Market Snapshot 18.12.07
USD
Brief:
1.Today’s US housing starts and building permits figure are due to be released at 8.30AM EST, economist put estimates 1176k for Housing and 1150k for buildings permits.
2.UK CPI figure released shows UK inflation rate was lower than economist’s forecasted; actual release was 2.1% while economist is forecasted 2.2%. GBP falls yesterday on speculation that BOE will have a rate cut to spur economic growth which has slowed affected by housing slump and today’s CPI figure should support a rate cut by BOE.
3.US stocks posted their biggest two-day drop in more than a month yesterday, led by commodity related corporation on growing concern that the U.S. economy will slow.
4.The dollar touched seven week high against the euro yesterday as the trade deficit of US current account deficit narrowed to the smallest level in two years helped by weaker USD as cheaper dollar is helping to boost exports. But US Empire manufacturing survey figure is much lower than forecasted, although it has little effect on capital markets and USD but still, in the period where market is depress, it is still worth mentioning it.
5.International buying of US financial assets jumped in October at the fastest pace in almost two years and bought the most US stocks since May, signaling confidence on US capital markets back on October even after September credit crisis surfaced.
6.Europe’s manufacturing and service industries grew at the slowest pace in more than two years this month because of increases in borrowing cost, energy and food prices.
On the upside:
•US capital markets recover, led by European markets, providing better outlook for US economy and demand for USD dominated assets.
•Housing starts and building permits figures might have positive effects on capital markets and USD strength, that if figures are favorable or within forecast range.
•Cross currency weakness, such as EUR, CAD, NZD and GBP, particularly EUR and GBP on economic growth and inflation concern.
•Buying interest after yesterday’s low volatility trades which might give investors an impression that USD is steady amid capital markets crash and non-supportive credit/housing related news.
On the downside:
•Today’s housing starts and building permits figure are not favorable, heightening investors fear that housing sector are much worse than expected as we head into 2008, dragging the sector instability into 1st quarter next year.
•Influential parties related to retail, housing and credit markets giving negative outlook at warn investors regarding sector growth.
•If there is no significant movement/strengthening on near term, Investors be closing position after recent USD gains to protect profit. could
To monitor:
•Housing starts and Building permits figures due to be released on 8.30AM EST
•Housing starts and Building permits figures released affects on USD (early and mid trading session), to see whether USD will retrace from recent gain or USD is strongly supported.
•Cross currency strength and weakness (CAD, EUR, GBP and NZD), Canada CPI.
•Fed activities (something similar to ECB latest statement?) regarding US economy, particularly financial related.
•Statement released on/by corporate involve in retail, credit and housing related sector.
Suggested pairs of the day:
Short: GBP/USD – EUR/USD – NZD/USD – AUD/USD
Long: USD/CHF – USD/JPY –USD/CAD
Possible main pairs are: GBP/USD – USD/CAD – USD/JPY
-According to 12.30 GMT price-
JPY
Brief:
1.The ECB loaned $501.5 billion for two weeks to banks to bring down the cost of money at year-end. The rate banks charge each other for two week euros fell to 4.45 percent from 4.94 percent, the European Banking Federation said today.
2.Most Asian and European markets rises on ECB latest statement and cheap price attract investor’s interest.
3.US Dow Jones index future fell following trend of European and Asian capital markets
4.Global capital markets fell yesterday extending fall on heightening investors concern over US economy growth.
5.The Bank of Japan will probably refrain from raising interest rates this Thursday after a drop in business confidence signaled companies are bracing for slower economic growth caused by strengthening JPY and slowdown on US economy.
6.JPY is consider steady late trading session yesterday, compared to early US trading session amid US indexes falls further on mid and late trading session.
7.GBP/JPY might rise today as UK CPI index released today are likely to force BOE to reconsider a rate cut forecasted earlier by economist.
On the upside: (Strengthening JPY)
•Cross currency weakens, especially GBP, EUR, CAD and NZD.
•Speculation over Thursday BOJ rate decision (likely a rate hold -0.5 %-)
•Global Major indexes weaken on concern ranging from economic growth to inflation.(Unlikely today, unless negative statement on US economy causing US indexes to fall and snap today’s rally)
On the downside: (Weakening JPY)
•With ECB bringing down Euro Interbank Offered Rate (Euribor) by loaning out as much as $500 Billion, they had achieved their objective. Euribor rates falls to 4.45 percent from 4.94 percent, boosting capital markets and cash flow between financial institutions.
•Capital markets, particularly US capital markets might recover from recent slump as investors are closing their short-positions, causing a rebound and cheap stock prices increase buying interest, providing support.
•USD might continue its gain against JPY slightly affecting other JPY pairs
•European central banks rate decision forecast affecting cross currencies and capital markets. (BOE, ECB and SNB)
To monitor:
•European and US capital markets, particularly US indexes.
•Housing starts and Building permits reports and its effect on European and US indexes.
•Cross currency strength and weakness.
•European central banks and BOE rate forecasts.
•Major institution statement/comments on sector growth and 4th quarter profits outlook releases.
Long: USD/JPY - GBP/JPY - EUR/JPY – AUD/JPY – NZD/JPY
To avoid: CAD/JPY – CHF/JPY
Possible main pairs are: GBP/JPY – EUR/JPY
-According to 12.30GMT price-
Time lapse prediction (according to current situation):
14AM - 16AM GMT:
•USD to strengthen on early trading session after Housing starts and building permits post better than expected or within range compared to economists forecasted and confidence pouring back into money markets.
•US and European capital markets remain or strengthen further boosted by positive statement/announcement by US markets.
•JPY gets weaker reflecting capital markets strength.
16AM – 18PM GMT:
•US capital remains for weaken a little as some investors are still concern over US economy slowdown.
•JPY remain or weaken further increasing demand for carry trade.
•USD is little change or slightly strengthens on investor’s confidence over this week economic figures.
18PM – 22PM GMT:
•Capital markets remains or strengthen supported by positive outlook on US economy release and investors buying interest.
•JPY will be little change or weaken further with US capital markets recovering.
•USD will be little change or weakens a little; retreat from earlier gains as investors closes position before market close putting pressure on prices.
Loh Chang Yuen,
Junior Strategist
All rights reserved: Admiral Markets Ltd
|
