Today’s session saw pretty thin liquidity and some choppy trading, but we did get some key themes and reaction to several news developments. The Euro was first stronger – on supportive comments from China – but then weaker as Moody’s warned Portugal of a possible downgrade. The GBP was weaker on government borrowing figures, while the CAD slid following a report showing soft consumer inflation in November.
1. Euro Rises on China’s Comments, But Slides on Portugal Moody’s Warning – To start the global session, we had some comments from Chinese vice premier Wang Qishan said his nation had taken “concrete action” to help the European Union with its debt problems. That helped to build a little confidence behind the euro-zone as the supportive comments implied that China will boost investment in the region or provide some kind of extra liquidity. China holds a record $2.65 trillion in foreign-exchange reserves. Portugal has said that China is willing to invest 4 billion euros to 5 billion euros in Portuguese government debt in the first quarter of next year. The EU is China’s largest trading partner and China is the EU’s second biggest export market, so there is advantages for both to see this crisis go away.
Despite the early rise in the EUR/USD following Wang’s comments, the Euro oared its gains on concern that European nations will struggle to raise funds amid a slew of credit-rating and outlook changes. We had the latest shot across the bow from Moody’s which said Portugal’s credit rating is at risk amid the economy’s sluggish economy. We saw Moody’s cut Ireland’s rating by 5 notches and has put Greece on review for a potential “multi-notch” downgrade. It also said Spain’s rating was at risk. S&P is reviewing its assessment of Ireland, Portugal and Greece.
EUR/USD
In thin, pre-holiday liquidity, we had pretty choppy action with the EUR/USD sliding in NY trading.
EUR/CHF
The EUR-CHF meanwhile continued to extends its losses. IN overnight trding we saw the small bump from the comments from China, but since then the action has been to sell, sell, sell, as we pushed through our pivot at 1.2650 and hit lows below 1.2560.
USD/CHF
The flight to safety by Europeans to the Swissy, pushed the USD/CHF down in favor of the Franc as well. We moved down to test the support of the range we had outlined in yesterday’s video. Let’s see if this level holds and we continue ranged trading, or if the third time testing this level will be the charm, and we see a further move to the downside.
2. GBP On the Back foot Amid Higher Government Borrowing Figures – The GBP slid against the USD, JPY, and EUR in today’s trading, extending what has been some steady weakness in the pair since the middle of last week. Today the catalyst were government borrowing figures that came in above expectations. Net government borrowing rose to 22.8 billion pounds in November, up from 16.7 billion pounds a year earlier, and above the consensus forecast of 16.8 billion pound.
A separate report from researcher GfK showed an index of UK consumer sentiment was at -21, unchanged from November, which was the lowest level since July.
GBP/USD
The GBP/USD fell overnight after rallying to 1.5566. We did find support at our lows from Friday at 1.5450., but after bouncing up from there back to 1.55, we are again seeing selling pressure. It’s a jumpy-choppy market.
3. USD/CAD – Canada Releases Soft Inflation Report, but Solid Retail Sales – The USD/CAD rallied again in today’s trading, bouncing up off support near 1.0150. We establish a new rather narrow 50 pip range between 1.0150 and 1.02.
The pair moved initially in favor of the USD following inflation data which showed consumer prices up a lower than expected 0.1% (forecast of 0.3%) in November. Core CPI was up 0.1%, also weaker than expected (0.2%). Looking at annual terms, inflation fell back to 2% from 2.4% in October.
Last month inflation data jumped (0.4% m/m and core m/m) and the question was whether what we saw in October was a one-month fluke or the start of a new higher trend in Canadian inflation. I think we can answer the question quite emphatically that October was a one-month fluke.
Softer inflation puts less pressure on the Bank of Canada to have to raise interest rates, and many observers do not expect the Bank of Canada to move on rates until mid-2011, though there are some that think a high from 1% benchmark rate could come sooner.
The CPI data came out at 7AM ET and was followed by retail sales data at 8:30AM. Here we saw sales rise 0.8% in October, but looking at the data more closely, we see that it was higher gasoline prices driving much of the increase. Sales at gas stations were up 7.4%. Excluding the impact of price changes, retail spending actually fell 0.2%, ending a streak of six-months of solid gains.
I think overall, the focus is more on inflation data in Canada, and this docile report pushes back on talk that a rate hike may come in early 2011.
AUD/USD – While the Canadian Dollar was weaker, for a second straight session we see our Asia-Pacific commodity currency – the Aussie – gaining. We come close to retesting parity, which means the 1.0020 pivot is within reach. Stocks were higher across Asia, Europe and the US, helping fuel risk appetite.
http://www.fxtimes.com/
No comments:
Post a Comment