Daily Market Commentary

FX Research Desk:

Fundamental Outlook at 1400 GMT (EDT + 0400)

€

The euro weakened vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4560 level and was capped around the $1.4720 level. World Bank President Zoellick reported the U.S. dollar could lose its status as the dominant reserve currency but noted it will remain a “major currency,” adding the euro is a “respectable alternative if the dollar is weak.” European Central Bank President Trichet optimistically reported “There has been no materialization of the deflationary risk in Europe.” Trichet also voiced his objection to a Tobin tax on speculative financial transactions. Speaking about the eurozone economy, Trichet added “The governing council of the ECB considers that it would be premature to declare the crisis over. Now is not the time to exit. However at some point in time exit strategies will have to be implemented.” Trichet remarked that the current level of interest rates in the eurozone economy is “appropriate” and said it is “extremely important” to have a strong dollar. Data released in the eurozone today saw German September consumer price inflation off 0.4% m/m and off 0.3% y/y, the latest data that suggest the risk of inflation there is minimal. Some economists are predicting the German inflation rate will remain below 2% in 2010. Other data saw the EMU-16 August composite index of leading indicators improve 1.8%. In U.S. news, traders will pay close attention to Friday’s September non-farm payrolls report. A reported released by the U.S. government today reported the U.S. Treasury raised US$ 1.202 trillion in new cash this year by selling U.S. Treasury securities and that the Federal Reserve has purchased about 24.1% of the new securities. Fed Governor Warsh on Friday suggested the Fed may need to be more aggressive than previously thought in preventing inflation. Euro bids are cited around the US$ 1.3900 figure.

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥88.25 level and was capped around the ¥89.65 level. The pair ceded some significant intraday gains that were earned as traders continued to speculate Japanese government officials will do little to slow the runaway yen. Finance minister Fujii verbally intervened twice overnight saying “The temporary movements (in the yen against the dollar) at present are a little one-sided. Prime Minister Hatoyama said in Pittsburgh that it's desirable if foreign exchange rates are stable, and I feel absolutely the same.” Fujii made it clear that although he does not favour much intervention, he does not want the yen to become a one-way bet, either. Data to be released on 1 October include the quarterly Bank of Japan tankan survey of business sentiment. The Nikkei 225 stock index lost 2.50% to close at ¥10,009.52. U.S. dollar offers are cited around the ¥94.75 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥129.80 level and was capped around the ¥131.80 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥139.70 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥85.90 level. In Chinese news, the U.S. dollar lost ground vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8220 in the over-the-counter market, down from CNY 6.8235. People’s Bank of China Deputy Governor Hu last week reported G20 nations should consider establishing an international wealth fund to invest a portion of members’ current account surpluses. Chinese financial markets will be closed from 1 October through 8 October for the National Day’s holiday. Some banks are predicting China will register consumer price inflation growth in November.

₤

The British pound extended recent losses vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.5765 level and was capped around the $1.5975 level. Bank of England Chief Economist Dale reported the U.K. economy has stabilized but added “it’ll be a long haul” to a full economic recovery. There is speculation that BoE may be getting ready to reduce the overnight deposit rate to a negative percentage so that lenders are not incentivized to stash cash overnight at the central bank. This is a policy action that Sweden’s Riksbank enacted recently. Cable bids are cited around the US$ 1.5720 level. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.9190 level and was capped around the ₤0.9295 level.

Technical Outlook at 1230 GMT (EDT + 0400)

(Bid Price) (Today’s Intraday Range)

EUR/ USD 1.4647 1.4720, 1.4562
USD/ JPY 89.38 89.67, 88.23
GBP/ USD 1.5910 1.5975, 1.5767
USD/ CHF 1.0304 1.0374, 1.0249
AUD/USD 0.8717 0.8720, 0.8586
USD/CAD 1.0883 1.0991, 1.0882
NZD/USD 0.7181 0.7222, 0.7112
EUR/ JPY 130.90 131.79, 129.79
EUR/ GBP 0.9204 0.9297, 0.9191
GBP/ JPY 142.21 143.13, 139.70
CHF/ JPY 86.73 87.28, 85.91

