The Forex Daily Digest – January 11, 2010
The USD dropped to a three-week low versus the EUR and fell to its weakest point since October versus the CAD, as signs the global recovery is gaining pace boosted demand for higher-yielding and commodity currencies. The AUD rose to the highest in a month versus the USD after a Chinese government report showed exports climbed for the first time in 14 months and imports reached record highs. South Korea’s won rose for a seventh day, its longest winning streak in three months, on speculation exports will gain. The EUR rose to a one-month high versus the JPY on prospects the Bank of Japan will keep borrowing costs near zero to revive growth.
St. Louis Federal Reserve Bank President James Bullard said today that U.S. Federal Reserve monetary policy is unlikely to be pushed off course by December's surprising job losses. Bullard told reporters after a speech at the Global Interdependence Center in Shanghai, the December jobs report would not change the Fed's policy. He said the pace of job losses has slowed even though unemployment remained high. The challenge for policymakers will be to adjust the central bank's extensive securities purchases.
The CAD rose to the strongest level in almost three months as commodities, which account for half the nation’s export revenue, rose and the USD fell against most of its major counterparts. Canadian housing starts in December rose to 174,500 the highest since October 2008. The consensus estimate was for starts to increase by 160,300. Meantime, Canadian building permits fell 4.6 percent in November, led by non-residential projects.
Forecasters believe that the CAD and the AUD will strengthen to trade at parity with the USD or better in 2010 for the first time in 34 years, appreciating at least 2.6 percent and 7.4 percent. National Australia, Royal Bank of Scotland Group Plc and JPMorgan Chase & Co. predict parity by June 30; another forecaster, Canadian Imperial Bank of Commerce, anticipates it there by Dec. 31.
The GBP increased against the USD for the third time in four days as stocks advanced on signs the global economic recovery is gathering momentum and a report showed U.K. businesses are more optimistic than a year ago. While optimism for Britain’s private companies increased, a separate report showed U.K. financial-services companies are more pessimistic than at any time in the past year on the outlook for business growth.
The CHF fell against the EUR after the country’s central bank President said policy makers will seek to prevent “excessive appreciation” of the currency. The franc ended three days of advances against the EUR as the bank’s president, Philipp Hildebrand, said in a statement that the Swiss National Bank will “monitor foreign-exchange market developments very closely” even as it doesn’t have a currency target. The SNB began selling the CHF early last year in an effort to ward off deflation and combat the nation’s economic slump.
In the Western Hemisphere, Venezuelan President Hugo Chavez, struggling to stem an outflow of dollars and rein in a budget deficit, has adopted a three-tiered exchange-rate system that fueled corruption, food shortages and inflation in the 1980s. Shoppers in Caracas lined up this past weekend to buy imported televisions, DVDs and refrigerators over concern prices will begin to increase after Chavez devalued the 2.15-per dollar exchange rate by as much as 50 percent. He set a rate of 2.6 for imports of items such as food and medicine, a rate of 4.3 for “non-essential” products and committed to defend the bolivar in the unregulated market, where it traded last week at 6.25.
On Tuesday’s economic calendar watch for the November U.S. Trade balance report which is expected to come in at -$34.5 billion after a -$32.9 billion last month.
Scheduled earnings reports on Tuesday include the Great Atlantic and Pacific Tea Company (the A&P), Infosys, KB Home, Supervalu, HB Fuller and Linear Technology.
Happy trading,
James Dicks
St. Louis Federal Reserve Bank President James Bullard said today that U.S. Federal Reserve monetary policy is unlikely to be pushed off course by December's surprising job losses. Bullard told reporters after a speech at the Global Interdependence Center in Shanghai, the December jobs report would not change the Fed's policy. He said the pace of job losses has slowed even though unemployment remained high. The challenge for policymakers will be to adjust the central bank's extensive securities purchases.
The CAD rose to the strongest level in almost three months as commodities, which account for half the nation’s export revenue, rose and the USD fell against most of its major counterparts. Canadian housing starts in December rose to 174,500 the highest since October 2008. The consensus estimate was for starts to increase by 160,300. Meantime, Canadian building permits fell 4.6 percent in November, led by non-residential projects.
Forecasters believe that the CAD and the AUD will strengthen to trade at parity with the USD or better in 2010 for the first time in 34 years, appreciating at least 2.6 percent and 7.4 percent. National Australia, Royal Bank of Scotland Group Plc and JPMorgan Chase & Co. predict parity by June 30; another forecaster, Canadian Imperial Bank of Commerce, anticipates it there by Dec. 31.
The GBP increased against the USD for the third time in four days as stocks advanced on signs the global economic recovery is gathering momentum and a report showed U.K. businesses are more optimistic than a year ago. While optimism for Britain’s private companies increased, a separate report showed U.K. financial-services companies are more pessimistic than at any time in the past year on the outlook for business growth.
The CHF fell against the EUR after the country’s central bank President said policy makers will seek to prevent “excessive appreciation” of the currency. The franc ended three days of advances against the EUR as the bank’s president, Philipp Hildebrand, said in a statement that the Swiss National Bank will “monitor foreign-exchange market developments very closely” even as it doesn’t have a currency target. The SNB began selling the CHF early last year in an effort to ward off deflation and combat the nation’s economic slump.
In the Western Hemisphere, Venezuelan President Hugo Chavez, struggling to stem an outflow of dollars and rein in a budget deficit, has adopted a three-tiered exchange-rate system that fueled corruption, food shortages and inflation in the 1980s. Shoppers in Caracas lined up this past weekend to buy imported televisions, DVDs and refrigerators over concern prices will begin to increase after Chavez devalued the 2.15-per dollar exchange rate by as much as 50 percent. He set a rate of 2.6 for imports of items such as food and medicine, a rate of 4.3 for “non-essential” products and committed to defend the bolivar in the unregulated market, where it traded last week at 6.25.
On Tuesday’s economic calendar watch for the November U.S. Trade balance report which is expected to come in at -$34.5 billion after a -$32.9 billion last month.
Scheduled earnings reports on Tuesday include the Great Atlantic and Pacific Tea Company (the A&P), Infosys, KB Home, Supervalu, HB Fuller and Linear Technology.
Happy trading,
James Dicks
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