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Daily Market Commentary - 22/12/2008

Discussion in 'Forex Daily News & Outlook' started by gcitrading, Dec 22, 2008.

  1. gcitrading

    gcitrading Contributing Member

    Dec 16, 2008
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    GCI Foreign Exchange Research: www.gcitrading.com/fxnews/
    FX Research Desk: fxnews@gcitrading.com
    22 December 2008, Monday
    Fundamental Outlook at 1500 GMT (EDT + 0500)

    The euro moved higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4125 level and was supported around the $1.3900 figure. Liquidity continues to lessen ahead of the Christmas holiday period and will remain light through the New Year holiday. International Monetary Fund chief Strauss-Kahn said 2009 is poised to be a “really bad year” for the global economy and will be worse-than-expected if major fiscal stimuli are not enacted. In U.S. news, President Bush is deciding whether or not to seek the second tranche of Troubled Asset Relief Program funds from Congress totaling US$ 350 billion. Bush offered the U.S. auto industry a US$ 17.4 billion lifeline late last week. Data released in the U.S. today saw the Chicago Fed’s National Activity Index fall to -2.49 for the three months to November, the lowest in 27 years. In eurozone news, EMU-15 October new industrial orders fell 4.7% m/m and 15.1% y/y, the largest annual decline since at least 1997. European Central Bank member Stark said he is not concerned about the recent disinflation in the eurozone economy and said deflation “is not to be expected.” Stark also said there are “arguments speaking in favour of a gradual upturn (in economic growth) from the end of next year.” Other data saw German GfK January consumer sentiment remain unchanged at 2.1. Euro bids are cited around the US$ 1.3300 figure.

    The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥90.45 level and was supported around the ¥89.10 level. Bank of Japan’s monthly economic report was extremely pessimistic, noting conditions are “deteriorating” on account of weak sentiment, declining production, and falling private demand. This marked the first time the central bank has characterized the economy as “deteriorating” since March 2002. Speaking about the possibility of additional rate cuts, BoJ Governor Shirakawa reported “As overnight interest rates among financial firms have become very accommodative in both Japan and the U.S., the cost and availability of corporate financing - that is, how to ease firms' fundraising conditions - is a meaningful point for monetary policy when considering the effects of rate (cuts) to stimulate the economy.” This likely means the central bank is likely to keep its overnight call rate unchanged at 0.10% for some time following Friday’s cut from 0.30% and enact additional methods to enhance the provision of liquidity. The Japanese government also cut its view on the economy overnight, indicating the economy is “worsening” for the first time since February 2002. This represents the third consecutive month the government has downgraded its economic outlook and the government said many economic sectors are worsening “at an exceptionally high pace.” Data released in Japan overnight saw November exports decline 26.7% y/y to ¥5.327 trillion and this is a primary reason why the government may decide to conduct yen-selling intervention. Also, October industrial output fell a larger-than-expected 3.1% and Q4 may end up declining by as much as 8.5%. The Nikkei 225 stock index gained 1.57% to close at ¥8,723.78. U.S. dollar offers are cited around the ¥104.15 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥126.60 level and was supported around the ¥123.90 level. The British pound gained ground vis-à-vis the yen as sterling tested offers around the ¥134.65 level while the Swiss franc moved higher vis-à-vis the yen as the franc tested offers around the ¥82.65 level. The Chinese yuan depreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8510 in the over-the-counter market, up from CNY 6.8465. People’s Bank of China announced it will reduce deposit and lending rates and also lower banks’ reserve requirements ratio. Today’s move represents PBoC’s fifth rate cut since mid-September. China reported its foreign exchange reserves fell in October to less than US$ 1.89 trillion, the first monthly decline since December 2003. Data released in China today saw November wholesale prices fall sharply, off 0.4% y/y and down from October’s 4.0% y/y gain.
    #1 gcitrading, Dec 22, 2008
    Last edited by a moderator: Dec 22, 2008

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