FOREX TRADING

UK’s Mortgage Approvals Rises To The Highest In 18 Months, While CPI Beat Estimates In The Euro Zone

Today U.K. released important data reflecting the economic situation in the economy after the improvement signaled recently. The British economy managed to moderate the pace of contraction in the third quarter to 0.3% from 0.6% in the second quarter thanks to the stimulus measures adopted by the BoE to stall the deterioration.

Mortgage approvals for October, after touching its highest in 18 months in September, it continued its upside rise in October to from 56.2 thousand. It seems that the housing market which was responsible for the crisis is emerging from a rout.

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USD Sinks to 15 Month Low, Jobless Claims Drop Sharply

• USD: Lower, FOMC signals rates will remain low for an extended period, jobless claims drop sharply
• JPY: Higher, Japan’s export sales improve, Sakakibara says JPY may fall to 85.00
• EUR: Higher, ECB may announce details of exit strategy at the December policy meeting
• GBP: Higher, Q3 GDP revised up slightly
• CAD and AUD: AUD & CAD higher, RBA rate hike speculation, Russia to add CAD to its reserves

Overview

The USD traded sharply lower Wednesday dropping to a 15 month low pressured by a number of factors. The main catalyst for today’s USD decline was confirmation in Tuesday’s release of the FOMC minutes for the November policy meeting that the Fed plans to maintain a low level of interest rates for an extended period. The FOMC minutes also stated that the Fed sees the USD depreciation as “orderly.” This statement is seen by some as a green light to sell the USD as the Fed indicates that it has no plans to support the USD.

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Fed releases FOMC meeting Minutes and New Projections for GDP, Unemployment, and Inflation

The Federal Reserve Minutes of FOMC meeting was released showing projections of the Federal Reserve governors along with Banks presidents about the future outlook for this year and the upcoming year, During the last FOMC Rate decision meeting the Fed kept the borrowing costs at record lows among 0.0% – 0.25% to stimulate economic growth.

The Federal Reserve focused on the future outlook for the world’s leading economy, regarding the challenges that currently pose a threat to economical recovery such as Unemployment, inflation and growth outlook along with other major concerns about the performance of company’s especially financial institutions and the effect of tight credit conditions on markets.

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European Market Update

German IFO survey hits 15 month highs; European bourses shakes off initial concerns over financial sector

ECONOMIC DATA

(MA) Malaysia Central Bank Interest rate maintains its overnight Rate at 2.00%; as expected

(RU) Russian Central Bank cuts its Refi rate by 50bps to 9.0%; In line with views

(FI) Finland Oct Unemployment Rate: 8.2% v 8.1%e

(GE) Germany GDP SA Q/Q: 0.7% v 0.7%e; Y/Y: -4.8% v -4.8%e; GDP NSA Y/Y: -4.7% v -4.7%e
(GE) German Q3 Final Private consumption: -0.9% v -0.4%e; Government Spending: 0.1% v 0.3%e; Imports: 5.0%e v 3.55e; Exports: 3.4% v 4.1%e

(SZ) Swiss Oct UBS Consumption Indicator: 0.867 v 0.671 prior

(FR) France Nov Business Confidence Indicator: 89 v 91e; Production Outlook: -9 v -9e; Own-Company Production: -3 v 1e
(FR) French Oct Consumer Spending M/M: 1.1% v 0.4%e; Y/Y: 3.5% v 2.3%e

(SP) Spain Oct Producer Prices M/M: 0.0% v 0.8%e; Y/Y: -4.2% v -3.1%e

(SZ) Swiss Q3 Employment Level Y/Y: 0.2% v -0.8%e; 3.96M 3.94Me

(NV) Netherlands Nov Producer Confidence: -5.6 v -6.5%e

(SW) Sweden Oct PPI M/M: -0.4% v -0.1%e; Y/Y: -1.8% v -1.6%e

(GE) Germany Nov IFO Business Climate: 93.9 v 92.5e (15 month high); Current Assessment: 89.1 v 88.0e; Expectations Survey: 98.9 v 97.3e

(NO) Norway Q3 GDP Q/Q 0.9% v 0.8%e; Mainland GDP Q/Q: 0.5% v 0.8%e

(UK) Q3 Total Business Investment Q/Q: -3.0% v -5.0%e; Y/Y: -21.7% v -22.9%e
(UK) BBA Loans for House Purchase: 43.2K v 44Ke

