December 14th, 2010 22:17:45 GMT

ForexLive Asian Session Open: Prepare for another subdued session…

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Yet again the overnight market has seen plenty of action as per Jamie’s report; with firm US yields we can expect the USD/JPY to be underpinned and the Asian bourses to be firm.

The AUD broke the parity barrier yet again and is also likely to be bid on dips for the moment as players may suspect a test of the 1.0180 level if the scenario plays out.

An aggressive amount of selling of GBP/AUD by a UK clearer last night assisted both Cable to trade with a suitable ‘lid’ on it and aided the AUD/USD rise. The pair traded at a similar low to the previous occasion at 1.5770 approx ( my platform has a wide spread) and looks , sadly for me, rather soft….I still blame Shane Warne’s dalliance

Sean’s on the 3rd tee and I am about to make one of the other kind…back in a min

13 Comments

December 14th, 2010 21:46:35 GMT

ForexLive US wrap: Yields spike as Fed does the expected

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Another very choppy day but as the dust begins to settle, the dollar finds itself on marginally changed compared to last nights closing levels.

EUR/USD slumped from the outset, falling back from the 1.3480 level (having traded to 1.3500 in London) to a low of 1.3362 after a renewed back up in US bond yields following the upbeat US retail sales data and the hotter than expected producer price data. Intraday trading was very choppy as liquidity thins out with each passing day of the balance of the year.

We headed into the FOMC meeting with the EUR around 1.3425; we eased to the high 1.3360s as US yileds brushed 3.50% before recovering slightly into the close as yields slipped to 3.45% at the close. EUR ends around 1.3380.

USD/JPY traded largely in line with US bond swings. There were a few aberrant moves, like a slide to 83.15/20 as London squared up. We end the day near 83.70, supported by firmer yileds but still well south of the 84.40 region which has capped us the last several weeks.

AUD/USD was quite choppy but garnered some support  from firm commodity prices for much of the day. Another record high close in copper was a help. We pushed above 1.00 again after the Fed, reaching 1.0024 before slipping back below 1.00 into the close. We end at 0.9995.

The CHF is the darling du jour with US bond yields rising and some investors unpersuaded that higher yields will benefit the buck in the long-term, the franc is once again a place of refuge. Large USD/CHF and EUR/CHF sales went through today in a very illiquid market.

We fell as low as 0.9557 intraday and end at 0.9590. EUR/CHF fell to 1.2840 and closes at 1.2855.

GBP was sold very heavily in the London afternoon on talk of GBP/AUD liquidation and on rumors of UK buying of EUR/GBP to fund the UK contribution to the Irish bailout.

As a side note, Ireland votes on the EU/IMF deal tomorrow. Could be good for some fireworks if popular pressure gets to just a handful of MPs.

1 Comment

December 14th, 2010 21:06:37 GMT

US: Roundup of Economic Indicators Through December 14

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By Kevin Kastner

WASHINGTON, December 14 (MNI) – Retail sales rose sharply in
November, their fifth straight gain. This month, however, they rise
without the help of the auto sector, which posted a decline in November.
However, sales at gasoline stations and for holiday merchandise more
than offset the motor vehicle drop, keeping the outlook for fourth
quarter consumption very positive. Business inventories posted a solid
October gain, though retail inventories fell, offsetting the already
announced factory and wholesale gains.

Producer prices posted a solid increase in November, though food
and energy prices accounted for much of the gain, leaving core prices up
slightly after their October plunge. While there were also signs of
pressures in the inflation pipeline to go along with the finished goods
price gains, the lack of pricing power should keep those costs from
passing onto consumers for the near future.

The international trade gap narrowed in December, as exports surged
and imports declined. The October deficit was smaller than most analysts
had expected and could result in adjustments to GDP estimated for the
fourth quarter.

The Michigan sentiment index rose sharply in early-December, with
gains in both the current conditions and expectations measures. The data
suggest that consumers were a bit more optimistic, which could translate
into better holiday sales.

The level of initial jobless claims fell back in the December 4
week, keeping claims on their recent downward trend. The surge in
unadjusted claims in the post-holiday week was smaller than seasonal
adjustment factors had expected. The week after Thanksgiving is usually
the largest one-week gain of the year due to the usual post-holiday
rebound and also to layoffs in seasonal industries such as construction.
The pattern should also be seen in the first few weeks of January when
holiday workers are laid off.


