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Market Snapshot 23.1.08
USD
Brief:
1.USD weakened against most currencies and felled the most in 2 months low against EUR yesterday as FOCM started an emergency inter meeting and cut its benchmark rates by 0.75%, surprising a lot of investors and prompt mass selling on USD by traders.
2.The Federal Reserve cut the benchmark interest rate by 0.75%, its first emergency reduction since 2001, after stock markets tumbled from Hong Kong to London amid increasing signs of a U.S. recession. The central bank cut the target overnight lending rate to 3.5% from 4.25% the FOMC said in a statement in Washington. Policy makers weren’t scheduled to gather until next week. It's the biggest single reduction since 1990
3.Policy makers set aside concerns about inflation to lower borrowing costs for the fourth time since September after retail sales fell, the unemployment rate climbed and global stocks slumped. Chairman Bernanke shifted the Fed’s stance to a more aggressive approach.
4.USD slid and Treasury securities rallied after the announcement. Stocks retreated as some investors questioned whether the rate cut would be able to avert a recession, and then recouped more than half the losses
5.The FOMC vote was 8-1, with St. Louis Fed President William Poole preferring to wait until the regularly scheduled meeting. Fed Governor Frederic Mishkin was absent and not voting.
6.Concern is growing that monetary stimulus in its own right won't be enough, the ECB and the BOE may have to follow the Federal Reserve and cut interest rates as the risk of a U.S. recession threatens to drag down a global expansion, economists said.
On the upside:
•There is little reasons left for USD to go upside now as yesterday emergency rate cut erases all the probability, but yesterday weakness might be oversold, might have some recovery as investor’s takes profit.
•Stimulus plan progress and details that might suggest it might able to help US economy.
•Cross currency weakness, yesterday cut might prompt other central banks to follow as slowing US economy would affect their economy growth too.
On the downside:
•Further negative views towards US economy by economist or major institution top executives.
•USD might continue its downtrend if other central bank hints no rate cuts.
To monitor:
•Fed or related government official’s statements and plans.
•Stimulus plan progress and details.
•Major corporate 4th quarter financial reports and its top executive outlook towards sector growth and near term US economy.
•Economist comments on sector growth, corporate financial statement –actual/forecast- and US economy.
•Cross currency strength and weakness. (GBP, EUR, AUD, NZD, CAD and JPY –Main-)
Suggested pairs of the day: (Light-Cautious)
Short: GBP/USD – EUR/USD – NZD/USD – AUD/USD
Long: USD/JPY – USD/CHF - USD/CAD
Possible main pairs are: – EUR/USD – USD/JPY – NZD/USD – GBP/USD
-According to 12.05GMT price-
JPY
Brief:
1.JPY strengthened against most currencies today amid Asia market recovery as European markets falls again on speculation Fed rate cut and President Bush stimulus plan is inadequate to prevent US falling into recession.
2.JPY weakens against most currencies yesterday as US capital markets recovered after Fed emergency 0.75% rate cut.
3.Today’s Japan economic releases, -forecast- Japan trade balance (943.0B Yen), Japan adjusted trade balance (663.0B Yen) and Japan all industry activity index (-0.4%)
4.The government cut its growth forecast for this fiscal year to 1.3% from 2.1% after stricter building permit rules caused housing starts to tumble to a four decade low.
On the upside:
•Cross currency weakness. (USD and GBP)
•Capital markets might continue its decline on negative reviews towards global economy by central bank members or finance ministers.
On the downside:
•JPY should follow capital markets recovery after Fed cut rates 0.75% on yesterday emergency meeting
•Yesterday Fed emergency rate cut would prompt BOJ to hold its rates to prevent an economy slowdown.
To monitor:
•Global capital markets movement, particularly US. (Main)
•Fed and other central banks statements that might affect capital markets, its currency or its economy outlook.
•Future BOJ members statements
•Major US/Japan institution financial statements.
•Economist comments on US/Japan economy, economic releases or sector growth.
