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US Session - Dollar Seeing Major Movements on Fed Testimony
July 10, 2008 8:29 PM CEST
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G10 Advancers and Decliners vs USD |
| | Aud | .46 |  | | | Cad | .20 | | | | Eur | .20 | | | | Dkk | .19 | | | | Sek | .14 | | | | Chf | .03 | |  | Nzd | -0.03 | | | Nok | -0.05 | | | Jpy | -.026 | | | Gbp | -0.33 | |
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Global Indexes |
Current Level |
% Change |
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| Nikkei 225 Index | 13,067.21 | + 0.12 | | Hang Seng Index | 21,821.78 | + 0.07 | | FTSE 100 Index | 5,406.80 | - 2.21 | | DAX Index | 6,305.00 | - 1.28 | | DJIA Index | 11,251.90 | + 0.94 | | NASDAQ 100 Index | 1,844.00 | + 1.41 | | S&P 500 Index | 1,253.50 | + 0.87 |
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World Markets |
Current Level |
% Change |
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| Gold | 940.60 | + 1.30 | | Silver | 18.22 | + 0.43 | | VIX | 25.18 | - 0.20 | | Crude wti | 137.68 | + 1.20 | | USD Index | 72.56 | - 0.03 |
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Todays Calender |
Estimates |
Previous |
Country / GMT |
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| Fed Chairman Bernake Speaks | -- | -- | 15:00 |
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Currency Tech |
AUDUSD
R 3: 0.9670
R 2: 0.9642
R 1: 0.9618
CURRENT: 0.9590
S 1: 0.9545
S 2: 0.9477
S 3: 0.9459
EURJPY
R 3: 169.46
R 2: 169.14
R 1: 168.90
CURRENT: 168.54
S 1: 167.83
S 2: 167.13
S 3: 166.10
USDSGD
R 3: 1.3850
R 2: 1.3827
R 1: 1.3730
CURRENT: 1.3606
S 1: 1.3565
S 2: 1.3505
S 3: 1.3470
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Market Brief |
The Usd fell in the European session based on continued weakness in the US financial markets. The EurUsd experienced a major movement to the upside trading at the high 1.57 level, while the UsdJpy fell below 107. The GbpUsd fell below 1.98 to the mid 1.97 price, due to the lack of clarity in the UK economy going forward. Equity Markets fell in Europe and the US across the board due to speculation surrounding the ailing financial sector. Commodities continue yesterday’s climb as oil is trading at 137, and gold rose to 943. Traders continue to invest heavily in treasuries in a move towards risk aversion causing yields to fall.
Industrial production fell in Italy from -4.1% from 0.9% expected, which is indicative of softening economic growth in the Eurozone. Economist are expecting to see a contraction in Eurozone GDP based on the recent data, however the number should still be positive at approx. 0.1%. The market seems to be moving towards a “flight to quality” strategy, as buying in bonds overseas have picked up as well. The UK decided to hold rates at 5.00% confirming the notion that the BOE is unclear regarding the direction of UK financial health. Balancing growth and inflation persists to be a serious challenge the central bank, and I would expect to see benchmark rates to stay on hold to prevent further damaging the economy.
The US Markets continue to trade very sensitively to news surrounding the financial sector, as well as movements in commodity prices. Jobless claims came in better than expected at 346k vs. 397k expected. This data had very little effect on the dollar, but does provide a breath of positivity in the recent string of negative news. Fed Chairman Bernanke and Paulson are testifying today, and the market will be listening intently on their stance regarding the dollar, rising inflation, and financials. Freddie and Fannie Mae which are two of the largest lenders fell sharply based on statements from St. Louis Federal Reserve President William Poole saying that both GSEs(Govt. Sponsored Enterprise) are insolvent. In addition, rumors of major issues at Lehman Brothers reemerged which drove the equity markets down further. Several major financial institutions released statements reaffirming their trading relationship with Lehman, easing some of the pressure. A failure in Freddie and Fannie Mae poses major systemic risks in the financial system, but Paulson reiterated that they are adequately capitalized as of now. The dollar dropped over 50pips against the Euro earlier, but regained ground when Bernanke cited the importance of a strong dollar to the US economy. We expect to see near-term market volatility in the majors, but a gradual turnaround over the next 12 months in US economy giving way to stabilization in the state of the dollar.
