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U.S. Forex Market Commentary

Mon, Nov 2 2009, 22:35 GMT
by GCI Financial Team

GCI

EURO

The euro moved moved higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4845 level and was supported around the $1.4685 level.  U.S. equity markets added to recent gains and the single currency improved today, partially as a result of the increased risk appetite in the markets.  Many data were released in the U.S. today. First, October ISM manufacturing improved to 55.7 from the September reading of 52.6 with the October ISM prices paid component higher at 65.0, up from 63.5.  Also, September construction spending improved to +0.8% from a revised August reading of -0.1%.  Also, September home sales were up 6.1% m/m, down from the August print of +6.4% but still above expectations.  On an annualized basis, September pending home sales were up 19.8%, up from 12.1%.  The big news in the market this week will be Friday’s October non-farm payrolls report with many forecasts centering on job losses of 175,000 and an unemployment rate around 9.9%.  An unemployment print at or above 10.0% will be attention-grabbing and could fuel some gains in the U.S. dollar.  Notably, the ISM employment sub-index rallied to 53.1 from September’s 46.2 level and this could presage a deceleration in labour market weakness.  Federal Reserve official Greenlee reported “significant stress and weaknesses persist” in the U.S. banking system.  The Fed is expected to keep interest rates unchanged this week and many Fed-watchers believe there will not be a seismic shift in the Fed’s policy statement this week.  In eurozone news, the October EMU-16 purchasing managers’ index improved to 50.7 from 49.3 in September, the strongest reading since January 2008. These data add to the view the eurozone economy is likely to grow in the second half of the year.  Germany’s manufacturing PMI reading improved to 51 from 49.6 in September.  The European Central Bank is expected to keep monetary policy largely unchanged this week.  Euro bids are cited around the US$ 1.4445 level.

JPY / CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥90.70 level and was supported around the ¥89.20 level. Bank of Japan official Watanabe reported the central bank will “keep monetary policy very accommodative.”  The government reported it will not hold regular meetings with the BoJ to exchange views on the economy and financial conditions.   BoJ Governor Shirakawa reported the central bank’s policies remain “conducive” to the economic recovery. As expected, Bank of Japan last week reported it will stop purchasing corporate debt at the end of 2009, a move designed to phase out one of the emergency measures it adopted as part of its quantitative easing policies.  The central bank also indicated it will only renew one additional emergency program one final time through 31 March.  Additionally, the central bank now expects deflation will continue for a third year with core consumer prices expected to decline 1.5% in the fiscal year ending March 2010 and the 0.8% in the fiscal year ending March 2011.  The Nikkei 225 stock index lost 2.31% to close at ¥9,802.95. U.S. dollar offers are cited around the ¥94.75 level.  The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥134.50 level and was supported around the ¥131.00 figure.  The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥145.75 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥89.10 level. In Chinese news, the U.S. dollar strengthened vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8214 in the over-the-counter market, up from CNY 6.8210.  The Chinese media reported People’s Bank of China is likely to adopt a tighter monetary policy.  PBoC Governor Zhou on Friday reported the central bank should maintain a “moderate easy monetary policy.”  Data released in China overnight saw October manufacturing expanded at its fastest pace in eighteen months and eighth consecutive month with the CFLP Purchasing Managers’ Index rallying to 55.2 from 54.3 in September.

STERLING

The British pound moved lower vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.6325 level and was capped around the $1.6475 level.  Bank of England’s Monetary Policy Committee is expected to keep monetary policy unchanged this week.  Some economists are calling for the MPC to expand its bond-buying program by ₤50 billion while other MPC-watchers believe policymakers will not expand its quantitative easing programs at this time.  Overall, the market consensus seems to favour an increase in the bond-buying program this week.  Data released in the U.K. today saw October PMI manufacturing improve to 53.7 from 49.9 in September.  Cable bids are cited around the US$ 1.6240 level.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.9050 level and was supported around the ₤0.8950 level.  Euro bids are cited around the ₤0.8780 level.

Published on  Mon, Nov 2 2009, 22:37 GMT