{"id":17430,"date":"2010-12-30T10:41:15","date_gmt":"2010-12-30T15:41:15","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=17430"},"modified":"2010-12-30T10:41:15","modified_gmt":"2010-12-30T15:41:15","slug":"forex-daily-market-commentary-186","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2010\/12\/30\/forex-daily-market-commentary-186\/","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$ 1.3315 level and was \t\t\tsupported around the $1.3215 level. \u00a0Technically, today\u2019s intraday \t\t\thigh was just above the 61.8% retracement of the $1.2650 \u2013 1.4280 \t\t\trange.\u00a0 Traders continue to lift the common currency higher at \t\t\tyear-end as commodities prices escalate at the expense of the U.S. \t\t\tdollar.\u00a0 European Central Bank member Nowotny warned it is possible \t\t\t\u201cthat there will be further challenges for individual countries in \t\t\tthe euro area\u201d and added a \u201cmore efficient Stability and Growth \t\t\tPact\u201d is a needed reform.\u00a0 Improving U.S. and global economic data \t\t\tare increasing the demand for higher-yielding assets and decreasing \t\t\tdemand for U.S. dollars.\u00a0 At the same time, safe haven assets like \t\t\tthe Swiss franc and Japanese yen remain bid.\u00a0 This evidences the \t\t\tdynamics of the two-track global economy where emerging market \t\t\teconomies are registering elevated rates of growth and \t\t\tindustrialized countries where fiscal imbalances are overshadowing \t\t\teconomic growth. \u00a0The dominant theme in the eurozone remains \t\t\tsovereign credit woes. \u00a0Ratings agencies have slashed eurozone \t\t\tcredit ratings in recent weeks, adding to the euro\u2019s malaise.\u00a0 There \t\t\tremains widespread speculation that Portugal and maybe other \t\t\teurozone countries will be forced to accept financial assistance \t\t\tnext year.\u00a0 Eurozone banks are hoarding cash at year-end to bolster \t\t\ttheir balance sheets.\u00a0 The European Central Bank this week attemped \t\t\tto absorb \u20ac73.5 billion of liquidity from the eurozone financial \t\t\tsystem, around the amount it has expended on the purchase of \t\t\teurozone government bonds.\u00a0 Eurozone banks, however, offered just \t\t\tover \u20ac60 billion and this represents the second failure to remove \t\t\tliquidity and sterilize its bond purchases since the bond-buying \t\t\tprogram was started in May to support asset prices and keep a lid on \t\t\tmarket rates.\u00a0 Data released in the eurozone this week saw German \t\t\tprovisional consumer price inflation data for many states come in \t\t\tstronger than November\u2019s levels and German headline CPI was up 1.0% \t\t\tm\/m and 1.7% and 1.2% m\/m and 1.9% y\/y at the harmonized level.\u00a0 In U.S. news<\/strong>, data released today saw weekly initial jobless \t\t\tclaims fall sharply to 388,000 from the prior reading of 422,000 \t\t\twhile continuing jobless claims climbed to 4.128 million from the \t\t\tprior reading of 4.071 million.\u00a0 Also, December Chicago PMI climbed \t\t\tsharply to 68.6 from the prior reading of 62.5 and November pending \t\t\thome sales improved +3.5% m\/m and improved to -2.4% y\/y.\u00a0 Other data \t\t\treleased in the U.S. this week saw the October CaseShiller home \t\t\tprice index decline more than expected at -0.99% m\/m and -0.80% \t\t\ty\/y.\u00a0 Also, Dcember consumer confidence tumbled to 52.5 from the \t\t\tprior reading of 54.3 while the December Richmond Fed manufacturing \t\t\tindex improved to +25.\u00a0 Euro bids are cited around the US$ 1.2995 \t\t\tlevel.<\/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 \u00a581.30 \t\t\tlevel and was capped around the \u00a581.65 level. Technically, today\u2019s \t\t\tintraday low was just above the 76.4% retracement of the \u00a580.25 \u2013 \t\t\t84.50 range.\u00a0 The pair has not been this weak since 9 November and \t\t\tits recent \u00a53 decline has more dealers speculating Bank of Japan \t\t\twill decide to expand monetary policy further.\u00a0 Five-year Japanese \t\t\tgovernment bonds appreciated by their largest amount in one year as \t\t\ttraders tried to get ahead of possible central bank easing.