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Daily Market Commentary

Discussion in 'Forex Daily News & Outlook' started by gcitrading, Dec 28, 2009.

  1. gcitrading

    gcitrading Contributing Member

    Dec 16, 2008
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    The euro moved marginally higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4415 level and was supported around the $1.4355 level. Liquidity was light today as many market participants celebrating Boxing Day. Most dealers expect greater liquidity overnight during the Australasian session with liquidity returning to normal next Monday, the first full trading day of the year. Data released in the U.S. today saw the December Dallas Fed manufacturing activity index improve to 3.8% from the November reading of 0.3%. Tomorrow’s data will include the October CaseShiller home price index and December consumer confidence. On Wednesday, the December Chicago purchasing manager index will be released followed by Thursday’s data releases of weekly initial jobless claims and continuing jobless claims. The Federal Reserve today announced measures to absorb some of the US$ 1 trillion in excess reserves in the U.S. banking system. The program would involve selling term deposits in which excess cash would be put aside, easing downward pressure on the federal funds rate. The new program may be used in conjunction with the Fed’s previously announced plan to conduct reverse repo operations. Assets on the Fed’s balance sheet were little changed at US$ 2.24 trillion in the latest week. In eurozone news, European Central Bank President Trichet was on the tape reporting bloc members must reduce their budget deficits by 2011 and “live up to their role of providing credit to the economy.” Euro bids are cited around the US$ 1.3885 level.

    The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥91.75 level and was supported around the ¥91.40 level. Data released in Japan overnight saw November industrial output up 2.6% m/m while November overall retail sales were off 1.0% y/y. Japan, China, Hong Kong, Korea, and other Asian countries agreed on a new US$ 120 billion measure today to address balance of payments and short-term liquidity difficulties in the region. Last week, finance minister Fujii reported Japan has “depleted most” of its special account funds and added it is difficult to compile a budget for fiscal year 2010. Fujii added monetary policy has been helpful in boosting the economy and that capital spending remains the worst part of the economy. Japanese government bonds sales are expected to reach a record ¥144.3 trillion. Minutes from Bank of Japan’s latest Policy Board meeting were released last week in which the government asked the central bank to monitor deflation. The minutes revealed “many” Policy Board members agreed “the bank would maintain its stance of responding promptly to changes in the market situation.” Policymakers said the central bank “would adopt the most effective method for money-market operations that conformed to changes in financial markets.” After an emergency meeting on 1 December, the central bank introduced a ¥10 trillion fixed-rate lending facility that was designed to arrest the yen’s advances and counter deflation. The central bank also characterized the most recent bout of deflation as “mild.” The Nikkei 225 stock index gained 1.32% to close at ¥10,634.23. U.S. dollar offers are cited around the ¥94.75 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥131.90 level and was supported around the ¥131.35 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥146.65 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥88.65 level. In Chinese news, the U.S. dollar appreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8302 in the over-the-counter market, up from CNY 6.8271. People’s Bank of China adviser Fan Gang said the yuan should not depreciated in the long-term but cited a risk the yuan may depreciate in the short term. Fan added China’s GDP growth rate may be between 8% and 9% in 2010 and said export growth could reach double digits in 2010.

    The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.6015 level and was supported around the $1.5930 level. BRC reported U.K. retailers expect 2010 to be a difficult year but don’t expect sales to fall from 2009 levels. Sterling liquidity was very light with Commonwealth and some European markets closed for the Boxing Day holiday. Cable is now up about thirteen big figures on a year-to-date basis. Many traders believe Bank of England’s Monetary Policy Committee will keep monetary policy unchanged until at least February when fourth quarter gross domestic product data are available along with the latest quarterly inflation forecast. Cable bids are cited around the US$ 1.5755 level. The euro moved lower vis-à-vis the British pound as cable tested bids around the ₤0.8980 level and was capped around the ₤0.9020 level.

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