Suggested pairs of the day:
Long: USD/JPY - GBP/JPY - EUR/JPY – AUD/JPY– NZD/JPY–
Possible main pairs are: USD/JPY – GBP/JPY – AUD/JPY –
-According to 12.05GMT price-
EUR
Brief:
1.EUR strengthened against USD the most in 2 months after yesterday Fed cut its benchmark rate by 0.75% in an emergency meeting yesterday.
2.Today’s economic releases, -actual- France consumer spending –YoY-MoM- (3.9% - 2.0%), Euro-zone PMI service (52), Euro-zone manufacturing (52.6) and Euro-zone composite (52.7)
3.European finance ministers said a global stock market slump and an economic slowdown in the US threaten to slow growth in Europe more than forecast, majority finance minister are now concern about the financial crisis.
4.Today’s BOE meetings might hints for a rate cut following US Fed yesterday’s cut, to prevent UK economy to slow further which is already taken place
5.ECB council member Nout Wellink said economic growth in the 15-nation euro region may slow more than policy makers expected. Euro area finance ministers are “worried” about volatility in financial markets.
6.European banks will make it harder for companies and consumers to get loans in the next three months, an ECB survey showed on Jan 18, with the euro’s appreciation to record hurting exports, more economists are betting the European Central Bank will be forced to lower interest rates.
On the upside:
•Cross currency weakness. (USD and GBP)
•EUR might strengthen against USD today as yesterday rally will cause some selling pressure today.
On the downside:
•Cross currency recovery. (CAD and AUD)
To monitor:
•Capital markets performance.
•President Bush stimulus plan and progress.
•Future euro zone economic releases forecast/actual.
•Europe’s major institutions performance and outlook.
•Cross currency strength and weakness.
•Highly influential news from US, Euro zone and UK.
•Central banks statements or its member’s comments.
•Euro - zone economy outlook and sector performance.
Suggested pairs of the day:
Short: EUR/USD – EUR/GBP – EUR/CAD –
Long: EUR/JPY - EUR/CHF –
Possible main pairs are: EUR/USD – EUR/CHF – EUR/CAD
-According to 12.05GMT price-
Crude oil
Brief:
1.Crude oil fell on early trading session on forecasts US inventories rose for a second week amid mounting concerns of an economic slowdown in the world’s biggest energy user.
2.Crude oil rose yesterday following capital markets recovery as Fed cut its benchmark rate by 0.75% on an emergency meeting.
3.Crude oil rally yesterday was further supported by short-covering as investors exits position before Crude oil February contract expires, although outlook on US economy hasn’t change, but yesterday surprise interest rate cut and weaker USD provides temporary support for crude oil.
4.The Nigerian government informed oil companies in its region that it would like to renegotiate production contracts within the next three months, a move that will likely increase the nation’s share of oil wealth.
On the upside:
•Capital markets recovery might prompt some buying interest in crude oil.
•Fresh fund into March contract.
•USD weakness.
On the downside:
•Fundamentals are not supporting a higher crude oil prices, unless main OPEC members signaling there will be no increase in crude oil production when the organization meets on February.
•US slip into recession speculation.
To monitor:
•OPEC member’s comments.
•Geopolitical risk, particularly Middle East and Nigeria.
•President Bush stimulus plan and details.
•Future economic releases forecast/actual.
•Near term weather forecast.
Trade suggestion:
“Long” Crude oil around low $87 and mid 87USD
- (Suggest) Exits all positions before market closes.-
Time lapse prediction: (according to current situation)
14PM – 16PM GMT:
•USD remains or retreats.
•US capital markets recover on market opening.
•JPY remains or slightly weakens, following futures indexes recovery.
•EUR slightly strengthens as cross currency retreats
•Crude oil remains or weakens on early trading session.
16PM – 18PM GMT:
•USD remains or slightly strengthens in mid trading session.
•US capital markets remains or slightly weakens.
•JPY remains or slightly strengthens.
•EUR weakens on selling pressure.
•Crude remains or slightly rises on mid trading session.
18PM – 22PM GMT:
•USD strengthens further on cross currency weakness and on investor buying interest.
•US capital markets recover further investors buying interest.
•JPY weakens tracking US capital markets recovery.
•EUR remains or slightly weakens by late session.
•Crude oil slightly strengthens by late trading session.
