Market Brief
The Usd was stable in the Asian session. The EurUsd traded between 1.2860 and 1.2964, while the UsdJpy traded between 88.40 and 89.30. The Cad continued to find buyers, as commodity prices traded higher with UsdCad falling from 1.2377 to 1.2259. Asian regional indexes were all slightly lower on light trading due to holidays, while European indexes are trading higher. A rash of disappointing earnings from the US should cap any upwards move this afternoon. Last Friday, commodities rallied with crude closing above $45.00bll, while gold jumped nearly $50. Banking sector troubles continue to be a primary concern for the market this week, with the UK specifically in focus. The UK Governments measures initiated last week failed to ease investors concerns and the UK's bank prices fell. In addition, the announcement by the BoE to purchase private sector assets, in the beginning financed by the issuance of treasury bills but then resorting to quantitative easing if necessary, weighed on sentiment. We expect the BoE to cut rates to close to zero in & QE to begin mid 2009. In an interview with the FT, ECB member Mersch stated that he would be unwilling to see the ECB rates drop much below than the current 2.00% level. A comment consistent with ECB President Trichet’s comments at the last ECB meeting.
The Chf was the second worst-performing G10 currency last week (behind the GBP). Given the entrenched nature of the risk aversion trade and, therefore, outperformance of funding currencies, this was somewhat difficult to explain. However, we think this phenomenon to be primarily related to the SNB Vice-Chairman Hildebrand making the SNB's most overt mention to FX intervention and keeping buyers sidelined.
The market expects the Fed funds target rate to remain in the 0-0.25% range, while are expected to accelerate unconventional monetary policy measures this week. Also on Wednesday, the RBNZ meeting should see the policy rate cut by 100bp to 4.00%. And perhaps the most interesting data release will be the US first estimate of fourth-quarter GDP, expected to show that real GDP contracted by a 5.0%
| Global indexes | Current level | % Change |
| Nikkei 225 Index | 7,682.14 | - 0.81 |
| FTSE 100 Index | 4,095.66 | + 1.06 |
| CAC 40 Index | 2,866.29 | + 0.60 |
| DAX Index | 4,190.27 | + 0.27 |
| SMI Index | 5,332.24 | + 0.47 |
| DJIA futures | 7,981.00 | + 0.10 |
| S&P future | 823.90 | + 0.04 |
| World markets | Current level | % Change | |
| Gold | 900.00 | + 0.02 | |
| Silver | 11.99 | + 0.08 | |
| VIX | 47.27 | - 0.04 | |
| Crude wti | 45.53 | - 2.03 | |
| USD Index | 85.72 | + 0.12 |
| Todays calender | Estimates | Previous | Country / GMT |
| BBA mortgage approvals, K | -- | 18 | UK / 9.30 |
| BBA mortgage lending, £bn Dec | -- | 2.9 | UK / 9.30 |
| BBA consumer credit, £bn Dec | -- | 0.2 | UK / 9.30 |
| Leading indicators, % m/m Dec | -0.3,-3.8Y | -0.4,-3.7Y | US / 15.00 |
| Existing home sales, mn saar Dec | 4.40 | 4.49 | US / 15.00 |
| CSPI, % y/y Dec | -2.4 | -1.9 | JP / 23.50 |
Currency Tech
AUDUSD
R 3: 0.6840
R 2: 0.6684
R 1: 0.6569
CURRENT: 0.6544
S 1: 0.6420
S 2: 0.6295
S 3: 0.6077
EURJPY
R 3: 118.82
R 2: 117.21
R 1: 116.04
CURRENT: 115.38
S 1: 112.10
S 2: 111.30
S 3: 109.90
USDSGD
R 3: 1.5340
R 2: 1.5265
R 1: 1.5120
CURRENT: 1.5045
S 1: 1.4920
S 2: 1.4805
S 3: 1.4759
- S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot
