Daily Currency Analysis
Posted 11-06-2009 at 04:19 PM by TraderPlanet.com
EUR/USD
The Euro consolidated below 1.49 against the dollar in Europe ahead of the ECB policy decision on Thursday. The Euro-zone retail sales data was weaker than expected with a further 0.7% decline for September to give a 3.6% annual decline, maintaining fears over the outlook for consumer spending.
There were no policy surprises from the ECB with interest rates left on hold at 1.00% following the latest council meeting. Bank President Trichet maintained a tone of cautious optimism over the economy, repeating his expectations for a very slow recovery while he drew attention to falling money supply and private loans. Trichet suggested that extreme liquidity measures would be gradually withdrawn during 2010. There were no substantive warnings over Euro strength from the bank head which curbed any selling pressure.
The US economic data was slightly stronger than expected with jobless claims falling to 512,000 in the latest week from a revised 532,000 previously. There was a further strong gain in productivity for the third quarter and a sharp drop in unit labour costs as companies cut employment aggressively
The Friday payroll data will inevitably have an important short-term currency impact and a better than expected figure would help underpin risk appetite which would also tend to curb defensive dollar demand. The longer-term impact may be measured with the data not having a major impact on interest rate expectations.
Markets will monitor the G20 meetings over the next two days, although currencies will probably not be a key topic during the discussions.
The Euro pushed above 1.49 following Trichet’s comments, but was unable to sustain the advance and consolidated around 1.4865 as Wall Street advanced.
Source: VantagePoint Intermarket Analysis Software
Yen
Asian equity markets were generally on the defensive during Thursday which curbed selling pressure on the yen while there was still a reluctance to push funds aggressively into high-yield currencies at prevailing levels.
There was also evidence of exporter dollar selling close to the 91 region and the yen strengthened towards 90.50 on Thursday. It remains the case that confidence in all the major currencies is liable to be fragile which will tend to curb institutional selling pressure on the Japanese currency.
The dollar found support close to the 90 level and rebounded to the 90.65 area in New York as equity markets gained while ranges were relatively narrow.
Sterling
Sterling drifted weaker ahead of the Bank of England meeting on Thursday with weaker equity markets not helping. The latest industrial production data was stronger than expected with a 1.6% gain for September following the sharp 2.6% decline previously.
At the Bank of England MPC meeting, interest rates were left on hold at 0.50% as expected. The MPC also announced a further GBP25bn increase in the quantitative easing target to GBP200bn.
The bank was slightly more confident of a recovery in the economy, but still very concerned that the economy is facing a shortage of credit as the battered banks work to repair their balance sheets.
The bank recognised that this is a difficult balancing act and there is certainly a high risk of policy errors over the next few months, maintaining the risk of currency volatility.
Sterling strengthened to above 1.66 against the dollar following the decision, supported in part by a fragile dollar, and was able to consolidate above 1.65.
The latest NIESR data recorded an estimated 0.4% GDP decline in the three months to October which was weaker than expected. The data will maintain fears that the UK recovery will lag behind other major economies and will be a negative Sterling influence.
Swiss franc
The dollar found some support below 1.0150 against the Swiss franc during Thursday, but was unable to break back above the 1.02 level during the day. The Euro found some support below 1.51 against the franc with narrow ranges prevailing.
Consumer prices rose 0.6% for October which was in line with market expectations for a 0.8% annual decline. The data will keep the National Bank on alert, but should not intensify pressure for action to curb franc gains.
Source: VantagePoint Intermarket Analysis Software
Australian dollar
Equity markets stalled in Asia on Thursday which curbed Australian currency support while the comments on interest rates from Reserve Bank Governor Stevens were not particularly hawkish. Erratic trading conditions will remain an important short-term threat given uncertainty over global economic trends.
The Australian dollar hit selling pressure above the 0.91 level and retreated to 0.9025 before a fresh challenge on the 0.91 level. There will continue to be strong Australian dollar buying support on any significant retreats.
The Euro consolidated below 1.49 against the dollar in Europe ahead of the ECB policy decision on Thursday. The Euro-zone retail sales data was weaker than expected with a further 0.7% decline for September to give a 3.6% annual decline, maintaining fears over the outlook for consumer spending.
