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U.S. Forex Market Commentary

Thu, Dec 11 2008, 22:37 GMT
by GCI Financial Team

GCI

EURO

The euro moved sharply higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3255 level and was supported around the $1.3000 figure.  The U.S. dollar suffered across the board and the euro led the charge higher.  In eurozone news, Eurogroup chairman Juncker said the European Central Bank’s interest rate cut last week was “a step in the right direction,” suggesting officials will seek additional rate cuts.  European Union leaders convened to review a European Commission proposal to commit €200 billion, or 1.5% of the EU’s aggregate gross domestic product, to a fiscal stimulus package.  The German government said other EU countries are “tossing around billions” and is resistant to spend more that its proposed €32 billion for fiscal stimulus. Ifo released a forecast that sees the German economy contracting by 2.2% in 2009.  ECB President Trichet dovishly said there’s “no room for complacency” regarding additional measures to support the economy while ECB member Tumpel-Gugerell said “no signals on future interest rate steps” have been given.  In U.S. news, the October trade deficit widened to –US$ 57.19 billion. Also, weekly initial jobless claims climbed 58,000 to 573,000 – the highest number since 1982 – while continuing jobless claims rose 338,000 to 4.429 million, the largest jump since 1974.  It was also reported that November import prices were off 6.7%.  Most traders expect the Federal Open Market Committee will ease monetary policy further on 16 December with some Fed-watchers calling for a 75bps easing.  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 ¥91.15 level and was capped around the ¥92.85 level. Some traders believe Bank of Japan will enact some additional monetary easing measures before the end of the year.  BoJ Deputy Governor Yamaguchi said the BoJ has no preconceptions about future monetary policy activities.  BoJ’s quarterly tankan survey of corporate sentiment will be released on 15 December and is expected to weaken substantially.  Also, BoJ’s Policy Board will convene on 18-19 December to deliberate monetary policy.  The Nikkei 225 stock index gained 0.70% to close at ¥8,720.55.  U.S. dollar offers are cited around the ¥104.15 level.  The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥121.70 level and was supported around the ¥120.25 level.  The British pound and Swiss franc came off vis-à-vis the yen as the crosses tested bids around the ¥135.85 and ¥76.55 levels, respectively.  The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8513 in the over-the-counter market, down from CNY 6.8633.  Data released in China overnight saw November consumer price inflation up 2.4% y/y, a 22-month low.  Many traders believe this pullback in inflation will result in additional monetary easing measures by People’s Bank of China.

STERLING

The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.4995 level and was supported around the $1.4770 level.  Bank of England Monetary Policy Committee member Barker said the U.K. economy should start to moderate “toward the end of next year but conceded it remains very weak.  BoE has cut its Bank Rate by 300bps to 2.0% since 2000 to counter recessionary pressures.  Data released in the U.K. today saw December industrial output remain weak with the CBI output balance unchanged in November at -42.  Other data saw October construction orders off 21% y/y. Cable offers are cited around the US$ 1.5130 level.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.8905 level and was supported around the ₤0.8760 level.

SWISS

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.1790 level and was capped around the CHF 1.2000 figure.  As expected, Swiss National Bank cut interest rates again today, taking its three-month Swiss franc LIBOR target lower to 0.00% - 1.00% from its previous 0.50% - 1.00% target range.  Today’s cut was SNB’s fourth cut in two months and the central bank warned the worsening global credit crisis may push Switzerland into a recession next year.  SNB President Roth there could be negative inflation in 2009 and SNB member Jordan said now is now the time for unconventional monetary policy measures.  Roth also warned the unemployment rate could reach 4.0% within one year.  U.S. dollar offers are cited around the CHF 1.2140 level.  The euro and British pound appreciated vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.5805 and CHF 1.7875 levels, respectively.

Published on  Thu, Dec 11 2008, 22:39 GMT