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Daily Market Commentary - 19/12/2008

Discussion in 'Forex Daily News & Outlook' started by gcitrading, Dec 19, 2008.

  1. gcitrading

    gcitrading Contributing Member

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    GCI Foreign Exchange Research: www.gcitrading.com/fxnews/
    FX Research Desk: fxnews@gcitrading.com
    ______________________________________________________________________________________

    19 December 2008, Friday
    Fundamental Outlook at 1500 GMT (EST + 0500)

    EURO

    The euro moved sharply lower vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3825 level and was capped around the $1.4305 level. The common currency extended yesterday’s losses as traders reassess the likelihood of additional monetary easing by the European Central Bank. NYMEX crude oil futures for February delivery traded with a $40 handle and some traders believe the euro will fall further as the price of crude falls below the psychologically-important US$ 40.00 figure. Also, traders moved into US$ assets after the Bush administration offered a US$ 17.4 billion facility to General Motors and Chrysler provided they can substantiate their viabilities as ongoing concerns by 31 March. With its key rate still at 2.5%, the ECB definitely has scope to expand monetary policy further and this is one reason why ECB President Trichet last night was cautious about the prospects of quantitative easing. Data released in the eurozone today saw the French December business climate indicator at a historic low. In U.S. news, Treasury Secretary Paulson called on Congress to release the second US$ 350 billion tranche of bailout funds under the Troubled Asset Relief Program. The Fed announced it will hold three auctions of 28-day loans and three auctions of 84-day loans in Q1 2009. Similar announcements were made by the ECB, BoE, SNB, and BoJ. Euro bids are cited around the US$ 1.3300 figure.

    JPN/CNY

    The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥89.80 level and was supported around the ¥88.40 level. As expected, Bank of Japan’s Policy Board reduced interest rates overnight, taking the overnight call rate lower to 0.10% from 0.30%. BoJ also announced it will increase its outright purchase of Japanese government bonds and temporarily purchase commercial paper outright. BoJ Governor Shirakawa characterized the global economic turmoil as “the most rapid in our lifetime” but said these new measures do not constitute quantitative easing. Some traders were disappointed BoJ did not take rates all the way to 0%. The central bank also announced it will hold four additional auctions of U.S. dollar liquidity in Q1 2009, part of a plan being undertaken by the Fed, BoE, ECB, and SNB to enhance global liquidity provision. The Japanese government reported its 2009/ 2010 budget will top a record ¥88.5 trillion and sees zero per cent economic growth in the year to March 2010. Data released in Japan today saw the October all-industries index fall 0.5% m/m. The Nikkei 225 stock index shed 0.91% to close at ¥8,588.52. 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 ¥123.75 level and was capped around the ¥128.20 level. The British pound came off vis-à-vis the yen as sterling tested bids around the ¥132.50 level while the Swiss franc moved lower vis-à-vis the yen as the franc tested bids around the ¥80.20 level. The Chinese yuan depreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8465 in the over-the-counter market, up from CNY 6.8295.
     
    #1 gcitrading, Dec 19, 2008
    Last edited by a moderator: Dec 20, 2008
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