{"id":17288,"date":"2010-12-24T14:13:06","date_gmt":"2010-12-24T19:13:06","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=17288"},"modified":"2010-12-24T14:13:06","modified_gmt":"2010-12-24T19:13:06","slug":"forex-daily-market-commentary-183","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2010\/12\/24\/forex-daily-market-commentary-183\/","title":{"rendered":"Forex Daily Market Commentary"},"content":{"rendered":"

By GCI Forex Research<\/strong><\/p>\n

Fundamental Outlook at \t\t\t0800 GMT (EDT + 0400)<\/strong><\/p>\n

\u20ac<\/strong><\/p>\n

The euro appreciated \t\t\tvis-\u00e0-vis the U.S. dollar today<\/strong> as the \t\t\tsingle currency tested offers around the US$ 1.3145 level and was \t\t\tsupported around the $1.3085 level. The common currency was poised \t\t\tto register its third consecutive lower weekly close.\u00a0 Ratings \t\t\tagency Fitch downgraded Portugal\u2019s credit rating by one notch to A+, \t\t\tthe fifth highest level, and confirmed Portugal\u2019s outlook is \t\t\tnegative.\u00a0 Fitch reported \u201cThe downgrade reflects an even slower \t\t\treduction in the current account deficit and a much more difficult \t\t\tfinancing environment for the Portuguese government and banks than \t\t\tincorporated into Fitch\u2019s previous rating and the negative outlook \t\t\tassigned on 24 March 2010, as well as a deteriorating near-term \t\t\teconomic outlook.\u201d\u00a0 Traders remain extremely concerned about the \t\t\tsovereign debt crisis involving peripheral eurozone countries like \t\t\tPortugal, Spain, Ireland, Greece, and others.\u00a0 Excess liquidity in \t\t\tthe eurozone banking system remains elevated into year-end, \t\t\treflecting banks\u2019 nervousness concerning market stresses and a \t\t\tdecreased willingness to lend.\u00a0 Irish finance minister Lenihan this \t\t\tweek said a default on senior debt would \u201cdestroy\u201d Ireland and is \t\t\tnot an option.\u00a0 ECB member Kranjec noted \u201cI see no danger for \t\t\texistence of the euro,\u201d adding the European Union has shown a lot of \t\t\t\u201cflexibility\u201d in tackling its members\u2019 financial problems.\u00a0 The \t\t\tGerman media this week reported Germany has proposed the creation of \t\t\ta new independent institution to bolster eurozone members that are \t\t\tfinancially-troubled.\u00a0 The German proposal would include the \t\t\tcreation of a European Stability and Growth Investment Fund that \t\t\twould enhance the operations of the European Central Bank.\u00a0 The new \t\t\tFund would provide liquidity against collateral in the form of gold \t\t\treserves or equity in state-owned companies.\u00a0 In U.S. news<\/strong>, \t\t\teconomic data released yesterday saw November durable goods come in \t\t\tat -1.3%, up from the revised prior reading of -3.1%, while the \t\t\tex-transportation component was up 2.4%.\u00a0 November personal income \t\t\tand November personal spending were up 0.3% and 0.4%, respectively, \t\t\twhile the November PCE deflator was up 1.0% y\/y.\u00a0 \u00a0Additionally, \t\t\tcore PCE was up 0.1% and 0.8% y\/y, below expectations.\u00a0 Weekly \t\t\tinitial jobless claims were up 420,000 and continuing jobless claims \t\t\twere up 4.064 million.\u00a0 Moreover, November new home sales were up \t\t\t5.5% to an annualized 290,000 units and the final University of \t\t\tMichigan consumer sentiment indicator improved to 74.5.\u00a0 Euro bids \t\t\tare cited around the US$ 1.2995 level.<\/p>\n

