• Home ::
• Technical ::
• Market View ::
• Market Session Recaps

Market Session Recaps

London Session

Fri, Oct 30 2009, 11:24 GMT
by Forex.com Research Desk

FOREX.com  |  View company's profile

Vote:

a179a446-284f-495b-818a-84d9ff1d9b8e

0

0

• Send
• Print
• Add To
• Rss

It is undoubtedly a good thing that the US economy pulled itself out of recession in the third quarter but market pricing this morning reflects only cautious optimism. While stocks in Asian hours had the added benefit of some good corporate earnings, EUR/USD remains below yesterday's best levels and the EUR has failed to gain vs the JPY. The failure of yesterday's 'better than expected' US GDP report to prompt a rally in risk reflects the support provided in Q3 by government spending and widening doubts as to how well the global economy will perform once fiscal and monetary supports are withdrawn.

Yesterday the Fed ended its USD300 bln Treasury purchases program, though it will continue to buy mortgage back securities. Yesterday also brought comments from the ECB's Weber that the ECB may not continue with its 12 mth auctions into next year, though there is one more scheduled for this year. Providing funds in the money market has been the mainstay of the ECB's extraordinary monetary policy reactions to the financial crisis. This morning the BoJ announced that it will stop buying corporate bonds by the end of the year even though it also forecast that deflationary pressures could last into 2011. Even though there are many signs that the banking system is healing, rising unemployment levels, downward pressure on real wages and an absence of inflation remain as very clear reminders of the sickness still suffered by many to the world's major economies. The withdrawal of bond purchasing plans and the eventually reversal of these programs will at some point pressure long term interest rates higher at a time when the reigning in of fiscal incentives is set to leave the consumer worse off. This backdrop provides compelling support for the persistence of low interest rates from the Fed, ECB, BoJ and the BoE for many months yet. It also supports the view that the rally in risk that has been in evidence since the spring could adopt a shallower trajectory going forward.

Comments from Japanese PM Hatoyama that he cannot be optimistic about the economy despite the BoJ's decision to end its bond buying program reflect a consensus view. This morning's slew of Japanese economic data provided confirmation of deflationary pressures with CPI falling -2.2% y/y in Sep. That said, the surprise fall in the Japanese Sep jobless rate to 5.3% provided a glimmer of light. UK data this morning were mixed to better. Gfk consumer confidence rose more than expected to -13 in Oct from -16 in Sep while the Nationwide house price index rose by +0.4% m/m. This was less than expected however, which prompted fears that the nascent recovery in the UK housing market may already be faltering. EUR/GBP has pushed moderately higher towards 0.8990. Cable is little changed from last night's close.

The AUD has recouped its overnight losses encouraged by the better tone of stocks, but as European stocks lose their footing into the US open, AUD/USD recovery has also stalled.

This afternoon Canadian Aug GDP is due. US data include Sep personal spending, the ECI, Oct Chicago PMI and the University of Michigan confidence index.

Published on  Fri, Oct 30 2009, 11:28 GMT

Vote:

a179a446-284f-495b-818a-84d9ff1d9b8e

0

0

• Send
• Print
• Add To
• Rss