DAILY MARKET COMMENTARY
27 December 2011 – 8:00 GMT
Wednesday
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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
Asian markets remained in a holiday mood overnight and FX flows were extremely light. News flow too was thin and Japanese economic data was second-tier and not market-moving. USDCNY fixed at a new low, but the adjustment on the previous fixing was minor, and the headline failed to attract much attention. EURUSD traded 1.3043-1.3077 and USDJPY 77.90-78.03. The minutes of the BoJ's Nov. 15-16 and Nov. 30 policy meetings were released together. The latter was an unscheduled meeting called to discuss the possibility of coordinated action on central bank swap lines - action which was subsequently taken later that day. The board emphasised that Japanese financial institutions were not having difficulty funding themselves in foreign currencies, but that "the possibility could not be ruled out" that Japan's financial system could be "adversely affected should conditions in global financial markets deteriorate further". US economic data is due in the form of house prices and the Conference Board Consumer Confidence reading. Impressed by the recent improvement in jobless claims and housing starts, our US economics team have raised their forecast for Q4 GDP to 3.0% annualised rate from 2.5% previously.
EUR
The ECB announced it settled only EUR0.019 bn worth of sovereign bond purchases in the week ended Friday, down from EUR3.361 bn the week before. This is the slowest pace of buying under the securities markets program since it was reactivated in early August. The total stock of bonds accumulated now stands at EUR211 bn, allowing for the maturation of some of the bonds purchased since the program began in May 2010.
JPY
Finance Minister Azumi said somewhat optimistically that the yen would return to levels reflecting the real state of the economy when the European and other crises are solved. He said the strong yen was partly to blame for Japan's export weakness in Q4.
A. White
Analyst at Fibosignals.com
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