\u00a5\/ CNY<\/strong><\/p>\n

The yen appreciated \t\t\tvis-\u00e0-vis the U.S. dollar today<\/strong> as the \t\t\tgreenback tested bids around the \u00a582.85 \t\t\tlevel and was capped around the \u00a583.15 level. \u00a0Technically, the pair \t\t\twas poised to close the week right around the 38.2% retracement of \t\t\tthe \u00a580.25 \u2013 84.50 range.\u00a0 Some media outlets reported Japan will \t\t\tlikely increase its reserves for conducting intervention in the \t\t\texchange rates market.\u00a0 Cabinet Office official Wada reported \u201cThe \t\t\tBoJ has pretty much done everything it can do.\u00a0 It\u2019ll probably be \t\t\thard for the Bank of Japan to find more effective policy tools.\u00a0 So, \t\t\tit will be the government\u2019s turn to make more of an effort with \t\t\tpolicy steps\u2026It\u2019s strange that private banks can\u2019t lend.\u00a0 They are \t\t\tpouring money into government bonds even though they have sufficient \t\t\tfunds to extend loans.\u00a0 Their money should go into companies rather \t\t\tthan government bonds.\u201d\u00a0 The Kan government today approved a record \t\t\t\u00a592.41 trillion draft budget for the fiscal year that begins 1 April \t\t\t2011.\u00a0 Japan plans to issue new bonds valued at \u00a544.3 trillion, a \t\t\tmove that means new debt will likely eclipse tax revenue for the \t\t\tsecond consecutive year.\u00a0 Notably, Japan\u2019s public debt is estimated \t\t\tto be approximately 200% of gross domestic product, the highest \t\t\tlevel among its industrialized peers.\u00a0 Finance minister Noda \t\t\treported \u201cWe were able to draft the budget\u2026while walking a fine line \t\t\tto achieve both improvement of fiscal health and economic growth.\u201d\u00a0 \t\t\tNoda also said the government fulfilled an obligation to limit new \t\t\tbond issuance to this year\u2019s \u00a544.3 trillion level.\u00a0 Bank of Japan \t\t\treleased its Monthly Report of Recent Economic and Financial \t\t\tDevelopments this week in which it reiterated \u201cJapan\u2019s economy still \t\t\tshows signs of a moderate recovery, but the recovery seems to be \t\t\tpausing,\u201d an assessment that is very similar to its assessments in \t\t\tNovember and October.\u00a0 Notably, however, the central bank upgraded \t\t\tits assessment of the impact from its \u201chighly accommodative\u201d \t\t\tmonetary policy and reported capital spending is improving.\u00a0 On a \t\t\tnegative note, the central bank lowered its assessment of \t\t\tproduction.\u00a0 The central bank also reported that it has made \u00a525 \t\t\ttrillion in asset purchases and loans as part of its \u00a530 trillion \t\t\tstimulus program designed to enhance economic growth and overcome \t\t\tdeflation. As expected, Bank of Japan\u2019s Policy Board kept monetary \t\t\tpolicy unchanged this week, leaving the overnight unsecured call \t\t\trate target between 0% and 0.1% and maintaining the size of its \t\t\tcredit programs.\u00a0 BoJ Governor Shirakawa reported \u201cVolatile \t\t\tlong-term rates can affect the economy, prices, and financial \t\t\tconditions by influencing borrowing costs for households and \t\t\tcompanies.\u201d\u00a0 The BoJ noted \u201cThe bank will steadily purchase various \t\t\tfinancial assets and provide longer-term funds\u201d so that \u201cthe effects \t\t\tof comprehensive monetary easing spread.\u201d Data released in Japan \t\t\tthis week saw the November merchandise balance total decline to \t\t\t+\u00a5162.8 billion from the prior total of \u00a5821.3 billion.\u00a0 The Nikkei \t\t\t225 stock index lost 0.65% to close at \u00a510,279.19.\u00a0 U.S. dollar \t\t\toffers are cited around the \u00a584.60 level.\u00a0 The euro moved lower <\/strong>vis-\u00e0-vis the yen as the single currency tested bids around the \t\t\t\u00a5108.55 level and was capped around the \u00a5109.05 level.\u00a0 The \t\t\tBritish pound moved lower <\/strong>vis-\u00e0-vis the yen as sterling tested \t\t\tbids around the \u00a5127.80 level while the Swiss franc moved lower <\/strong>vis-\u00e0-vis the yen and tested bids around the \u00a586.00 figure. In Chinese news<\/strong>, the U.S. dollar depreciated vis-\u00e0-vis the \t\t\tChinese yuan today as the greenback closed at CNY 6.6264 in the \t\t\tover-the-counter market, down from CNY 6.6450. \u00a0For the second time \t\t\tin one month, China failed to solicit enough demand for a bill sale \t\t\tas banks have less cash on account of higher reserve requirements.\u00a0 \t\t\tPeople\u2019s Bank of China today reiterated China needs to return to a \t\t\t\u201cprudent monetary policy\u201d to control its money supply and reduce \t\t\tprice inflation.\u00a0 The current cash squeeze being faced by banks \t\t\trenders it unlikely PBoC will hike interest rates by the end of the \t\t\tyear.\u00a0 Notably, Chinese financial institutions have lent CNY 17 \t\t\ttrillion over the past two years.\u00a0 Chinese money-market rates \t\t\tescalated to their highest level in more than two years this week as \t\t\ta result of lenders having to provision more capital as reserves.\u00a0 \t\t\tPeople\u2019s Bank of China Governor Zhou last week reported global \t\t\teconomic turbulence is limiting the central bank\u2019s ability to raise \t\t\tinterest rates to counter inflation.\u00a0 Notably, China\u2019s inflation \t\t\trate reached a 28-month high in November and PBoC has pledged it \t\t\twill transition to a \u201cprudent\u201d monetary policy stance in 2011.\u00a0 \t\t\tChina is said to be targeting 8% GDP growth and 4% inflation growth \t\t\tin 2011 along with 16% M2 money supply growth.<\/p>\n

