EURO
The euro moved sharply lower vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2665 level and was capped around the $1.2920 level. Data released in the eurozone today saw EMU-15 consumer price inflation recede to +3.2% y/y, increasing the chances the European Central Bank will cut rates by at least 50bps next week. Also, EMU-15 unemployment remained steady at 7.5% in September. The German government announced it will likely unveil a €30 billion fiscal stimulus package next week. EMU-15 consumer sentiment reached its lowest level since 1993 and September German retail sales reached their lowest level in nearly two years, off 3.1% m/m and 3.8% y/y. In U.S. news, many traders expressed surprise that yesterday’s Q3 GDP number in the U.S. was only off 0.3%. Data to be released in the U.S. today include personal income and spending, the Q3 employment cost index, Chicago PMI, and the University of Michigan consumer sentiment indicator. Traders will pay very close attention to comments from Federal Reserve Chairman Bernanke. Euro bids are cited around the US$ 1.2135 level.
JPY / CNY
The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥96.35 level and was capped around the ¥99.00 figure. Bank of Japan’s Policy Board reduced the overnight call rate by 20bps to 0.30%, a smaller-than-expected decrease. Policymakers were evenly split on the move and BoJ Governor Shirakawa cast the deciding vote. This represented the first time in seven years the central bank has eased monetary policy. Shirakawa reported “Share prices have been falling worldwide, the yen has been rising, and foreign exchange rates are volatile...Financial market conditions have greatly changed in the past month… the rate cut was necessary in order to keep accommodative monetary conditions in correspondence with changes in economic and price conditions.” The Policy Board’s statement read “…increased sluggishness in Japan's economic activity will likely remain over the next several quarters, with exports leveling off and the effect of earlier increases in energy and materials prices persisting.” The central bank also reported it will pay an annual 0.1% interest rate on excess current account deposits held by financial institutions between November and March 2009. Additionally, the central bank now sees real GDP around 0.1% for the fiscal year ending in March 2009, down from the previous estimate of 1.2%. Data released in Japan overnight saw October PMI manufacturing fall to 42.2. The Japanese government announced a new ¥5 trillion spending package designed to help shore up the economy. Finance minister Nakagawa verbally intervened overnight saying “I have many things in my pocket, but I won't comment on whether I will use them or when I would use them.” Other data released in Japan today saw September housing starts up 54.2% y/y while September nationwide core CPI printed at 2.3% y/y and September all household spending was off 2.3% y/y. Moreover, the September jobless rate fell to 4.0%. The Nikkei 225 stock index lost 5.01% to close at ¥8,576.98. U.S. dollar offers are cited around the ¥104.15 level. The euro weakened vis-à-vis the yen as the single currency tested bids around the ¥122.20 level and was capped around the ¥127.55 level. The British pound and Swiss franc moved lower vis-à-vis the yen as the crosses tested bids around the ¥155.50 and ¥83.75 levels, respectively. The Chinese yuan weakened vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8395 in the over-the-counter market, up from CNY 6.8380.
STERLING
The British pound depreciated sharply vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.6115 level and was capped around the $1.6505 level. Sterling moved lower as the yen’s overnight resurgence lessened demand for higher-yielding currencies. Data released in the U.K. today saw the October GfK consumer confidence index fall to -36 from -32 in September. Barclays Bank reported it will raise about ₤7.3 billion in additional capital from outside investors. Barclays has so far resisted U.K. government cash unlike its rivals Royal Bank of Scotland, Halifax, and Lloyds. Cable bids are cited around the US$ 1.6230 figure. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the 0.7910 level and was supported around the ₤0.7810 level.
SWISS
The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.1540 level and was supported around the CHF 1.1355 level. Data released in Switzerland today saw the October KOF leading indicator decline to 0.35 from 0.62 in September. U.S. dollar offers are cited around the CHF 1.1805 level. The euro and British pound came off vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.4545 and CHF 1.8535 levels, respectively.
