Overall: The dollar strengthened again in the overnight session against the higher-yielding currencies and fell against the yen as global equity markets weakened. The momentum was generally continued in N.Y. as equity markets moved between small gains and losses on the day. In U.S. Economic news, the Commerce Department said the trade deficit shrank by the most in 12 years during November to $40.44 billion as the global economy cooled and that in volume terms, the amount of oil imported during the month declined 19.3% to 261.60 million barrels.
The Euro (Eur/Usd) managed to break below the 1.33 level for the first time in a month during the overnight session. The pair lost nearly 100 pips as traders speculated the ECB would sound dovish at the press conference. Most market analysts assess that the ECB is behind the curve with regards to easing policy, saying that the bank would have to cut rates at a strong pace later in the year. As a result, this is eroding the confidence in the single currency. The weaker trend was continued in N.Y., with the pair finding support on 1.3140.
The Pound (Gbp/Usd) has fallen 550 pips in the last three days, erasing its gains from last week. The pair is trading below all the important daily moving averages, as it seems the U.K. economy will first get worse before it gets better. Some analysts say, the pound may make a new low in the following few days, as the BoE is seen cutting interest rates down to 0%. The weaker trend was continued in N.Y as stocks moved between small gains and losses, moving briefly below the support level set back on Jan. o6 at 1.4502.
Retail sales in the United Kingdom fell 3.3 percent on a like for like basis and dropped 1.4 percent on a total basis from December of 2007. This has been the worst December figures seen since the survey was started 14 years ago. In the United Kingdom, house prices again took a fall according to the Royal Institute of Chartered Surveyors. The report has shown that 73.0 percent of surveyors reported a decline rather than a rise in house price in December.
The U.K. deficit widened again in November to a record £8.3 billion, more than market expected. The previous number was revised lower, from a deficit of £7.8 billion to £7.6 billion. U.K. house prices fell by 8.6% from November 2007. The release was slightly lower than what analysts had predicted. The average price of a home stood at £199,732 in November 2008
The Aussie (Aud/Usd) also traded lower for the fifth consecutive day, falling nearly 90 pips overnight to just above the 50-day simple moving average. The pair has been sold lately following the decline in the commodity markets. Raw materials are Australia's main export industry, and have the power to influence the whole business cycle. The pair was mostly lower in N.Y., hitting its lowest level since Dec. 12.
The Cad (Usd/Cad) continued to advance in the Asian and European sessions, as oil headed towards the low of the year. The pair gained 50 pips testing the 50-day simple moving average and the 1.2250 resistance area. The pair was generally higher in N.Y., finding resistance at 1.2343.
The Swissy (Usd/Chf) advanced to TheLFB R1 (1.1225) overnight before retracing a small part of the move. This area has acted as resistance for the last few days, especially on Monday, when the pair topped here. Tonight, the pair moved in-line with the euro but the pair range-traded in N.Y. A break above 1.1278 likely signals a move to the upside.
The Yen (Usd/Yen) is heading for its fifth day of declines in which the pair has fallen nearly 450 pips. The yen lost 40 pips overnight to test the 89.00 area, where the pair bottomed one day earlier. The Japanese yen is strengthening lately despite the numerous BoJ intervention threats. The pair declined in N.Y. as stocks moved between small gains and losses, briefly falling below 89 for the second straight day.
The M2 money stock for Japan has increased by 1.8 percent year over year in December. This figure is slightly higher than the 1.7 percent which was forecasted and is up from the November figure of 1.8 percent. Japan's current account for the month of November came in at 650 million yen which was slightly lower than Octobers 1.1 billion. This dramatic decline this year is mainly due to sluggish exports as consumers cut spending amid the financial crisis.