Loh Chang Yuen,
Brief:
1.USD weakened against most currencies and felled the most in 2 months low against EUR yesterday as FOCM started an emergency inter meeting and cut its benchmark rates by 0.75%, surprising a lot of investors and prompt mass selling on USD by traders.
2.The Federal Reserve cut the benchmark interest rate by 0.75%, its first emergency reduction since 2001, after stock markets tumbled from Hong Kong to London amid increasing signs of a U.S. recession. The central bank cut the target overnight lending rate to 3.5% from 4.25% the FOMC said in a statement in Washington. Policy makers weren’t scheduled to gather until next week. It's the biggest single reduction since 1990
3.Policy makers set aside concerns about inflation to lower borrowing costs for the fourth time since September after retail sales fell, the unemployment rate climbed and global stocks slumped. Chairman Bernanke shifted the Fed’s stance to a more aggressive approach.
4.USD slid and Treasury securities rallied after the announcement. Stocks retreated as some investors questioned whether the rate cut would be able to avert a recession, and then recouped more than half the losses
5.The FOMC vote was 8-1, with St. Louis Fed President William Poole preferring to wait until the regularly scheduled meeting. Fed Governor Frederic Mishkin was absent and not voting.
6.Concern is growing that monetary stimulus in its own right won't be enough, the ECB and the BOE may have to follow the Federal Reserve and cut interest rates as the risk of a U.S. recession threatens to drag down a global expansion, economists said.
On the upside:
•There is little reasons left for USD to go upside now as yesterday emergency rate cut erases all the probability, but yesterday weakness might be oversold, might have some recovery as investor’s takes profit.
•Stimulus plan progress and details that might suggest it might able to help US economy.
•Cross currency weakness, yesterday cut might prompt other central banks to follow as slowing US economy would affect their economy growth too.
On the downside:
•Further negative views towards US economy by economist or major institution top executives.
•USD might continue its downtrend if other central bank hints no rate cuts.
To monitor:
•Fed or related government official’s statements and plans.
•Stimulus plan progress and details.
•Major corporate 4th quarter financial reports and its top executive outlook towards sector growth and near term US economy.
•Economist comments on sector growth, corporate financial statement –actual/forecast- and US economy.
•Cross currency strength and weakness. (GBP, EUR, AUD, NZD, CAD and JPY –Main-)
Suggested pairs of the day: (Light-Cautious)
Short: GBP/USD – EUR/USD – NZD/USD – AUD/USD
Long: USD/JPY – USD/CHF - USD/CAD
Possible main pairs are: – EUR/USD – USD/JPY – NZD/USD – GBP/USD
-According to 12.05GMT price-
JPY
Brief:
1.JPY strengthened against most currencies today amid Asia market recovery as European markets falls again on speculation Fed rate cut and President Bush stimulus plan is inadequate to prevent US falling into recession.
2.JPY weakens against most currencies yesterday as US capital markets recovered after Fed emergency 0.75% rate cut.
3.Today’s Japan economic releases, -forecast- Japan trade balance (943.0B Yen), Japan adjusted trade balance (663.0B Yen) and Japan all industry activity index (-0.4%)
4.The government cut its growth forecast for this fiscal year to 1.3% from 2.1% after stricter building permit rules caused housing starts to tumble to a four decade low.
On the upside:
•Cross currency weakness. (USD and GBP)
•Capital markets might continue its decline on negative reviews towards global economy by central bank members or finance ministers.
On the downside:
•JPY should follow capital markets recovery after Fed cut rates 0.75% on yesterday emergency meeting
•Yesterday Fed emergency rate cut would prompt BOJ to hold its rates to prevent an economy slowdown.
To monitor:
•Global capital markets movement, particularly US. (Main)
•Fed and other central banks statements that might affect capital markets, its currency or its economy outlook.
•Future BOJ members statements
•Major US/Japan institution financial statements.
•Economist comments on US/Japan economy, economic releases or sector growth.
Suggested pairs of the day:
Long: USD/JPY - GBP/JPY - EUR/JPY – AUD/JPY– NZD/JPY–
Possible main pairs are: USD/JPY – GBP/JPY – AUD/JPY –
-According to 12.05GMT price-
EUR
Brief:
1.EUR strengthened against USD the most in 2 months after yesterday Fed cut its benchmark rate by 0.75% in an emergency meeting yesterday.
