The Forex Daily Digest – October 9, 2009
The USD briefly cut its losses against the JPY after data showed the number of Americans filing new claims for unemployment benefits fell more than expected to a nine-month low last week. The USD fell to a two-week low against the EUR amid signs the global economy is recovering, increasing demand for higher-yielding assets. The Dollar Index saw its weakest level in 14 months after Alcoa Inc. (AA) reported third-quarter earnings that beat analysts’ estimates, motivating gains for stocks.
The EUR gained against the JPY and the USD as the European Central Bank left its main refinancing rate at a record low, while the GBP rose after the Bank of England left its rate unchanged and said its asset-purchase program would stay under review. The AUD climbed to a 14-month high after data showed employment unexpectedly increased.
Analysts believe that gold, which traded at a record for a third straight day, will keep rising as a weaker USD and concern that inflation will accelerate strengthened investor demand. Many say that gold will advance to $1,150 an ounce by the end of the year. Estimates ranged from $1,300 to $1,050. Gold has already increased 20 percent this year and is heading for a ninth consecutive annual gain, the best performance since at least 1948.
The CAD rose against the USD due to higher commodity prices and growing expectations that domestic jobs data due later this week could be better than anticipated. Helping push the CAD higher was an increase in gold prices to another record high and a rally in oil prices above $70 a barrel on signs of global economic recovery. The upbeat tone was helped by Australian employment data that beat expectations and added to the case for more interest rate increases this year.
The European Central Bank and the Bank of England, in widely expected decisions, made no policy changes as officials now weigh how to deal with a long-awaited but potentially weak recovery from the steepest downturn since World War II. The EUR added gains against the USD after European Central Bank President Jean-Claude Trichet said the euro zone economy is stabilizing and will recover at a gradual pace. Speaking after the ECB kept its main refi rate at 1.0 percent for the fifth month in a row, Trichet said interest rates remained appropriate. He added that "uncertainty remains high" and the recovery is expected to "remain rather uneven."
The JPY traded near its highest level in more than eight months against the USD on speculation the Bank of Japan will be quicker than the Federal Reserve in withdrawing emergency stimulus measures. Meantime, Japan's three-week-old government faces a rising yen, a central bank looking to unwind some of its financial crisis funding measures and a fiscal time bomb -- all with the economy teetering between recession and modest growth. Investors watching Japan must also factor in uncertainty over who decides what in Prime Minister Yukio Hatoyama's new cabinet while eyeing an upper house election next year.
There was an interesting report out of Japan this week. According to a survey from the Japanese Ministry of Economy, Trade and Industry, about 30% of large Japanese companies said the strong yen is cutting into earnings, showing that the country's manufacturers are apparently insulated from the JPY's appreciation. The results included input from about 130 firms, after the USD fell to 88 yen late last month. Only 1.5% of the firms said the stronger yen would "severely" deteriorate earnings, while 30.8% said that, as a result, profit will fall "more or less."
The AUD increased 1.4 percent to over 90U.S. cents, the highest level since August 2008, after the statistics bureau in Sydney said the number of people employed rose by 40,600 last month from August 2008. This week the Reserve Bank of Australia became the first G20 central banks to raise interest rates since the beginning of the current global financial crisis. The NZD increased to a 15-month high, riding on an unrestrained Australian dollar that responded to the country’s stronger than forecast jobs data.
In their final estimate before the official numbers are issued, the Congressional Budget Office said the U.S. government spent a record $1.4 trillion more than it collected in the fiscal year ended Sept. 30th. Bank bailouts, stimulus spending and declining tax revenues due to a deep recession led the government posting a deficit that is 9.9 percent of the U.S. Gross Domestic Product for the 2009 fiscal year.
The number of initial claims for state unemployment benefits fell by 33,000 to a seasonally adjusted 521,000 in the week ending Oct. 3rd. It's the fewest initial jobless claims since the first week of January. The number of people continuing to claim regular state jobless benefits fell by 72,000 to 6.04 million in the week ending Sept. 26th, which is the lowest since late March.
