EURO
The euro moved higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2970 level and was supported around $1.2870 level. European Central Bank member Provopoulos warned “The world economy and the international financial system are facing the worst crisis since the 1930s, as they are trapped in a double vicious cycle. The worsening in financial and credit markets and the deterioration in the real economy impact each other in a negative way. This interaction feeds and intensifies the conditions of crisis while maintaining an unusually high degree of uncertainty." Eurozone economic sentiment reached a fifteen-year low in November at 74.9, down from 80.0 in October. Many traders believe these data will increase the chances the European Central Bank will reduce interest rates by more than 50bps next week. Some dealers now anticipate a 75bps move lower to 2.50%. It was also reported that corporate and household inflation expectations fell sharply. ECB member Nowotny today said the ECB has room to cut interest rates because inflation is falling and the EMU-15 economy is contracting. ECB member Liikanen added “If things go well growth could start to recover some time next year. If things go badly return to normal could take a lot longer.” Other data released today saw M3 money supply growth remain steady at an annualized rate of 8.7% in November while private sector loan growth decelerated to 7.8%. Other data saw German November unemployment fall to 3.150 million while the October ILO unemployment rate was unchanged at 7.1%. Euro bids are cited around the US$ 1.2135 level.
JPY / CNY
The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥95.00 figure and was capped around the ¥95.70 level. Minutes from Bank of Japan Policy Board’s interest rate deliberations from 31 October were released in which four policymakers voted to reduce rates by 20bps to 0.30% and four voters dissented. BoJ Governor Shirakawa cast the deciding vote to cut the overnight call rate. The minutes also revealed a sense that the economic crisis had worsened between the unscheduled Policy Board meeting held on 14 October. The Nikkei 225 stock index climbed 1.95% to close at ¥8,373.39. U.S. dollar offers are cited around the ¥104.15 level. The euro gained ground vis-à-vis the yen as the single currency tested offers around the ¥123.65 level and was supported around the ¥122.45 level. The British pound and Swiss franc moved higher vis-à-vis the yen as the crosses tested offers around the ¥147.85 and ¥79.80 levels, respectively. The Chinese yuan appreciated vis-à-vis the U.S. dollar today as the greenback closed at CNY 6.8280 in the over-the-counter market, down from CNY 6.8282. A government think tank is forecasting annual economic growth would decelerate to 8% in Q4 from 9% in Q3. A government official warned “The global financial crisis has not bottomed out yet. The impact is spreading globally and deepening in China. Some domestic economic indicators point to an accelerated slowdown in November.” The government also repeated foreign reserves will reach US$ 2 trillion by the end of the year.
STERLING
The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.5510 level and was supported around the $1.5310 level. Bank of England Monetary Policy Committee member Besley reported policymakers must prevent banks from overreacting when they scale back lending during the economic pullback. Besley noted “The effectiveness of monetary policy is impaired. For a long time people were looking at prices of credit. These don't really tell the story. It's really down to credit rationing.” Data released in the U.K. today saw Nationwide house prices fall 0.4% m/m in November and up 13.9% y/y. MPC archdove Blanchflower reported “That's why I warned that this was going to happen unless we acted -- I wanted to prevent the crisis. I'm not saying everything would have been wonderful, but at least if we'd acted earlier we would be ahead of events and not reacting to them. All hands are to the pump and I get the sense that people have absolutely got it right.” Cable bids are cited around the US$ 1.4315 level. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.8345 level and was capped around the ₤0.8415 level.
SWISS
The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2035 level and was supported around the CHF 1.1955 level. Data released in Switzerland today saw Q3 non-farm payrolls rise 2.0% y/y to 3.956 million. U.S. dollar offers are cited around the CHF 1.2350 level. The euro and British pound moved lower vis-à-vis as the crosses tested bids around the CHF 1.5445 and CHF 1.8390 levels, respectively.
