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Video for December 22nd 2008 (5 min): Euro Gives Up Earlier Gains, Yen Down on Trade Data, Pound Pressured

JPN Trade Balance Shows Record Fall for Exports

Japan's trade balance faced a second month of deficit in November, and the third month out of four, as the seasonally adjusted balance fell to -¥367 billion. Exports were down 26.7% compared to a year earlier, which was the worst year-over-year change on record. The export sector is being pressured by collapsing demand for Japanese cars and electronics as consumers in America and even China cut back on imports. Exports to the US slid 34% on the year, those to Europe were down 31%, and sales to China were down 25%. The record fall in exports signals that the second-largest economy was falling deeper into a recession. Bank of Japan Governor Shirakawa, in a speech today, explained further how the bank would step up efforts to purchase corporate debt and government bonds in order to improve the availability of funds and alleviate the cost of corporate borrowing.

USD/JPY - Yen Retreats on Stock Gains

 

Despite the trade data, stocks were up in Japan, which caused the Yen to fall as it usually moves inversely to investor sentiment in the region. Equities in Asia gained on Friday's news that the US government would offer assistance to its ailing auto industry and hopefully stall a worsening recession. The Dollar-Yen pair climbed above the 90 level today, testing 90.50, and establishing a new line of support to watch going forward this week.

GER Consumer Confidence Stable at 2.1 GFK Reports

In Germany, consumer confidence remained at 2.1 despite the financial crisis and its impact on the economy. German consumer propensity to buy was up slightly as they react to lower rates of inflation to end 2008. Still the fact that the index remained stable at its low level is only a small comfort.

GER Import Prices Down 1.5% on the Year

German import prices continued plummeting in November as energy products continued their descent. On the year prices were 1.3% lower, the biggest drop in 5 years. Just in August, prices were up 9.3% on the year. The dramatic reduction in oil prices are of course the main reason for such a steep drop, as oil was down 30% on the year and 20% on the month. Excluding crude oil prices were up 3.2% on the year. Lower import costs should help ease the pressure on companies' profit margins.

EUR Industrial Orders Down 15.1% on the Year in October

In a third piece of data from Europe, Euro-zone industrial new orders dipped 4.7% in October following a downwardly revised 5.4% decline in September. Surprisingly, such a poor monthly result was above expectations. (This is not true, today's data was below expectations). Orders were down 15.1% compared to the same month a year ago. Transportation orders recorded the largest monthly drop of 9.4%, reflecting weakness at European car makers. Orders for machinery and equipment dropped by 6.5%, as companies cut back on capital investment spending. 

EUR/USD - Euro Relinquishes Earlier Gains Following Orders Data

 

The Euro-Dollar rose overnight to test 1.4125, but then fell back down to its global open below 1.40. The Euro gave up its gains following the weak Euro-zone orders data. Trading is expected to be light this week prior to Christmas, but that means that a fewer amount of players can push prices around in volatile action.

EUR/CHF - Weak Stocks In European Boost Franc

 

Stocks in Europe closed in the red, pressured by automakers seeing weaker orders. The increase in risk aversion in Europe carried over into the US session and boosted the fortune of the Swiss Franc. The Euro-Franc pair fell 200 pips, with short term support near the 1.5360 level cracked in European trading. The NY session saw the pair slide further until it found support right below 1.52.

GBP/USD - Pound Pressured For 4th Session

 

The Pound remained pressured, falling against the Dollar and Yen. Here, the Pound-Dollar pair slid to 1.4695 in European trading continuing a downtrend started last Wednesday that has amounted to a 1000 pip swing. The Pound remains pressured on interest rate expectations and a stream of poor news, including weak employment data last week.

Tonight's and Tomorrow's Releases

Tonight, look for GDP data from New Zealand and the leading index from Australia. Japan has a bank holiday so trading will be light around the Asian session. Overnight, the Euro-zone and UK release their current accounts and the UK will also post its final version of 3^rd quarter GDP.

Tomorrow, the US has a slew of releases including its final 3^rd quarter GDP, existing and new home sales, a government house price index, the Richmond fed index and the final version of the UMich consumer sentiment.