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Video for December 12th, 2008 (4 min): Risk Aversion Boosted Overnight on Failed Auto Bailout Vote, Yen Gives Up Gains in Later Trading
US Senate Republicans Block Auto Industry Bailout
Yesterday evening, the Senate voted on and rejected the auto-industry bailout after it had passed the House. The news set off a wave of risk aversion which boosted the Yen. The Treasury said it was ready to lend money to automakers following the failed vote. Also, the White House said it might use some of the money set aside as part of the financial bailout to fund the rescue package. AUD/JPY - Aussie Slides 400 Pips Following Failed Vote on US Auto Sector
Global stocks faltered overnight as a result of the failed auto-sector bailout vote. The Nikkei 225, the main benchmark in Japan, was down 5.6% and shares in Sydney were down 2.3%. The Aussie-Yen pair fell almost 400 pips to test support from last week near 57.64. The pair managed to recover a good deal of its losses but it did bounce down off new support-turned-resistance at 60.60. EUR Industrial Production Down 5.3% in Annual Terms Industrial production plunged in October with the monthly rate down 1.2%, while the annual rate was down 5.3%. That year-over-year change is the worst in 15 years as companies cut back on investment spending amid the recession. EUR/JPY - Euro Recovers From Sharp 480 Pip Fall to Yen
The Euro-Yen pair saw a sharp 480 pip drop on increased risk aversion following the failed Senate vote. The pair found support at 117.50, and actually managed to pare all of its losses by noontime in NY. The industrial production news stalled the rally for a little while, but Euro strength overcame the weak fundamental release. US Retail Sales Fall for 5th Straight Month US retail sales fell for a 5th straight month, down 1.8% in November. Despite an increase at electronic and department stores, weaker sales at car dealers and a 15% drop in sales at gas stations kept the headline number negative. Gas station sales were down as the price for gas fell by a historical amount. US Producer Prices Down 2.2% in November Producer prices fell 2.2% in November, following a record 2.8% decline in October. With gas prices down a record amount during the month and a deep recession pressuring prices on the downside, the drop is the 4th straight month producer prices have decreased. Core prices, which exclude energy and food, rose 0.1% after being up 0.4% in October. Inflation concerns are rapidly vanishing and the Fed is expected to cut rates to near-historic lows next week. burner. US Business Inventories Down More Than Expected in October US business inventories fell more than expected during October. Inventories were down 0.6% as sales decreased 3.5% on the month. Usually the more stockpiles are run down the more business would buy to replenish their inventory, thus boosting economic activity. However with sales plummeting, companies will most likely try and keep their inventory lean during this holiday shopping season. US UMich Consumer Sentiment Improves In a 4th release from the US, the preliminary release of December's UMich consumer sentiment showing a marked improvement compared to November, with the index climbing to 59.1. EUR/USD - Euro Consolidated in Choppy Trading
The recent rally in the Euro-Dollar pair stalled in today's session, with price moving in choppy sideways action. A new level of resistance may be forming at 1.3415 after the pair climbed 650 pips this week. USD/JPY - Dollar Falls to 13-Year Low vs Yen
In a look at a final Yen pair, we see the Dollar falling to 88.17 on the bout of risk aversion we documented earlier. That was a 13-year low for the Dollar against the Yen and reflects the Yen's strength during times of weak investor sentiment. The Dollar managed to pare most of its losses as the news that the White House was looking at other options to push through a rescue of Detroit helped to lift stocks into positive territory. Upcoming Releases Next Week Next week starts with the Tankan survey from Japan, housing prices from the UK, and industrial production data from the US. Tuesday brings consumer prices data from the UK and US along with the interest rate decision from the Federal Reserve. |
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