AUS Construction Sector and Building Approvals Show Weak Housing Sector

We begin a busy day of fundamentals in Australia where the construction sector fell deeper into contraction. The December PMI decreased to 30.9, where any level below 50 represents contraction. In another poor release from the housing sector, building approvals fell 12.8% in November, a much larger decrease than forecast.

AUS Trade Surplus Shrinks as Exports Decline

A third release from Australia shows the trade surplus shrinking to A$1.45B as exports fell by 4% while imports rose 2%. The combination of weaker trade, poor housing and a slumping construction sector all point to further interest rate cuts by the RBA.

AUD/JPY - Aussie Falters vs Yen on Risk Aversion, Weak Data

The Australian Dollar and other commodity pairs weakened overnight as oil prices tumbled yesterday by $6 and risk aversion increased. The main stock index in Tokyo was down almost 4% overnight while Syndey's was down 2.3%. That led to an unwinding of carry trade during the Asian session, extending the slide in the Aussie-Yen pair to 350 pips for the last two sessions. The pair found support just below the 64 level, but only managed a slightly counter-rally during the rest of the session.

SWZ Consumer Prices Fall More Than Expected

Swiss consumer prices eased more than expected in December, falling 0.5% following a drop of 0.7% in November. That put the annual inflation rate at 0.7%, more than half the level seen in November, and down considerably from a peak of 3.1% in July. Prices are falling as a result of lower costs for oil products, though prices for transportation, housing and energy, and also for clothes and shoes dropped by more than 1% on the month.

SWZ Unemployment Notches Up As Economy Weakens

The unemployment rate in Switzerland increased in December to 2.8% on a seasonally adjusted basis, and to 3.0% in unadjusted terms. That puts unemployment at its highest rate in 2 years, and is the first time since 2003 that unemployment is higher at year-end than at the beginning of the year.

GER Trade Surplus Shrinks on Record Fall in Exports

In Germany, trade data showed that exports plunged 10.6%, a record amount, in November which slashed the trade surplus by about one-third. The surplus on a seasonally adjusted basis shrank to 10.7 billion euros. The large drop in exports reflects the worsening situation in the global economy which is seeing a sharp and synchronized downturn of the major economies.

GER Factory Orders Fall 6% in November

Factory orders in Germany reflected that downturn. Orders fell 6%, more than triple what forecasts had called for. It was the third month of declines, following drops of 6.3% and 8.3% in the previous two months. That slump is the worst since records began after Germany was reunified in 1991 pointing to a weak 2009.

EUR Economic Sentiment Index Falls to Record Low

Economic conditions continued to deteriorate in the Euro-zone, as sentiment among consumers and business continued to fall. The overall economic sentiment index declined to a record low of 67.1, as all three major groups, consumers, and the services and industry sectors saw significant falls. The business climate index was also significantly lower. The data puts extra pressure on the ECB to lower rates in the face of a worsening economic situation.

EUR Unemployment Rate Increases to 7.8%

Another report showed the Euro-zone unemployment rate rise to a seasonally adjusted 7.8%. That is the highest in nearly 2 years. Increased joblessness will limit spending by households and further the cycle of worsening economic conditions.

EUR/JPY - Weak Equities Bolster Yen vs Euro

The Euro-Yen pair fell 200 pips in overnight trading to test the level around 124. Stocks in Asia were sharply down, fueling part of the risk aversion, as most of the fall in the pair came before the European releases. Today's action broke below support at 125.30, though the pair retested that level in NY trading.

The Dollar-Yen pair followed up yesterday's drop with another steep fall today, as declines in global equities pressured the greenback. The pair fell from its intra-day high at 92.90 to a low of 90.80, a change of 200 pips. That cut down the rise we saw last week by about 76.4% a key Fibonacci level.

Upcoming Releases

Overnight, the steady stream of fundamental news continues. The UK will post data on manufacturing and industrial production, and producer prices. Germany will also post its production figures, and along with the Euro-zone will release information on retail sales.

Tomorrow, we get the Non-farm payroll data, one of the most closely watched releases. Canada releases its employment data as well along with information on housing starts and building permits.