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U.S. Forex Market Commentary

Thu, Nov 5 2009, 22:13 GMT
by GCI Financial Team

GCI

EURO

The euro moved lower vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4810 level and was capped around the $1.4915 level.   Data released in the U.S. today saw Q3 non-farm productivity increase to 9.5% from the revised prior reading of 6.9% while Q3 unit labour costs were off 5.2%, up from a revised -6.1%.  Also, weekly initial jobless claims continued to move lower, printing at +512,000, down from a revised 532,000 with continuing jobless claims lower at 5.749 million.  Additionally, ICSC chain store sales were up 2.1% y/y.  Collectively, these data suggest the U.S. economy remains on the mend though the productivity data can be viewed as a double-edged sword, especially as companies have become more producitve with fewer employees.  The Federal Open Market Committee’s interest rate decision was released yesterday in which officials noted the economic recovery continues and pared back some of their emergency stimulus programs.  The Fed continues to make it abundantly clear that rates are likely to remain unchanged for some time.  Many economists expect October non-farm payrolls will have fallen about 175,000 with the unemployment rate around 9.9%.  Those data will be released tomorrow in the U.S.  In eurozone news, As expected, the European Central Bank kept official interest rates unchanged today with the main refinancing rate unchanged at 1%.  ECB President Trichet reported banks “have a lot of liquidity” already and noted the ECB’s December offer of unlimited twelve-month loans will likely be its last – the latest indication the ECB is unwinding some monetary stimuli.  Nonetheless, Trichet said the ECB’s exit from its emergency stimuli will be “timely and gradual” and reiterated the central bank will “solidly anchor inflation expectations, which is absolutely key in our own strategy.”  Data released in the eurozone today saw EMU-16 retail sales decline 0.7% m/m and 3.6% y/y, the third consecutive monthly decline.  Euro bids are cited around the US$ 1.4445 level.

JPY / CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥90.00 figure and was capped around the ¥90.85 level.  Minutes from the Bank of Japan Policy Board meeting from 13-14 October were released overnight in which policymakers noted they’d work to make sure investors realize the removal of some emergency stimuli program does not mean official interest rates will rise.  The minutes noted the central bank plans to “maintain the accommodative financial environment.” BoJ Governor Shirakawa today reported it is “unlikely that the decline in prices will induce downward pressure on economic activity.”  Vice finance minister Minezaki called on the government and central bank to discuss the real economic threat of deflation.  The central bank and government remain at odds over the removal of monetary accommodation.   Bank of Japan Governor Shirakawa yesterday continued to talk up Japan’s economy, saying “given that the emerging and commodity-exporting economies are likely to continue growing at high rates, risks have been becoming balanced, compared with a situation in early spring when risks were generally tilted downside.”  On interest rates, Shirakawa added “The Bank of Japan declared an end to the state of emergency, but it will stand pat until the economy returns to normal. The bank will probably continue its super-low rate policy through early 2011.”  BoJ’s Policy Board last week 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 last week 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 lost 1.29% to close at ¥9,717.44.  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 ¥133.35 level and was capped around the ¥135.15 level.  The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥148.50 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥88.30 level. In Chinese news, the U.S. dollar weakened vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8196 in the over-the-counter market, down from CNY 6.8205.  People’s Bank of China official Jiao reported new bank loans growth may accelerate in November and December.  PBoC official Guo reported the central bank will keep liquidity “reasonably abundant.” 

Published on  Thu, Nov 5 2009, 22:13 GMT

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