* The dollar extended its losses Wednesday following gloomy ADP data suggesting December was the worst month in job losses since records began in 2001. The Canadian and Australian dollars declined as commodities fell and oil prices dropped the most in seven years. Sterling rose against the euro on decelerating eurozone producer-price inflation increasing speculation for a further European Central Bank interest-rate cut.

* The EUR/USD rose today as US ADP data showed private employers cut payrolls at a faster rate in December. The pair has consolidated gains following the penetration of the downtrend on December 11. The EUR/USD will likely move higher unless support at 1.35 is broken. There is resistance in the 1.39 area.

Financial and Economic News and Comments

US & Canada

* US private employers cut an estimated 693,000 jobs in December, the most since ADP Employer Services began its gauge based on payroll data in 2001. The deeper-than-expected job-loss figure suggests forecasts for half a million job losses in Friday's official employment data may be an underestimate.

* Treasury Secretary Henry Paulson suggested replacing Fannie Mae and Freddie Mac with utility-like enterprises that would guarantee mortgages without maintaining investment portfolios. A public utility-like mortgage credit guarantor could be the best way to resolve the inherent conflict between public purpose and private gain, Paulson said to the Washington Economic Club.


* Eurozone producer prices fell a more-than-expected 1.9% m/m in November, the sharpest fall since 1981, following October's 0.8% m/m decline, Eurostat reported. The producer-price inflation rate was at 3.3% y/y, less than forecast and down from October's 6.3% y/y. Excluding energy cost increases, producer-price inflation came in at 2.3% y/y. The decelerating PPI supports an argument for a further European Central bank interest-rate cut at the ECB January meeting.

* Germany's unemployment increased for the first time in almost three years, rising a more-than-expected 18,000 in December amid a recession, data from the Federal Labor Agency showed. The unemployment rate in December was unchanged at 7.6% after revised higher for November.

* The British Retail Consortium Nielsen shop price index showed UK inflation slowed to 0.5% y/y in December from 2.7% y/y in November, the sharpest fall recorded since September 2007. Shop prices fell 2.0% m/m after November's 0.2% m/m decline.


* Australia's seasonally adjusted retail sales unexpectedly increased 0.4% m/m in November, following October's upwardly revised 1.0% m/m gain, the Australian Bureau of Statistics reported. The retail sales trend grew 0.1% m/m after October's 0.2% m/m increase.

* The Australian housing market suffered losses in November, with the HIA Australian new home sales index declining 1.1% m/m following October's 3.1% m/m increase, the Housing Industry Association said.

* International commodity prices continued weakening in December, with the ANZ commodity price posting a 7.4% m/m decline in the price of New Zealand's export basket following November's downwardly revised 7.4% m/m decline, Australia and New Zealand Banking Group Ltd. reported.

FX Strategy Update