 |
||||||||||||
    |
||||||||||||
 |
||||||||||||
|
||||||||||||
Video for December 19th, 2008 (5 min): Bank of Japan Cuts Rates to 0.1% While US Gov't Bails out Auto Sector JPN Bank of Japan Cuts Rates, Gov't Approves Emergency Stimulus Package The Bank of Japan cut its key interest rate to 0.1% from 0.3% Friday. It also laid out a plan to boost liquidity in the financial and corporate debt markets by buying corporate debt and expanding its purchases of government debt. It does so after laying out the dangers affecting the Japanese economy which includes a warning about a deepening recession. The cut is aimed to stimulate the economy and to help ease the appreciation of the yen, which has recently jumped to a 13-year high against the Dollar. Such a strong exchange rate makes Japanese goods more expensive abroad cutting into export growth. The Japanese government also approved an emergency stimulus package worth 43 trillion yen or $489 billion to improve a worsening employment situation and ease financing worries in the corporate sector. GBP/JPY - Yen Gains as Banks and Gov't Plans Not Enough to Curb Risk Aversion
The Yen gained overnight against its main rivals, with the Pound-Yen pair continuing its decline this week after hitting and bouncing down off resistance at 139 on Wednesday. The pair is 600 pips lower than that intra-week high and breached an important support level at 134 in today session. It then retested that level as resistance before heading down to 132.60. EUR/JPY - Yen Gains on Weakening Euro
The Euro-Yen slid almost 400 pips as it continues its correction from the recent rapid upswing we saw earlier in the week. The pair hit a high of 131 yesterday in European trading, before the ECB announced a cut to its discount rate which led a spurt of euro selling. GER Producer Prices Fall 1.5% in November Turning to Europe, German producer prices fell by more than anticipated in November, declining 1.5% on the month. That drop was the most since records began in 1949. The annual rate cooled to 5.3% from 7.8% in October. Such a big reduction in producer prices eases pressure on profit margins and gives the ECB leeway to cut rates by another 50 basis points in January's meeting. EUR/USD - Euro Falls Below 1.40 in Strong Correction to End the Week
The Euro-Dollar pair, similar to the Euro-Yen, continued its decline after hitting a peak near 1.4720 in Thursday's session. The huge gains for the Euro following the Fed's announcement on Tuesday were judged to be unsustainable, and the pair has broken below 1.40 again in a strong 400 pip move that reached 1.3840 to end the week. USD/JPY- Dollar Pares Overnight Losses to Yen
The Dollar-yen pair fell overnight but recovered its losses in NY trading. There were two big pieces of news as the Bush administration said it would extend an initial $13.4 billion in loans to GM and Chrysler with an additional $4 billion likely in February in order to bailout the ailing auto industry. Coinciding with this announcement, Treasury Secretary Paulson urged Congress to release the second half of the $700 billion set aside for the financial sector bailout after the government exhausted the first $350 billion in the first 3 months of hte TARP program. The Dollar-Yen pair was trading about 250 pips higher than its 13-year low set on Wednesday. The Dollar gained against the Swiss Franc, in a one sided 330 pip move which pared some of the losses seen earlier in the week. CAN Consumer Prices Fall Less Than Expected In Canada, consumer prices fell 0.2% in November, and slowed to 2% in annual terms. Last month prices plunged 1%, so economists expected bigger falls that today's provided. The slowdown is attributed mainly to falling gasoline prices, and offset increases in food and shelter items. USD/CAD - Loonie Pressured Further as Oil Falls Below $35 a Barrel
The US Dollar Canadian Dollar rose for a second straight day, breaking above a downward sloping line of resistance at 1.21. The pair surged 330 points from its global open to test 1.24, as the Loonie remains pressured by falling oil prices which were below $35 a barrel in today's trading. The Aussie and Kiwi were also pressured for a second session. Next Week's Key Releases Next week should feature low liquidity which can mean quiet market conditions, or a relatively few players can push action into volatile trading. Some key releases next week include new and existing home sales from the US along with durable goods orders. That should help gauge the US housing and manufacturing sectors. Also on tap will be end of the month releases from Japan including retail sales, household spending, employment and consumer prices. |
||||||||||||
|
*Trading OTC Forex on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange or futures you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange and futures trading, and seek advice from an independent financial advisor if you have any doubts. |
