| Daily Forex Fundamentals | Written by CMS Forex | Nov 08 08 06:21 GMT | | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| The dollar fell modestly versus most key currencies on Friday. The US labor market was extremely weak in October, with a large payroll loss, extensive negative revisions to August and September, and a 14-year-high unemployment rate. The US stock market rose despite the weak economic data. The S&P 500 rally from the important 900 support is a good sign. In addition to the deteriorating labor market, GM said the company may not have enough cash to finish the year and Goldman Sachs sees the worst recession since the 1980s. The yen fell against its rivals on the rising stock market and increased risk appetite. Most major currencies are at important technical levels following months of depreciations. If the stock market can build a base at these levels, the dollar is likely to consolidate its strong gains. The EUR/USD rose modestly today. Current economic data of the US and Europe are dismal, the two regions are in recessions and their respective central banks are likely to cut rates 50 basis points next meetings. The pair has been testing the 1.25-area support. If it holds, we may see a short covering rally. The EUR/USD sharp downtrend has been broken, but the long-term trend is down. Therefore, we do not expect any major recovery for the pair.
Financial and Economic News and CommentsUS & Canada US nonfarm payroll employment dropped 240,000 in October while revisions to August and September subtracted 179,000 jobs, resulting in a net loss of 419,000, data from the Labor Department showed. The consensus expected a loss of 200,000. Private payrolls fell in almost all key sectors. The weakest job categories were manufacturing (down 90,000), employment services - such as temps - (down 51,000), and construction (down 49,000). The strongest sector was health care (up 26,000). The unemployment rate jumped more than expected to 6.5%, a 14-year high, from September's 6.1%. Average hourly earnings increased 0.2% m/m in October and rose 3.5% y/y, both as expected. Average weekly hours remained at 33.6. Overall, the October dismal job figures show an extremely weak US labor-market condition, undoubtedly concluding that the US economy is in a recession, a prolonged and painful one.
US pending home sales fell 4.6% m/m in September, more than expected, following August's upwardly revised 7.5% m/m gain, according to the National Association of Realtors. The data indicates the credit crisis will inflict more damage on the US housing market.
US wholesale inventories unexpectedly declined 0.1% m/m in September, the first drop since December 2006, following August's downwardly revised 0.6% m/m increase, the Commerce Department said. Wholesale sales fell 1.5% m/m in September after dropping 1.6% m/m in August. US consumer credit rose $6.9 billion, or 3.2% at an annual rate, to $2.59 trillion, the Federal Reserve reported. In August, credit dropped $6.3 billion, the most since records began in 1943. There is no doubt now the US recession is under way following a surge in the unemployment rate to a 14-year high, Robert Hall, the Stanford University economist who heads the National Bureau of Economic Research's business cycle dating committee, said in an interview. “The evidence is more than compelling,” Hall said. “It's conclusive, in my personal opinion.” Canada's employment unexpectedly increased 9,500 in October, after a record gain of 106,900 in September. The unemployment rate rose to 6.2%, as expected, from 6.1%. Europe Germany's trade balance surplus widened more than expected to €15.0 billion in September, following August's €10.6 billion surplus, according to the Federal Statistical Office (Destatis). Exports increased 0.7% m/m to €84.8 billion in seasonally adjusted terms in September, while imports rose 0.9% m/m to €71.1 billion, both exceeding forecasts. The German current account registered a €15.0 billion surplus in September, more than expected, following August's upwardly revised €7.5 billion surplus, according to Destatis data. Germany's industrial production fell a seasonally adjusted 3.6% m/m in September, more than expected and the deepest decline since January 1995, following August's downwardly revised 3.2% m/m increase, Destatis data showed. Industrial production adjusted for working days fell 2.1% y/y. The figures suggest Germany may have slipped into a technical recession in Q3, supporting the argument for further ECB interest-rate cuts.
Switzerland's seasonally adjusted unemployment rate held steady at 2.6% in October, while the headline reading increased to 2.5% from September's 2.4%, reflecting a dimmed outlook for the Swiss economy, data from the State Secretariat for Economic Affairs showed. Economic conditions are expected to worsen as the Swiss National Bank said the economy may contract in 2009 after unexpectedly cutting the 3-month LIBOR target rate 50 basis points. Asia-Pacific Australia's AiG performance of construction index increased to 36.4 in October, below the 50 mark still indicating a decline in the Australian construction, following September's 31.8. The Bank of South Korea, taking part in global rate cuts, lowered its key interest rate to 4.00% from 4.25% to boost a slowing South Korean economy and restore confidence in financial markets. FX Strategy Update
Hans Nilsson | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Saturday, November 8, 2008
Greenback Falls on Weak Labor Market
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