The Forex Daily Digest – December 8, 2009
The USD gained as much as 0.7 percent against the EUR, climbing to a one-month high. Gold firmed up, moving away from a two-week low marked the previous day as the dollar weakened after the Federal Reserve chief cautioned that the U.S. economic recovery remains fragile. Gold typically moves inversely to the dollar and has added 30 percent this year as record-low Federal Reserve interest rates contributed to the currency’s 5.3 percent drop. Some central banks have bought bullion, helping to push prices to a record high last week.
The EUR dropped against the USD over concerns about Greece’s fiscal health after Fitch downgraded the country’s credit rating from A- to BBB+. Greek banks have a particular problem, in that a large part of their assets are Greek government bonds, which are also used as collateral for their regular loans from the European Central Bank. The market value of those bonds has suffered from ratings downgrades since the new government admitted that this year's budget deficit could be nearly 13% of gross domestic product, which is more than twice the previous consensus estimate.
The JPY increased against all of its major counterparts as speculation the global equity rally has exceeded prospects for economic growth discouraged demand for higher- yielding assets. Japan’s government announced a 7.2 trillion yen economic spending package that includes 3.5 trillion yen to help regions, 600 billion yen for employment and 800 billion yen on environmental initiatives. The JPY also rose on speculation Japanese officials won’t act to weaken it even as they say they are concerned about the effect of yen strength on the economy.
The Bank of Canada held its key interest rate at 0.25 percent, as expected, and maintained its outlook on the economic recovery despite unexpectedly weak third-quarter growth. The rate decision was anticipated and the tone of the statement was in line with market expectations. The Bank of Canada anticipates economic growth to pick up speed and become more widespread across the private sector in the fourth quarter and into 2010 and 2011, becoming less reliant on official stimulus policies.
Federal Reserve Chairman Bernanke said he believes the U.S. economy's recovery remains fragile and unemployment may be high for some time, cooling anticipation of an early increase in U.S. interest rates. Just days after news of a surprise fall in the U.S. jobless rate prompted investors to speculate the Fed might move more quickly to raise rates than had been expected, Bernanke said the Fed -- the U.S. central bank -- was holding to its pledge to keep benchmark borrowing costs at exceptionally low levels for an "extended period."
On the economic calendar for Wednesday, watch for the October Wholesale Inventories and Crude Inventories for the week of December 4.
Scheduled earnings reports include, Grief Brothers, Jackson Hewitt Tax Services, Men’s Warehouse, Pall Corp, Powell Industries, and Stagecoach Group.
Happy Trading,
James Dicks
The EUR dropped against the USD over concerns about Greece’s fiscal health after Fitch downgraded the country’s credit rating from A- to BBB+. Greek banks have a particular problem, in that a large part of their assets are Greek government bonds, which are also used as collateral for their regular loans from the European Central Bank. The market value of those bonds has suffered from ratings downgrades since the new government admitted that this year's budget deficit could be nearly 13% of gross domestic product, which is more than twice the previous consensus estimate.
The JPY increased against all of its major counterparts as speculation the global equity rally has exceeded prospects for economic growth discouraged demand for higher- yielding assets. Japan’s government announced a 7.2 trillion yen economic spending package that includes 3.5 trillion yen to help regions, 600 billion yen for employment and 800 billion yen on environmental initiatives. The JPY also rose on speculation Japanese officials won’t act to weaken it even as they say they are concerned about the effect of yen strength on the economy.
The Bank of Canada held its key interest rate at 0.25 percent, as expected, and maintained its outlook on the economic recovery despite unexpectedly weak third-quarter growth. The rate decision was anticipated and the tone of the statement was in line with market expectations. The Bank of Canada anticipates economic growth to pick up speed and become more widespread across the private sector in the fourth quarter and into 2010 and 2011, becoming less reliant on official stimulus policies.
Federal Reserve Chairman Bernanke said he believes the U.S. economy's recovery remains fragile and unemployment may be high for some time, cooling anticipation of an early increase in U.S. interest rates. Just days after news of a surprise fall in the U.S. jobless rate prompted investors to speculate the Fed might move more quickly to raise rates than had been expected, Bernanke said the Fed -- the U.S. central bank -- was holding to its pledge to keep benchmark borrowing costs at exceptionally low levels for an "extended period."
On the economic calendar for Wednesday, watch for the October Wholesale Inventories and Crude Inventories for the week of December 4.
Scheduled earnings reports include, Grief Brothers, Jackson Hewitt Tax Services, Men’s Warehouse, Pall Corp, Powell Industries, and Stagecoach Group.
Happy Trading,
James Dicks
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