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Video for November 17th, 2008 (4 min): Japan Officially in in Recession Though Some Signs of Risk Appetite Emerge Overnight and In NY Trading JPN GDP Growth Contracts in 3rd Quarter, Economy Officially in Recession The Japanese economy, the second largest in the world, has officially slid into recession, with economic growth contracting for a second straight quarter in the face of weaker international trade and weak business investment. GDP shrank by an inflation-adjusted 0.1% on a quarterly basis and 0.4% in annual terms. Both figures came in below expectations. It's the first time Japan has been in recession since 2001. Expectations are for perhaps two more quarters in which growth is negative. JPN Demand for Services Retreats 0.6% in September Demand for services fell 0.6% in September, the second straight month of decline. Weaker spending by households and business on services will depress profits in that sector, forcing companies to cut payrolls, which will hit consumer spending in a cycle of weaker economic activity. UK Rightmove House Prices Fall 7.1% in Annual Terms In the UK meanwhile, November's housing prices were down 2.9% on the month, and a record 7.1% in annual terms. The government has attempted to try and stimulate lending by supporting the banking system and slashing interest rates, but prices may have to come down further in order for potential buyers to start buying property. The Bank of England has cut rates to 3%, which is a 63-year low, and is expected to continue cutting rates in order to head off this period of recession. GBP/JPY - Pound Rallies 500 Pips After Hitting Support To Open This Week's Trading
Initially to start the session, the currency markets saw a period of risk aversion as the GDP data from Japan mixed with lukewarm reaction to the statement by G-20 countries which laid out an agenda for setting up new regulations to manage risk at banks and other financial institutions. The Pound-Yen pair for instance opened Sunday by falling to 140.70, recent support. However, as the session progressed, the Pound recovered its earlier losses, rallying 500 pips to test recent resistance near the 146.50 level. GBP/USD - Pound Sees Some Strength to Start Week After Plummeting Last Week
The Pound also climbed against the Dollar, reaching the 1.5080 level in NY trading. The Pound was pressured heavily last week until Friday, where it traded sideways. Traders may have taken the recent drop in the Pound to mean that the currency had been oversold. It managed to rally against the Euro as well today, while the Dollar lost ground against its main rivals. US Industrial Production Surprises Forecasts
In the US,
industrial production surprised forecasts on the upside for the October period,
increasing 1.3% after a downwardly revised 3.7% decrease in September. The
increase in October was propelled by a 6.1% increase in mining output, as oil
production operations and other facilities resumed work after being shut down
because of Hurricane Ike.
US NY Manufacutring Hits Lowest Level in 7 Years The Empire State Manufacturing Survey indicates that conditions for New York manufacturers continued to deteriorate in November. The general business conditions index slipped 0.8 point, to -25.4 which is a record low in the survey's seven-year history. EUR/USD - Euro Climbs vs Rivals Despite European Stocks Being Down
The Euro-Dollar pair, plunged initially to open the week, but recovered to trade near 1.2740 by 1 PM EST, which was above its open. Stocks were down in Europe, but risk appetite for Euro's was evident in the Euro's climb against the Dollar, Swiss Franc and Yen today. USD/CAD - Loonie Gains as Us Stocks Recover Earlier Losses Boosting Risk Appetite in NY Session
The US Dollar-Canadian Dollar pair, which rose to an intra-day high of 1.2420 to start today's session fell back down around 300 pips to the 1.2110 area. The main thrust of the Loonie's gains came as US stocks recovered from their opening losses, helping to boost risk appetite in the currency markets which in this pair favors the Canadian Dollar. Tonight's and Tomorrow's Releases Tonight, Australia releases its Meeting minutes from the November 2nd decision to cut rates by 75 basis points on November 3rd. Overnight, Switzerland will reveal data on retial sales and the UK posts its consumer price index. Tomorrow, the US releases data on producer prices, net capital flows, and the NAHB housing market index. |
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