Business Inventories for October (percent change)
Tuesday, December 14 at 10:00 a.m. ET Actual:
Median Range Responses Oct10 Sep10 Aug10
Inventories +1.0% +0.7% to +1.2% 16 +0.7% +1.3% +0.9%

Comments: October business inventories rose 0.7%, below
expectations of a 1.0% rise because retail inventories fell 0.6% on
strong sales. Retail inventories excluding motor vehicle fell 0.3%, with
motor vehicle inventories down 1.3%. Business inventories excluding
retail auto inventories rose 0.9%. There were inventory declines in
every retail category except clothing and department stores. Business
sales were up 1.4% in October, pulling the inventory/sales ratio down to
1.27, still below the 1.30 ratio a year ago.


Retail and Food Sales for November (percent change)
Tuesday, December 14 at 8:30 a.m. ET Actual:
Median Range Responses Nov10 Oct10 Sep10
Retail Sales +0.6% +0.3% to +0.9% 21 +0.8% +1.7% +0.9%
Ex-Mtr Veh +0.7% +0.4% to +1.1% 21 +1.2% +0.8% +0.8%

Comments: Retail sales rose 0.8% in November despite a 0.8% decline
in motor vehicle and parts sales, as sales excluding motor vehicle were
up a solid 1.2%. There were strong sales increases in a variety of
components, particularly gasoline station sales and at holiday sales
stores such as department stores, clothing stores, and sporting goods
stores. Overall, sales were well above their year ago levels for almost
all of the components, with particular gains in recent months that
should boost 4Q PCE.


Producer Price Index for November (percent change)
Tuesday, December 14 at 8:30 a.m. ET Actual:
Median Range Responses Nov10 Oct10 Sep10
PPI +0.7% +0.3% to +1.2% 21 +0.8% +0.4% +0.4%
PPI Core +0.3% -0.1% to +0.8% 21 +0.3% -0.6% +0.1%

Comments: Producer prices jumped 0.8% in November on a 1.0% rise in
food prices and a 2.1% rise in energy prices. Core PPI was up 0.3% on a
1.7% increase in passenger car prices and gains in other key core
components. There also increases at both the intermediate and crude
levels, both including and excluding food and energy prices. The pace of
year/year inflation remains tame, particularly for the core, and with
pricing power weak, there should be little pass through to consumers.


Treasury Statement for November ($ billions)
Friday, December 10 at 2:00 p.m. ET Actual:
Median Range Responses Nov10 Oct10 Nov09
Balance -$130.0b -$145.0b to -$110.0b 10 -$150.4b -$140.4b -$120.3b

Comments: The U.S. Treasury posted a $150.4 billion budget gap in
November, well above the $120.3 billion gap in November 2009, but the
2009 figure was affected by a shift in outlays into the previous month.
Through the first two months of the fiscal year, the shortfall stands at
$290.8 billion, only slightly smaller than the $296.7 billion gap in the
same period a year earlier.


Reuters/University of Michigan Survey for December (preliminary)
Friday, December 10 at 9:55 a.m. ET Actual:
Median Range Responses Dec10p Nov10 Oct10
Consumer Sent 72.2 71.0 to 76.5 17 74.2 71.6 67.7

Comments: The Michigan Sentiment index jumped to a reading of 74.2
in early-December from 71.6 in November, with the current conditions
index and expectations reading both higher and inflation expectations
down.


Trade in Goods and Services for October (deficit, billion $)
Friday, December 10 at 8:30 a.m. ET Actual:
Median Range Responses Oct10 Sep10 Aug10
Trade Gap -$44.0b -$45.5b to -$40.0b 19 -$38.7b -$44.6b -$46.9b

Comments: The international trade gap narrowed more than expected
to $38.7 billion in October on a surge in exports and lower imports. The
export gain was led by industrial supplies, particularly energy
components. There were also stronger exports of capital goods, food,
automotive, and consumer goods, though civilian aircraft exports
declined. Imports fell due to a decline in the value of energy goods,
as well as lower capital goods, food, and automotive imports. Consumer
goods imports, however, surged prior to the holiday season. The trade
gap with China was smaller, but there were wider deficits with Canada,
the EU, and Japan. The trade data should result in stronger 4Q GDP
estimates.