\u00a0 The \t\t\tgovernment reported it did not conduct official yen-selling \t\t\tintervention in December for a third consecutive month following its \t\t\t\u00a52.12 trillion intervention actions in September.\u00a0 Data released in \t\t\tJapan overnight saw December manufacturing PMI climb to 48.3 from \t\t\tthe prior reading of 47.3.\u00a0 Current account deposits held by the BoJ \t\t\thave remained above \u00a520 trillion for several consecutive days, an \t\t\tindication that banks have a significant amount of capital on hand.\u00a0 \t\t\tFinance Minister Noda this week verbally intervened against the \t\t\tyen\u2019s strength again, vowing to take \u201cbold action when moves are \t\t\texcessive.\u201d\u00a0 Noda added the yen\u2019s appreciation has been \u201cone-sided\u201d \t\t\twhile Economy Minister Kaieda added \u201cabrupt yen moves must be \t\t\tavoided.\u201d\u00a0 Japanese policymakers clearly remain preoccupied with \t\t\tpreventing the yen\u2019s advances from eroding exporters\u2019 margins too \t\t\tmuch, especially after positive Japanese economic data were released \t\t\tovernight.\u00a0 \u00a0\u00a0On 22 December, the government released an economic \t\t\tgrowth forecast that predicts economic growth will fall to +1.5% in \t\t\tthe fiscal year beginning 1 April, down from the estimated +3.1% \t\t\trate of growth in the current fiscal year.\u00a0 Many data were released \t\t\tin Japan this week. The Nikkei 225 stock index lost 1.12% to close \t\t\tat \u00a510,228.92.\u00a0 U.S. dollar offers are cited around the \u00a584.60 \t\t\tlevel.\u00a0 The euro moved higher <\/strong>vis-\u00e0-vis the yen as the single \t\t\tcurrency tested offers around the \u00a5108.30 level and was supported \t\t\taround the \u00a5107.60 level.\u00a0 The British pound moved lower <\/strong> vis-\u00e0-vis the yen as sterling tested bids around the \u00a5125.55 level \t\t\twhile the Swiss franc moved higher <\/strong>vis-\u00e0-vis the yen and \t\t\ttested offers around the \u00a587.00 figure. In Chinese news<\/strong>, the \t\t\tU.S. dollar depreciated vis-\u00e0-vis the Chinese yuan today as the \t\t\tgreenback closed at CNY 6.6070 in the over-the-counter market, down \t\t\tfrom CNY 6.6245. \u00a0Today\u2019s close was the pair\u2019s weakest showing since \t\t\t1993 and traders continue to speculate People\u2019s Bank of China will \t\t\tallow the yuan to appreciate at a faster pace in 2011.\u00a0 Data \t\t\treleased in China overnight saw December HSBC manufacturing PMI fall \t\t\tto 54.4 from the prior reading of 55.3.\u00a0 The December business \t\t\tconditions survey will be released overnight and December \t\t\tmanufacturing PMI will be released tomorrow night. People\u2019s Bank of \t\t\tChina raised the yield on three-month bills for the first time in \t\t\tseven weeks following a move in China\u2019s benchmark seven-day \t\t\trepurchase rate to 6.27%, its highest level since 2007.\u00a0 Liquidity \t\t\tconditions remain very tight on account of year-end cash hoarding by \t\t\tfinancial institutions.\u00a0 \u00a0People\u2019s Bank of China official Sheng \t\t\tSongcheng this week reported China should accelerate the \t\t\t\u201cliberalization\u201d of interest rates \u201cby a certain degree\u201d to reduce \t\t\tinflation and said asset prices should become an \u201cimportant\u201d factor \t\t\tin formulating monetary policy.\u00a0 PBoC raised its one-year lending \t\t\tand deposit rates by 25bps on Saturday, its second rate hike since \t\t\tmid-October.\u00a0 The benchmark lending rate increased to 5.81% and the \t\t\tbenchmark deposit rate increased to 2.75%.\u00a0 Many economists believe \t\t\tPBoC will front-load additional rate hikes and other monetary \t\t\ttightening policies in the coming months.\u00a0 Notably, China has raised \t\t\tbanks\u2019 reserve requirements six times in 2010 and reduced loan \t\t\tgrowth from record levels.\u00a0 These actions evidence a central bank \t\t\tand government that remain very concerned about elevated rates of \t\t\tinflation.\u00a0 China is said to be targeting 8% GDP growth and 4% \t\t\tinflation growth in 2011 along with 16% M2 money supply growth.<\/p>\n

