Friday January 8, 2010 - 21:20:22 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (8 January 2010)
The euro appreciated vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4440
level and was supported around the $1.4265 level. Euro bulls were emboldened by
weaker-than-expected U.S. December non-farms payrolls data that saw December
non-farm payrolls decline 85,000, compared with a revised 4,000 gain for
November ‚Äď the first gain in several months.
In contrast, October‚Äôs tally was downwardly revised and the December
unemployment rate remained unchanged at 10.0%.
Manufacturing payrolls improved to -27,000 from a revised -35,000 and
December average weekly hours were unchanged at 33.2. Moreover, December hourly earnings were up
0.2% m/m and 2.2% y/y. These data were
definitely a setback for dollar bulls who thought the tide had turned in the
labour market. Economists are now
wondering if the Obama administration will now steer fiscal stimulus towards
projects that actually create jobs.
Additionally, today‚Äôs number could delay some rate hikes from the
Federal Reserve. Fed funds futures had
been discounting higher rates by the March Federal Open Market Committee
meeting but that now seems implausible. The Fed may be forced to delay its
eventual rate hikes to later in the year.
Other data released today saw November wholesale inventories up 1.5%
from a revised 0.6% in October and November consumer credit widened to a record
‚ÄďUS$ 17.5 billion from a revised prior reading of ‚ÄďUS$ 4.2 billion. Richmond Fed President Lacker spoke and said
the economy ‚Äúmay face an increasing risk of inflation edging upward.‚ÄĚ In
eurozone news, EMU-16 November unemployment reached 10%, its highest level
in eleven years. French Prime Minister
Fillon reported the Group of Twenty should focus on currency imbalances when
they next convene. Other data saw German
industrial production rise 0.7% m/m and decline 8% y/y. Additionally, EMU-16 gross domestic product
growth was up 0.4% q/q and off 4% y/y in Q3 while the German November trade surplus increased to
‚ā¨17.4 billion from ‚ā¨13.4 billion. Euro
bids are cited around the US$ 1.3885 level.
The yen appreciated vis-√†-vis the U.S. dollar today as the
greenback tested bids around the ¬•92.25 level and was capped around the ¬•93.75
level. New finance minister Kan clarified his
remarks from the day before, indicating it is his responsibility to respond to
moves in the currency market but added the markets should determine rates. On Thursday, Kan indicated the yen should be weaker
whereas his predecessor, Fujii, green-lighted a stronger yen when he first took
office last year. Chief Cabinet
Secretary Hirano said the government should not make any comments that could
impact the markets. Prime Minister
Hatoyama said rapid exchange rate moves are ‚Äúnot good‚ÄĚ and ‚Äúunwelcome.‚ÄĚ Most
traders believe the Japanese government will probably try to orchestrate a
weaker yen to help counter deflationary pressures and stimulate foreign
trade. Data released overnight saw foreign
reserves decline to US$ 1.049 trillion at the end of December while the
November leading indicator was up +1.8. Also,
the December trade surplus printed at ¬•129.355 billion during the first twenty
days of December. The Nikkei 225 stock
index climbed 1.09% to close at ¬•10,798.32.
U.S. dollar offers are cited
around the ¬•94.75 level. The euro moved lower vis-√†-vis the yen
as the single currency tested bids around the ¬•132.45 level and was capped around
the ¬•134.10 level. The British pound moved lower vis-√†-vis the yen as sterling tested bids
around the ¬•148.05 level while the Swiss
franc moved higher vis-√†-vis the yen and tested offers around the ¬•90.60
level. In Chinese news, the U.S.
dollar appreciated vis-√†-vis the Chinese yuan as the greenback closed at CNY
6.8276 in the over-the-counter market, up from CNY 6.8275. Yesterday, People‚Äôs Bank of China guided
interest rate expectations higher by selling three-month bills at higher rates
for the first time in nineteen weeks.
This evidences the central bank‚Äôs attempt to tighten liquidity. PBoC-watchers
believe the central bank may lift interest rates for the first time in three
years by September. This week, People‚Äôs
Bank of China yesterday reported it will support ‚Äúrelatively fast‚ÄĚ economic
growth and manage inflation expectations.
Additionally, PBoC noted it will target ‚Äúmoderate‚ÄĚ loan growth in
British pound appreciated vis-√†-vis the U.S. dollar today as cable tested offers
around the US$ 1.6110 level and was supported around the $1.5915 level. Data
released in the U.K.
today saw December producer price inflation up 0.5% m/m and 3.5% y/y at the
output level while input was up 0.1% m/m and 6.9% y/y. Yesterday, Bank of
England kept its main Bank rate unchanged at 0.5% and kept its bond purchase
program unchanged at ‚ā§200 billion, also as expected. Policymakers have made it clear they will
modify the asset purchase program as required. There are two major focuses for
traders now. First, there is increasing speculation the central bank will not
lift interest rates in 2010. Second, there
is a worsening political environment for Prime Minister Brown, including
decreasing confidence among some in the Labour party. Cable bids are cited around the US$ 1.5730 level.
The euro gained ground vis-√†-vis the
British pound as the single currency tested offers around the ‚ā§0.9005 level and
was supported around the ‚ā§0.8920 level.
franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested
bids around the CHF 1.0215 level and was capped around the CHF 1.0385 level. Data released in Switzerland today saw the December
unemployment rate increase to 4.4% from 4.2% in November. Swiss National Bank is expected to keep
interest rates unchanged for at least the next couple of months. U.S. dollar offers are cited around the CHF 1.0615
level. The euro came off vis-√†-vis the Swiss franc as the single currency
tested bids around the CHF 1.4740 level while the British pound moved lower vis-√†-vis the Swiss franc and tested
bids around the CHF 1.6370 level.
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