Support Resistance Support Resistance

EUR/ USD USD/ JPY

L1. 1.4470 1.4915 88.60 93.30

L2. 1.4355 1.5140 87.10 95.50
L3. 1.4175 1.5360 86.10 98.85

GBP/ USD USD/ CHF

L1. 1.6115 1.6685 1.0275 1.0580

L2. 1.5720 1.6830 1.0040 1.0695

L3. 1.5405 1.7040 0.9750 1.0885

AUD/ USD USD/ CAD

L1. 0.8450 0.8830 1.0535 1.0945

L2. 0.8300 0.9050 1.0365 1.1125

L3. 0.8070 0.9120 1.0155 1.1355

NZD/ USD EUR/ JPY

L1. 0.6880 0.7125 131.45 135.75

L2. 0.6750 0.7260 129.75 136.90

L3. 0.6535 0.7395 127.00 138.75

EUR/ GBP EUR/ CHF

L1. 0.8795 0.8995 1.5110 1.5380

L2. 0.8675 0.9105 1.4905 1.5580

L3. 0.8320 0.9225 1.4670 1.5880

GBP/ JPY CHF/ JPY

L1. 146.10 152.50 86.30 88.65

L2. 142.05 157.75 85.40 90.10
L3. 135.70 161.70 81.55 91.60

SCHEDULE

Sunday, 27 September 2009

all times GMT

(last release in parentheses)

2301 UK September Hometrack house prices (+0.1% m/m)

2301 UK September Hometrack house prices (-6.7% y/y)

Monday, 28 September 2009

all times GMT

(last release in parentheses)

N/A Germany September consumer price index (+0.2% m/m)

N/A Germany September consumer price index (+0.0% y/y)

N/A Germany September consumer price index, harmonized (+0.3% m/m)

N/A Germany September consumer price index, harmonized (-0.1% y/y)

1230 US August Chicago Fed national activity index (-0.74)

2245 NZ August building permits (+5.0% m/m)

2330 Japan September Tokyo-area CPI (-1.6% y/y)

2330 Japan September Tokyo-area CPI, ex-food, energy (-1.1% y/y)

2330 Japan August consumer price index (-2.2% y/y)

2330 Japan August CPI, ex-food, energy (-0.9% y/y)

Tuesday, 29 September 2009

all times GMT

(last release in parentheses)

N/A Japan September purchasing manager index (53.6)

N/A Germany August import price index (-0.9% m/m)

N/A Germany August import price index (-12.6% y/y)

0600 CH August UBS consumption indicator (0.766)

0830 UK Q2 gross domestic product (-0.7% q/q)

0830 UK Q2 gross domestic product (-5.5% y/y)

0830 UK Q2 current account (-₤8.5 billion)

0830 UK August mortgage approvals (50,100)

0830 UK August net consumer credit (-₤200 million)

0830 UK August net lending secured on dwellings (-₤400 million)

0830 UK August M4 money supply (1.5% m/m)

0830 UK August M4 money supply (14.5% y/y)

0900 Eurozone September economic confidence (80.6)

0900 Eurozone September business climate indicator (-2.21)

0900 Eurozone September consumer confidence (-22)

0900 Eurozone September industrial confidence (-26)

0900 Eurozone September services confidence (-11)

1000 UK September CBI distributive trades (-16)

1300 US July S&P/ Case-Shiller home price composite (-15.44% y/y)

1400 US September consumer confidence (54.1)

2300 US Philadelphia Federal Reserve President Plosser speaks

2350 US August industrial production (2.1% m/m)

2350 US August industrial production (-22.7% y/y)

Wednesday, 30 September 2009

all times GMT

(last release in parentheses)

N/A Australia Q2 quarterly wage agreements

N/A Japan September small business confidence (41.8)

N/A Eurozone September Ifo, business climate

N/A Germany August retail sales (0.7% m/m)

N/A Germany August retail sales (-1.0% y/y)

