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Daily Market Commentary

Discussion in 'Forex Daily News & Outlook' started by gcitrading, Nov 16, 2009.

  1. gcitrading

    gcitrading Contributing Member

    Dec 16, 2008
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    The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.5015 level and was supported around the $1.4880 level. Federal Reserve Chairman Bernanke spoke today and said “headwinds” of reduced bank lending and a weaker labour market will restrain the pace of economic growth in the U.S. economy. Bernanke also verbally intervened to support the U.S. dollar, saying the Fed is “attentive” to its value and “will help ensure that the dollar is strong.” Bernanke also reiterated U.S. interest rates will remain low for an “extended period.” Most dealers believe rates will remain unchanged well into the middle of 2010. It is unlikely that Bernanke’s verbal intervention will lead to a volte face and sustainable reversal of the U.S. dollar’s recent weakness. Dallas Fed President Fisher said the U.S. dollar’s depreciation has been “gradual.” Data released in the U.S. today saw October retail sales climb 1.4%, more-than-anticipated and stronger than the revised -2.3% print for September. The ex-autos component was up 0.2%, worse-than-expected and down from the revised +0.4% print in September. Also, the November Empire State manufacturing index fell to 23.51 to 34.57 in October while September business inventories were off 0.4%, up from a revised -1.6% in August. In eurozone news, European Central Bank member Quaden reported “short-term measures have to be unwound at the right time and place,” the latest indication the ECB is in no hurry to change monetary policy at this time. Data released in the eurozone today saw EMU-16 October consumer prices up 0.2% m/m after remaining unchanged in September, and were off 0.1% y/y in October – the fifth consecutive annual decline. ECB member Weber spoke today and said “stabilization is not recovery…
    "Even if the banking sector is looking more solid since the stabilization of the financial markets, there are still challenges ahead which should not be underestimated.” Euro bids are cited around the US$ 1.4445 level.

    The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥88.75 level and was capped around the ¥89.70 level. The pair moved lower after it was reported Japanese gross domestic product data expanded 1.2% in the April – June period, better-than-expected and 4.8% on an annualized basis. These data render it likely Japan is leaving a technical recession but it is still highly probable that deflation will remain a problem over the next several business quarters. Today’s GDP data were leaked by the Japanese trade minister. Bank of Japan Governor Shirakawa spoke about interest rates today saying “"If the continuation of low interest rates (in the U.S.) leads to a substantial rise in long-term interest rates by raising inflation expectations or by generating expectations for a weak dollar, this may give rise to another problem, namely that the fiscal burden increases and in turn the need for adjustments in the government's balance-sheet arises.” He added balance sheet adjustments in the U.S. and European economies is a “key issue in determining the outlook for the global economy.” BoJ’s Policy Board recently predicted core consumer prices will decline 1.5% in the year ending March 2010, decline 0.8% in the fiscal year ending March 2011, and decline 0.4% in the fiscal year ending March 2012. The central bank recently reported it will stop its purchase of corporate debt and commercial paper at the end of 2009. BoJ Policy Board’s next interest rate decision is scheduled for 19 November. The Nikkei 225 stock index climbed 0.21% to close at ¥9,791.18. U.S. dollar offers are cited around the ¥94.75 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥133.20 level and was capped around the ¥134.30 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥150.35 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥88.25 level. In Chinese news, the U.S. dollar weakened vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8210 in the over-the-counter market, down from CNY 6.8240. President Obama met in China with leaders there and does not appear to have obtained any official concessions from the government there on further liberalization of the yuan’s exchange rate. China’s main banking regulator today criticized U.S. monetary policy as having led to greater financial speculation. European official Alumnia said the Chinese government knows its yuan currency must appreciate.

    The British pound appreciated sharply vis-à-vis the U.S. dollar today as sterling tested offers around the US$ 1.6875 level and was supported around the $1.6670 level. Data released in the U.K. today saw Rightmove November house prices off 1.6% m/m and up 1.6% y/y. Bank of England Deputy Governor Tucker spoke about recapitalizing banks today. BoE Monetary Policy Committee member Sentance optimistically reported the U.K. economy is “in the very early stages of a resumption of growth.” He also reiterated that the U.K. economy faces the danger of inflation in two years, as first indicated in last week’s quarterly inflation report. Cable bids are cited around the US$ 1.6410 level. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.8870 level and was capped around the ₤0.8980 level.

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