15 January 2010 at 7:10 GMT
Market Comments:
The ECB’s rate decision was as expected – no change in anything – though in his prepared press statement, president Trichet encouraged governments to implement “ambitious” fiscal exit strategies. Referring to the situation with Greece (the main focus today), Mr. Trichet said that any talk of Greece leaving the union is “absurd”, and refused to comment on Greek debt ratings, no surprise when you consider Greek debts spreads widened further beforehand. Bringing nothing new, Mr Trichet appeared to infer the ECB hopes that Greece can take care of business in the coming months without any special treatment from the ECB. He said that no government should get special treatment and that Greece faces some “very tough” decisions. Generally, the tone of the comments was seen as slightly dovish.
US retail sales ex-autos and gas fell 0.3% in December, failing to match expectations of gains of 0.2%, but the previous month’s reading was revised higher from +0.6% to +1.0%, partly offsetting the negative December print. Initial jobless claims were also were slightly higher than expected at 444k vs. 437k though more encouragingly the 4-week moving average slid to its lowest level since August 2008 and continuing claims fell to 4,596k vs. consensus 4,750k and 4,807k last week. In other data, business inventories rose by 0.4% m/m as a decline in retail inventories offset growth in manufacturing and wholesale stocks.
So, with both bulls and bears able to garner something from the data, FX markets played ranges during the overnight session. The 30-year US bond auction went off successfully and completed this period of supply with US yields ending the day a tad lower. This hot on the heels of NY Fed’s Dudley’s comments that the central bank should keep the main policy rate at an ultra-low level near zero for “at least six months” and “could be a year from now , two years from now, depending on the economic outlook”. As a result, USDJPY eased back from an early test higher and the USD was in a mild retreat across the board, though losses against the CAD were more pronounced as the pair broke down through recent range parameters.
After the bell yesterday, Intel reported better than expected profits for Q4 and issued a strong outlook for Q1 so Asia opened with markets willing to embrace risk again. However, early morning there was talk of bond redemptions in Japan – some EUR 45b and USD 31b – and this put downward pressure on JPY crosses despite perceived corporate demand for USDJPY into the Tokyo fix. With pressure already applied, markets were hit with rumours that German Chancellor Angela Merkel would resign in response to falling popularity and a weakening of the CDU’s base. Two articles featured the topic, one in Time magazine and the other in Deutsche Welle, and EURUSD took out stops below 1.4450 to hit a 1.4410 low. The moves were also reflected to some extent in other pairs and the USD was on course for gains of 0.4% against the index for the day.
In an otherwise uneventful data calendar, a news briefing from China’s Commerce Ministry provided some interest. The Ministry commented that the contribution of China’s domestic consumption to GDP had risen to 51% in 2009, up from 48.6% in 2008, as the fiscal and monetary stimulus kicked in last year. A step in the right direction but we need a lot ,ore progress before we can make a dent in With regard to trade, a ministry spokesman expects a slow recovery in 2010 and, while a recovery to 2008 levels would be “ideal”, he sought to dampen expectations.
Looking at the data calendar going forward, Europe releases German wholesale prices, Swiss PPI followed by Euro-zone CPI and trade balance. The US session features US CPI, empire state manufacturing index, industrial production/capacity utilization and Michigan Confidence.
Have a great weekend.
Headlines – previous session
- US Dec. Import Price Index out at flat m/m, +8.6% y/y, both as expected vs. +1.7%/+3.7% prior resp.
- US Retail Sales out at -0.3% vs. +0.5% expected and revised +1.8% prior
- US Retail Sales ex-autos/gas out at -0.3% vs. +0.2% expected and revised +1.0% prior
- US Initial Jobless Claims out at 444k vs. 437k expected and revised 433k prior
- US Continuing Claims out at 4,596k vs. 4,750k expected and revised 4,807k prior
- US Nov. Business Inventories out at +0.4% vs. +0.3% expected and revised +0.4% prior
- NZ Dec. Card Spending out at +0.7% m/m, as expected vs. revised +0.9% prior
- NZ Dec. Non-resident Bond Holdings out at 63.2% vs. 65.4% prior
- China Dec. Actual FDI YTD out at -2.6% y/y vs. -8.2% expected and -9.9% prior
- SI Nov. Retail Sales out at -1.4% y/y vs. -2.2% expected and revised -4.6% prior
Themes to watch – upcoming session
(All times GMT)
- GE Wholesale Prices (0700)
- Swiss Producer/Import Prices (0815)
- Sweden Avg. House Prices (0830)
- Norway Trade Balance (0900)
- EU Euro-zone CPI (1000)
- EU Euro-zone Trade Balance (1000)
- CA New Vehicle Sales (1330)
- US CPI (1330)
- US Empire Manufacturing Index (1330)
- US Industrial Production (1415)
- US Capacity Utilization (1415)
- US Univ. of Michigan Confidence (1455)
- US Fed’s Lacker to speak (1730)