USDCAD breaks above the falling price channel on 4-hour chart, suggesting that a short term cycle bottom is being formed at 1.0397. Range trading between 1.0397 and 1.0590 is expected in a couple of days. However, the bounce from 1.0397 is treated as consolidation of downtrend from 1.0779, one more fall towards 1.0300 area is still possible after consolidation.
By GCI Forex Research
Fundamental Outlook at 1500 GMT (EDT + 0500)
€
The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3645 level and was supported around the $1.3540 level. The common currency reversed course during the North American session and moved to intraday highs after U.S. equities opened better and also following the release of U.S. economic data. It was reported that weekly initial jobless claims unexpectedly rose to 473,000 from a revised print of 442,000 while continuing jobless claims were unchanged from a revised 4.563 million. Traders await clues as to when the U.S. labour market will improve and today’s data do not offer much confidence. Other data released in the U.S. today saw the January producer price index climb stronger-than-expected at +1.4% m/m and +4.6% y/y while the ex-food and energy core rate was up 0.3% m/m and 1.0% y/y. Additionally, the February Philadelphia Fed’s manufacturing index improved to 17.6 with improvements in the employment, prices received, and new orders sub-indices while January leading indicators came in weaker-than-expected at +0.3%. Tomorrow’s U.S. data releases will include the January consumer price index. Minutes from the Federal Open Market Committee’s most recent meeting were released overnight in which policymakers debated a reduction in the size of the Fed’s balance sheet that currently stands at US$ 2.26 trillion. Some policymakers noted they want to begin selling some of the Fed’s assets “in the near future” and added the Fed’s holdings need to shrink “substantially over time.” In Bernanke’s prepared testimony on 10 February, he noted he does not expect any asset sales in the “near term” and said any such sales will occur at a “gradual pace.” The Fed also reaffirmed it would end its US$ 1.25 trillion program to purchase mortgage-backed securities as previously planned. Philadelphia Fed President Plosser said he advocates selling the Fed’s mortgage-backed securities at the right time, rather than “relaying on redemptions.” In eurozone news, the EMU-16 flash February consumer confidence index fell to -17.4. German Chancellor Merkel today said it would be a “scandal” if banks helped Greece falsify its budget deficit statistics through derivatives transactions. Even if the swaps were legal at the time, Greece’s indebtedness may have been understated for years. Many German politicians are railing against any semblance of a financial bailout for Greece. Euro bids are cited around the US$ 1.3530 level.
¥/ CNY
The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥90.65 level and was capped around the ¥91.25 level. As expected, Bank of Japan voted unanimously to maintain its overnight call rate at 0.1%, the same official target level it has been at since December 2008. BoJ Governor Shirakawa reported “the key to putting Japan out of deflation” is “improving productivity.” He also noted the central bank will monitor the impact of Toyota’s massive vehicle recall on overall Japanese production and the impact of Europe’s debt crisis. The government had been pushing the BoJ to expand policy further to counter strong deflationary pressures. In recent days, finance minister Kan has been proposing an inflation target of at least 1%. In December, BoJ Policy Board members noted their “understanding” of price stability is increases of up to 2%, with a median of 1%. Shirakawa pushed back harder on the central bank after today’s meeting, saying “It’s important to gain trust of financial markets by showing a path of fiscal consolidation.” In recent weeks, he has indicated that increases in productivity and final private demand are required to close the output gap, along with fiscal consolidation. He also today indicated governments need to “respect” the fact the monetary policy is not designed to finance fiscal spending. Shirakawa’s overnight remarks are the sternest he’s made to date and evidences a new level of tension and friction between the central bank and government. Whereas the Japanese government has limited – if any at all – scope to increase fiscal spending, the central bank is making it clear that it will not be a proxy fiscal agent for government spending. Earlier this week, Kan suggested the government may modify its tax code and raise the sales tax. The Nikkei 225 stock index climbed 0.28% to close at ¥10,335.69. U.S. dollar offers are cited around the ¥94.75 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥141.20 level and was capped around the ¥143.05 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥141.20 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥83.85 level. In Chinese news, the U.S. dollar remained steady vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8333 in the over-the-counter market. Chinese financial markets were closed for the Chinese New Year holiday. Last week, People’s Bank of China reconfirmed it will “gradually guide monetary conditions back to normal levels from the counter-crisis mode” but then the central bank lifted reserve requirements by 0.5%, effective 25 February. The central bank is clearly trying to contain inflationary pressures and avert asset bubbles. Some China-watchers believe the central bank could allow the yuan to appreciate some 5% in the coming months.
