New York Session Recap
The buck gave up overnight gains in NY trading as a poor batch of US economic data and the FOMC meeting minutes dealt the market a fresh dose of reality. The ISM services index was the lone positive surprise, coming at a still dismal 40.6 in December after a paltry 37.3 print the prior month. Factory orders for November, however, were worse at -4.6% and the key capital expenditure measure that feeds into GDP was revised lower, to a horrendous three-month annual run-rate of -28.0%. Pending home sales also disappointed by registering a sharp -4.0% decline in November, in an ominous sign for home sales in 1Q 2009.
The FOMC meeting minutes were no better. Members continue to harp on the significant downside risks to economic growth while noting appreciable reduction in inflation metrics. Some members even went as far as acknowledging that the contraction in activity will be prolonged. Given that the Fed now has run out of bullets on the rates front -- effectively cutting the target to 0% -- we would not be surprised to see other efforts to pump liquidity into the market such as direct purchases of Treasury securities in the near future.
EUR/USD rocketed 200 pips from the NY open and was sitting near 1.3530 as trading came to a close here. Trendline resistance near 1.3570/80 looks like the next barrier to upside and a break above there should see the move extend into the 1.3650 zone next. Cable caught a mammoth rally as GBP/USD shot up more than 350 pips towards the 1.4920/30 area. The pair made a high just below the 1.50 mark and this looks like the next hurdle for any move higher. We would expect especially volatile price action here as the Bank of England meeting looms later this week.
Upcoming Economic Data Releases (Asia Session) previous forecast
- 1/7 0:01 GMT UK Nationwide Consumer Confidence DEC 50 - -
- 1/7 0:30 GMT AU Retail Sales Trend (MoM) NOV 0.20% - -
- 1/7 0:30 GMT AU Retail Sales s.a. (MoM) NOV 0.70% - -
- 1/7 1:00 GMT AU HIA New Home Sales (MoM) NOV 4.50% - -
- 1/7 1:00 GMT NZ Westpac McDermott Miller Employment Confidence Index 7-Jan
- 1/7 2:00 GMT NZ Commodity Price Index for December 7-Jan
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