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


\nThe British pound depreciated vis-\u00e0-vis \t\t\tthe U.S. dollar today<\/strong> as cable tested bids \t\t\taround the US$ 1.5040 level and was capped around the US$ 1.5535 \t\t\tlevel. Technically, today\u2019s intraday high was right around the 76.4% \t\t\tretracement of the $1.5300 – 1.6300 range.\u00a0 The pair last week \t\t\treached its weakest level since September. \u00a0Bank of England Monetary \t\t\tPolicy Committee Sentance reported official interest rates should \t\t\t\u201cgradually\u201d be raised to signal the U.K. economy is returning to \t\t\t\u201cnormal\u201d and contend with inflation that may accelerate to double \t\t\tthe BoE\u2019s target in 2011.\u00a0 Sentance also reported the British \t\t\teconomy \u201chas bounced back from recession more strongly than most \t\t\tpeople were expecting.\u201d\u00a0 He also warned against a wage price \t\t\tspiral.\u00a0 In contrast, MPC member Posen continues to call for \t\t\tadditional monetary expansion.\u00a0 Data released in the U.K. this week \t\t\tsaw Q3 Bank of England housing equity withdrawal decline to -\u00a36.1 \t\t\tbillion.\u00a0 December Nationwide house prices data will be released \t\t\ttomorrow.\u00a0 Other data released this week saw the December Hometrack \t\t\thousing survey off 0.4% m\/m and off 1.6% y\/y.\u00a0 Bank of England \t\t\tMonetary Policy Committee member Fisher last week warned mortgage \t\t\tinterest rates could reach 5%. Cable bids are cited around the US$ \t\t\t1.5265 level.\u00a0 The euro appreciated<\/strong> vis-\u00e0-vis the British \t\t\tpound as the single currency tested offers around the \u00a30.8610 level \t\t\tand was supported around the \u00a30.8515 level.<\/p>\n

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

The Swiss franc \t\t\tappreciated vis-\u00e0-vis the U.S. dollar today<\/strong> as the greenback tested bids around the CHF 0.9370 level and was \t\t\tcapped around the CHF 0.9460 level. The pair has now lost about 23 \t\t\tbig figures from its 2010 high and fell to an all-time low this week \t\t\tas the franc continues to sharply escalate.\u00a0 Data released in \t\t\tSwitzerland this week saw the December KOF Swiss leading indicator \t\t\tdecline to 2.10 from the revised prior reading of 2.13.\u00a0 Also, the \t\t\tNovember UBS consumption indicator declines to 1.630 from the \t\t\trevised prior reading of 1.708, still indicating an expansion in \t\t\tconsumer spending activity.\u00a0 Swiss National Bank Chairman Hildebrand \t\t\thas labeled the franc\u2019s record rally a \u201cburden\u201d and options traders \t\t\tare said to more bullish on the franc over the next quarter than any \t\t\tother currency other than the yen.\u00a0 SNB incurred approximately CHF \t\t\t22 billion of intervention-related losses in the first nine months \t\t\tof 2010 on account of its inability to halt the franc\u2019s appreciation \t\t\tand there is a broadening perspective the SNB may not be able to \t\t\treverse the franc\u2019s ongoing gains.\u00a0 SNB last week 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 The SNB\u2019s 2012 inflation forecast was reduced to 1% from \t\t\t1.2% on 16 December, just a few months after SNB Vice Chairman \t\t\tJordan reported intervention is no longer necessary because the \t\t\tdeflation threat was almost gone.\u00a0 \u00a0Last week, the euro reached an \t\t\tall-time low vis-\u00e0-vis the Swiss franc.\u00a0 U.S. dollar offers are \t\t\tcited around the CHF 0.9780 level.\u00a0 The euro depreciated<\/strong> vis-\u00e0-vis the Swiss franc as the single currency tested bids around \t\t\tthe CHF 1.2400 figure while the British pound moved lower<\/strong> vis-\u00e0-vis the Swiss franc and tested bids around the CHF 1.4450 \t\t\tlevel.<\/p>\n

Forex Daily Market Commentary<\/strong><\/em> provided by<\/em><\/strong> GCI Financial Ltd<\/strong><\/a>.<\/strong><\/span><\/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":"

Traders continue to lift the common currency higher at year-end as commodities prices escalate at the expense of the U.S. dollar. European Central Bank member Nowotny warned it is possible<\/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-17430","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/17430","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=17430"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/17430\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=17430"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=17430"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=17430"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}