₤
The British pound moved lower vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.5555 level and was capped around the $1.5685 level. Many data were released in the U.K. today. First, the February CBI industrial trends survey improved to -36 from -39 in January, evidencing a marginal improvement in manufacturing activity. Second, January mortgage approvals decreased to 49,000 from 60,000 and the January M4 money supply rose to 0.6% m/m and 5.1% y/y. Perhaps the biggest news today confirmed that U.K. public borrowing increased for the first time in the month of January since at least 1993, up ₤4.3 billion. Notably, public borrowing from April 2009 through January 2010 grew to ₤124.2 billion, an all-time record. These data are indicative of the significant amount of debt being issued in the U.K. to finance the Brown government’s expansionary fiscal spending initiatives. The U.K. media is reporting some economists are displeased with economic language Bank of England Governor King used in recent testimony as compared with the MPC’s meeting minutes. Cable bids are cited around the US$ 1.5340 level. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.8720 level and was supported around the ₤0.8660 level.
CHF
The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0745 level and was capped around the CHF 1.0825 level. Data released in Switzerland today saw the January trade surplus climb to CHF 2.42 billion from CHF 1.36 billion in December. Also, the ZEW February expectations survey fell to 52.5 from 56.2 in January. Dealers are today again speculating the Swiss National Bank sold francs for euro in an intervention to help Swiss foreign trade. Many dealers believe the Swiss National Bank will not be able to prevent the Swiss U.S. dollar offers are cited around the CHF 1.0930 level. The euro moved lower vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.4645 level while the British pound depreciated vis-à-vis the Swiss franc and tested bids around the CHF 1.6805 level.
Forex Daily Market Commentary provided by GCI Financial Ltd.
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By CountingPips.com
The U.S. Dollar has been mixed in the forex markets on a day filled with U.S. economic data while the American stock markets have traded higher today. The dollar has advanced versus the euro, British pound, Swiss franc and the Japanese yen while declining against the Canadian dollar in forex trading as of 1:34 pm EST in the afternoon of the US trading session. The Australian dollar and New Zealand dollar are trading virtually unchanged against the American 
currency from their opening day exchange rates.
The U.S. stock markets, meanwhile, are having a positive session today with the Dow gaining around 20 points, the Nasdaq increasing by over 2 points while the S&P 500 is up by roughly 1.2 points. Oil has edged higher to $78.13 while gold has been unchanged at the $1,119.50 per ounce level.
Leading Indicators continue to rise
U.S. economic news releases out of the U.S. today showed that the U.S. Leading Indicators Index published by the Conference Board today increased for the tenth straight month in January. The Leading Indicator Index, which measures future economic activity, rose by 0.3 percent in January following a revised 1.2 percent gain in December. January’s advance failed to surpass the market forecasts which were predicting a gain of 0.5 percent for the month.
The coincident index, which is viewed as a measure of the current economic activity, increased by 0.2 percent in January while the lagging index edged down by 0.1 percent after declining by 0.3 percent in December.
An economist at the Conference Board, Ken Goldstein commented on the report saying, “The cumulative change in the U.S. LEI over the past six months has been a strong 9.8 percent, annualized. This signals continued economic recovery at least through the spring.”
Jobless Claims increase last week
A release by the U.S. Labor Department showed that weekly U.S. jobless claims increased in the week that ended on February 13th. New jobless claims grew to a total of 473,000 unemployed workers, an increase over the prior week by 31,000 workers. A 4-week moving average of unemployed workers fell by 1,500 workers from the prior week to a total of 467,500.
Meanwhile, workers seeking continuing claims for unemployment benefits for the week ending February 6th was unchanged at 4,563,000 unemployed workers. A four week moving average of continuing claims declined by 24,000 to 4,585,750.
Producer Prices gain more than expected
The Producer Price Index, released in a separate report by the Department of Labor, rose more than expected in January as energy costs increased and boosted inflation on finished goods. Producer prices increased by 1.4 percent in January following an increase of 0.4 percent in December and have now increased for four straight months. The annual rate of increase for Janaury showed that producer prices were 4.6 percent higher than January of 2009 after December’s annual rate registered a 4.4 percent increase.
Market forecasts were expecting monthly producer prices to gain by 0.8 percent and the annual rate of increase to register 4.4 percent.
Core producer prices, excluding food and energy prices, rose by 0.3 percent in January following no change in December and surpassing market expectations of a 0.1 percent gain. On an annual basis, core producer prices advanced by 1.0 percent in January compared with an increase of 0.9 percent in December and just above expectations of a 0.8 percent increase.