2.Today’s economic releases, -actual- France consumer spending –YoY-MoM- (3.9% - 2.0%), Euro-zone PMI service (52), Euro-zone manufacturing (52.6) and Euro-zone composite (52.7)
3.European finance ministers said a global stock market slump and an economic slowdown in the US threaten to slow growth in Europe more than forecast, majority finance minister are now concern about the financial crisis.
4.Today’s BOE meetings might hints for a rate cut following US Fed yesterday’s cut, to prevent UK economy to slow further which is already taken place
5.ECB council member Nout Wellink said economic growth in the 15-nation euro region may slow more than policy makers expected. Euro area finance ministers are “worried” about volatility in financial markets.
6.European banks will make it harder for companies and consumers to get loans in the next three months, an ECB survey showed on Jan 18, with the euro’s appreciation to record hurting exports, more economists are betting the European Central Bank will be forced to lower interest rates.
On the upside:
•Cross currency weakness. (USD and GBP)
•EUR might strengthen against USD today as yesterday rally will cause some selling pressure today.
On the downside:
•Cross currency recovery. (CAD and AUD)
To monitor:
•Capital markets performance.
•President Bush stimulus plan and progress.
•Future euro zone economic releases forecast/actual.
•Europe’s major institutions performance and outlook.
•Cross currency strength and weakness.
•Highly influential news from US, Euro zone and UK.
•Central banks statements or its member’s comments.
•Euro - zone economy outlook and sector performance.
Suggested pairs of the day:
Short: EUR/USD – EUR/GBP – EUR/CAD –
Long: EUR/JPY - EUR/CHF –
Possible main pairs are: EUR/USD – EUR/CHF – EUR/CAD
-According to 12.05GMT price-
Crude oil
Brief:
1.Crude oil fell on early trading session on forecasts US inventories rose for a second week amid mounting concerns of an economic slowdown in the world’s biggest energy user.
2.Crude oil rose yesterday following capital markets recovery as Fed cut its benchmark rate by 0.75% on an emergency meeting.
3.Crude oil rally yesterday was further supported by short-covering as investors exits position before Crude oil February contract expires, although outlook on US economy hasn’t change, but yesterday surprise interest rate cut and weaker USD provides temporary support for crude oil.
4.The Nigerian government informed oil companies in its region that it would like to renegotiate production contracts within the next three months, a move that will likely increase the nation’s share of oil wealth.
On the upside:
•Capital markets recovery might prompt some buying interest in crude oil.
•Fresh fund into March contract.
•USD weakness.
On the downside:
•Fundamentals are not supporting a higher crude oil prices, unless main OPEC members signaling there will be no increase in crude oil production when the organization meets on February.
•US slip into recession speculation.
To monitor:
•OPEC member’s comments.
•Geopolitical risk, particularly Middle East and Nigeria.
•President Bush stimulus plan and details.
•Future economic releases forecast/actual.
•Near term weather forecast.
Trade suggestion:
“Long” Crude oil around low $87 and mid 87USD
- (Suggest) Exits all positions before market closes.-
Time lapse prediction: (according to current situation)
14PM – 16PM GMT:
•USD remains or retreats.
•US capital markets recover on market opening.
•JPY remains or slightly weakens, following futures indexes recovery.
•EUR slightly strengthens as cross currency retreats
•Crude oil remains or weakens on early trading session.
16PM – 18PM GMT:
•USD remains or slightly strengthens in mid trading session.
•US capital markets remains or slightly weakens.
•JPY remains or slightly strengthens.
•EUR weakens on selling pressure.
•Crude remains or slightly rises on mid trading session.
18PM – 22PM GMT:
•USD strengthens further on cross currency weakness and on investor buying interest.
•US capital markets recover further investors buying interest.
•JPY weakens tracking US capital markets recovery.
•EUR remains or slightly weakens by late session.
•Crude oil slightly strengthens by late trading session.
Loh Chang Yuen,
Junior Strategist
All rights reserved: Admiral Markets Ltd
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