\u00a3<\/strong><\/p>\n


\nThe British pound appreciated vis-\u00e0-vis \t\t\tthe U.S. dollar today<\/strong> as cable tested \t\t\toffers around the US$ 1.5475 level and was supported around the US$ \t\t\t1.5415 level. Cable was poised to register its lowest weekly close \t\t\tsince early September.\u00a0 Bank of England Monetary Policy Committee \t\t\tmember Fisher this week warned mortgage interest rates could reach \t\t\t5%. Data to be released early Monday include the December Hometrack \t\t\thousing survey.\u00a0 Data released in the U.K. this week saw November \t\t\tBBA loans for house purchases moderate while the October index of \t\t\tservices were off 0.4% y\/y.\u00a0 Other data released in the U.K. this \t\t\tweek saw Q3 total business investment up 3.1% q\/q and 8.9% y\/y while \t\t\tQ3 gross domestic product was downwardly revised to +0.7% q\/q and \t\t\t+2.7% y\/y.\u00a0 Also, the Q3 current account deficit widened to -\u00a39.6 \t\t\tbillion.\u00a0 Minutes from Bank of England\u2019s December Monetary Policy \t\t\tCommittee meeting were released this week in which there was a \t\t\tthree-way voting split again.\u00a0 MPC member Posen again voted to \t\t\tincrease the BoE\u2019s \u00a3200 billion asset purchase program by \u00a350 \t\t\tbillion while MPC member Sentance voted to increase interest rates \t\t\tfor a seventh month.\u00a0 The other MPC members voted for no change in \t\t\tpolicy but \u201cstood ready to change the stance of policy should the \t\t\tbalance of risks shift materially.\u201d\u00a0 BoE also reported that spare \t\t\teconomic capacity is \u201csubstantial.\u201d\u00a0 Cable bids are cited around the \t\t\tUS$ 1.5265 level.\u00a0 The euro depreciated<\/strong> vis-\u00e0-vis the British \t\t\tpound as the single currency tested bids around the \u00a30.8475 level \t\t\tand was capped around the \u00a30.8510 level.<\/p>\n

