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U.S. Forex Market Commentary

Sun, Mar 8 2009, 22:09 GMT
by GCI Financial Team

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EURO

The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2750 level and was supported around the $1.2530 level.   As expected, the U.S. February non-farm payrolls number was a disaster as 651,000 Americans lost their jobs last month and the unemployment rate spiked to 8.1% from 7.6%.  Average hourly earnings were up 0.2% and the average workweek was unchanged at 33.3 hours.  Today’s non-farm payroll print came in right around forecasts and was consistent with the ADP print.  The big news, however, was a sharp downward revision to December’s and January’s non-farm payrolls results of a cumulative 161,000 jobs.  The U.S. economy has now shed 4.4 million jobs since the recession officially began.  The Federal Deposit Insurance Corporation yesterday indicated it may become insolvent this year on account of anticipated bank failures.  The U.S. Senate is today deliberating an emergency US$ 500 billion loan to the FDIC that would serve as a backstop.  In eurozone news, European Central Bank member Bini Smaghi said if the current rate cuts end “at a higher level… it is more likely that the interest rate will remain at that above-zero floor level for some time.”  He added this would incentivize lenders to invest in long-term assets.  The ECB yesterday trimmed its key interest rate target to 1.5%, the lowest rate ever.   It is likely the ECB will resort to some sort of quantitative easing to expand the money supply.  Data released in Germany today saw 2008 corporate insolvencies off 4.5% y/y.   Euro bids are cited around the US$ 1.2385 level.

JPY / CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥96.55 level and was capped around the ¥98.50 level.  The U.S. dollar sputtered lower after yesterday’s massive sell-off in U.S. equity markets and an ensuing sell-off in Asian markets.  Traders drove the greenback lower ahead of the terrible U.S. February non-farm payrolls report.  Data released in Japan overnight saw the trade balance print at -¥131 billion between 1-20 February, down from a ¥413 billion surplus one year ago.  The Nikkei 225 stock index lost 3.50% to close at ¥7,173.10.  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 offers around the ¥123.90 level and was supported around the ¥122.35 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 higher vis-à-vis the yen and tested offers around the ¥84.90 level.  The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8395 in the over-the-counter market, down from CNY 6.8409.  People’s Bank of China reported it will continue to reform the yuan’s exchange rate this year and “keep it at a reasonable and balanced level.”

STERLING

The British pound depreciated vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.4075 level and was capped around the $1.4305 level.  Data released in the U.K. today saw February producer price inflation rise +0.1% m/m and 3.1% y/y, the lowest annual increase since September 2007.  Also, PPI input prices were up 0.6% m/m, defying expectations of a pullback.   U.K. government minister Malloch-Brown reported the depreciation in sterling has not been an “engineered policy” and said the G20 meeting in London on 2 April will see the U.K. call for measures to monitor protectionist policies.  Construction sector output was off 7% q/q in Q4 and this helped cause GDP to contract 1.5%, the largest quarterly contraction since 1980.  Cable bids are cited around the US$ 1.3740 level.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.8995 level and was supported around the ₤0.8860 level.

Published on  Sun, Mar 8 2009, 22:11 GMT

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