- The dollar broke several important technical levels as it plunged on Wednesday. Investors are selling the dollar and buying risky assets as they see little risk of higher US rates or any attempt by the Federal Reserve to strengthen the dollar as long as the dollar decline is orderly as the Fed described. Recovery optimism rose as US consumer spending and new-home sales climbed more than expected and initial jobless claims dropped to the lowest level since September 2008. The S&P 500 rose 4.98 to 1,110.63. The USD/JPY fell to a 10-month low and broke the 88 support; however, remaining above the 87. The euro surged through the 1.50- area resistance and has little resistance until the 1.54 area. Sterling advanced. UK Q3 2009 GDP contraction was revised to 0.3% q/q from 0.4% q/q. The Australian dollar was supported by Reserve Bank of Australia Deputy Governor Ric Battellino's comments that with the economy in a new upswing, it is reasonable to assume that we will see this growth extended for a few more years. The Canadian dollar rose after Russia's central bank said it will add the Canadian dollar to its reserves. The Swiss franc advanced after Swiss National Bank President Jean-Pierre Roth said the central bank may soon start withdrawing stimulus as the global economy recovers.
- The dollar index plunged to a 15-month .low. The index broke the important 75-handle resistance, which has been tested about a month. In a strong downtrend, the index is likely to test the 73-area support and may even retest the support from the lows set in early 2008.
Financial and Economic News and Comments
US & Canada
- US personal income rose 0.2% m/m in October, as forecast, after upward gains of 0.2% m/m in September and 0.3% m/m in August, according to data from the Commerce Department. Personal spending advanced a slightly more-than-expected 0.7% m/m, following September's revised 0.6% m/m decline. Disposable personal income increased 0.4% m/m in October, up 2.4% y/y. The overall PCE deflator rose 0.3% m/m in October, up 0.2% y/y. The core PCE deflator increased 0.2% m/m in October and rose 1.4% y/y, showing inflation wasn't a threat as the economy recovers slowly.
- US durable goods orders unexpectedly declined 0.6% m/m to a seasonally adjusted $166.17 billion in October after an upwardly revised 2.0% m/m increase in September, data from the Commerce Department showed. Excluding transportation, durable goods orders unexpectedly fell 1.3% m/m, following September's upwardly revised 1.8% m/m gain. The largest decreases in orders were for industrial machinery and computers/electronics, while the largest increases in orders were for civilian aircraft/parts and primary metals. Shipments of non-defense capital goods excluding aircraft, used in calculating GDP, declined 0.2% m/m in October, but increased 0.3% including the revision to last month. Durable goods orders fell 12.3% y/y in October and fell 11.0% y/y excluding transportation.
- US initial jobless claims in the week ending November 21 declined 35,000 to 466,000, the lowest level since September 2008 and below the 500,000 mark for the first time since early January, from the previous week's downwardly revised 501,000, according to figures from the Labor Department. The 4-week moving average of new jobless claims fell 16,500 to 496,500, the lowest level since November 2008. Continuing claims in the week ending November 14 dropped 190,000 to 5,423,000 from the preceding week's upwardly revised 5,613,000.
- US consumer confidence fell in November but rose substantially from November 2008. The Reuters/University of Michigan final US consumer sentiment index for November declined to 67.4 (revised up from a preliminary reported 66.0) from 70.6 in October and 73.5 in September, compared with a cyclical-low 55.3 in November 2008, Reuters and University of Michigan data showed. The current economic conditions fell to 68.8 in November from 73.7 in October. The consumer expectations index slipped to 66.5 from October's 68.6.
- US new-home sales climbed a much more-than-expected 6.2% m/m to a seasonally adjusted 430,000 annual rate in October, after a revised 2.4% m/m decline to 405,000 in September, according to figures released jointly by the US Census Bureau and the Department of Housing and Urban Development. October new-home sales gained 5.1% y/y. Sales were up substantially in the South, but down in the Midwest, Northeast and West. At the current sales pace, the supply of unsold new homes dropped to 6.7 months in October. Inventories fell to 239,000 in October, the lowest level since mid-1971. The median price of new homes sold was $212,200 in October, down just 0.5% y/y. The average price of new homes sold was $261,100, down 4.7% y/y.
- The GfK German sentiment index unexpectedly declined to 3.7 in December from 4.0 in November, indicating Germany's consumer confidence fell for a second month on unemployment worries, according to a report by GfK Group. The economic expectations index dropped to 0.9 in December from 8.7 in November. The income expectations index fell to 6.2 from 12.9, while the index of consumer propensity to buy increased to 26.3 from 26.1.
- UK GDP was down 0.3% q/q in Q3 2009, revised up slightly from an initially reported 0.4% q/q decline, preliminary Q3 GDP data released by the Office for National Statistics showed, following a 0.6% q/q decrease in Q2. The economy has now contracted over six quarters, the longest since records began in 1955. Q3 GDP fell 5.1% y/y, revised up slightly from an initially reported 5.2% y/y slide, following Q2's 5.5% y/y contraction.
- UK service-sector output in the three months to September declined 0.1%, as forecast, after the same rate of decline in the three months to August, according to data from the Office for National Statistics.
- Japan's merchandise trade surplus widened more than expected to ¥807.1 billion ($9.1 billion) in October, the largest since March 2008, compared with a ¥75.2 billion deficit in October 2008, according to figures from the Ministry of Finance. Exports decreased a less-than-expected 23.2% y/y in October, a 13th consecutive yearon- year fall and the slowest pace of decline in a year, after a revised 30.6% y/y slide in September. Imports fell 35.6% y/y, a 12th consecutive year-on-year fall, following September's 36.9 y/y drop.
- Japan's corporate service prices declined a less-than-expected 2.2% y/y in October, a thirteenth consecutive year-on-year fall, after a 3.2% y/y decrease in September, according to the corporate services price index released by the Bank of Japan.
- Australian construction work done increased 2.2% q/q to A$39.63 billion ($36.25 billion) in Q3 2009 after an upwardly revised 4.5% q/q rise in Q2, the Australian Bureau of Statistics reported. Q3 construction work done rose 6.9% y/y.
FX Strategy Update