CHF<\/strong><\/p>\n

The Swiss franc \t\t\tdepreciated vis-\u00e0-vis the U.S. dollar today<\/strong> as the greenback tested offers around the CHF 0.9635 level and was \t\t\tsupported around the CHF 0.9555 level. \u00a0The pair was poised to \t\t\tregister its second consecutive lower weekly close. Swiss National \t\t\tBank reported it is \u201cready to take the measures necessary\u201d to \t\t\tcounter deflation, adding to speculation it may conduct a fresh \t\t\tround of franc-selling intervention.\u00a0 SNB today reported \u201cConcerns \t\t\tabout stability in the euro area have led to renewed financial \t\t\tmarket tensions.\u00a0 Should these tension be exacerbated and put a \t\t\tstrain on economic developments in the euro area, this would also \t\t\thave a detrimental effect on the Swiss economy.\u00a0 If a deflation risk \t\t\temerges, the SNB would take the measures necessary to ensure price \t\t\tstability.\u201d\u00a0 Earlier this week, the euro reached an all-time low \t\t\tvis-\u00e0-vis the Swiss franc.\u00a0 The November UBS consumption indicator \t\t\tand December KOF Swiss leading indicator will be released next \t\t\tweek.\u00a0 There was market chatter this week that Swiss National Bank \t\t\tChairman Hildebrand said the euro could fall to CHF 0.50 but the SNB \t\t\tlater denied this comment.\u00a0 Data released in Switzerland this week \t\t\tsaw the November trade balance surplus narrow to CHF 1.93 billion \t\t\tfrom the revised prior reading of CHF 2.05 billion.\u00a0 Also, the \t\t\tNovember M3 money supply indicator climbed 6.4% y\/y.\u00a0 Swiss National \t\t\tBank member Jordan this weekend reported \u201cThere may be situations \t\t\twhere interest rates have to be kept at a low level to ensure price \t\t\tstability, and where higher rates could threaten the economy.\u201d\u00a0 SNB \t\t\tChairman Hildebrand reported he remains concerned over the eurozone \t\t\tsovereign debt crisis, adding it could lead to \u201cdevastating\u201d \t\t\tconsequences if the euro depreciates sharply and the franc soars.\u00a0 \t\t\tThe KOF Institute last week raised its Swiss GDP growth forecast \t\t\tslightly for 2011 and reported Swiss National Bank is likely to \t\t\traise interest rates around the middle of 2011.\u00a0 Swiss National \t\t\tBank\u2019s quarterly interest rate announcement was announced last week \t\t\tin which policymakers maintained the central bank\u2019s three-month \t\t\tSwiss franc Libor target rate at 0.25%.\u00a0 SNB\u2019s 2011 inflation \t\t\tforecast was raised to 0.4% from 0.3% and its 2012 inflation \t\t\tforecast was reduced to 1% from the prior reading of 1.2%.\u00a0 SNB \t\t\texpects the Swiss economy to grow about 2.5% in 2010 and around 1.5% \t\t\tin 2011.\u00a0 The Swiss government last week raised its GDP growth \t\t\tforecast for 2011 to 1.5% from the 1.2% projection it noted in \t\t\tSeptember.\u00a0 U.S. dollar offers are cited around the CHF 0.9780 \t\t\tlevel.\u00a0 The euro appreciated<\/strong> vis-\u00e0-vis the Swiss franc as the \t\t\tsingle currency tested offers around the CHF 1.2655 level while the British pound moved higher<\/strong> vis-\u00e0-vis the Swiss franc and \t\t\ttested offers around the CHF 1.4885 level.<\/p>\n

Forex Daily Market Commentary<\/strong><\/em> provided by<\/em><\/strong> GCI Financial Ltd<\/strong><\/a>.<\/strong><\/p>\n

GCI Financial Ltd (\u201dGCI\u201d) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (\u201dForex\u201d) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (\u201dCFDs\u201d) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.<\/p>\n

DISCLAIMER: GCI\u2019s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.<\/p>\n","protected":false},"excerpt":{"rendered":"

Ratings agency Fitch downgraded Portugal\u2019s credit rating by one notch to A+, the fifth highest level, and confirmed Portugal\u2019s outlook is negative. Fitch reported \u201cThe downgrade reflects an even slower reduction in the current account deficit<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-17288","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/17288","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=17288"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/17288\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=17288"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=17288"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=17288"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}