(SA) South Africa Q3 GDP Annualized: 0.9% v 0.5%e; Y/Y: -2.1% v -2.6%e

(EU) Euro-Zone Sept Industrial New Orders M/M; 1.5% v 1.0%e; Y/Y: -16.5% v -17.3%e

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities: Following a strong Monday session in which a three day downward trend was snapped, European markets gapped down in line with their Asian peers. Asian trading, specifically out of mainland China, was broadly negative as rebuttals from financials regarding capital raise speculation failed to restore confidence. Commentary from the Chinese Academy of Social Sciences supporting stronger capital controls fueled concern. Follow-through from this concern has hit the European financial sector with the large cap banks leading the downward trend.

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USD Lower, Existing Home Sales Rise 10.1%

• USD: Lower, Fed’s Bullard says Fed will maintain stimulus, existing home sales surge 10.1%
• JPY: Higher, Tokyo markets closed for holiday, gains limited by surging equity markets
• EUR: Higher, EU manufacturing and services PMI rise, ECB begins unwinding stimulus
• CHF: Higher, supported by improving risk sentiment, surge in equity markets and record price of gold
• GBP: Higher, supported by improving risk sentiment
• CAD and AUD: AUD & CAD higher, gold at record high, Australia’s auto sales & Canada’s retail sales rise

Overview

The USD starts the week sharply lower as equity markets rally and gold trades at a new record high. The initial catalyst for the surge in the equity markets and gold were linked to dovish comments from the Fed’s Bullard. Bullard called for the Fed to extend its asset purchase plan beyond Q1 2010. Bullard’s comments were seen as dovish and an endorsement of the Feds maintaining stimulus. In addition, the IMF says the global economy has passed the worst of the crisis.

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European Market Update

USD finds it hard to be loved; Gold hits fresh all-time highs near $1,1170/oz; Stocks aided by rising risk appetite

ECONOMIC DATA

(HU) Hungary Sept Retail Trade Y/Y: -7.3% v -6.8%e

(TT) Taiwan Oct Industrial Production Y/Y: 6.6% v 5.6%e; Export Orders Y/Y: 4.4% v 4.0%e
(TT) Taiwan Oct Unemployment rate: 6.0% v 6.1%e

(FR) France Nov PMI Manufacturing: 54.2 v 56.0e; PMI Services: 60.4 v 57.8e

(SZ) Swiss Oct Money supply M3 Y/Y: 7.7% v 7.7% prior

(GE) Germany Nov Advanced PMI Manufacturing: 52.0 v 51.6e; PMI Services: 51.5 v 51.2e

(IC) Iceland Oct Wage Index M/M: 0.3% v 0.3% prior; Y/Y: 1.9% v 1.9% prior

(EU) EU Nov Advanced PMI Manufacturing: 51.0 v 51.2e; PMI Services: 53.2v 52.9e; PMI Composite: 53.7 v 53.4e

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities: European markets have entered the abbreviated US week on a light tone. Rebounding from last week’s equity declines, markets have been supported across the board by the ‘global recovery’ story and new multi-year and all time highs in commodity prices. Corporate news, much like trading volumes have been thin with a relatively quiet weekend and pre-market session. Lloyds [LLOY.UK] announced the completion of the first stage in its multi-stage capital raise plan and Heritage Oil [HOIL.UK] confirmed sale of certain Ugandan license stakes to Italian firm ENI [ENI.IT]. Following commodity rises, basic resources and heavy industrial names have been the outstanding players throughout the session.

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USD Carry Trade Under Threat

U.S. Dollar Trading (USD) finished the weak on a strong footing with fresh multi-week highs against the Euro, GBP and AUD. Talk in the markets is of traders closing out short USD positions ahead of the end of the year and that weakness in global stock markets is souring the investors mood. In US Stocks, DJIA -14 points closing at 10318, S&P -3 points closing at 1091 and NASDAQ -10 points closing at 2146. Looking ahead, October Existing Home sales are forecast at 5.7Mln vs. 5.57Mln previously.

