Forex Market Update

Monday, Feb 08, 2010, 07:04 GMT

By Andrew Timothy Robinson FX-specialist, Market Strategist, Saxo Bank

US jobs data on Friday has something for everyone

G7 has no official comment on currencies; Asia holds steady


MAJOR HEADLINES – PREVIOUS SESSION

  • CA Jan. Unemployment Rate out at 8.3% vs. 8.5% expected and revised 8.4% prior
  • US Jan. Change on Non-farm Payrolls out at -20k vs. +15k expected and revised -150k prior
  • US Dec. Consumer Credit out at -$1.7b vs. –S10b expected and revised -$21.8b prior
  • NZ Jan. QV House Prices out at +4.4% vs. +2.8% prior
  • JP Dec. C/a Balance out at ¥900.8b vs. ¥1011.7b expected and ¥1103b prior
  • JP Dec. Trade Balance out at ¥631.2b vs. ¥669.4b expected and ¥490.6b prior
  • JP Jan. Bank Lending out at -1.5% y/y vs. -1.0% prior
  • JP Jan. M3 Money Stock out at +2.1% y/y vs. 2.2% expected and 2.2% prior
  • JP Jan. Econ. Watchers Survey: Current out at 38.8 vs. 35.4 prior
  • JP Jan. Econ. Watchers Survey : Outlook out at 41.9 vs. 36.3 prior

 


THEMES TO WATCH – UPCOMING SESSION

(All times GMT)

  • Swiss Unemployment (0645)
  • Swiss Retail Sales (0815)
  • Denmark C/a Balance (0830)
  • EU Sentix Investor Confidence (0930)
  • CA Housing Starts (1315)

 

Market Comments:

The highlight of last week – the US non-farm payroll and unemployment data – had something for all yesterday although volatility from other sources did cloud the outcome somewhat. Optimists would highlight the fall in unemployment below the 10% mark for the first time since October last year (to 9.7%) whereas the nay-sayers will note that the US economy failed to add jobs for the first time since end-2007 with a loss of 20k jobs rather that the +20k expected while December’s data was revised down an additional 65k. Post-data, the dollar was generally better bid following some end-of –week profit-taking on a knee-jerk dip. Equity markets tended to take the data more positively with news with Wall St posting a positive number for the first time in three days.

The EUR was a continual underperformer as markets intensified scrutiny on credit spreads for weaker members’ debt and less-than convincing economic data from Germany. Meanwhile other risk currencies saw falls to fresh 2010 lows while US bond markets found support after the data and 10-year yields dipped 4bp, helping to keep USDJPY capped.

The G7 meeting at the weekend did not produce any official communiqué on currencies but press briefings following the meetings alluded to general discussions about currencies – and those countries with inflexible exchange rates – without specific mention of the Renmimbi while no express concern was voiced over the EUR’s recent (quite dramatic) slide. EU ministers sought to calm broader concerns about Greece’s debt situation and commented that its fiscal problems could be sorted out without help from the IMF. However this came hand in hand with warnings that the economic recovery is not assured and promises to continue the current stimulus framework.

It was a relatively orderly start to the week in Asia though the AUD had an initial move lower in response to weekend press highlighting comments from Australian Finance Minister Tanner who said the nation’s economy remains fragile and further stimulus will be required this year. The data slate was congested by releases from Japan in Asia though most failed to ignite much activity. Japan’s current account surplus remained in surplus in December but fell short of both expectations and the previous months’ reading, coming in at ¥900.8 bln. Loans growth again showed a disappointing trait, with bank lending shrinking for the second consecutive month. If we subtract lending by shinkin or credit unions then lending was down 1.7% y/y, its fastest pace of decline in 5 years.

Elsewhere it is a slow start to the week on the data front with European releases restricted to Swiss unemployment and retail sales and the EU’s Sentix investor confidence. There are no releases from the US and the day finishes with Canada’s housing starts.

  

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