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Daily Market Commentary

Discussion in 'Forex Daily News & Outlook' started by gcitrading, Feb 4, 2011.

  1. gcitrading

    gcitrading Contributing Member

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    The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3540 level and was capped around the $1.3640 level. Technically, today’s intraday low was below the $1.3576 level, representing the 50.0% retracement of the $1.2587 - $1.4281 range. The common currency moved to intraday lows after it was reported that U.S. January non-farm payrolls came in at +36,000, far below estimates between +140,000 and +150,000 and down from the revised 121,000 December figure. Also, the January unemployment rate fell to 9.0% from 9.4% in December, far below the 9.5% estimate. January private payrolls were up 50,000, down from the revised +139,000 December figure, and January manufacturing payrolls grew to 49,000 from the revised December reading of 14,000. Other data saw January average weekly hours worked tick lower to 34.2 while January average hourly earnings were up 0.4% m/m and 1.9% y/y. The euro reacted negatively as traders cited less demand for riskier assets like equities. Bad weather was partially accountable for the large distortion in January’s number. Economists note there are typically about 417,000 persons who cannot work due to weather conditions during the month of January and last month there were 886,000 workers impacted by seasonal effects Fed Chairman Bernanke spoke yesterday and said a failure to raise the U.S. debt limit would have “catastrophic” consequences. He also said the Fed expects U.S. economic growth will expand above the 2.5% level required to reduce the unemployment rate. Bernanke also said the Fed is considering an enhancement to transparency by increasing the number of press conferences. Many Fed-watchers continue to forecast the Fed will not raise official interest rates in 2011 and believe the Fed will exhaust its US$ 600 billion asset-purchase program as expected by mid-year. In eurozone news, EMU-17 finance ministers are convening today to discuss the eurozone sovereign debt crisis and the European Financial Stability Facility. European Central Bank member Nowotny was quoted as saying he believes inflation will remain above 2% for some months but will decline later this year and average 1.8% in 2012. Traders are also reacting to news that Egyptian President Mubarak may be stepping down from office as early as today. Euro bids are cited around the US$ 1.3505 level.
    ¥/ CNY
    The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥82.25 level and was supported around the ¥81.10 level. Technically, today’s intraday low was below the ¥81.25 level, representing the 76.4% retracement of the ¥80.24 – 84.50 range. Former Bank of Japan Executive Director Masayuki Matsushima warned Japan is in a “bond bubble” that may burst in a few years if its debt burden is not offset by higher taxes. Last week, Standard & Poor’s downgraded Japan’s sovereign debt rating to AA-, warning the Kan government “lacks a coherent strategy” to address the country’s debt. Domestic Japanese investors hold 90% of Japanese government debt and they will be encouraged to purchase more Japanese government bonds. At the same time, however, bank lending decreased 1.8% last year, the first decline in five years. Bank of Japan today reported “A somewhat sensitive bias is likely to continue in financial markets for the time being, as market participants are expected to react nervously to economic indicators and changes to macroeconomic policies in each country. Caution in the markets is high because it’s difficult to foresee economic and financial structural problems in Europe being solved in the short term, and a massive amount of eurozone government bonds are scheduled to mature in the spring.” The Nikkei 225 stock index gained 1.08% to close at ¥10,543.52. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥111.40 level and was supported around the ¥111.05 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥131.25 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥85.85 level. In Chinese news, the U.S. dollar was unchanged vis-à-vis the Chinese yuan today the greenback closed at CNY 6.5850 in the over-the-counter market. Liquidity was light on account of the Chinese New Year holiday. Data released in China this week saw January PMI manufacturing decline to 52.9 while January non-manufacturing PMI ticked lower to 56.4. January HSBC services PMI and January trade balance data will be released next week. People’s Bank of China is largely expected to raise official interest rates over the next several weeks. PBoC adviser Li this week reported the Chinese economy will continue to expand at a clip of at least 9.5% and said the inflation rate may exceed 5% in the first quarter.
    £

    The British pound depreciated vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.6035 level and was capped around the US$ 1.6170 level. Technically, today’s intraday low was below the $1.6058 level, representing the 23.6% retracement of the $1.5344 – 1.6277 range. Data released in the U.K. today saw January Halifax house prices up 0.8% m/m and data released earlier this week included an improvement in January PMI services. Data to be released next week include the BRC retail sales monitor, January RICS house prices, December trade balance, December industrial production, December manufacturing production, and January producer prices inflation. Bank of England’s Monetary Policy Committee is expected to keep its benchmark Bank Rate unchanged at 0.50% next week and its asset purchase program unchanged at £200 billion. Two MPC members voted for a rate hike in January and given the elevated rate of inflation, other MPC members could join the call for higher rates next week. Former MPC member Barker said the BoE has suffered a “modest loss of credibility” on account of the central bank’s response to higher inflation. Cable bids are cited around the US$ 1.5965 level. The euro appreciated vis-à-vis the British pound as the single currency tested offers around the £0.8475 level and was supported around the £0.8420 level.
    CHF
    The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 0.9595 level and was supported around the CHF 0.9450 level. Technically, today’s intraday high was right around the CHF 0.9592 level, representing the 38.2% retracement of the CHF 1.0065 – 0.9299 range. Data released in Switzerland today saw January foreign currency reserves increase to CHF 207.9 billion and it is not believed Swiss National Bank conducted franc-selling intervention last month. Data to be released next week include the January unemployment rate, January SECO consumer confidence, and January consumer price inflation. Data released in Switzerland this week saw the December trade balance expand to CHF 1.93 billion from the revised prior reading of CHF 1.79 billion. Swiss banking giant UBS reported it expects Swiss National Bank will begin raising its benchmark rate in June by 25bps to 0.5%, three months later than previously expected. Former Swiss National Bank Chairman Roth this week was quoted as saying “The problem is less in the advance of the franc but with the speed of the movement in 2010. But wouldn’t the situation have been even worse if the SNB hadn’t intervened? Those who now criticize its actions should look at the facts and measure the associated risks.” U.S. dollar offers are cited around the CHF 0.9775 level. The euro appreciated vis-à-vis the Swiss franc as the single currency tested offers around the CHF 1.2960 level while the British pound moved higher vis-à-vis the Swiss franc and tested offers around the CHF 1.5320 level.
     
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