EURO
The euro moved higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2605 level and was supported around the $1.2475 level. The U.S. dollar went on a tear yesterday after NYMEX crude oil futures for December delivery fell below the $60 level per barrel. Some traders expressed surprise that the greenback moved sharply higher yesterday because U.S. equities tumbled amidst fresh news of layoffs and higher capital needs at Fannie Mae and Freddie Mac. General Motors shares reached their lowest level since 1946. Traders are deliberating the likelihood of additional monetary easing from both the European Central Bank and Federal Reserve before the end of the year and again in Q1 2009. ECB President Trichet and other ECB members have made it abundantly clear that they have not prejudged monetary policy but that it is possible rates could come down in December. At the Fed, policymakers continue to implement multiple liquidity provision facilities to support commercial banks, investment banks, primary dealers, and the commercial paper market. Data released in Germany yesterday saw the November ZEW survey’s economic sentiment indicator rise to -53 from -63 in October. The media is reporting that Germany’s “Wise Men” are gloomy on their 2009 economic outlook and foresee a likely recession. U.S. September trade data will be released on Thursday. Euro bids are cited around the US$ 1.2135 level.
JPY / CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥97.85 level and was supported around the ¥97.15 level. Dealers are wondering if the BoJ will be easing monetary policy further, particularly if other central banks continue to reduce borrowing costs to contend with the ongoing credit crisis. Data released in Japan overnight saw October consumer confidence weaken to a new record low, printing at 29.4 – down from 41.4 in September. Data released in Japan yesterday saw the October service sector sentiment index print at 22.6 while October outstanding bank loans were up 2.2% y/y. Also, the October M3 money supply was up 0.6% y/y while the September current account surplus was off 48.8% y/y. Additionally, October corporate bankruptcies were up 13.4% y/y. The Nikkei 225 stock index lost 1.29% to close at ¥8,695.51. 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 ¥123.20 level and was supported around the ¥121.20 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥151.20 level while the Swiss franc gained ground vis-à-vis the yen and tested offers around the ¥82.65 level. In Chinese news, the government on Monday announced a major US$ 586 billion economic stimulus package and People’s Bank of China Governor Zhou reported the central bank’s monetary policy is being shifted to “moderately easy” from “prudent and flexible.” Data released in China yesterday saw the October trade surplus reach a record US$ 35.24 billion while consumer price inflation receded to a seventeen-month low of +4.0% y/y in October as domestic demand lessened. Data released in China overnight saw October retail sales growth up 22.0% y/y.
STERLING
The British pound moved higher vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.5465 level and was supported around the $1.5345 level. Traders expect today’s Bank of England’s quarterly inflation report will reveal additional monetary easing is on the way, perhaps as early as December, and that inflationary concerns have given way to deflationary pressures. The central bank is likely to signal that unemployment is rising, housing prices are continuing to decline, and the financial crisis has become exacerbated. Yesterday, BRC reported October retail sales were off 0.1% y/y, their first decline since August 2005. Second, the U.K.’s global goods trade deficit narrowed to ₤7.5 billion in September from a revised ₤8.0 billion in August. Third, U.K. home sales reached their lowest level in at least 30 years in October. Economists are concerned with these data because they portend a weak holiday shopping period for retailers and evidence the weak state of final private demand. U.K. Prime Minister Brown has suggested the government may reduce taxes to help stimulate the economy. Cable bids are cited around the US$ 1.5275 level. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.8165 level and was supported around the ₤0.8130 level.