Weekly Jobless Claims for week of December 4
Thursday, December 9 at 8:30 a.m. ET Actual:
Median Range Responses 04-Dec 27-Nov 20-Nov
Jobless claims 425k 370k to 435k 17 421k 438k 410k

Comments: Initial jobless claims fell 17,000 to 421,000 in December
4 week, slightly below the 425,000 level expected. The Labor Department
analyst said seasonal factors expected a 46.9% rise, or about 194,000,
in unadjusted claims in what is usually the largest weekly jump of the
year due to holiday effects and seasonal layoffs in construction and
other industries. Actually, unadjusted claims rose only 40.9%, or
169,085, to 582,007. With the decrease in seasonally adjusted claims,
the 4-week moving average fell 4,000 to 427,500, continuing its downward
trend. Continuing claims fell 191,000 to 4.086 million in November 27
holiday week, the lowest level since the November 15, 2008 week. The
insured unemployment rate fell to 3.2%, the lowest since the November
22, 2008 week.


Consumer Credit for October (dollar change, billions)
Tuesday, December 7 at 3:00 p.m. ET Actual:
Median Range Responses Oct10 Sep10 Aug10
Cons Credit -$2.0b -$5.0b to +$1.5b 15 +$3.4b +$1.2b -$5.0b

Comments: Consumer credit usage rose $3.4 billion in October,
though revolving credit use continued its downward trend with a $5.6
billion decline. Nonrevolving credit use jumped $9.0 billion in the
month on strong auto sales. Nonrevolving credit usage has risen over $19
million in the last three months combined.

** Market News International Washington Bureau (202) 371-2121 **

[TOPICS: MAUDS$]

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December 14th, 2010 20:45:21 GMT

FOMC Keeps Mon Pol Unch At Final 2010 Meeting; Open To More QE

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By Steven K. Beckner

WASHINGTON (MNI) – The year is ending much as it began for the
Federal Reserve — with the federal funds rate being held near zero “for
an extended period” and with the Fed buying assets aggressively in an
effort to minimize long-term interest rates.

There were no real surprises as the Fed’s policymaking Federal Open
Market Committee held its final meeting of 2010 and left monetary policy
essentially unchanged as it looked ahead to 2011.

The FOMC further prolonged its now two-year-old policy of holding
the funds rate “exceptionally low … for an extended period,” and it
reaffirmed its plan to continue buying massive amounts of U.S. Treasury
bonds in a so-far spectacularly unsuccessful effort to hold down
long-term rates.

When the FOMC approved the resumption of so-called “quantitative
easing” on Nov. 3, it said it would “regularly review” the program and
“adjust” it “as needed.”

But the initial review did not lead to any change in the size or
pace of asset purchases. Until further notice, the plan remains that it
will buy $600 billion of longer-term Treasury securities by the end of
the second quarter next year — subject to further review.

Fed Chairman Ben Bernanke, among other officials, has made clear he
is prepared to expand “QE2″ if economic and financial conditions seem to
require it. They haven’t ruled out reducing the magnitude of purchases,
but that seems much less likely, given the Fed’s oft-expressed
dissatisfaction with high unemployment and low inflation.

The FOMC does not detail what might cause it to “adjust” its asset
buys up or down, but officials have made clear that it will depend on
the “efficacy” of asset purchases and on how the economic picture
unfolds.

If economic growth remains too sluggish to reduce unemployment,
there will likely be strong support for expanding QE. But that decision
could be complicated by untoward developments, such as an increase in
inflation expectations or a deterioration in the value of the dollar
that drove up long-term interest rates counterproductively.

So far, financial conditions have not cooperated with the Fed.
Since QE2 was launched, interest rates have risen rather than fallen, as
the Fed hoped. And the dollar has largely strengthened, contrary to Fed
expectations.

In explaining the FOMC’s decision to push ahead with QE and with an
“extended period” of near zero short-term rates, the Fed gave much the
same justifications as it did in early November. Once again, the
ultra-easy policy stance was couched in terms of the failure of the
economy to fulfill the Fed’s “dual mandate” of full employment and price
stability.

If anything, there was even more of an emphasis on unemployment,
which was reported to have risen from 9.6% to 9.8% since the FOMC last
met. That shouldn’t be a surprise either, given the heavy emphasis which
Bernanke and others have put on joblessness in multiple public
statements since Nov. 3.