Helping to contribute to the increased producer prices in January was the cost of energy which advanced by 5.1 percent for the month after increasing by just 0.7 percent in December. The crude goods index climbed by 9.6 percent while the foods index also registered a 0.4 percent increase for the month.
Philly Fed Business Survey improves
The Philadelphia Manufacturing Business Index released today by the Philadelphia Federal Reserve Bank showed that its survey increased in February and has remained in positive territory for the sixth straight month. The Philly general business diffusion index increased to 17.6 in February after January’s score of 15.2. A positive score is considered growth in that business sector while a negative score is considered a contraction. Continuing to show positive manufacturing levels this month in the business survey were the indexes for general activity, new orders, shipments and number of employees.
“Cash on the sidelines is bullish for stocks.” Have you ever heard some stock market pundit utter these words? Have you ever wondered if the statement were true? Read this item from the latest issue of The Elliott Wave Financial Forecast, and you’ll wonder no more:
Myth — Cash on the sidelines is bullish for stocks. This refrain rang like a gong all the way through the declines of 2000-2002 and 2007-2009. In February 2000, when mutual fund cash hit 4.2% (compared to 3.8% in November), The Elliott Wave Financial Forecast issued its “cash is king” advice. Once again, the word on the street is that there is way too much “cash on the sidelines” for stocks to fall precipitously. This chart shows net cash available to investors plotted beneath the DJIA. In December 2007, available net cash expanded to a new high, besting all extremes since at least 1992, a 15-year time span. Despite the presence of this mountain of cash, the DJIA lost more than half its entire value over the next 15 months. Indeed, as the chart shows, cash remained high right as the stock market entered the most intense part of the crash in 2008. Available cash does correlate with the market’s moves, but the market is in charge, not the cash.
––The Elliott Wave Financial Forecast, Jan. 29, 2010
Now take a look at these 10 statements and decide if they are true:
Bob Prechter and our other analysts have debunked each of these statements as a market myth. You can discover how we exposed these ideas as myths, and in turn make more informed decisions about your investing.
We’ve gathered the writings that expose these 10 statements as market myths in our 33-page eBook, called Market Myths Exposed. They come from two of our premier publications, The Elliott Wave Theorist and The Elliott Wave Financial Forecast, as well as two of our books, Prechter’s Perspective and The Wave Principle of Human Social Behavior.
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By Greg Holden
– The chart below is the GBP/USD 4-hour chart by ForexYard.
– The indicators used are the Stochastic (slow) and Williams Percent Range.
– Point 1: This pair has been trading within a distinct bullish channel with clear high and low points.
It currently sits at the lower border of this channel, indicating that if nothing changes in fundamental news, this pattern will continue and the pair will experience bullishness today.
– Point 2: The Stochastic (slow) shows an impending bullish cross, which suggests that a bullish movement is on the way sometime later today.
– Point 3: The Williams Percent Range is near the -100 level which suggests that upward pressure is reaching its highest point and a correction is imminent.
It seems as if now is a good time to begin preparing for an upward movement of the GBP/USD, unless the current channel is broken. In that case, all bets are off.
———————
GBP/USD 4-Hour Chart
Forex Market Analysis provided by Forex Yard.
© 2006 by FxYard Ltd
Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.
Source: ForexYard
The Forex market awaits crucial U.S. data today in the PPI and Unemployment Claims figures at 13:30 GMT. These publications are set to drive the pace of the forex market throughout the trading day. Forex traders are advised to open their USD positions now, prior to the release of the vital economic data from the leading economies.
The dollar rose against most of its major currency pairs yesterday, lifted by stronger-than-expected U.S. housing and industrial data, and as worries about Greece’s fiscal health weighed on the EUR. By yesterday’s close, the USD rose to a two-week high against the yen, pushing the oft-traded currency pair to 91.20. The dollar experienced similar behavior against the EUR and closed at 1.3600.
The dollar extended gains against the EUR and JPY after minutes from the Federal Reserve’s January meeting showed policy makers saw a need to begin a program of assets sales in the near future and expect the economic recovery to continue. The optimistic tone bolstered investors’ expectation that the Fed could increase interest rates sooner than previously thought.
