Thursday December 24, 2009 - 17:07:25 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (24 December 2009)
The euro moved higher vis-Ă -vis the U.S. dollar today as the single currency tested offers around the US$ 1.4415
level and was supported around the $1.4320 level. Traders lifted the common
currency after Greece
approved a plan to reduce its budget deficit.
move allayed some recent sovereign credit concerns that had been mounting in
recent weeks and impacting the common currency negatively. Greece plans to reduce its budget
deficit in 2010 to a level equal to 9.1% of gross domestic product, a move that
may prevent the deficit from exceeding 12% of GDP. Nonetheless, Greeceâ€™s budget deficit will remain
more than three times above the permissible limits of the European Union. European Central Bank member Wellink said the
eurozoneâ€™s economic recovery remains fragile and said the euroâ€™s strong level
is negatively impacting Dutch exports.
It is likely other policymakers will assail the euroâ€™s relative strength
if it persists in the New Year. Data
released in the eurozone today saw the CEPR Eurocoin activity indicator rise to
0.68 in December, the highest level in two years and an indication of a further
increase in consumer and business confidence.
In U.S. news, data released
in the U.S. today saw November durable goods orders climb 0.2%, up from the
October reading of -0.6%, while the ex-transportation component exceeded
expectations at +2.0%, above the upwardly revised October reading of
-0.7%. Also, weekly initial jobless
claims fell to 452,000 from 480,000 and continuing jobless claims slumped to
5.076 million from a revised 5.203 million.
Euro bids are cited around the US$ 1.3885 level.
The yen depreciated vis-Ă -vis the U.S. dollar today as the
greenback tested offers around the ÂĄ91.75 level and was supported around the ÂĄ91.10
level. Minutes from Bank of Japanâ€™s
latest Policy Board meeting were released in which the government asked the
central bank to monitor deflation. The
minutes revealed â€śmanyâ€ť Policy Board members agreed â€śthe bank would maintain
its stance of responding promptly to changes in the market situation.â€ť Policymakers said the central bank â€śwould
adopt the most effective method for money-market operations that conformed to
changes in financial markets.â€ť After an
emergency meeting on 1 December, the central bank introduced a ÂĄ10 trillion
fixed-rate lending facility that was designed to arrest the yenâ€™s advances and
counter deflation. The central bank also
characterized the most recent bout of deflation as â€śmild.â€ť Data released in Japan overnight saw the
finance ministryâ€™s October â€“ December company sentiment survey released with
sentiment falling back to -1.9 from +0.3 in the July â€“ September period. Big manufacturers and big non-manufacturers
all experienced a pullback in sentiment during the last business quarter of the
year. Interestingly, this report is at
odds with Bank of Japanâ€™s recently-released quarterly Tankan survey of
corporate sentiment. The Nikkei 225 stock
index climbed 1.53% to close at ÂĄ10,536.92.
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 ÂĄ131.85 level and was supported around the ÂĄ130.90 level. The
British pound moved higher vis-Ă -vis the yen as sterling tested offers
around the ÂĄ146.45 level while the Swiss
franc moved higher vis-Ă -vis the yen and tested offers around the ÂĄ88.60 level.
In Chinese news, the U.S. dollar depreciated
vis-Ă -vis the Chinese yuan as the greenback closed at CNY 6.8290 in the
over-the-counter market, down from CNY 6.8294.
Peopleâ€™s Bank of China reaffirmed its plans to maintain a â€śmoderately
looseâ€ť policy stance in 2010 and to restrict credit for industries that have
excess capacity. PBoC also asked Chinese
banks to improve management of interest rates risks. China appears poised to register
economic growth of 8% this year. Chinese lenders provided US$ 1.3 trillion in
loans in the first eleven months of the year.
Monetary policy adjustments are expected in 2010 to slow the pace of
economic growth and inflationary pressures.
Peopleâ€™s Bank of China Governor Zhou this week reported reserve ratios
are an important policymaking tool and there is widespread speculation the
central bank will lift reserve requirements for banks when policy is tightened
further. Peopleâ€™s Bank of China advisor Fan Gang this week
said the U.S. dollar may decline in the â€śvery long termâ€ť and fluctuate in the
short term. State
member Zhu Baoliang reported â€śthe yuan shouldnâ€™t move against the dollar next
year.â€ť The Chinese government reported industrial output will have expanded 11%
in 2009 when final data are tallied. A
government think tank reported retail sales will likely expand 18.5% in 2010
with exports up 6% next year.
British pound depreciated vis-Ă -vis the U.S. dollar today as cable tested bids
around the US$ 1.5925 level and was capped around the $1.6020 level. Many traders believe Bank of Englandâ€™s
Monetary Policy Committee will keep monetary policy unchanged until at least
February when fourth quarter gross domestic product data are available along
with the latest quarterly inflation forecast.
BBA yesterday reported net mortgage lending by U.K. banks
increased â‚¤3.3 billion in November, up from a â‚¤3.2 billion rise in
October. Demand for consumer credit
weakened last month as â‚¤300 million was repaid by borrowers, up from â‚¤200
million in October. BBA also reported
that mortgage approvals rose to a two-year high of 44,713 in November. Minutes from Bank of Englandâ€™s 9-10 December
Monetary Policy Committee meeting were released yesterday in which policymakers
unanimously voted to keep the BoEâ€™s asset purchase facility unchanged at â‚¤200
billion and its main Bank Rate unchanged at a record-low of 0.5%. Cable bids are cited around the US$ 1.5755
level. The euro moved higher vis-Ă -vis the British pound as cable tested
offers around the â‚¤0.9015 level and was supported around the â‚¤0.8965 level.
The Swiss franc
appreciated vis-Ă -vis the U.S. dollar today as the greenback tested bids
around the CHF 1.0320 level and was capped around the CHF 1.0400 figure. There
remains ongoing talk the Swiss National Bank is conducting franc-selling
intervention. Swiss National Bank
released its quarterly report on Monday and said it would be â€śprematureâ€ť to
begin raising borrowing costs, noting there are â€śdownside risksâ€ť to the
inflation outlook.â€ť Trying to provide a
balanced outlook, however, SNB reported â€śexpansionary monetary policy cannot be
maintained indefinitely.â€ť On 10 December, SNB voted to keep its benchmark rate
unchanged at 0.25% and noted it will end its corporate bond purchases as a
first step to withdraw its emergency measures.
On Monday, SNB reported it will â€ścontinue to act decisively to prevent
any excessive appreciation.â€ť U.S. dollar
offers are cited around the CHF 1.0615 level.
The euro moved lower
vis-Ă -vis the Swiss franc as the single currency tested bids around the CHF 1.4875
level while the British pound
depreciated vis-Ă -vis the Swiss franc and tested bids around the CHF 1.6495
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