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Daily Market Commentary - 26/12/2008

Discussion in 'Forex Daily News & Outlook' started by gcitrading, Dec 26, 2008.

  1. gcitrading

    gcitrading Contributing Member

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    GCI Foreign Exchange Research
    26 December 2008, Friday
    Fundamental Outlook at 1500 GMT (EST + 0500)


    EURO
    The euro moved higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4115 level and was supported around the $1.4035 level. Liquidity was light as traders continued to celebrate the Christmas and Boxing Day holidays. Many data were released in the U.S. on Wednesday and they pointed to a deepening recession. First, weekly initial jobless claims reached a 26-year high, up 30,000 to 586,000. Nearly two million U.S. workers have lost their jobs this year and pushed the unemployment rate higher to 6.7%. Second, personal spending fell 0.6% in November while personal incomes fell 0.2%. These data underscore the fragile nature of final private demand and represented the fifth consecutive monthly decline in spending. Third, durable goods orders were off 1% in November, less-than-expected. Chancellor Merkel is likely to come under more fire for not adopting greater fiscal stimulus plans. European Central Bank President Trichet on Tuesday called on governments to be mindful of the amount of debt they’re assuming to fund fiscal stimulus programs. ECB member Nowotny on Wednesday indicated additional interest rate cuts by the ECB cannot be ruled out. Liquidity is expected to remain light through next week. Euro bids are cited around the US$ 1.3300 figure.

    JPN/CNY
    The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥90.65 level and was supported around the ¥90.35 level. Many data were released in Japan overnight. First, November annual core inflation slowed sharply to 1.0% in November from 1.9% in October, while core inflation excluding food and energy prices was 0%. These data evidence growing deflationary pressures in Japan. Second, the government reported the November jobless rate rose to 3.9% from 3.7% in October. Third, wage earners’ total case earnings were off 1.9% y/y in November, the first decline in nearly one year. Fourth, industrial output was off 8.1% m/m in November, the largest decline on record, and these data suggest Japan’s current economic pullback could be deeper and longer than currently anticipated. Fifth, November retail sales were down 0.9% y/y. Sixth, November all household spending was off 0.5% y/y. Seventh, PMI fell to a record low as recessionary pressures intensified. Economics Minister Yosano was doubtful that quantitative easing measures would do much to revive bank lending. Yosano reported “It may have some psychological effect, but on whether the money will reach companies, I doubt it. When the vicious cycle of fear sets in, only direct measures would make a real difference.” The Nikkei 225 stock index gained 1.63% to close at ¥8,739.52. 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 ¥127.65 level and was supported around the ¥127.10 level. The British pound came off vis-à-vis the yen as sterling tested bids around the ¥132.95 level while the Swiss franc gained ground vis-à-vis the yen and tested offers around the ¥84.70 level. The Chinese yuan depreciated vis-à-vis the U.S. dollar as the greenback closed at 6.8414 in the over-the-counter market, up from CNY 6.8313.

    STERLING
    The British pound moved lower vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.4690 level and was capped around the US$ 1.4755 level. BRC reported U.K. December retail sales “won’t be pretty.” RICS on Wednesday reported house prices will fall an additional 10% in 2009. Tuesday’s data suggested the U.K. economy shrank 0.6% in Q3 and many traders believe Bank of England’s Monetary Policy Committee will drive interest rates towards zero per cent in 2009. Cable bids are cited around the US$ 1.4470 level. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.9580 level and was supported around the ₤0.9530 level.

    SWISS
    The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0695 level and was capped around the CHF 1.0755 level. Swiss National Bank on Wednesday published a grim report today that indicates Swiss companies expect business conditions to “considerably worsen” in 2009. U.S. dollar offers are cited around the CHF 1.1160 level. The euro moved higher vis-à-vis the Swiss franc as the single currency tested offers around the CHF 1.5130 level while the British pound moved lower vis-à-vis the Swiss franc and tested bids around the CHF 1.5705 level.
     
    #1 gcitrading, Dec 26, 2008
    Last edited by a moderator: Dec 26, 2008
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