There’s only one major economic report on the calendar to end the week; the Trade Balance numbers for August.
Happy Trading,
James Dicks
The EUR gained against the JPY and the USD as the European Central Bank left its main refinancing rate at a record low, while the GBP rose after the Bank of England left its rate unchanged and said its asset-purchase program would stay under review. The AUD climbed to a 14-month high after data showed employment unexpectedly increased.
Analysts believe that gold, which traded at a record for a third straight day, will keep rising as a weaker USD and concern that inflation will accelerate strengthened investor demand. Many say that gold will advance to $1,150 an ounce by the end of the year. Estimates ranged from $1,300 to $1,050. Gold has already increased 20 percent this year and is heading for a ninth consecutive annual gain, the best performance since at least 1948.
The CAD rose against the USD due to higher commodity prices and growing expectations that domestic jobs data due later this week could be better than anticipated. Helping push the CAD higher was an increase in gold prices to another record high and a rally in oil prices above $70 a barrel on signs of global economic recovery. The upbeat tone was helped by Australian employment data that beat expectations and added to the case for more interest rate increases this year.
The European Central Bank and the Bank of England, in widely expected decisions, made no policy changes as officials now weigh how to deal with a long-awaited but potentially weak recovery from the steepest downturn since World War II. The EUR added gains against the USD after European Central Bank President Jean-Claude Trichet said the euro zone economy is stabilizing and will recover at a gradual pace. Speaking after the ECB kept its main refi rate at 1.0 percent for the fifth month in a row, Trichet said interest rates remained appropriate. He added that "uncertainty remains high" and the recovery is expected to "remain rather uneven."
The JPY traded near its highest level in more than eight months against the USD on speculation the Bank of Japan will be quicker than the Federal Reserve in withdrawing emergency stimulus measures. Meantime, Japan's three-week-old government faces a rising yen, a central bank looking to unwind some of its financial crisis funding measures and a fiscal time bomb -- all with the economy teetering between recession and modest growth. Investors watching Japan must also factor in uncertainty over who decides what in Prime Minister Yukio Hatoyama's new cabinet while eyeing an upper house election next year.
There was an interesting report out of Japan this week. According to a survey from the Japanese Ministry of Economy, Trade and Industry, about 30% of large Japanese companies said the strong yen is cutting into earnings, showing that the country's manufacturers are apparently insulated from the JPY's appreciation. The results included input from about 130 firms, after the USD fell to 88 yen late last month. Only 1.5% of the firms said the stronger yen would "severely" deteriorate earnings, while 30.8% said that, as a result, profit will fall "more or less."
The AUD increased 1.4 percent to over 90U.S. cents, the highest level since August 2008, after the statistics bureau in Sydney said the number of people employed rose by 40,600 last month from August 2008. This week the Reserve Bank of Australia became the first G20 central banks to raise interest rates since the beginning of the current global financial crisis. The NZD increased to a 15-month high, riding on an unrestrained Australian dollar that responded to the country’s stronger than forecast jobs data.
In their final estimate before the official numbers are issued, the Congressional Budget Office said the U.S. government spent a record $1.4 trillion more than it collected in the fiscal year ended Sept. 30th. Bank bailouts, stimulus spending and declining tax revenues due to a deep recession led the government posting a deficit that is 9.9 percent of the U.S. Gross Domestic Product for the 2009 fiscal year.
The number of initial claims for state unemployment benefits fell by 33,000 to a seasonally adjusted 521,000 in the week ending Oct. 3rd. It's the fewest initial jobless claims since the first week of January. The number of people continuing to claim regular state jobless benefits fell by 72,000 to 6.04 million in the week ending Sept. 26th, which is the lowest since late March.
There’s only one major economic report on the calendar to end the week; the Trade Balance numbers for August.
Happy Trading,
James Dicks
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