The Euro (EUR) tested the noted 1.4800 support level before recovering late in the US session with stock markets also rising off lows. October German PPI was at 0.0% vs. 0.1% forecast. EUR/JPY came under increasing pressure as the technical picture continues to weaken testing 132 supports. Overall the EUR/USD traded with a low of 1.4800 and a high of 1.4935 before closing at 1.4859. Looking ahead, November PMI Manufacturing is forecast at 51.2 vs. 50.7 whilst PMI services is forecast at 52.8 vs. 52.6 previously.

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BoJ Holds Rates Steady

Market Brief

Risk appetite stayed weak in the Asian session, after Wall Street closed lower but, overall, most of the trading in currencies and commodities was well in their ranges. The EURUSD traded between 1.4880 and 1.4940, while spot Gold traded between $1140 and $1147. With no first tier economic releases scheduled today, we don’t expect any one way trade of break out of the monthly ranges. But ranges can also be very profitable, especially the EURCHF. The USDJPY remains heavy below 90.61 high, with the break of 88.74 low opening the 88.01 key support.

As was universally expected, the BoJ held its uncollateralized overnight cash rate at 0.1%. The decision was unanimous and the BoJ statement stated that the domestic economy was improving but would continue with its ‘extremely accommodative’ monetary policy. Finance Minister Fujii warned about the dangers of rising bond yields, which could counteract the ultra loose monetary policy and small business improvement initiatives.

Today, China’s Central Bank Governor, Zhou Xiao Chuan, said ‘It’s like watching a tournament,…We just watch the game. Regardless who wins or loses, the issue of whether the winner or loser benefits the spectator doesn’t arise.’ In short, don’t expect pressure from the West to have any influence on China’s exchange rate mechanism.

There is little economic data of note today. More significantly, speakers in Frankfurt today include ECB President Trichet and Bundesbank President Weber. Outside the euro area, SNB President Roth will speak in Fribourg.

ACM FOREX

Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

USD Extends Gains as Risk Appetite Falls

• USD: Higher, risk appetite drops as stocks and commodities decline, fear of double dip recession
• JPY: Higher, supported by safe haven demand, gains in cross trade
• EUR: Lower, German Wiseman said Germany may be at risk to double dip recession in late 2010
• GBP: Lower, retail sales improve and public-sector borrowing rose more than expected
• CAD and AUD: AUD & CAD lower, tracking weaker equity and commodity prices, RBA policy uncertainty

Overview

A wave of pessimism hit the global equity and commodity markets Thursday sending the USD sharply higher as investors trim risk exposure. President Obama’s warning that too much US debt could increase the risk of a double dip recession, a similar warning from the German Wiseman that Germany could be at risk for a double dip recession in late 2010 and a statement from Treasury Secretary Geithner that the credit crunch is not over appeared to have dented enthusiasm about the global recovery.

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Yields Grind Lower as Stock Markets Weaken

Interest rate futures are higher across the globe as investors continue to tread further and further down the seemingly endless red carpet rolled out by global central banks. Recent accentuation by various political and monetary chiefs confirming the period of low rates is practically a permanent fixture in the global house of cards is again a key factor today. With jobless claims in the U.S. coming in at an in-line 505,000 reading bond and short term yields continue to heed the words of central banks as interest rate yield curves flatten out.

An OECD report overnight predicts firmer growth than at the time of its previous June survey but still expects no change in Fed or ECB policy until one year from now. The OECD forecasts growth across its leading 30-member nations will be 1.9% next year and 2.5% in 2011. Underscoring the impact of the healing banking crisis is the fact that they don’t predict the pace of growth last seen during the first quarter of 2008 until the third quarter of 2011.

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USD Lower, Housing Starts Fall 10.6% and Stocks Slide

• USD: Mixed, housing starts and building permits drop sharply, CPI rises
• JPY: Lower, JAL may be on the verge of bankruptcy, monitoring the debate over the Yuan
• EUR: Higher, current account slipped to deficit, construction output falls, gains in cross to GBP
• GBP: Lower, MPC split on quantitative ease, discussed possible cut in the remuneration rate
• CAD and AUD: AUD lower & CAD higher, Australia’s leading indicators rise, Canada’s CPI turns higher

Overview

After a two-day rally the USD was back on the defensive Wednesday pressured by the return of risk appetite as equity markets rally in Europe and gold trades at a new record high. A statement from Fed Chairman Bernanke that US interest rates would remain low for extended period and maybe longer if unemployment continues to rise appears to be the latest catalyst for the USD selloff. The fact that the Fed is not prepared to withdraw stimulus at this time fuels demand for commodities and contributes to improving risk sentiment.

