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EUR Manufacturing and Services Sectors Continue Contracting We begin in the Euro-zone where the preliminary versions of December's manufacturing and services PMI showed growth in the sectors contracting at the fastest pace in at least a decade with the Euro-zone economy falling deeper into recession. The manufacturing PMI index fell to 34.5 from 35.6 in November, while the services PMI declined to 42 from 42.5. The weak results will add pressure on the ECB to continue their rate cutting campaign though officials are making it clear they may have only one more cut in store. Rates are currently at 2.5% after the central bank reduced them by 175 basis points since early October. UK Consumer Prices Ease, Though Not As Much As Expected In the UK, consumer inflation figures came in less than expected in November. The annual rate cooled to 4.1% from 4.5% the previous month. On the month prices were down 0.1%. Bank of England members, including Governor Mervyn King believe prices will continue falling into next year, and that the annual rate will fall to the 2% in the first or second quarter. EUR/GBP - Euro Hits New Record High vs Pound
The Euro-Pound rose to a new record high in NY trading just shy of 0.9050. The Euro is taking the mantle of the best performing currency, as they have one of the few central banks trying to be hawkish. The Bnak of England is expecting to continue their aggressive rate cutting campaign to help bolster the economy. US Consumer Prices Plunge at Record Pace for Second Straight Month US consumer prices posted a second-straight record decline in November, with prices falling 1.7% during the month. Energy prices were down 17%, leading the decline. The annual inflation rate cooled to 1.1% from 3.7% in October. That matches a four decade low, and is below the Fed's target of 1.5% to 2%. US Housing Starts and Building Permits at Record Low Housing starts tumbled 18.9% in November to post an annual rate of 625,000. That was the worst drop in 24 years and the actual rate is a record low. The decrease was much worse than expected by economists and Wall Street. With home sales plunging and credit and financing for new starts difficult to obtain home builders are scaling back new constructions. Building permits, which are a leading indicator of future starts, fell 15.6% to a record-low 616,000 which means that the woes in the housing construction market will continue. US Federal Reserve Cuts Rates to Range of 0-0.25% The Fed cut rates by 75-100 basis points to bring the rate down to a target range of 0 to 1/4 percent. The move is the last cut the Fed can take and will it will keep rates low "for some time." They will also try an array of new economic measures to stimulate spending, including increasing the quantity of money in the system by increasing its balance sheets. EUR/USD - Euro Jumps Above 1.41 on Fed Cut
The Euro-Dollar was climbing prior to the Fed announcement and surged past 1.41 in its aftermath. That amounted to a 400 pip move from the global open. That extends the weakness in the greenback that has been apparent the last two weeks. GBP/USD - Pound Breaks Resistance at 1.55
The Pound also saw a strong gain in today's trading breaking through key resistance at 1.55. From its low near 1.52 following the UK CPI data, the pair rallied 450 pip during the rest of the session to climb to 1.5650. USD/JPY - Yen Gains Despite Strong Surge in US Stocks
Despite strong gains in US equities, the Dollar-Yen pair extended its down move from overnight falling 130 pips in the aftermath of the release. That put the pair about 200 pips lower than its global open. The Dow Jones index was up 360 points at today's close which should help boost the Asian session and carry trade. AUD/USD - Aussie Roars Forward Following Greenback
Speaking of carry trade, the Aussie skyrocketed against the greenback following the Fed announcement. For the day the pair was up 280 pips. Earlier in the global session, RBA minutes showed that the central bank was going to wait and assess how its recent aggressive cutting campaign filters down into the economy, striking a less dovish tone than in its previous statements. USD/CAD - Loonie Jumps 350 Pips vs Dollar
In a final pair, the US Dollar-Canadian Dollar pair fell 350 pips today, continuing a downward channel started after the third test of 1.30 at the beginning of the month. Safe to say, the greenback was pressured across the board and the Dollar strength we have seen the last 4 months is over. Tonight's and Tomorrow's Releases Taking a look at some upcoming releases, overnight Germany and the Euro-zone posts their flash consumer prices and the UK releases employment data. Tomorrow morning the us will post its current account while Canada releases data on wholesale sales. |
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