DAILY Fundamental Forex Market Overview
30 November 2010 – 8:00 GMT
Tuesday
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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 consolidated during the Asia session given the general lack of newsflow. EURUSD traded 1.3076-1.3150, USDJPY 83.83-84.41. Asian equities are broadly weaker at the time of writing, and the S&P 500 earlier finished fractionally in the red. Concern over Eurozone sovereign risk remains the primary driver of the dollar for now, and so any further widening of Eurozone bond spreads will likely continue to be dollar supportive. However, there are plenty of US data releases also due out this week and any positive surprises could further bolster the case of dollar bulls such as ourselves. We maintain our 3m EURUSD forecast of 1.25. Ahead in the US today, we have S&P/Case Shiller data, Chicago PMI, and the Conference Board consumer confidence index. Minneapolis Fed President Kocherlakota and Fed Chairman Bernanke are also scheduled to speak.
EUR
Eurozone sovereign spreads continued to widen despite the financial rescue of Ireland. The package did little to dissuade contagion fears and a poor Italian auction also put upward pressure on sovereign yields. Spanish and Italian 10y spreads over Germany reached euro-era record wides of 265bp and 191bp according to Bloomberg. And despite the Eurogroup's statement regarding 'private sector involvement' post 2013, the market appears to be questioning the assurances for bonds issued before this date.
The fixed interest rate charged on Greece's loan will be increased to 5.8%, to bring it into line with the terms of Ireland's loan. The repayment schedule will also be extended out to 2021.
JPY
The jobless rate for October unexpectedly ticked higher to 5.1% from 5.0% previously. Economy Minister Kaieda said Japan's economy is stalling, and the employment situation remains severe. He said the rise in JGB yields reflects a similar trend globally, and that he will continue to watch the impact of the BoJ's latest easing efforts.
GBP
The UK's Office for Budget Responsibility (OBR)released its latest forecast for the UK economy with GDP growth for 2010 unsurprisingly revised up from 1.2% to 1.8%. GDP growth for 2011 was revised down from 2.3% to 2.1% versus our economist's forecast of 2.3%. The OBR also said the UK has more than a 50% chance of meeting its fiscal mandate and the budget deficit forecasts are in line with earlier forecasts.
CAD
Canada's current account deficit widened by $4.6 bn to record $17.5 bn in the third quarter, well above consensus estimates. Up next is GDP for Q3 and September. Monthly GDP should show decreased growth and the quarterly GDP figure will also show a drop from the previous quarter, though it will still show positive growth.
AUD
The AUD got a boost from a strong bounce in October building approvals which came in at +9.3% m/m (cons. 1.4%, prev. -5.3%). The current account deficit was larger than expected. Our Australian economics team are below consensus on the Q3 GDP report due out tomorrow, expecting to see a headline print of +0.3% q/q (cons. 0.4% q/q).
A. M. Negrin Bautista, CFA
Chief Analyst at Fibosignals.com
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