Friday December 4, 2009 - 21:50:30 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (4 December 2009)
The euro lost significant ground vis-Ă -vis the U.S.
dollar today as the single currency
tested bids around the US$ 1.4820 level and was capped around the $1.5000 level.
The common currency retraced recent
gains after the release of U.S.
non-farm payrolls data that saw November non-farm payrolls decrease a
less-than-expected 11,000, down from a downwardly revised -111,000 in
October. The unemployment rate moved
lower to 10.0% from 10.2% in October and average hourly earnings were off 0.1%
m/m and 2.2% y/y. On another positive
note, November average weekly hours worked climbed to 33.2 from 33.1 and
October factory orders came in stronger-than-expected at +0.6%, down from +1.6%
in September. Some economists believe the
jobs data released today may be distorted by some seasonal factors including
holiday hiring. Many economists believe
that while job losses are minimizing and may show gains, several million jobs
have been lost over the past several months and the current U.S. economic
recovery could remain a jobless one. Todayâ€™s
economic data have revised U.S. interest rate expectations as fed funds futures
have moved lower in anticipation of rates moving higher earlier. Still, most Fed-watchers believe it could be
early 2011 before we see any appreciable rate hike by the Fed. Fed funds futures are now pricing in a rate
hike to 0.50% by Augus 2010, up from the current target range of zero per cent
to 0.25%. Fed funds futures for December
2010 imply a chance the benchmark rate could reach 1% by then. U.S. Treasury Secretary Geithner talked up
the U.S. dollar and U.S.
assets today saying â€śWhen
fear was at its most acute, when we were in mid-panic, the world brought its
savings into Treasuries. As confidence
has started to return, you're seeing some of that reverse and largely that's a
healthy development.â€ť In eurozone news, European Central Bank
member Bini Smaghi reported â€śAll the indicators are pointing to a recovery but
consumption and domestic demand are likely to be quite moderate over the course
of 2010 and in 2011 we have to think that parts of fiscal supporting measures
will have to be withdrawn.â€ť The ECB
yesterday announced to keep some emergency monetary policy measures in place
until early April and reported the interest rate on twelve-month long-term
refinancing operations will become index and floating rather than fixed. Euro bids are cited around the US$ 1.4720
The yen depreciated sharply vis-Ă -vis the U.S. dollar today as the
greenback tested offers around the ÂĄ90.75 level and was supported around the ÂĄ88.00
figure. Deputy Prime Minister Nan
verbally intervened and said â€śit would be good if the yen weakened a bit more.â€ť The pairâ€™s ascent today was hastened by the
jobs report and by ongoing verbal intervention from Japanese monetary
officials. The government also reported
it will avoid issuing new deficit-covering bonds to finance stimulus
spending. Japanâ€™s public debt is expected to
reach 227% of gross domestic product in 2010.
The gap between six-month yen Libor and six-month U.S. dollar Libor
rates moved to zero yesterday for the first time since 17 November and this has
also been dollar-supportive. Bank of
Japan this week announced a plan to offer three-month loans to commercial banks
at 0.1%, a ÂĄ10 trillion program designed to counter deflationary pressures and reverse
the yenâ€™s strength. The Nikkei 225 stock
index gained 0.45% to close at ÂĄ10,022.59.
U.S. dollar offers are cited around the ÂĄ94.75 level. The
euro moved higher vis-Ă -vis the yen as the single currency tested offers around
the ÂĄ134.55 level and was supported around the ÂĄ132.50 level. The
British pound moved higher vis-Ă -vis the yen as sterling tested offers
around the ÂĄ149.05 level while the Swiss
franc moved higher vis-Ă -vis the yen and tested offers around the ÂĄ89.15
level. In Chinese news, the U.S.
dollar depreciated vis-Ă -vis the Chinese yuan as the greenback closed at CNY
6.8276 in the over-the-counter market, down from CNY 6.8280. Chinese Commerce Minister yesterday reported
â€śThe focus of global attention shouldnâ€™t be on the yuanâ€™s exchange rate, but
the dollarâ€™s stability.â€ť The State Administration of Foreign Exchange today
reported the dollarâ€™s depreciation is a long-term trend.
British pound depreciated vis-Ă -vis the U.S. dollar today as cable tested bids
around the US$ 1.6420 level and was capped around the $1.6670 level. Some traders believe Bank of Englandâ€™s
Monetary Policy Committee will keep its bond-purchase plan at â‚¤200 billion next
week when policymakers deliberate monetary policy. BoE Chief Economist Spencer this week said
economy may be experiencing â€śrenewed expansion.â€ť Data released in the U.K. this week saw the seventh consecutive
monthly expansion in the U.K.
services sector as PMI services printed at 56.6, down from 56.9 in October but
above the boom-or-bust 50.0 level. Cable
bids are cited around the US$ 1.6290 level.
The euro moved lower vis-Ă -vis
the British pound as the single currency tested bids around the â‚¤0.8990 level
and was supported around the â‚¤0.9110 level.
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