The Forex Daily Digest – November 20, 2009

The USD advanced, heading to its first weekly gain in three weeks against higher-yielding currencies in Australia, New Zealand and the U.K. as a week's worth of official commentary and economic data has dampened expectations of a strong rebound from the U.S. recession. Thin trading and lack of major economic data in Europe and the United States, analysts looked at possible steps being considered by emerging-market countries that would further dampen hopes for stronger growth in less developed nations and a pullback in corresponding currency trades.

The GBP fell versus the USD, the EUR and the JPY over worries that the U.K.’s worst budget deficit since records began will impede the nation’s recovery. The Organization for Economic Cooperation and Development said yesterday the Bank of England should keep the benchmark interest rate at a record low until 2011.

The CAD fell for a fourth straight day, the longest losing streak in more than two months, as global stocks and crude oil dropped and the U.S. currency rose against all of its major counterparts. Bank of Canada Governor Mark Carney said he’s still comfortable with the central bank’s cost-of-living projection. He said inflation won’t return to his 2 percent target until the third quarter of 2011 because of “slack” in the economy.

Japan's government said for the first time since 2006 that the economy was back in deflation, warning of the risk that price falls may pressure a fragile economy barely out of its worst recession in decades. The announcement came as the Bank of Japan kept interest rates near zero and upgraded its economic assessment, despite grumblings from the government, which is concerned about price falls and the risk of another recession.

Next week will be an abbreviated trading week for the U.S. equities markets due to the Thanksgiving Day holiday. But there are still quite a few major economic reports slated to be released the firstg three days of the week. Watch for Existing Home Sales, preliminary GDP, the Case-Shiller Home Index, Personal Income and Spending, PCE Prices, Initial Claims for Unemployment, Durable Goods, Crude Inventories, New Home Sales and the revision to the University of Michigan Consumer Sentiment report.

Major earnings next week will include Hewlett Packard, Campbell Soup, Dycom Industries, Tyson Foods, American Eagle Outfitters, Barnes & Noble, the Bank of Montreal, Borders Group, H.J. Heinz, Hormel Foods, TIVO, Deere & Company, and Tiffany & Company.

Happy Trading,

James Dicks