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Asian Session - Usd Stable
July 10, 2008 10:08 AM CEST
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G10 Advancers and Decliners vs USD |
| | SEK | 0.18 | | | | AUD | 0.11 | | | EUR | -0.05 | | | DKK | -0.05 | | | NOK | -0.07 | | | JPY | -0.08 | | | CHF | -0.09 | | | GBP | -0.16 | | | CAD | -0.17 | | | NZD | -0.83 | |
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Global Indexes |
Current Level |
% Change |
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| Nikkei 225 Index | 13,067.21 | + 0.11 | | Hang Seng Index | 21,758.99 | - 0.21 | | Shanghai Index | 2,875.45 | - 1.54 | | FTSE 100 Index | 5,414.10 | - 2.08 | | CAC 40 Index | 4,252.79 | - 2.00 | | DAX Index | 6,296.34 | - 1.41 | | DJIA futures | 11,177.00 | + 0.25 |
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World Markets |
Current Level |
% Change |
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| Gold | 926.75 | - 0.19 | | Silver | 18.08 | - 0.33 | | VIX | 25.23 | + 8.98 | | Crude wti | 136.12 | + 0.05 | | USD Index | 72.71 | + 0.18 |
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Todays Calender |
Estimates |
Previous |
Country / GMT |
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| BoE Rate Announcement | 5.00% | 5.00% | UK / 11.00 | | Initial jobless claims, thous (4wk mvg avg) | -- | 404 (390.5 | US / 12.30 |
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Currency Tech |
AUDUSD
R 3: 0.9670
R 2: 0.9642
R 1: 0.9618
CURRENT: 0.9590
S 1: 0.9545
S 2: 0.9477
S 3: 0.9459
EURJPY
R 3: 169.46
R 2: 169.14
R 1: 168.90
CURRENT: 168.54
S 1: 167.83
S 2: 167.13
S 3: 166.10
USDSGD
R 3: 1.3850
R 2: 1.3827
R 1: 1.3730
CURRENT: 1.3606
S 1: 1.3565
S 2: 1.3505
S 3: 1.3470
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Market Brief |
The Usd was stable in Asian session as a lack of real news provided no real impetus for a directional move. EurUsd traded in a 1.5700 - 1.5750 range while UsdJpy slipped from 107.50 to 106.90. Strong Jpy buying spilled over into select carry trades with GbpJpy the hardest hit dropping from 212.30 to 211.40 while AudJpy was able to rally back from early selling to 102.70. Oil was trading at $136.50 barrel after rising above $138 after a sharp fall in U.S. stocks. Gold closed with strong gains, amid geopolitical tensions thus increasing the metals attractiveness as a safe-haven instrument; the most active Aug '08 contract up $5.30 to $928.60. Sep '08 silver +22.0 ¢ at $18.175/oz.
Wall Street fell over 2% as rumours abound that investment banks still have large write-downs to declare. Merrill Lynch fell over 9% after Fitch Ratings indicated that it may cut the banks debt rating. Merrill's along with other U.S. banks report earnings next week. Asian markets are mostly trading mixed this morning in a directionless session. Lenders lost ground in Australia on worries about the US financial sector, but financials came off early lows in volatile trading in Japan and Korea as the markets reversed early declines. European stocks are coming under significant selling pressure, but so far ,US index futures are still in the positive.
With the Aud looking a little vulnerable ( due to deteriorating fundamentals) today’s better then expected employment figure 29.5k vs. 25k exp (prior -19.7k) help give the currency some support.
The highlight of this data devoid day will be the BoE's interest rate announcement. It is universally expected that the MPC will hold rates at 5.00% due to worrying inflationary pressures. Economic activity in the recent month has shown clear deterioration. In addition, negative data from the housing market, industrial sector that has probably fallen into a recession and a consumer spending ready to decelerate significantly. But the BoE members at this point are still leaning to the inflation side of the story which means a strong chance of a technical recession in the UK. With economic indicators well in the region which historically the BoE would be cutting rates, we believe its just a matter of time before rates come down.
Ex Fed President William Poole in a conference yesterday stated he believes that the government-sponsored mortgage companies, Fannie Mae and Freddie Mac, are insolvent. Interesting questions maybe asked of Fed Chairman Bernanke and Treasury Secretary Paulson when they testify on the health of the financial system later today.
17.45gmt - ECB's Trichet speaks
19.30gmt - Fed's Yellen speaks
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