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U.S. Forex Market Commentary

Tue, Nov 3 2009, 22:40 GMT
by GCI Financial Team

GCI

EURO

The euro moved lower vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4625 level and was capped around the $1.4810 level.  Data released in the U.S. today saw September factory orders climb 0.9%, a sharp reversal from the August reading of -0.8%, with the ex-transportation component up 0.9%.  These data were just above expectations and are supportive of the view the U.S. economy expanded in the third quarter.  The big news in the market this week will be Friday’s October non-farm payrolls report with many forecasts centering on job losses of 175,000 and an unemployment rate around 9.9%.  An unemployment print at or above 10.0% will be attention-grabbing and could fuel some gains in the U.S. dollar.  The Federal Open Market Committee is expected to keep borrowing costs unchanged when its policy decision is announced tomorrow.  The Fed could amplify its view on some of its sizable credit easing programs and some dealers believe the Federal Open Market Committee could announce it is inching closer to unwinding some of the massive monetary stimuli it has provided to counter the U.S. recession.  In eurozone news, the European Union’s Lisbon Treasity will take effect on 1 December following the Czech Republic’s accession.  The European Commission today reported the European Union’s economy is likely to contract 4.1% in 2009 and expand 0.7% in 2010 and 1.6% in 2011.  The European Commission expects the eurozone economy will contract about 4% in 2009 and register 0.7% growth in 2010 and 1.5% growth in 2011.  The European Central Bank is expected to keep interest rates unchanged when its decision is announced on Thursday.  Euro bids are cited around the US$ 1.4445 level.

JPY / CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥90.55 level and was supported around the ¥89.85 level.   Traders were non-committal over the yen today with the currency gaining on some crosses and losing on others.  A mixed day for global equities also contributed to a lack of market direction for the pair.  Yomiuri quoted Bank of Japan Governor Shirakawa as saying the government needed to restore “a healthy balance” to its finances, adding “if we take inflation measures to reduce the value of government bonds, it would cause various problems.”  BoJ’s Policy Board last week predicted core consumer prices will decline 1.5% in the year ending March 2010, decline 0.8% in the fiscal year ending March 2011, and decline 0.4% in the fiscal year ending March 2012.  Yesterday, 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.  The Nikkei 225 stock index lost 2.31% yesterday to close at ¥9,802.95. U.S. dollar offers are cited around the ¥94.75 level.  The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥131.70 level and was capped around the ¥134.00 figure.  The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥148.55 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥87.10 level. In Chinese news, the U.S. dollar strengthened vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8215 in the over-the-counter market, up from CNY 6.8214.  China Banking Regulatory Commission instructed banks to “keep their lending at a reasonable level in the fourth quarter.”  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 yesterday 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.  It was also reported that PBoC is establishing a new department to manage its foreign exchange policy.

STERLING

The British pound moved higher vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.6455 level and was supported around the $1.6260 level. Cable was given earlier in the Australasian session but North American dealers lifted the pair to intraday highs. Data released in the U.K. today saw Halifax October house prices climb for the fourth consecutive month, up 1.2% m/m from a revised 1.5% m/m in September.  Bank of England’s Monetary Policy Committee will announce their interest rate decision on Thursday and while the MPC is expected to keep interest rates unchanged, they could broaden their bond-buying program by as much as ₤25 billion.  The European Commission today forecast the U.K. economy will fare better than the eurozone economy over the next two years. Cable bids are cited around the US$ 1.6240 level.  The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.8935 level and was capped around the ₤0.9060 level.  Euro bids are cited around the ₤0.8780 level.

Published on  Tue, Nov 3 2009, 22:41 GMT