1. This site uses cookies. By continuing to use this site, you are agreeing to our use of cookies. Learn More.

Daily Market Commentary

Discussion in 'Forex Daily News & Outlook' started by gcitrading, Jan 10, 2011.

  1. gcitrading

    gcitrading Contributing Member

    Joined:
    Dec 16, 2008
    Messages:
    329
    Likes Received:
    0

    The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2940 level and was supported around the $1.2875 level. The common currency reached its lowest level since 14 September 2010 before European and North American dealers lifted the pair. The pair gapped about 30 points lower on today’s open from Friday’s close as dealers reacted to media reports that Portugal is facing pressure from Germany and France to accept a bailout. The European Union denied the story, saying there are “no talks going on” about Portugal receiving aid. Dealers are carefully monitoring sovereign debt issuance in the eurozone this week as Portugal, Greece, Spain, and Italy are scheduled to sell a significant amount of debt this week. Traders report the European Central Bank was on the bid for Irish, Portuguese, and Greek bonds during the European session ahead of these debt sales. ECB President Trichet today reported “Inflationary threats present some kind of general feature in the emerging world; it’s something you don’t see necessarily in advanced economies. It’s clear that it is extremely important that we all keep control of inflation expectations, and that calls for appropriate decisions.” Speaking about global economic growth, Trichet added “Since the start of the recovery, we were observing results in terms of facts and figures, in terms of real economic evolution, that were better than forecast. I would say that it’s also the case until now in the euro area.” Former ECB Chief Economist Issing spoke pessimistically about the eurozone today, saying “The present seemingly unstoppable process toward further financial transfers will generate tensions of an economic and especially political kind. The longer this process is characterized by unsound conduct of individual member countries, the more these tensions will endanger the existing of EMU.” The ECB is not expected to change monetary policy when its decision is announced on Thursday. Data released in the eurozone today saw the EMU-16 December Sentix investor confidence index improve to 10.6 from the prior level of 9.7. Also, French industrial production was up 2.3% m/m and 6.0% y/y while November manufacturing production was up 2.2% m/m and 5.1% y/y. In U.S. news, data to be released tomorrow include November wholesale inventories. Traders are still talking about Friday’s weaker-than-expected U.S. December non-farm payrolls report with many economists suggesting monthly payroll gains of at least 200,000 are required to make sustainable reductions in the unemployment rate. San Francisco Fed President Yellen spoke this weekend and said the Fed’s balance sheet could stay “elevated” for two years after completing its large-scale U.S. Treasuries purchases within a year, and then return to its pre-crisis size over five years. Chicago Fed President Evans reported changing the size of the Fed’s US$ 600 billion quantitative easing program would be a “pretty high hurdle.” Euro bids are cited around the US$ 1.2740 level.
    ¥/ CNY
    The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥82.95 level and was capped around the ¥83.25 level. Technically, the pair continues to orbit the ¥83.10 level, representing the 50% retracement of the ¥85.95 – 80.25 level. Bank of Japan Deputy Governor Nishimura reported the central bank needs to “avoid creating an impression of the monetization of government debt. Otherwise, purchases may lead to a substantial and lasting ratcheting-up of long-term rates which would pose a serious problem for economic recovery and the financial position of the government.” Nishmura also warned an increase in long-term rates could create a “serious problem.” Data to be released in Japan this week include the November coincident index, November leading index, December bank lending, November current account, December economy watchers survey, and the December domestic corporate goods price index. December official reserves assets data will be released tonight. Data released in Japan last week saw the December monetary base climb +7.0% y/y, down from the prior reading of +7.6% y/y. The Nikkei 225 stock index climbed 0.11% on Friday to close at ¥10,541.04 and will reopen tonight. U.S. dollar offers are cited around the ¥84.60 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥106.95 level and was capped around the ¥107.65 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥128.70 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥85.75 level. In Chinese news, the U.S. dollar appreciated vis-à-vis the Chinese yuan today as the greenback closed at CNY 6.6350 in the over-the-counter market, up from CNY 6.6320. Data released in China overnight saw the December trade balance narrow to US$ 13.10 billion from the prior reading of US$ 22.89 billion, far below forecasts and principally due to a sizable decrease in export activity to +17.9% y/y. China-watchers believe the country’s foreign exchange reserves probably increased to around US$ 2.75 trillion in the fourth quarter and this dramatic increase will likely lead to additional pressure on People’s Bank of China to remove liquidity from the economy. Chinese President Hu will visit the U.S. later this month and there are expectations the yuan will be permitted to appreciate before his visit. People’s Bank of China official Xu Nuojin reported China must diversify its foreign exchange reserves away from the U.S. dollar. PBoC Governor Zhou last week hawkishly reported “Monetary easing policies in the U.S. and other major economies are leading to abundant liquidity in international markets, intensifying imported inflationary pressure.” China is said to be targeting 8% GDP growth and 4% inflation growth in 2011 along with 16% M2 money supply growth.
    £

    The British pound depreciated vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.5475 level and was capped around the US$ 1.5570 level. Technically, today’s intraday high was right around the 23.6% retracement of the $1.6300 – 1.5350 range. Data released in the U.K. today saw December Halifax house prices off 1.3% m/m. Many data will be released in the U.K. this week including the November trade balance, November industrial production, and November manufacturing production. Bank of England’s Monetary Policy Committee is not expected to change monetary policy when its decision is announced on Thursday. Bank of England official Bailey said the European debt crisis’s threat on the U.K. has been “limited” as banks have “refinanced debt at longer maturities and raised their buffers of capital.” Cable bids are cited around the US$ 1.5265 level. The euro depreciated vis-à-vis the British pound as the single currency tested bids around the £0.8335 level and was capped around the £0.8425 level.

    CHF
    The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 0.9695 level and was supported around the CHF 0.9630 level. Technically, today’s intraday high was right around the 50% retracement of the CHF 1.0070 – 0.9300 range. Data released in Switzerland today saw November retail sales up a real 2.5% y/y. The Swiss media reported the Swiss government will be discussing the impact of the franc’s gains on the economy. Swiss National Bank last week reported its foreign currency holdings fell to CHF 202.6 billion in December. Swiss National Bank last week confirmed that it will no longer accept bonds issued by Ireland and some of its financial institutions as collateral for liquidity operations following recent credit rating downgrades. The dominant theme in Switzerland in 2011 will be whether or not Swiss National Bank restarts its franc-selling intervention operations, or even has the war chest do so to prevent exporters’ margins from eroding. SNB incurred approximately CHF 22 billion of intervention-related losses in the first nine months of 2010 on account of its inability to halt the franc’s appreciation. Swiss National Bank Chairman Hildebrand has labeled the franc’s record rally a “burden.” U.S. dollar offers are cited around the CHF 0.9780 level. The euro appreciated vis-à-vis the Swiss franc as the single currency tested offers around the CHF 1.2515 level while the British pound moved lower vis-à-vis the Swiss franc and tested bids around the CHF 1.4925 level.
     
Loading...

Share This Page