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U.S. Forex Market Commentary

Wed, Dec 24 2008, 23:49 GMT
by GCI Financial Team

GCI

EURO

The euro moved higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4020 level and was supported around the $1.3915 level.  Many data were released in the U.S. today and they pointed to a deepening recession. First, weekly initial jobless claims reached a 26-year high, up 30,000 to 586,000.  Nearly two million U.S. workers have lost their jobs this year and pushed the unemployment rate higher to 6.7%.  Second, personal spending fell 0.6% in November while personal incomes fell 0.2%. These data underscore the fragile nature of final private demand and represented the fifth consecutive monthly decline in spending.  Third, durable goods orders were off 1% in November, less-than-expected.  Chancellor Merkel is likely to come under more fire for not adopting greater fiscal stimulus plans.  European Central Bank President Trichet called on governments to be mindful of the amount of debt they’re assuming to fund fiscal stimulus programs.  ECB member Nowotny today indicated additional interest rate cuts by the ECB cannot be ruled out.  Liquidity is expected to remain light through next week.  Euro bids are cited around the US$ 1.3300 figure.

JPY / CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥90.20 level and was capped around the ¥90.95 level.  The Japanese government formally approved a budget totaling ¥88.5 trillion, its largest ever and one that encompasses a ¥12 trillion fiscal stimulus.  A government report confirmed that big manufacturers’ sentiment printed at -44.5 in the October – December period, considerably worse than the -10.0 reading in the July – September period.  Prime Minister Aso reported “Japan cannot avoid the tsunami of the world recession, but it can try to find a way out.  The world economy is in a once-in-a-hundred-years recession. We need extraordinary measures to deal with an extraordinary situation."  The Nikkei 225 stock index lost 2.37% to close at ¥8,517.10.  U.S. dollar offers are cited around the ¥104.15 level.  The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥126.00 figure and was capped around the ¥126.80 level.  The British pound came off vis-à-vis the yen as sterling tested bids around the ¥132.55 level while the Swiss franc gained ground vis-à-vis the yen and tested offers around the ¥84.35 level.  The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at 6.8397 in the over-the-counter market, down from CNY 6.8485.

STERLING

The British pound moved marginally higher vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.4805 level and was supported around the US$ 1.4655 level.  RICS reported house prices will fall an additional 10% in 2009.  Yesterday’s data suggested the U.K. economy shrank 0.6% in Q3 and many traders believe Bank of England’s Monetary Policy Committee will drive interest rates towards zero per cent in 2009.  Cable bids are cited around the US$ 1.4470 level.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.9535 level and was supported around the ₤0.9435 level.

SWISS

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0715 level and was capped around the CHF 1.0890 level.  Technically, today’s intraday low was right around the 38.2% retracement of the move from CHF 1.2465 to CHF 0.9645.  Swiss National Bank published a grim report today that indicates Swiss companies expect business conditions to “considerably worsen” in 2009. U.S. dollar offers are cited around the CHF 1.1160 level.  The euro and British pound moved lower vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.5005 and CHF 1.5770 levels, respectively.

Published on  Wed, Dec 24 2008, 23:52 GMT