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U.S. Forex Market Commentary

Thu, Jan 8 2009, 22:42 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$ 1.3800 figure and was supported around the $1.3535 level.  The U.S. dollar continues to suffer as a result of the ongoing global economic pullback and traders will pay close attention to remarks on additional U.S. economic stimulus possibilities from incoming U.S. President Obama around 1600 GMT today.  Data released in the U.S. today saw weekly initial jobless claims fall 24,000 to 467,000 while continuing jobless claims rose to 4.611 million, the highest reading since November 1982.  Expectations for tomorrow’s December non-farm payrolls report are grim following the release of a very bad ADP private-sector employment report for December yesterday.  Many economists are speculating the U.S. economy may have shed much more than 500,000 jobs last month, a development that could be very negative for U.S. assets and keep the Fed’s focus squarely on expanding monetary policy further.  In eurozone news, many poor economic data were released today.  Eurozone December economic sentiment fell to its lowest level since at least 1990 and German exports were off 10.6% m/m in November.  Also, German November manufacturing orders were off 6% and Spanish unemployment now exceeds three million for the first time in more than twelve years.  Additionally, the European Commission’s December business climate index fell to -3.17 from -2.10 in November, the lowest level since records began in 1985.  Germany’s Deutsche Bank is privately forecasting the German economy could contract by as much as 4% in 2009 and Goldman Sachs said German unemployment could double to about six million.  European Central Bank President was quite bearish in remarks released overnight, saying “It's clear that we have had a significant deterioration of the real economy. What strikes me is that the most recent projections are also the most pessimistic. And this is true at a global level, not particularly at the level of Europe."  Euro bids are cited around the US$ 1.3055 level.

JPY / CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥90.85 level and was capped around the ¥92.90 level.  Bank of Japan Governor Shirakawa testified that recent central bank actions have helped the economy, reporting “The markets are already reacting. The environment for issuance of commercial paper is improving somewhat after the BOJ's decision to buy commercial paper.”  BoJ’s Policy Board is expected to keep interest rates unchanged at its 21-22 January meeting but it may expand policy by broadening the types of assets it accepts for corporate financing.  Nikkei reported the government now expects its budget deficit for the year to March 2012 will reach more than 2% of GDP.  Prime Minister Aso testified and verbally intervened today saying “We need to consider maintaining our support for the dollar as a key currency for the time being, otherwise our national interest would be hurt.” The Nikkei 225 stock index lost 3.93% to close at ¥8,876.42.  U.S. dollar offers are cited around the ¥104.15 level.  The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥124.10 level and was capped around the ¥126.50 level.  The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥137.25 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥82.90 level.  The Chinese yuan weakened vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8352 in the over-the-counter market, up from CNY 6.8330.

STERLING

The British pound moved higher vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.5370 level and was supported around the US$ 1.4980 level.  As expected, Bank of England’s Monetary Policy Committee reduced interest rates by 50bps today to a record low of 1.5% and most economists expect additional monetary easing in February.  U.K. interest rates have now declined 3.5% since October but many U.K. lenders have not followed suit meaning market interest rates are not as supportive of the U.K. economy as some policymakers would like. The MPC reported output would likely keep declining sharply in H1 2009 and added banks are unwilling to extend credit because they’re addressing problems on their own balance sheets.  Two large U.K. employment agencies, Michael Page and Hays, today warned of deteriorating U.K. market conditions.  Chancellor Darling this week intimated he no longer expects a swift economic recovery in H2 2009 but he today killed speculation that quantitative easing measures are imminent in the U.K.  Most traders expect the Darling’s March budget will include a significant tax cut and/ or fiscal spending plans by the government.  Data released in the U.K. today saw IDS wage details up 3.5% in the three months to November.  Cable bids are cited around the US$ 1.3920 level.  The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.8890 level and was capped around the ₤0.9060 level.

SWISS

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0865 level and was capped around the CHF 1.1085 level.  Data released in Switzerland today saw December inflation ease, off 0.5% m/m with the annual rate lower at 0.7% from 1.5% in November.  This annual inflation rate represents the lowest since September 2007.  Also, the percentage of unemployed Swiss workers grew in December to 3.0% from 2.7% in November, near a two-year high.  U.S. dollar offers are cited around the CHF 1.1330 level.  The euro moved lower vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.4935 level while the British pound gained ground vis-à-vis the Swiss franc as sterling tested offers around the CHF 1.6825 level.

AUSSIE

The Australian dollar came off vis-à-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.6955 level and was capped around the $0.7140 level.  Data released in Australia today saw the November trade surplus print at A$ 1.45 billion while November building approvals fell 12.8%.  The Australian government today warned unions about high wage claims.  Australian dollar bids are cited around the US$ 0.6600 figure.

CAD

The Canadian dollar appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the C$ 1.1820 level and was capped around the C$ 1.2070 level.  Commodity-based currencies like the loonie have not fared well as commodities prices, including oil, have come off.  NYMEX crude oil futures for February delivery slipped further today and are now trading with a $41 handle.  Prime Minister Harper confirmed his minority Conservative government will unveil a budget on 27 January that could include a stimulus package worth as much as C$ 30 billion. Regarding the current global economic pullback, Harper added “We're entering the recession later. All the indications are that it will not be as deep here and we should be able to come out of it sooner.”  U.S. dollar offers are cited around the C$ 1.2210 level.

Published on  Thu, Jan 8 2009, 22:46 GMT