DAILY Fundamental Forex Market Overview
11 November 2010 – 8:00 GMT
Thursday
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Market Analysis Desk
Foreign Exchange Research: www.fibosignals.com/5585/resources.html
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FUNDAMENTAL ANALYSIS at 0800 GMT
USD
The dollar stabilized during the Asia session given the relative absence of news and economic dataflow. Although the G20 Summit is currently underway, delegates refrained from expressing any surprising or controversial opinions in public, and this contributed to the general lack of price direction. EURUSD traded 1.3716-1.3821, USDJPY 82.04-82.80. The Nikkei-225 is up +0.3% at the time of writing while the S&P500 finished +0.44% ahead. Initial jobless claims dropped to 435k (cons. 450k) in the week of Nov 6 from a revised estimate of 459k for the week before. In addition, the US trade balance narrowed $2.5B to -$44.0B in September (cons. -$45.0B). US Treasury Secretary Geithner said that the US "will never" seek to weaken the dollar as a tool to grow the economy, and said that the dollar's recent fall is in part due to reversal of earlier safe haven flows. The New York Fed published a tentative schedule for Treasury purchases as part of the Fed's latest round of quantitative easing. The purchases are due to begin on Friday.
EUR
Irish Central Bank Governor Honohan said that it will not be necessary for Ireland to tap the EU rescue fund and that budget measures should boost confidence, adding that there was no reason why Ireland can't return to the bond market in 2011. However he observed that Irish banks saw net outflows in September.
Although a Portuguese auction passed without incident, yields continued to rise for sovereign issuers on the Eurozone's periphery. News that a major London-based clearing house increased the margin they require for holding Irish government bonds likely contributed to the bearish tone.
A Greek newspaper claimed that Greece would upwardly revise its 2010 budget deficit to 9.5% of GDP from the originally projected 8.1% of GDP. There were mixed industrial reduction results across France and Italy, illustrating their diverging prospects for Q3 GDP. Year-on-year readings were +5.1% vs. consensus of +4.7% for France, while Italian industrial production greatly missed estimates, falling -2.1% m/m vs. consensus of -0.3%.
GBP
Sterling received a temporary boost when the BoE's quarterly inflation report showed an upward revision to the near-term inflation forecast. For the short term, the likelihood of further QE remains slim due to better-than-expected fundamentals, but price risks on both sides suggest that is still a distinct possibility heading into the new year.
AUD
October's employment report was mixed. Although +29.7k new jobs were created (cons. +20k), only part-time jobs increased. The unemployment rate was much higher than expected at 5.4% (cons. 5.0%, prev. 5.1%), although this was due to a large increase in the work force. Our Australian economists believe the new data shows an economy running at, rather than above, trend. This further supports their view that the RBA is likely 'on hold' until March.
A. M. Negrin Bautista, CFA
Chief Analyst at Fibosignals.com
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