DAILY Fundamental Forex Market Overview
10 December 2010 – 8:00 GMT
Friday
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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 was largely unchanged for most of the Asia session given the relative absence of news. EURUSD traded 1.3217-1.3271, USDJPY 83.52-83.87. Trade data out of China was extremely strong however. Ordinarily this would have boosted global risk appetite, but market attention focused instead on the policy tightening measures that might soon be deployed to promote sustainable economic growth. As a result, the AUD and the EUR failed to stage much of a rally on the numbers. Treasury yields were slightly lower following a better than anticipated auction of $13bn of 30y Treasurys. Initial jobless claims declined by more than expected and wholesale inventories were slightly higher in October, with an upward revision to the September reading. Upcoming US data releases include the trade balance, the monthly budget statement and the University of Michigan Consumer Confidence index. Ongoing uncertainty in the Eurozone should keep the dollar supported.
EUR
ECB Governing Council member Draghi said that the euro "is not in question" due to the sovereign debt crisis, adding that it is "one of the pillars of European economic integration". He said that "sooner or later" the ECB is likely to return to the pre-crisis system of auctioning liquidity and that the ECB is discussing "concrete proposals" over how to handle banks that are currently dependent on ECB cash.
The Irish government announced it will put the EU/IMF aid package to a parliamentary vote on December 15. Shortly afterwards, the opposition Labour party said it would vote against the deal while an independent member of parliament (MP) said that he and a fellow independent MP would vote in favour.
Fitch downgraded Ireland by 3 notches to BBB+ in light of the additional fiscal costs of bank restructuring. This was largely in line with expectations, and the market was somewhat consoled by the stable outlook assigned. Moody's is currently conducting a ratings review, and is expected to announce its decision over the coming weeks.
Fitch also said that Eurozone credit fundamentals are better than markets show, and said it does not envisage a Eurozone break-up.
GBP
As expected, the BOE left their benchmark rate unchanged at 0.5%, and as a consequence offered no statement. Our team of analysts expects rate hikes in Q3 of next year..
A. M. Negrin Bautista, CFA
Chief Analyst at Fibosignals.com
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