Daily Forex Analysis by Finexo.com 29/01/2010

Risk still under pressure following weak US data, weak Wall St.

Month-end volatility in Asia sees EURUSD touch new cycle lows


  • US Dec. Chicago Fed Activity Index out at -0.61 vs. -0.4 expected and revised -0.39 prior
  • US Dec. Durable Goods Orders out at +0.3% vs. +2.0% expected and revised -0.4% prior
  • US Weekly Initial Jobless Claims out at 470k vs. 450k expected and revised 478k prior
  • US Weekly Continuing Claims out at 4602k vs. 4593k expected and revised 4659k prior
  • NZ Dec. Building Permits out at -2.4% m/m vs. +3.0% expected and revised +0.1% prior
  • NZ Dec. Trade Balance out at +2 mln vs. -110 mln expected and revised -276 mln prior
  • AU Nov. Conference Board Leading Index out at -0.3%, unchanged from prior
  • JP Dec. Jobless rate out at 5.1% vs. 5.3% expected and 5.2% prior
  • JP Dec. Household Spending out at +2.1% y/y vs. 1.6% expected and 2.2% prior
  • JP Jan. Tokyo CPI out at -2.1% y/y, as expected, vs. revised -2.2% prior
  • JP Dec. National CPI out at -1.7% y/y, as expected, vs. -1.9% prior
  • JP Dec. Industrial Production out at +2.2% m/m, +5.3% y/y vs. 2.5%/5.7% expected and 2.2%/-4.2% prior
  • UK GfK Consumer Confidence out at -17 vs. -18 expected and -19 prior
  • AU Dec. Private sector Credit out at +0.3% m/m, +1.5% y/y vs. +0.1%/+1.1% expected and +0.1%/+0.9% prior resp.
  • SI Q4 Unemployment Rate out at 2.1% vs. 3.4% expected and 3.4% prior
  • JP Dec. Housing Starts out at -15.7% y/y vs. -18.8% expected and -19.1% prior
  • JP Dec. Construction Orders out at +0.6% y/y vs. -11.6% prior

(All times GMT)

  • UK Nationwide House Prices (0700)
  • Sweden Household Lending (0830)
  • EU Euro-zone M3 Money Supply (0900)
  • Norway Retail Sales (0900)
  • EU ECB Bank Lending Survey (0900)
  • EU Euro-zone Unemployment (1000)
  • EU Euro-zone CPI Estimate (1000)
  • Swiss KOF Leading Indicator (1030)
  • EU ECB’s Bini Smaghi to speak (1115)
  • US Fed’s Kohn to speak (1315)
  • CA Industrial Product/Raw Material Prices (1330)
  • CA Nov. GDP (1330)
  • US Q4 GDP (1330)
  • US Chicago PMI (1445)
  • US Final Michigan Confidence (1455)
  • US NAPM – Milwaukee (1500)

Market Comments:

Risk appetite took another step backwards overnight as US data remained on the weak side and jitters running through Wall St on an under-performing tech sector. On the data front, it was a very disappointing initial jobless claims number with only a small fall from last week’s supposedly holiday-influenced number being noted. Hopefully the steadily falling continuing claims data is offering the correct picture of a job market that continues to stabilize. Durable goods orders on the headline were disappointing but were better than expected when the volatile transportation component was taken out.

The risk aversion trade generally benefitted the USD (except against the JPY), which was also given an additional leg up from comments by IMF’s Lipsky and noted investor George Soros who said there was no viable alternative to the USD as a reserve currency. We also witnessed the end-of-week rumour that China would hike rates this weekend but this could have been a misinterpretation of a WSJ article headlined “China to Stay Course, With Flexibility” which talked about policy rather than exchange rates. Nevertheless, this could become a recurring theme over coming weeks and as a result early gains in the “risk” currencies were soon wiped out, with JPY crosses noticeably lower.

GBP took an especially large hit as S&P said it no longer classifies the UK as being the most stable banking systems globally. While the report was allegedly an expanded version of a report issued Dec 21, the damage was done, despite reported corporate demand for dividend payments which supposedly lasts until tomorrow. Continuing concerns over Greece’s debt situation (and the PIIGS in general) kept the EUR on a downward path, though failed to print new levels below yesterday’s Asian low. On a more positive note, Fed chief Ben Bernanke was confirmed for a second term, with the vote recording a larger majority than envisaged – 77-23 in the end.

The Asian data calendar was crowded with Japanese data this morning and, although there was a small positive from an improvement in the unemployment rate to 5.1% from 5.2%, the market’s attention was firmly fixed on the CPI data which showed a continued problem of deflation. National data for December showed a 1.7% y/y decline, slowing slightly from November’s 1.9%, while Tokyo data for January also showed a mild easing in the pace of decline to 2.1% y/y from a revised 2.2% for December.

Euro-zone credit issues were a feature of an Ambrose-Evans Pritchard article in the Telegraph where he referred to a testimony made in German parliament by economics minister Rainer Brederle saying that, despite a few member nations exhibiting “dangerous weakness” that could have fatal consequences for the Euro-zone, there would be no bail-outs for struggling debtors. Whether this was a trigger or not, or whether retail Japan was bailing out of EURJPY longs, EURUSD touched new cycle lows at 1.3913 early in the Asian session. Note Spain will be under scrutiny by markets today as its Government is scheduled to announce a plan for slashing its budget deficit by two thirds. Still more uncertainty ahead for the EUR we feel…..

Month-end and we have a busy session in Europe with UK Nationwide House Prices, Euro-zone money supply, unemployment and CPI estimate, Norway retail sales and Swiss leading indicators all on tap. The US session closes off the week/month with Canadian industrial/raw product prices, Nov GDP and US Q4 GDP, Chicago PMI, final Michigan confidence and Milwaukee NAPM.

Written by Finexo.com