USD trading will be interesting today as another batch of important economic data is expected to be released. Similar to yesterday, the news will start at 13:30 GMT with a series of economic indicators being released starting with PPI figures, unemployment claims and the Philly Fed Manufacturing Index. Surprisingly, almost all of these releases are expected to be higher than their previous figures meaning the USD could continue to show further bullishness today. Traders should stay close to the market today, as there is a strong chance to capitalize on the fluctuations which will likely follow these releases.
The EUR extended losses against most of its major currency on Wednesday and hit session lows, as bearish investor sentiment over Greece’s public finances weighed on the single currency. After yesterday, the 16 nation currency fell sharply against the USD, pushing the oft-traded currency pair to 1.3600. The EUR also saw bearishness against the GBP and closed at 0.8675.
The EUR fell even after European finance ministers on Tuesday gave Greece a one-month reprieve, until March 16, to show its deficit reduction plan was being rolled out effectively. They set the same deadline for them to decide what should happen next.
The EUR has fallen almost 5% against the dollar since the start of the year on concerns about Greece’s fiscal health and that of other euro zone peripheral countries. Currency speculators raised net EUR short positions to a record high last week.
The Japanese Yen completed yesterday’s trading session with mixed results versus the major currencies. The JPY fell against the USD yesterday, pushing the oft-traded currency pair to 91.20. The Yen experienced similar behavior against the GBP as the pair rose from 1.4195 to 1.4285 by day’s end. The JPY did see some bullishness as well as it gained 100 points against the EUR and closed at 123.60.
The Japanese market should have a heavy effect on the JPY versus its major currency counterparts, as the Overnight Call Rate will be announced today. The rate is expected to remain unchanged but traders should pay close attention to the BoJ Press Conference that will follow to look for expectations of Japan’s economic future. A bullish statement from the BoJ could lead some traders to believe the BoJ is forecasting a rosier financial climate in Japan.
Crude oil rose for a second day on increasing optimism that the world economy is emerging from recession and fuel consumption will recover. The crude oil ended above $77 a barrel for the first time in two weeks yesterday as Traders also took positive clues from the recent upsurges in the stock markets.
Today, the release of crude oil inventory is likely to help determine the market’s next direction for Black Gold. Moreover, a release of a string of positive economic figures from U.S could help its bullishness. Therefore, traders are advised now to make some profits as the price of Crude Oil is set to remain volatile in the short-medium term.
There is a very distinct bearish channel forming on the 4H chart, as the pair is now floating in its lower section. In addition, all oscillators on the daily chart are pointing down, suggesting that the downtrend might extend. Going short might be the right strategy today
It seems that the Cable has limited its bullish correction after peaking at the 1.5790 level. And now, a bearish cross on the 4H chart’s Slow Stochastic indicates that the general downtrend might extend. Going short seems to be the preferable choice today
The hourly chart shows that the pair is currently range-trading within a restricted price range. However, as the RSI on the 4H chart has dropped beneath the 70 line, it appears that bearish momentum might be arising. Going short with tight stops could be the right choice today.
Ever since bottoming at the 1.0650 level, the pair has entered a very strong bullish trend and is currently traded around the 1.0800 level. And now, a flag formation on the 4-hour chart suggests that the bullish move has more room to go
Gold prices are in the midst of a very strong downtrend, and an ounce of gold is currently traded for about $1100. The hourly chart shows that the current price has dropped beneath the Bollinger Bands’ lower border, indicating that the bearish move is still quite strong. This might be a good opportunity for forex traders to join a very popular trend.
Forex Market Analysis provided by Forex Yard.
© 2006 by FxYard Ltd
Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.
After Tuesday’s massive rally the major U.S indices presented some choppy action during yesterday session, but managed to close in positive territory. Investors continued to pour back into riskier assets, backed by a better than expected GDP forecast from the Fed and improving housing data.
President Obama took the stand yesterday, commenting on his recent stimulus package. Already a year has passed since the President began to inject funds into the financial system to reduce the recession’s impact. According to his statement, even though unemployment is at high levels, the stimulus helped to prevent over 2 million job losses. President Obama claimed that the stimulus plan is on target to create or save a total of 3.5 million jobs.
It was a Fed day yesterday, as the FOMC released its closely watched minutes. According to the minutes from last month’s policy meeting, the FED now sees some light at the end of the tunnel, but is cautious about making any sudden moves to rattle the markets. Even though some policy members expressed their opinions about moving into a more tightening stance, no formal statement was given. All the members agreed that the balance sheet is extraordinary high and that measures need to be taken to reduce the high figure. Some are now calling for asset sales which could provide an income and reduce the high balance. Despite the high number, the Fed did upgrade their GDP forecast from 3.0% to 3.2% and commented that they do see the economy slowly creeping out of its dire situation.