“Information received since the Federal Open Market Committee met
in November confirms that the economic recovery is continuing, though at
a rate that has been insufficient to bring down unemployment,” the Fed
said, employing new language that highlights the Committee’s paramount
concern about the weak labor market.

The rest of the statement tracks the previous one.

“Household spending is increasing at a moderate pace, but remains
constrained by high unemployment, modest income growth, lower housing
wealth, and tight credit,” it said. “Business spending on equipment and
software is rising, though less rapidly than earlier in the year, while
investment in nonresidential structures continues to be weak.”

“Employers remain reluctant to add to payrolls,” the statement
continued. “The housing sector continues to be depressed.”

“Longer-term inflation expectations have remained stable, but
measures of underlying inflation have continued to trend downward,” it
added.

“Consistent with its statutory mandate, the Committee seeks to
foster maximum employment and price stability,” the FOMC announcement
went on to say. “Currently, the unemployment rate is elevated, and
measures of underlying inflation are somewhat low, relative to levels
that the Committee judges to be consistent, over the longer run, with
its dual mandate.”

“Although the Committee anticipates a gradual return to higher
levels of resource utilization in a context of price stability, progress
toward its objectives has been disappointingly slow,” the FOMC
reiterated.

The FOMC declared it will continue to buy Treasuries at the
previously announced amount “to promote a stronger pace of economic
recovery and to help ensure that inflation, over time, is at levels
consistent with its mandate.”

It pledged to “regularly review the pace of its securities
purchases and the overall size of the asset-purchase program in light of
incoming information and will adjust the program as needed to best
foster maximum employment and price stability.”

Once again, the FOMC said it “will maintain the target range for
the federal funds rate at 0 to 1/4 percent and continues to anticipate
that economic conditions, including low rates of resource utilization,
subdued inflation trends, and stable inflation expectations, are likely
to warrant exceptionally low levels for the federal funds rate for an
extended period.”

“The Committee will continue to monitor the economic outlook and
financial developments and will employ its policy tools as necessary to
support the economic recovery and to help ensure that inflation, over
time, is at levels consistent with its mandate,” the FOMC added.

As he has all year, Kansas City Federal Reserve Bank President
Thomas Hoenig dissented. The only thing that differed was the
explanation for his dissent: “In light of the improving economy, Mr.
Hoenig was concerned that a continued high level of monetary
accommodation would increase the risks of future economic and financial
imbalances and, over time, would cause an increase in long-term
inflation expectations that could destabilize the economy.”

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$,MT$$$$,M$$FI$]

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December 14th, 2010 20:42:05 GMT

Do I hear 3.50%?

by

3.494% is the highest I’ve seen yet..

Not exactly sure what new news the market is reacting to, but sometimes trends just extend, once news events are out of the way. The Fed said nothing new, but it looks as though the market has come to the conclusion that loose monetary plus loose fiscal policy plus lousy technicals for the bond market equal much higher rates…

Much higher rates are working to the dollars benefit today but could be a detriment tomorrow if traders see the rate spike as a lose of confidence in the Fed/Treasury…At the moment, I’d put down about 25% of the move to loss of confidence, 25% to improved economic prospects and 25% to a further rise in the deficit based on the passage of the latest tax cut/stimulus package and 25% to technicals.

12-14 ust

14 Comments

December 14th, 2010 20:35:50 GMT

US’s Reid: Senate To Vote On Tax Bill ‘Sometime This Evening’

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–Senate Majority Leader: Senate May Vote On 2 or 3 Amendments First
–Senate Must Also Finish Work on Stop-Gap, START Treaty
–’May Have To Work Into the Weekend’

By John Shaw

WASHINGTON (MNI) – Senate Majority Leader Harry Reid said Tuesday
that he expects the Senate to vote “sometime this evening” on the $858
billion tax cut and spending package that was negotiated by President
Obama and congressional Republican leaders.

In remarks after a Senate Democratic luncheon, Reid said the Senate
will vote on the bill sometime “before midnight.”

In a key procedural vote Monday evening, the Senate voted 83 to 15
to formally end the debate on the tax cut and spending bill bill.

Ending the debate required 60 votes. After this was achieved, the
Senate is allowed to debate the bill for another 30 hours.

Reid said that the debate time expires at midnight, but he hopes
that the vote could be held before then.