0000 Australia July leading index (0.9%)

0000 Australia August retail sales (-1.0% m/m)

0130 Australia August private sector credit growth (0.2% m/m)

0130 Australia August private sector credit growth (3.0% y/y)

0130 Australia August building approvals (7.7% m/m)

0130 Australia August building approvals (-3.9% y/y)

0130 Japan August labour cash earnings (-4.8% y/y)

0200 NZ September NBNZ business confidence (34.2)

0500 Japan August housing starts (-32.1% y/y)

0500 Japan August housing starts, annualized (746,000)

0500 Japan August construction orders (-42.8% y/y)

0645 France August producer prices

0755 Germany September unemployment change (-1,000)

0830 UK July index of services (-0.6%)

0900 Eurozone September consumer price index, estimate (-0.2% y/y)

0900 Italy August producer price index (-0.6% m/m)

0900 Italy August producer price index (-8.5% y/y)

0930 CH September KOF leading indicator (-0.04)

1100 US MBA mortgage applications

1215 US September ADP employment change (-298,000)

1230 US Q2 gross domestic product, annualized (-1.0)

1230 US Q2 personal consumption expenditure, (2.0% q/q)

1230 US Q2 gross domestic product prices index (0.0%)

1230 Canada July gross domestic product (0.1% m/m)

1230 Canada August industrial product prices (-0.5% m/m)

1230 Canada August raw materials price index (-3.8% m/m)

1345 US September Chicago purchasing manager index (50.0)

1430 US Federal Reserve Bank of Atlanta President Lockhart speaks

1630 US Federal Reserve Governor John speaks

2330 Australia September performance of manufacturing index (51.7)

2350 Japan Q3 Tankan large manufacturing index (-48)

2350 Japan Q3 Tankan large manufacturers’ outlook (-30)

2350 Japan Q3 Tankan non-manufacturing index (-29)

2350 Japan Q3 Tankan non-manufacturing outlook (-21)

2350 Japan Q3 Tankan large all industry capex (-9.4%)

2350 Japan August retail trade (0.4% m/m)

2350 Japan August retail trade (-2.5% y/y)

2350 Japan August large retailers’ sales (-8.4%)

Thursday, 1 October 2009

all times GMT

(last release in parentheses)

N/A UK September Halifax house prices (0.8% m/m)

N/A UK September Halifax house prices (-10.1% y/y)

0730 CH September purchasing managers index (50.2)

0750 France September purchasing manager index

0755 Germany September purchasing manager index (49.6)

0800 Eurozone September purchasing manager index (49.0)

0830 UK September purchasing manager index (49.7)

0900 Eurozone August unemployment rate (9.5%)

1130 US September Challenger job cuts (-13.8% y/y)

1230 US August personal income (0.0%)

1230 US August personal spending (0.2%)

1230 US August PCE deflator (-0.8% y/y)

1230 US August PCE, core (0.1% m/m)

1230 US August PCE, core (1.4% y/y)

1230 US Weekly initial jobless claims (530,000)

1230 US Continuing jobless claims (6.138 million)

1400 US September ISM, manufacturing (52.9)

1400 US September ISM, prices paid (65)

1400 US August pending home sales (3.2% m/m)

1400 US August pending home sales (12.9% y/y)

1400 US August construction spending (-0.2% m/m)

2130 US Federal Reserve Bank of Atlanta President Lockhart speaks

2330 Japan August jobless rate (5.7%)

2330 Japan August household spending (-2.0% y/y)

2350 Japan September monetary base (6.1% y/y)

Friday, 2 October 2009

all times GMT

(last release in parentheses)

0030 Australia September TD Securities inflation (0.0% m/m)

0030 Australia September TD Securities inflation (1.7% y/y)

0830 UK September PMI, construction (47.7)

0830 UK Q2 BoE housing equity withdrawal (-₤8.1 billion)

0900 Eurozone August producer price index (-0.8% m/m)

0900 Eurozone August producer price index (-8.5% y/y)

1230 US September non-farm payrolls, net change (-216,000)

1230 US September unemployment rate (9.7%)

1230 US September average hourly earnings (0.3% m/m)

1230 US September average hourly earnings (2.6% y/y)

1230 US September average weekly hours (33.1)

1400 US August factory orders (1.3%)