| Risk Aversion Declines As US Enters Great Recession |  |  |
| Daily Forex Fundamentals | Written by CMC Markets NY | Dec 06 08 04:31 GMT | | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| The dollar traded mixed on Friday after US nonfarm payrolls plunged the most since 1974 and mortgage delinquencies and foreclosures rose the most since recordkeeping began 29 years ago. The current US economic crisis is not the same as the Great Depression but could be called the Great Recession as it is already a year-old recession without any signs of abating. The USD/JPY rose, after successfully testing the 92-area support, as US equities rallied despite today's gloomy economic data. Equity gains on bad news bode well for stocks and risk appetite, possibly indicating a bottom in the USD/JPY. The euro fell as Germany's factory orders dropped more than expected. Sterling rose after testing the 1.45-handle support. The Australian dollar reversed earlier losses on increased risk appetite despite a larger than 4% drop in the RJ/CRB commodity index. The USD/CAD initially gained on Canada's November employment dropping the most since 1982 but later fell on increased risk appetite. The pair successfully tested the important 1.30-resistance for a third time since October. This could be a bearish sign, but the trend is still up. The Canadian dollar has been pressured by collapsing commodity prices, economic contraction and political crisis in Ottawa. There are support from the diagonal support line in the 1.25-area and strong support in the 1.15. If the 1.30 resistance is broken, the pair will move higher. However, we expect the pair to move sideways.
Financial and Economic News and CommentsUS & Canada US nonfarm payrolls plunged a larger-than-expected 533,000 in November, the 11th consecutive drop and largest since December 1974, according to data from the Labor Department. The US economy has lost more than 1.2 million jobs in the last three months following large revisions to September and October that showed steeper job losses than previously reported. The October number was revised to 320,000 job losses from the previous 240,000 estimate. The unemployment rate rose to 6.7% in November, the highest since October 1993, from 6.5% in October. Manufacturing payrolls dropped 85,000, with automobile and auto parts makers accounting for 13,000 job losses. Average hourly earnings increased $0.07, or 0.4%, to $18.30. The average workweek fell to 33.5 hours from 33.6 hours. A separate index of aggregate weekly hours declined one point to 104.7. Overall, the November employment figures show a shockingly terrible outlook for the US labor market and the overall economy, suggesting this recession is surely the most painful one.
US consumer credit fell for the second time in three months in October, dropping $3.5 billion, or 1.6% y/y, to $2.578 trillion, the Federal Reserve reported. In September, credit rose $6.7 billion, less than initially estimated. US mortgage delinquencies rose 6.99% in Q3 while foreclosures increased 2.97%, both all-time highs in a survey that goes back 29 years, the Mortgage Bankers Association reported. Canada's employment plunged 70,600 in November, larger than anticipated and the most since 1982, following a 9,500 job gain in October, according to data from Statistics Canada. The unemployment rate rose to a 2-year high of 6.3% from October's 6.2%. November's dismal job losses signal Canada is on the brink of a recession, likely prompting the Bank of Canada to cut interest rates 50 basis points to 1.75% on December 9.
Europe Germany's factory orders dropped a more-than-expected 6.1% m/m in October, reflecting weakness in domestic and foreign demand, following September's downwardly revised 8.3% m/m decline, data from the Federal Statistical Office showed. Domestic orders fell 6.1% m/m in October, deepening September's 4.7% m/m decline, while foreign demand fell 6.2% m/m, following September's 11.6% m/m drop. On an annual basis, factory orders plunged a more-than-expected 17.3% y/y in October, following September's downwardly revised 3.0% y/y decline. Domestic demand dropped 11.2% y/y, down from September's 2.5% y/y increase. Foreign demand suffered even more, plunging almost 23% y/y. The figures signal further contraction in Germany's Q4 GDP. Asia-Pacific Australia's construction industry saw a continued downturn in November, with the AiG performance of construction index declining to 32.0 from October's 36.4, the Australian Industry Group reported. Japan's official reserve assets grew to US$1002.9 billion in November from $977.7 billion in October, the Ministry of Finance said. Foreign currency reserves expanded to $976.91 billion from October's $955.07 billion. Australia's official reserve assets rose to A$46.7 billion (US$30.69B) in November from A$44.89 billion (US$29.99B) in October, the Reserve Bank of Australia reported. Foreign exchange reserves rose to A$42.4 billion from October's A$41.5 billion. FX Strategy Update
Hans Nilsson | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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1 comments:
It seems we are in very volatile times.
Yes, any commodity index you look at will be showing significant falls over recent months, but the long term problem is still a shortage of real assets, whether it is crude oil, wheat, corn or copper.
There are signs that perhaps the US dollar may rally but in the medium term the trillions flooded into the markets will feed through to inflationary pressures in the economy.
Perhaps then, as we enter the recovery phase, the AUD and CAD will strengthen against the US dollar, as they are both rich in natural resources.
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