DAILY MARKET COMMENTARY
14 January 2010
Thursday
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$ 1.4475 level and was capped around the $1.4555 level. As expected, the European Central Bank kept its main refinancing rate unchanged at 1% today and traders will pay close attention to remarks from ECB President Trichet as to when the central bank may next remove some monetary policy accommodation. Data released in the eurozone today saw November EMU-16 industrial production climb 1.0% m/m, up from -0.3% in October, but fell 7.1% y/y – albeit better than expectations. Other data saw German 2009 consumer price inflation print at its lowest level in twenty years despite the upward revision of +0.8% m/m and +0.9% y/y. Average inflation for 2009 printed at 0.4%, the lowest level since German reunification in 1990 and below the 2008 level of 2.6%. Greece and Ireland potentially face additional credit ratings downgraded on their sovereign debt but the markets are not pricing in the chances of a national default yet. In U.S. news, New York Fed President Dudley reported the U.S. economic recovery is "in the middle of the beginnings" but said the unemployment rate needs to come down before interest rates are raised. Dudley also indicated he is confident the Fed can manage its balance sheet smoothly, a reference to the fact the Fed will have to begin reducing the size of its balance sheet as policy accommodation is removed. Data released in the U.S. today saw the December import price index print as expected at 0.0% m/m and 8.6% y/y. Also, December advance retail sales were weaker-than-expected at -0.3%, down from the prior reading of +1.8%, while the ex-autos component was off 0.2%, down from the revised 1.9% print. Also, weekly initial jobles claims rose 444,000 while continuing jobless claims fell to 4.596 million in the latest week. November business inventories data will be released later in the North American session. Euro bids are cited around the US$ 1.3885 level.
¥/ CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥92.05 level and was supported around the ¥91.30 level. Poor Japanese economic data contributed to the yen's weakness. First, Bank of Japan's consumer sentiment diffusion index printed at -67.0 in December, an improvement from -72.3 in September but a higher number of respondents reported they expect the economy to worsen by the end of the year. This pessimism is coincident with worsening deflationary pressures in the Japanese economy. Data released in Japan overnight saw December domestic corporate goods price inflation climb +0.1% m/m and decline 3.9% y/y. Also, November core machinery orders were off 11.3% m/m, significantly below positive expectations and worse than November's print. Traders are closely monitoring the yen's progress given recent policy announcements from People's Bank of China. New finance minister Kan reported he plans to address the yuan at the Group of Seven meeting in February and indicated "there are still various policy measures that could be taken" by Bank of Japan to relax monetary conditions further. BoJ reported households' inflationary expectations fell to their lowest level in more than four year as consumers expect prices to rise 1.7% in the next year – the smallest projected increase since June 2005. The Nikkei 225 stock index gained 1.61% to close at ¥10,907.68. 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 ¥133.65 level and was supported around the ¥132.40 level. The British pound moved higher vis-à-vis the yen as sterling tested bids around the ¥150.00 figure while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥90.30 level. In Chinese news, the U.S. dollar appreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8272 in the over-the-counter market, up from CNY 6.8267. Traders are still talking about People's Bank of China's decision to lift reserve requirements at commercial banks by 50bps from 15.50% to 16.00%, effective 18 January. This is PBoC's most effective weapon to enact implement a contractionary monetary policy and follows a move to reduce monetary accommodation last week by selling one-year bills at higher rates. China Investment Corporation executive Peng moved the markets this week when he said "I think the dollar is at its bottom now. There will be very limited space for the dollar to drop further. The yen is what, I think, has the worst outlook. The yen will continue to drop, unlike the dollar, which will not serve for long as a source of funding carry trades."
₤
The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.6325 level and was supported around the $1.6250 level. Bank of England Monetary Policy Committee member Posen called for additional business lending while MPC member Barker said she does not expect the economy to gather steam in the first six months of the year. MPC member Sentance moved the markets today when he said "At some point you have to say we have increased the amount of stimulus enough. It doesn't mean you are going to withdraw it but you don't have to keep adding to it. The Bank is approaching the point where we need to hold back and wait and see how that's flowing into the recovery." Data released in the U.K. yesterday saw November manufacturing production flat m/m and off 5.4% y/y while November industrial production was up 0.4% m/m and off 6% y/y. Cable bids are cited around the US$ 1.5730 level. The euro lost ground vis-à-vis the British pound as the single currency tested bids around the ₤0.8880 level and was capped around the ₤0.8935 level.
Technical Outlook at 1330 GMT (EDT + 0500)
(Bid Price) (Today's Intraday Range)
EUR/ USD 1.4490 1.4555, 1.4480
USD/ JPY 91.83 92.03, 91.28
GBP/ USD 1.6261 1.6312, 1.6250
USD/ CHF 1.0214 1.0220, 1.0159
AUD/USD 0.9284 0.9329, 0.9225
USD/CAD 1.0311 1.0321, 1.0288
NZD/USD 0.7415 0.7442, 0.7383
EUR/ JPY 132.97 133.63, 132.39
EUR/ GBP 0.8903 0.8934, 0.8903
GBP/ JPY 149.26 149.99, 148.53
CHF/ JPY 89.83 90.32, 89.59
Support Resistance Support Resistance
EUR/ USD USD/ JPY
L1. 1.4355 1.4925 86.95 93.20
L2. 1.4175 1.5145 84.85 95.50
L3. 1.3795 1.5360 82.30 98.85
GBP/ USD USD/ CHF
L1. 1.5755 1.6890 1.0040 1.0370
L2. 1.5355 1.7310 0.9920 1.0580
L3. 1.4950 1.7615 0.9750 1.0695
AUD/ USD USD/ CAD
L1. 0.8870 0.9425 1.0150 1.0590
L2. 0.8685 0.9600 0.9920 1.0820
L3. 0.8225 0.9840 0.9735 1.1060
NZD/ USD EUR/ JPY
L1. 0.7145 0.7645 125.70 135.75
L2. 0.6880 0.7785 122.50 138.20
L3. 0.6750 0.8215 118.55 141.00
EUR/ GBP EUR/ CHF
L1. 0.8795 0.9175 1.4575 1.4875
L2. 0.8675 0.9290 1.4305 1.5010
L3. 0.8320 0.9430 1.4110 1.5450
GBP/ JPY CHF/ JPY
L1. 144.90 149.20 85.30 91.60
L2. 141.20 150.60 83.35 93.60
L3. 135.95 152.20 81.40 97.95
SCHEDULE
Thursday, 14 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, 15 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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