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Daily Market Commentary - 14/01/2009

Discussion in 'Forex Daily News & Outlook' started by gcitrading, Jan 14, 2009.

  1. gcitrading

    gcitrading Contributing Member

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    14 January 2009, Wednesday
    Fundamental Outlook at 1500 GMT (EST + 0500)


    EURO
    The euro moved lower vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3090 level and was capped around the $1.3335 level. Traders are expecting the European Central Bank to reduce its main interest rate by at least 50bps tomorrow with some traders calling for 75bs of easing. Three items from today could propel the ECB to cut more than 50bps. First, Standard & Poors followed through on its threat and downgraded the sovereign credit rating of Greece to A-/A-2. S&P had recently noted that it may reduce the ratings of Spain, Portugal, and Greece. Second, there is market talk that Ireland may seek financial support from the International Monetary Fund if its economy continues to weaken. Third, EMU-15 industrial production declined a record amount in November, off 1.6% m/m and 7.7% y/y – the deepest decline since 1990. Also, German November real machinery orders were off 30% y/y. The German government is now estimating the economy was off between 1.5% and 2.0% in Q4 2008. In U.S. news, December retail sales declined for a sixth consecutive month, off a worse-than-expected 2.7%. Other data saw December import prices decline 4.2% m/m and 16.2% q/q. Lower import prices will be a relief to Federal Reserve policymakers who must continue to provide ample liquidity through their expansionary monetary policy without engendering inflation. Fed Chairman Bernanke yesterday indicated he “sees little risk of inflation in the near term.” Richmond Federal Reserve President Lacker reported the Fed may have to withdraw some monetary stimulus quickly before credit markets are healed. Other data released in the U.S. today saw November business inventories fall at their steepest pace in seven years while sales were off a record 5.1%. Euro bids are cited around the US$ 1.3055 level.

    JPN/CNY
    The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥88.60 level and was capped around the ¥89.95 level. The pair reached its lowest level since 19 December as traders’ risk aversion increased following volatility on Wall Street. Citigroup and Morgan Stanley reached a deal to combine their brokerage units and analysts believe Citigroup may be forced to sell off additional assets, possibly creating a “good bank” and a “bad bank,” the latter of which would hold toxic or underperforming assets. Bank of Japan’s Policy Board will convene on 21-22 January and is expected to announce additional plans to enhance liquidity to the corporate sector. The Nikkei 225 stock index climbed 0.29% to close at ¥8,438.45. U.S. dollar offers are cited around the ¥104.15 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥117.70 level and was capped around the ¥119.55 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥129.70 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥79.30 level. The Chinese yuan came off vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8352 in the over-the-counter market, up from CNY 6.8341. The government upwardly revised its 2007 GDP growth figure to 13.0% from 11.9%. 2008 GDP growth data will be released next week.

    STERLING
    The British pound moved higher vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.4705 level and was supported around the US$ 1.4490 level. The Brown government formally launched a ₤20 billion package to help businesses with credit issues. Data released in the U.K. today saw Q3 corporate profitability off 13.9%. Traders are closely watching the employment situation in the U.K. following Barclays’ announcement that it will trim more jobs after laying-off 4,600 people last week. Cable bids are cited around the US$ 1.3920 level. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.8975 level and was capped around the ₤0.9125 level.
     
    #1 gcitrading, Jan 14, 2009
    Last edited by a moderator: Jan 14, 2009
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