There were no policy surprises from the ECB with interest rates left on hold at 1.00% following the latest council meeting. Bank President Trichet maintained a tone of cautious optimism over the economy, repeating his expectations for a very slow recovery while he drew attention to falling money supply and private loans. Trichet suggested that extreme liquidity measures would be gradually withdrawn during 2010. There were no substantive warnings over Euro strength from the bank head which curbed any selling pressure.
The US economic data was slightly stronger than expected with jobless claims falling to 512,000 in the latest week from a revised 532,000 previously. There was a further strong gain in productivity for the third quarter and a sharp drop in unit labour costs as companies cut employment aggressively
The Friday payroll data will inevitably have an important short-term currency impact and a better than expected figure would help underpin risk appetite which would also tend to curb defensive dollar demand. The longer-term impact may be measured with the data not having a major impact on interest rate expectations.
Markets will monitor the G20 meetings over the next two days, although currencies will probably not be a key topic during the discussions.
The Euro pushed above 1.49 following Trichet’s comments, but was unable to sustain the advance and consolidated around 1.4865 as Wall Street advanced.
Source: VantagePoint Intermarket Analysis Software
Yen
Asian equity markets were generally on the defensive during Thursday which curbed selling pressure on the yen while there was still a reluctance to push funds aggressively into high-yield currencies at prevailing levels.
There was also evidence of exporter dollar selling close to the 91 region and the yen strengthened towards 90.50 on Thursday. It remains the case that confidence in all the major currencies is liable to be fragile which will tend to curb institutional selling pressure on the Japanese currency.
The dollar found support close to the 90 level and rebounded to the 90.65 area in New York as equity markets gained while ranges were relatively narrow.
Sterling
Sterling drifted weaker ahead of the Bank of England meeting on Thursday with weaker equity markets not helping. The latest industrial production data was stronger than expected with a 1.6% gain for September following the sharp 2.6% decline previously.
At the Bank of England MPC meeting, interest rates were left on hold at 0.50% as expected. The MPC also announced a further GBP25bn increase in the quantitative easing target to GBP200bn.
The bank was slightly more confident of a recovery in the economy, but still very concerned that the economy is facing a shortage of credit as the battered banks work to repair their balance sheets.
The bank recognised that this is a difficult balancing act and there is certainly a high risk of policy errors over the next few months, maintaining the risk of currency volatility.
Sterling strengthened to above 1.66 against the dollar following the decision, supported in part by a fragile dollar, and was able to consolidate above 1.65.
The latest NIESR data recorded an estimated 0.4% GDP decline in the three months to October which was weaker than expected. The data will maintain fears that the UK recovery will lag behind other major economies and will be a negative Sterling influence.
Swiss franc
The dollar found some support below 1.0150 against the Swiss franc during Thursday, but was unable to break back above the 1.02 level during the day. The Euro found some support below 1.51 against the franc with narrow ranges prevailing.
Consumer prices rose 0.6% for October which was in line with market expectations for a 0.8% annual decline. The data will keep the National Bank on alert, but should not intensify pressure for action to curb franc gains.
Source: VantagePoint Intermarket Analysis Software
Australian dollar
Equity markets stalled in Asia on Thursday which curbed Australian currency support while the comments on interest rates from Reserve Bank Governor Stevens were not particularly hawkish. Erratic trading conditions will remain an important short-term threat given uncertainty over global economic trends.
The Australian dollar hit selling pressure above the 0.91 level and retreated to 0.9025 before a fresh challenge on the 0.91 level. There will continue to be strong Australian dollar buying support on any significant retreats.
Who Are We?
TraderPlanet.com is the world’s coolest social network built exclusively for traders.
They’re building a community where people who have common interests in trading worldwide markets can come together and share resources, embrace new friendships and make charitable contributions to benefit others.
Darrell Jobman, Editor-in-Chief, TraderPlanet.com
Darrell Jobman has been writing about financial markets for more than 35 years, covering all aspects of the trading industry. A decorated Vietnam War veteran, he was a newspaper farm editor and editor of several agricultural publications before becoming an editor of Futures Magazine for more than 15 years. He has written and/or edited more than a dozen books on trading including The Handbook for Technical Analysis. His passion is helping others succeed by learning the "dos and don'ts" of trading and through TraderPlanet.com he has really been able to satisfy his passion.
