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U.S. Forex Market Commentary

Tue, Dec 23 2008, 22:36 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 $1.3930 figure.  The common currency’s gains were muted as many traders were loath to put on big positions during the Christmas holiday period.  Data released in the U.S. today saw Q3 personal consumption expenditures decline 3.8% following a 1.2% increase in Q2.  These are the latest data that evidence the strong disinflationary pressures in the U.S. economy.  Some economists are forecasting a mild bout of deflation for the U.S. economy next year.  It was also confirmed that Q3 annualized GDP fell 0.5% and November building permits were revised to -15.8% from -15.6%.  Additionally, the final December University of Michigan consumer sentiment indicator improved to 60.1 from 55.3 in November while the Richmond Fed manufacturing index tumbled to -55 in December from -38 in November.  Moreover, November existing home sales fell 8.6% to an annualized rate of 4.49 million and new home sales fell 2.9% in November to a 407,000 annualized rate.  In eurozone news, European Central Bank policymaker Hurley reported “The euro economy is contracting and will contract next year. We have also seen in the euro area inflation reduce and it's expected to reduce even further.”  Euro bids are cited around the US$ 1.3300 figure.

JPY / CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥90.35 level and was supported around the ¥89.90 level.  Liquidity was lower as traders lacked the willpower to test new recent lows in the pair, especially with increasing rhetoric from Japanese government officials about the prospect of conducting yen-selling intervention.  The Japanese government will release many economic data on Thursday and Friday including the consumer price index, industrial production, and retail trade.  The Nikkei 225 stock index gained 1.57% to close at ¥8,723.78.  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 ¥126.55 level and was supported around the ¥125.65 level.  The British pound gained ground vis-à-vis the yen as sterling tested offers around the ¥134.25 level while the Swiss franc moved higher vis-à-vis the yen as the franc tested offers around the ¥83.15 level.

STERLING

The British pound came off marginally vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.4750 level and was supported around the US$ 1.4895 level.  Data released in the U.K. today confirmed that gross domestic product shrank 0.6% in the three months to September, downwardly revised from the previous estimate of -0.5% and the largest decline since 1990. On an annualized basis, the economy was up +0.3% y/y. Notably, output by U.K. workers declined 0.2% - the first time in almost twenty years - and the services sector continued its contraction in the three months to October.  Other data saw BBA November mortgage approvals for home loans fall 61% y/y to 17,773 while November net mortgage lending increased ₤2.9 billion. Additionally, the Q3 current account deficit printed at -₤7.723 billion.  Cable bids are cited around the US$ 1.0725 level.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.9480 level and was supported around the ₤0.9385 level.

SWISS

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.5145 level and was capped around the CHF 1.5310 level.  Swiss National Bank expanded monetary policy last week and does not have much room left to maneuver interest rates. Switzerland’s foreign trade balance is closely tied to the economic health of Germany and the current economic pullback in the eurozone’s largest economy may result in unorthodox monetary policy from SNB.  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 1.5145 and CHF 1.6050 levels, respectively.

Published on  Tue, Dec 23 2008, 22:38 GMT