Economic data also had an impact on the intraday session after housing starts increased 2.8 percent in January, making up for the 0.7% slip in December. Building Permits came out lower than the prior result but hit expectations at 0.62M. Industrial production also helped to boost confidence after the 12 month growth rate was up 0.9%, the first positive reading after nearly two years of declines.
Stocks climbed at the start of the U.S open and managed to stay afloat for most of the session. The S&P500 finished within an intraday range, up by 0.42%, while the Nasdaq closed higher by 0.55%. The leading sector of the day was industrials, partially backed by the improving data.
Forex
On the Forex market the Dollar bounced back, despite a positive equity market. As mentioned numerous times on the site, this year we could witness a higher U.S Dollar along with higher equities, especially as Federal Reserve members are now hinting towards the end of their monetary easing. Furthermore, fundamental data in the U.S is slowly improving while other countries are still dealing with a major recession. This could attract foreign capital into the U.S Dollar, while investors head into riskier assets.
The USD/JPY posted its largest gains yesterday, after the services index dropped at the largest rate in nine months. Over night the Bank of Japan kept its key interest rate on hold at 0.1% stating that the bank doesn’t intend to issue any new policy initiatives. Even though Japan’s economy is picking up, it is still being driven by foreign consumption. From a technical point of view, the USD/JPY confirmed its higher-low, a technical sign for the possible start of a new trend. Even though it is still too early to determine whether this new pattern will lead to consolidation or an uptrend, major stability can be seen around ¥88.10.
The Day Ahead
Looking forward the U.S and Canada will both grab the center of attraction today. Canada is scheduled to release its inflation numbers and foreign securities purchases. CPI is expected to come out at a positive 0.3%, compared to last month’s negative figure. The core figure which excludes food and energy should rise by a mere 0.1%.
Over in the U.S, the Phili index is scheduled to be release along with the leading index. Both numbers are expected to increase, 17 points and a 0.6% increase, respectively. Furthermore Initial jobless claims will be released and is currently expected by analysts to show a lower figure of 435.00k compared to the prior 440.00k.
Daily Forex Market Analysis provided by eToro
Disclaimer: Trading in the Foreign Exchange market might carry potential rewards, but also potential risks. You must be aware of the risks and are willing to accept them in order to trade in the foreign exchange market. Don’t trade with money you can’t afford to lose.
EURUSD broke above the falling price channel on 4-hour chart and traded in a range between 1.3531 and 1.3838. Lengthier sideways movement in the range would more likely be seen in a couple of days. The price action from 1.3585 is still treated as consolidation of downtrend from 1.4579. As long as 1.3838 resistance holds, one more fall towards 1.3400 area is expected after consolidation, and a breakdown below 1.3531 could signal resumption of downtrend. However, above 1.3838 will indicate that the fall from 1.4579 has completed, then the following bounce could bring price back to 1.3890 or even 1.4050 area.
By GCI Forex Research
Fundamental Outlook at 1500 GMT (EDT + 0500)
€
The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3685 level and was capped around the $1.3785 level. The common currency gave back some of this week’s gains amid a report that Greece may have used questionable derivatives instruments to mask the real amount of its public debt before it qualified to join the eurozone. The questionable swaps arrangements were said to have been made in 2002 or so and draw into question whether the markets really have a solid understanding about how much Greek debt is really outstanding. Greece has until 19 February to disclose information on the swaps transactions it undertook. The European Central Bank is said to have instructed Greece to reduce its budget deficit by an additional €2 billion. Bank of Italy today said Italy’s derivatives transactions – which has itself been accused of using swaps and derivatives in the 1990s to qualify for eurozone membership – were certified by the European Union. Greece yesterday received a 30-day period to improve its fiscal position after which time it must demonstrate how it is going to reduce its sizable 12%+ budget deficit to as low as 3% by the middle of 2012. The European Union has offered qualified assistance for Greece’s severe fiscal problems but has not yet indicated if a financial assistance package will be offered, or by whom. There remains some stiff political opposition by some in Germany and some traders are speculating a two-currency European Monetary Union may need to be introduced to salvage the eurozone. Spanish Prime Minister Zapatero today said his country will do whatever is necessary to cut its deficit. Data released in the eurozone today saw December construction output increase 0.5% m/m and decline 3.1% y/y while the EMU-16 trade surplus printed at a five-year high at €4.4 billion in December, up from €4.0 billion in November. ECB member Quaden today said a “gradual” exit from its accommodative monetary policy will be best. In U.S. news, data released in the U.S. today saw the January import price index climb 1.4% m/m from a revised +0.2% total in December and expand 11.5% y/y. Also, January housing starts improved 2.8% to an annualized 591,000 while January building permits were off 4.9% m/m to an annualized 621,000. Moreover, January industrial production beat expectations by growing 0.9% while January capacity utilization came in at 72.6%. Dealers await the release of the minutes from the most recent Federal Open Market Committee meeting later in the North American session. Dealers will pay close attention to the FOMC’s forecasts. Federal Reserve Chairman Bernanke will testify before the House on 24 February. Euro bids are cited around the US$ 1.3530 level.
