Tuesday December 2, 2008 - 19:45:10 GMT
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FX Blog- GVI Forex Analysis Thread: December 3, 2008
GVI Forex Analysis Thread: December 3, 2008
Pre-Far East Open
- Forex markets were tracking equities again on Tuesday. Dealers seem to lack any other inspiration. The USD fell when equities were rising again. One possibility Monday was that the markets were setting up for a very weak employment report on Friday. Far East bourses tumbled today in reaction to the U.S. European bourses ended higher on the U.S. recovery. The early call for the U.S. close today is uncertain.
- As expected, the RBA made another major rate cut, reduing its cash rate target by 100bps to 4.25%. Late Wednesday (early Thursday in NZ). The Reserve Bank of New Zealand is expected to cut its cash rate target by -150bps to 5.00% from 6.50%. As expected, the Bank of Japan said additional liquidity will be made available to the system.
- Key data Wednesday will be the various PMI Service indices. The manufacturing PMIs on Monday were abysmal. Also the ADP private employment report (see -198K) will give the markets a first hint about the Friday non-farm payroll report (estimate -320K).
- Additionally, significant rate cuts are expected from the ECB and BOE on Thursday. Rate cut estimates range from -50 to -100bps.
- The 2-yr U.S. minus E-Z spread is -120 bps +4 bps. U.S. bond prices are higher. E-Z bond prices have advanced as well. Some are beginning to talk about a bubble in treasuries.
- The USD is lower vs. the EUR and GBP from late Monday. The CHF and JPY are steady. The volatile commodity currencies (AUD and NZD) are now unchanged. CAD is weaker. Oil is lower and below the pivotal $50 line. Gold is higher. See the GVI calendar for an updated schedule of data releases in the two weeks ahead.
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