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Daily FX Market Commentary

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Little movement in EUR/USD and USD/JPY

Fri, Nov 6 2009, 08:14 GMT
by Allan von Mehren

Danske Bank A/S

Key news

• Equities performed strongly yesterday on stronger jobless claims and upbeat earnings. Asian markets trade higher taking the lead from US markets.
• Bond yields unchanged overnight awaiting the US non-farm payrolls report today.
• Little movement in EUR/USD and USD/JPY while SEK has gained on the rise in risk appetite.
• Extension of US home buyer tax credit approved in the Senate.
• A more optimistic quarterly report from Reserve Bank of Australia pushed up AUD.

Markets Overnight

Equity markets posted solid gains of around 2% yesterday with Dow breaking the psychological 10 000 level again. Stronger jobless claims alleviated concerns over the sustainability of the recovery and raised expectations for today’s payrolls report. Adding to the sentiment boost were strong productivity gains in Q3 and another decent report on monthly chain store sales. Yesterday’s very upbeat earnings report from Cisco also continued to support the market as Cisco’s CEO John Cambell said the recovery was well underway and the improvement was gaining momentum.

The S&P future is broadly unchanged overnight while Asian markets show strong performance taking their lead from the US market.

US bond yields have shown little movement from the European close after rising earlier yesterday on the stronger data and the digestion of marginally more hawkish than expected statements from Bank of England and ECB (see Flash). Markets are now in a waiting mode for today’s non-farm payrolls number.

In FX markets EUR/USD is broadly unchanged from yesterday despite the rise in risk appetite, which tends to push the cross higher. GBP has gained versus EUR while JPY is trading sideways. In Scandi SEK has gained a bit from the rise in risk appetite, while NOK has not moved much.

An extension and expansion of the tax credit for first-time buyers and extension of jobless benefits was approved by the Senate yesterday. It is being processed in the House where it is expected to pass quickly. It will expand the tax credit and prolong the scheme throughout June 2010.

In its quarterly “Statement on Monetary Policy” (see link) Reserve Bank of Australia upgraded its growth forecast and said that “a further gradual lessening of monetary stimulus is likely to be required over time”. The Statement added support to AUD already gaining from the rise in equity markets.

Oil prices continue to trade sideways around USD80 per barrel.

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Published on  Fri, Nov 6 2009, 08:24 GMT