Thursday December 25, 2008 - 14:59:28 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (25 December 2008)
moved lower vis-Ă -vis the U.S. dollar today as the single currency tested bids
around the US$ 1.3980 level and was supported around the $1.4025 level. Many data were released in the U.S. yesterday
and they pointed to a deepening recession. First, weekly initial jobless claims
reached a 26-year high, up 30,000 to 586,000.
Nearly two million U.S.
workers have lost their jobs this year and pushed the unemployment rate higher
to 6.7%. Second, personal spending fell
0.6% in November while personal incomes fell 0.2%. These data underscore the
fragile nature of final private demand and represented the fifth consecutive
monthly decline in spending. Third,
durable goods orders were off 1% in November, less-than-expected. Chancellor Merkel is likely to come under
more fire for not adopting greater fiscal stimulus plans. European Central Bank President Trichet on
Tuesday called on governments to be mindful of the amount of debt theyâ€™re
assuming to fund fiscal stimulus programs.
ECB member Nowotny yesterday indicated additional interest rate cuts by
the ECB cannot be ruled out. Liquidity
is expected to remain light through next week.
Euro bids are cited around the US$ 1.3300 figure.
The yen appreciated vis-Ă -vis the U.S. dollar today as the greenback
tested bids around the ÂĄ90.85 level and was capped around the ÂĄ90.25 level. Bank
of Japan Policy Board member Kamekazi reported â€śWhen we think about further
easing steps, we will be dealing with longer-term interest rates and corporate
financeâ€¦ Taking on credit risk is extremely abnormal...But we need abnormal
steps at an abnormal time. The BOJ will do its best to ensure financial market
stability by taking all possible policy steps.â€ť Data released in Japan
today saw November housing starts flat in November while November construction
orders fell 12.5% y/y. Also, November corporate service prices were off 1.9%
y/y. Minutes from Bank of Japan November
Policy Board meeting indicated policymakers believed â€śconsiderable timeâ€ť would
be required for economic conditions to improve.
The Japanese government yesterday formally approved a budget totaling
ÂĄ88.5 trillion, its largest ever and one that encompasses a ÂĄ12 trillion fiscal
stimulus. A government report confirmed
that big manufacturersâ€™ sentiment printed at -44.5 in the October â€“ December
period, considerably worse than the -10.0 reading in the July â€“ September
period. Prime Minister Aso reported â€śJapan cannot
avoid the tsunami of the world recession, but it can try to find a way out. The world economy is in a
once-in-a-hundred-years recession. We need extraordinary measures to deal with
an extraordinary situation." The
Nikkei 225 stock index climbed 0.97% to close at ÂĄ8,599.50. U.S. dollar offers are cited around the
ÂĄ104.15 level. The euro moved lower vis-Ă -vis the yen as the single currency
tested bids around the ÂĄ126.00 figure and was capped around the ÂĄ126.80
level. The British pound came off vis-Ă -vis the yen as sterling tested bids around the ÂĄ132.55
level while the Swiss franc gained
ground vis-Ă -vis the yen and tested offers around the ÂĄ84.35 level. The
Chinese yuan appreciated vis-Ă -vis the U.S. dollar as the greenback closed
at 6.8313 in the over-the-counter market, down from CNY 6.8397.
British pound moved lower vis-Ă -vis the U.S. dollar today as cable tested bids
around the US$ 1.4650 level and was capped around the US$ 1.4755 level. BRC reported U.K. December retail sales â€śwonâ€™t
be pretty.â€ť RICS yesterday reported
house prices will fall an additional 10% in 2009. Tuesdayâ€™s data suggested the U.K. economy
shrank 0.6% in Q3 and many traders believe Bank of Englandâ€™s Monetary Policy
Committee will drive interest rates towards zero per cent in 2009. Cable bids are cited around the US$ 1.4470 level. The
euro moved higher vis-Ă -vis the British pound as the single currency tested
offers around the â‚¤0.9570 level and was supported around the â‚¤0.9480 level.
franc depreciated vis-Ă -vis the U.S. dollar today as the greenback tested offers
around the CHF 1.0790 level and was supported around the CHF 1.0730 level. Technically, todayâ€™s intraday low was right
around the 38.2% retracement of the move from CHF 1.2465 to CHF 0.9645. Swiss National Bank yesterday published a
grim report today that indicates Swiss companies expect business conditions to
â€śconsiderably worsenâ€ť in 2009. U.S. dollar offers are cited around the CHF
1.1160 level. The euro moved higher vis-Ă -vis the Swiss franc as the single
currency tested offers around the CHF 1.5120 level while the British pound moved lower vis-Ă -vis the Swiss franc and tested
bids around the CHF 1.5800 figure.
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