GMT
(last release in parentheses)
N/A Germany December wholesale price index (0.7% m/m)
N/A Germany December wholesale price index (-3.2% y/y)
0200 NZ December non-resident bond holdings (65.4)
0430 Japan Bank of Japan Chief Economist speaks
0815 CH December producer and import prices (0.0% m/m)
0815 CH December producer and import prices (-3.3% y/y)
0900 Italy December consumer price index
1000 Eurozone December consumer price index (0.1% m/m)
1000 Eurozone December consumer price index (0.5% y/y)
1000 Eurozone December CPI, core (1.0% y/y)
1000 Eurozone November trade balance (€6.3 billion)
1330 US December consumer price index (0.4% m/m)
1330 US December consumer price index (1.8% y/y)
1330 US December CPI, ex-food and energy (0.0% m/m)
1330 US December CPI, ex-food and energy (1.7% y/y)
1330 US January Empire State manufacturing index (2.55)
1415 US December industrial production (0.8%)
1415 US December capacity utilization (71.3%)
1455 US Mid-January University of Michigan consumer sentiment (72.5)
1930 US Federal Reserve Bank of San Francisco President Yellen speaks
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