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Dollar Index Finds Buyers

Overall, the dollar index started slowly to add points during the Asian session and continued doing so throughout the first part of the European session. Right now, every major currency is trading below Tuesday’s opening price against the dollar, even thought the U.K. sterling and Japanese yen currencies showed some resilience. The dollar’s uptrend seen overnight reflects the selling from the equity markets, and echoes Mr. Bernanke’s latest comments, which called for a stronger dollar.

Dollar Index Technical View: TheLFB Member Charts

4 Hour Chart: Mixed. Main price points: 74.70, and 75.77. Looking for: Wave V)

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European Market Update

Two-way risk returns to the market

ECONOMIC DATA

(FI) Finland Oct PPI M/M 0.1% v 0.1%e; Y/Y; -8.4% v -8.0%e

(HU) Hungary Sept Avg Gross Wages Y/Y: 0.7% v 0.1%e

(SZ) Swiss Sept Retail Sales-Real Y/Y: -1.6% v -1.0% prior

(SW) Sweden Q3 Total Number of Employees Y/Y: -2.8% V -1.9% prior

(SP) Spain Sept Industrial Orders Y/Y: -18.8% v -18.6% prior; Service Sector Sales Y/Y: -10.6% v -13.4% prior; Service sector employment Y/Y: -6.0% v -6.3% prior

(HK) Hong Kong Oct Unemployment Rate: 5.2% v 5.3% prior

(RU) Russian Oct Industrial Production M/M: 0.8% v 5.1% prior, Y/Y: -11.2% v -8.1%e

(UK) Oct CPI M/M: 0.2% v 0.1%e; Y/Y: 1.5% v 1.4%e; Core CPI Y/Y: 1.8% v 1.8%e

(UK) Oct RPI M/M: 0.3% v 0.1%e; Y/Y: -0.8% v -1.0%; Retail Price Index Y/Y: 1.9% v 1.8%e

(EU) Euro-Zone Sept Trade Balance 3.7B v -2.3B prior; Trade Balance sa: 6.8B v 2.2B prior

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Bernanke… Got Buck’s Back

When the falling USD is in the headlines daily, gold at a record high and US Treasury having little luck in stabilizing the dollar (many still think this is something the Obama admin opposes in favor of a still weaker dollar), is it any wonder that Fed Chairman Bernanke has addressed the dollar and monetary policy and implied a risk to the economic forecast from continued depreciation in the dollar? In other words the dollar decline to date has unwound the safe haven rally of the second half of 2008 and hence is normal.

However, additional dollar depreciation (against floating developed economy currencies I add) is a threat to inflation and any significant change in the outlook for inflation (employment) could lead to a change in policy. Yes Bernanke said the USD is one factor among a number that the Fed sees impacting inflation but it is clear that currently it is the leading risk to inflation and inflation expectations (behind rising commodity prices too in part) albeit in a world with excess resource slack. So the motivation is not there yet for the Fed to move on inflation via a weak dollar channel. Nevertheless, the Fed is sensitive to the currency’s decline and it could in due course craft policy to address this source of inflation.

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Retail Sales Rise Better than Forecasts as Auto Sales Rise, While Manufacturing Activity Ease in November!

Retail sales rose in October amid a huge increase in auto sales, though the “cash for clunkers” program has ended, as the program helped in boosting auto sales indeed, yet still with unemployment levels standing at a 26-year high we should still expect consumer spending to suffer, meanwhile activity in the manufacturing sector seems to have eased slightly, though manufacturing activity is still expanding.

Retail sales increased in October by 1.4% more than median estimates of 0.9% and following a prior revised drop of 2.3% back in September according to the U.S. Commerce Department, while retail sales that exclude autos rise by 0.2% down from the prior revised rise of 0.4% and below median estimates, and retail sales that excludes both autos and gas sales rose by 0.3% inline with the prior revised and median estimates as well.

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