Friday December 26, 2008 - 16:43:26 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (26 December 2008)
moved higher vis-Ă -vis the U.S. dollar today as the single currency tested
offers around the US$ 1.4115 level and was supported around the $1.4035 level. Liquidity was light as traders continued to
celebrate the Christmas and Boxing Day holidays. Many data were released in the U.S. on
Wednesday and they pointed to a deepening recession. First, weekly initial
jobless claims reached a 26-year high, up 30,000 to 586,000. Nearly two million U.S. workers have lost their jobs
this year and pushed the unemployment rate higher to 6.7%. Second, personal spending fell 0.6% in
November while personal incomes fell 0.2%. These data underscore the fragile
nature of final private demand and represented the fifth consecutive monthly
decline in spending. Third, durable
goods orders were off 1% in November, less-than-expected. Chancellor Merkel is likely to come under
more fire for not adopting greater fiscal stimulus plans. European Central Bank President Trichet on
Tuesday called on governments to be mindful of the amount of debt theyâ€™re
assuming to fund fiscal stimulus programs.
ECB member Nowotny on Wednesday indicated additional interest rate cuts
by the ECB cannot be ruled out.
Liquidity is expected to remain light through next week. Euro bids are cited around the US$ 1.3300
The yen depreciated vis-Ă -vis the U.S. dollar today as the
greenback tested offers around the ÂĄ90.65 level and was supported around the ÂĄ90.35
level. Many data were released in Japan
overnight. First, November annual core
inflation slowed sharply to 1.0% in November from 1.9% in October, while core
inflation excluding food and energy prices was 0%. These data evidence growing deflationary
pressures in Japan. Second, the government reported the November
jobless rate rose to 3.9% from 3.7% in October.
Third, wage earnersâ€™ total case earnings were off 1.9% y/y in November,
the first decline in nearly one year. Fourth, industrial output was off 8.1%
m/m in November, the largest decline on record, and these data suggest Japanâ€™s
current economic pullback could be deeper and longer than currently
anticipated. Fifth, November retail
sales were down 0.9% y/y. Sixth, November all household spending was off 0.5%
y/y. Seventh, PMI fell to a record low
as recessionary pressures intensified.
Economics Minister Yosano was doubtful that quantitative easing measures
would do much to revive bank lending.
Yosano reported â€śIt may have some psychological effect, but on whether
the money will reach companies, I doubt it.
When the vicious cycle of fear sets in, only direct measures would make
a real difference.â€ť The Nikkei 225 stock
index gained 1.63% to close at ÂĄ8,739.52.
U.S. dollar offers are cited around the ÂĄ104.15 level. The
euro moved higher vis-Ă -vis the yen as the single currency tested offers
around the ÂĄ127.65 level and was supported around the ÂĄ127.10 level. The
British pound came off vis-Ă -vis the yen as sterling tested bids around the ÂĄ132.95 level while the Swiss franc gained ground vis-Ă -vis
the yen and tested offers around the ÂĄ84.70 level. The
Chinese yuan depreciated vis-Ă -vis the U.S. dollar as the greenback closed
at 6.8414 in the over-the-counter market, up from CNY 6.8313.
British pound moved lower vis-Ă -vis the U.S. dollar today as cable tested bids
around the US$ 1.4690 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 on Wednesday 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‚¤0.9580 level and was supported around the â‚¤0.9530 level.
franc appreciated vis-Ă -vis the U.S. dollar today as the greenback tested bids
around the CHF 1.0695 level and was capped around the CHF 1.0755 level. Swiss National Bank on Wednesday 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 1.5130 level while the British pound moved lower vis-Ă -vis the Swiss franc and tested
bids around the CHF 1.5705 level.
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