Prior to the final Senate vote, Reid said the Senate may vote “on a
few amendments” to the underlying tax bill, adding that Republicans may
be preparing to offer two or three amendments.

The Senate bill reflects the agreement that President Obama
announced last week. It extends all of the Bush era tax cuts for two
years and extends unemployment insurance benefits for 13 months. It
includes the extension of a host of expiring or expired tax credits,
including business tax expensing provisions that are designed to spur
growth.

The agreement provides for a 2 percentage point reduction in the
employee share of payroll taxes in 2011.

The agreement also sets the estate tax at 35% above a $5 million
per person threshold. This is an important component for some
Republicans.

If the Senate passes the bill it will be sent to the House for its
consideration.

House Majority Leader Steny Hoyer said Tuesday that there is an
“urgency” in completing work on the tax legislation this week.

** Market News International Washington Bureau: (202) 371-2121 **

[TOPICS: M$U$$$,MFU$$$,MCU$$$,MT$$$$]

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December 14th, 2010 20:16:23 GMT

US Data Prev:Nov CPI Boosted By Energy,Food;Core Still Subdued

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By Utta Von Nuremburg

WASHINGTON (MNI) – The release of the November Consumer Price Index
report Wednesday morning is expected to show a modest boost to the
overall number from higher energy and food prices, similar to that seen
in Tuesday’s November Producer Price Index data.

A survey of economists by Market News International have centered
on a rise of 0.2% in the headline figure, following gains of 0.2% in
October and 0.1% in September.

According to Kim Rupert, managing director of global fixed income
analysis for Action Economics, “our outlook has not changed per today’s
PPI report. We should see in tomorrow’s report a reflection of higher
food prices and other commodities prices.”

The rise in October’s CPI headline number was largely attributed to
the energy complex, in particular the gasoline index, which rose 4.6%,
the fastest pace since July and following a 1.6% increase the month
prior. Positive contributions from the household energy, electricity and
fuel oil indices were offset by a 0.4% decline in natural gas prices.

After remaining relatively tame since May, the food index in
October’s CPI report posted a 0.1% rise, due in part to higher prices in
the food away from home index. The food at home index remained
unchanged.

In today’s November PPI report, the index for finished consumer
foods prices advanced 1%, after falling 0.1% in September. Much of this
can be attributed to higher prices for fresh fruits and melons, which
climbed 13.6%. A surge in prices for eggs for fresh use also contributed
to the advance in the finished consumers’ food index.

The November PPI report also revealed a rise of 2.1% in the price
of finished energy goods, with higher gasoline prices leading the
advance, rising 4.7% while home heating oil prices rose 7%. Excluding
energy, November’s PPI would have gained 0.4%, reversing last month’s
0.4% decline.

Stripping out the volatility in the food and energy sectors,
October’s core CPI figure is expected to be subdued once again, posting
a modest 0.1% increase after remaining flat for three consecutive months
and falling 0.1% in July.

Core inflation on an annual basis slowly climbed 0.6% in October —
the lowest 12-month increase.

“Core CPI may be slightly held back by the shelter component”,
Rupert said in during a telephone interview, with Action Economics
predicting a 0.1% rise in Wednesday’s core CPI number.

The CPI Housing Index, which accounts for 42% of the CPI headline
figure, has remained relatively unchanged over the last nine months. It
was flat in February, March, May and August; saw 0.1% declines in April,
June, July and September; and a rise of 0.1% in October. Rents, one of
its main components, showed a 0.1% uptick in October after an uptick of
0.1% the month prior.

–Utta Von Nuremburg is a Reporter for Need to Know News in Washington

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MAUDS$]

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December 14th, 2010 19:54:27 GMT

Bond yields continue to fly; 3.45% trades

by

The dollar is getting a further lift from firmer US yields as they rise to 3.45% after the Fed, well above the 3.370% fibo which had been constraining yileds in recent days. Traders fear a return to the 4.00 area in coming weeks…

EUR/USD is down to 1.3380, eying earlier 1.3362 lows.

Just crossing the wires, Spain extends its state of emergency to January 15, This was regarding the air traffic controllers strike, I believe.

USD/JPY made a new high at 83.69 on the day and trades there now. 83.80/85 is next resistance.

1 Comment

1 11,371 11,372 11,373 11,374 11,375 11,376 11,377 11,378 11,379 11,380 11,381 15,795

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