EURO
The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2990 level and was supported around the $1.2745 level. As expected, the U.S. January non-farm payrolls data were horrendous. Job losses between December 2007 and last month aggregated 3.6 million, which January non-farm payrolls off 598,000. The January unemployment rate jumped 0.4% to 7.6%, the highest level since September 1992. Some economists believe the unemployment rate may rocket to 9% or even 10% this year. The “marginally-attached” rate of unemployment and underemployment reached 13.9% last month. Average hourly earnings were up 0.3% to US$ 18.46, up 3.9% y/y, while average hours worked was unchanged at 33.3 hours. These data underscore the depth of the U.S. recession and the need for the Obama administration to pass a fiscal stimulus that will improve the beleaguered job market. The U.S. Senate continues to debate the US$ 900 billion+ fiscal stimulus. It was also reported a government aggregator is planning on purchasing up to US$ 500 billion in financial assets. St. Louis Federal Reserve President Bullard said it is premature for the Fed to start purchasing U.S. Treasuries, adding “I do think there are some downside risks on inflation, so you could end up in negative territory. I am worried about it, partly because of the global nature of this recession. I don't think we're going to get any good news into the fall of this year. So I think it is going to continue to put downward pressure on prices during that whole period…I think policies have to be designed to avoid that outcome.” In eurozone news, the European Central Bank reported credit conditions tightened in the fourth quarter of 2008, the sixth consecutive quarter of tighter lending standards. Most traders expect the ECB will ease interest rates by 50bps in March. German data released today saw November industrial output off 4.6% with manufacturing output off 5.3%. The decline in industrial output was the largest since 1991. ECB President Trichet today reported “One would argue that when you are at that level (zero rates) you have a other instruments that you could utilize but there are a number of other aspects of the zero position which we consider sufficiently full of drawback to try to avoid, that is the present position. At the moment I'm speaking, the council of governors of the ECB considers it would not be appropriate considering the drawbacks.” ECB member Liikanen added “As the markets have correctly interpreted, at the next meeting a rate cut is possible. The message is that in relation to price stability, our risk is in balance...The ECB's main task is to keep inflation around or under two percent, and this is quite well under control, so we have room to use monetary policy for other purposes. An interest rate of two percent is not the bottom limit, it could go lower.” Euro bids are cited around the US$ 1.2475 level.
JPY / CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥92.20 level and was supported around the ¥90.75 level. Bank of Japan Governor Shirakawa warned the economy is worsening, reporting “Exports fell sharply in the fourth quarter and corporate finance has been tight, which is putting downward pressure on the economy in various ways. That has happened not only in Japan but other parts of the world. The worsening of economic activity in the past three months has been very severe.” Shirakawa reiterated the central bank will purchase equities from banks. Data released in Japan overnight saw the December coincident indicator index fall 2.6 points m/m and Japan reported its foreign reserves totaled US$ 1.011 trillion at the end of January. The Nikkei 225 stock index climbed 1.60% to close at ¥8,076.62. 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 ¥119.70 level and was supported around the ¥115.70 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥136.75 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥79.45 level.