¥/ CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥91.10 level and was supported around the ¥90.10 level. Traders await Bank of Japan’s monetary policy decision overnight with most focusing on no change in interest rates or quantitative easing programs. Bank of Japan Governor Shirakawa yesterday reported the central bank is ready to act “decisively” and is “always ready to provide abundant funds” adding it will maintain low interest rates “persistently.” Finance minister Kan suggested the BoJ should adopt some sort of inflation-targeting measure, reporting a CPI around 1% should be a “policy target.” Shirakawa also reported the central bank has expanded its balance sheet more than the Federal Reserve and European Central Bank have. BoJ’s balance sheet was equivalent to about 26% of Japanese gross domestic product in December, compared with 21% at the ECB at 16% in the U.S. He also noted Japan’s previous quantitative easing measures have had a “very limited” impact on reducing deflation but added BoJ policy alone cannot end deflation. Vice finance minister Minezaki called on Japan to impose the so-called Tobin tax on financial transactions, noting “…speculative funds flowing carelessly…are destroying the lives of ordinary people.” Despite a recent 4.6% annualized increase in Q4 gross domestic product, some prices declined more than they have in more than 50 years and others dealers believe this decrease will result in additional easing measures from the central bank this week. The GDP deflator tumbled 3% – the largest drop since at least 1955 – and the domestic demand deflator was off 2.9%. Data released in Japan overnight saw the tertiary index come in lower-than-expected. The Nikkei 225 stock index climbed 2.72% to close at ¥10,306.83. U.S. dollar offers are cited around the ¥94.75 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥124.85 level and was supported around the ¥123.90 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥143.60 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥85.05 level. In Chinese news, the U.S. dollar remained steady vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8333 in the over-the-counter market. Chinese financial markets were closed for the Chinese New Year holiday. Last week, People’s Bank of China reconfirmed it will “gradually guide monetary conditions back to normal levels from the counter-crisis mode” but then the central bank lifted reserve requirements by 0.5%, effective 25 February. The central bank is clearly trying to contain inflationary pressures and avert asset bubbles. Some China-watchers believe the central bank could allow the yuan to appreciate some 5% in the coming months.
₤
The British pound moved lower vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.5715 level and was capped around the $1.5815 level. As expected, Bank of England’s Monetary Policy Committee voted 9-to-0 to keep its Bank Rate unchanged at 0.5% this month and to pause its ₤200 billion bond purchase plan, according to minutes released today. Data released in the U.K. today saw January jobless claims rise 23,500 with the jobless rate steady at 7.8%. The central bank is not expected to resume its bond purchase program unless the economy falters significantly. BoE also warned credit conditions will remain tight “for some time” and said there is “no overwhelming risk” CPI could fall below 2,” noting economic headwinds remain “considerable.” Cable bids are cited around the US$ 1.5340 level. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.8685 level and was capped around the ₤0.8740 level.
CHF
The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0785 level and was supported around the CHF 1.0645 level. Many dealers believe the Swiss National Bank will not be able to prevent the Swiss franc from appreciating too much in the wake of the euro’s widespread depreciation. There is speculation the central bank has intervened at least eight times in recent weeks by selling francs for euro. SNB member Jordan was quoted as saying “central banks need to be independent and have a clear mandate to ensure price stability.” Data released in Switzerland on Mondat saw January producer price inflation climb 0.3% m/m and decline 1.3% y/y. Swiss financial markets will likely be closed for most of the week for Carnival holidays. U.S. dollar offers are cited around the CHF 1.0810 level. The euro moved higher vis-à-vis the Swiss franc as the single currency tested offers around the CHF 1.4690 level while the British pound appreciated vis-à-vis the Swiss franc and tested offers around the CHF 1.6895 level.
Forex Daily Market Commentary provided by GCI Financial Ltd.
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