Intraday Market Thoughts Archives

GBP a major loser shedding over 2 cents to $1.4539 and inline to fall back to yesterdays latest 6 year lows at $1.4463. Although both EURUSD and GBPUSD are falling victim to the dollars risk-driven allure, euros declines remain more contained than cables, hence the recovery in EURGBP, which may regain 87 pence trend line resistance. Any recovery in US stocks is likely to boost GBPUSD and EURUSD back towards $1.4730 and $1.2750, while prolonged equity declines are seen extending the pairs towards $1.4530 and $1.2580.

Aside from the shocking 529K decline in US November payrolls (expectations -330K), the upward revisions in layoffs in prior months were as horrendous, with September payrolls revised to -403K from initial -284K, and October revised to -320K from -240K, amounting to a total of 199k in upward revisions. Jan-Nov 2008 net layoffs have reached 1.706 million versus 1.763 million for all of 2001, meaning the 2001 high will be well exceeded after the Dec figures.

While the increasingly volatile BoE delivered its 100-bp cut to 2.00% in line with expectations, the usually measured ECB surprised with a 75-bp easing (biggest in its 10-year history) versus the quarter-point move anticipated by most analysts. The 100-bp rate cut from the Bank of England was in line with consensus but came as a disappointment to whisper expectations of what could have been a greater cut. Conversely, the ECB surprised with a 75-bp cut to 2.50%, departing from its practise of acting in line with market expectations, which are largely a product of ECB members public pronouncements.

The 100-bp rate cut from the bank of England was in line with consensus but came as a disappointment to whisper expectations of what could have been a greater cut. As a result, sterling pushes higher along with the European and antipodean currencies against the yen, while FTSE and US equity futures scale down their earlier gains. With the BoE not surprising, markets may count on the usually stable ECB to not surprise and deliver a 50-bp easing to 2.75%. But FX impact from ECB may not transpire until ...

Although market consensus leans towards a -100 bps by the BoE and -50 bps by the ECB, the surprise element is more likely to emerge from the BoE in the form of a 125 bps or 150 bps, rather than a 75-bp cut from the ECB. As UK interest rates stand 200-bps more than the 1.0% Fed funds rate of the US, the Bank of England will see to it to bring down rates to at least as low as those in the US considering the similarity of the debt-driven recessionary environment, which is accompanied by plummeting price indices and rising structural imbalances. GBPUSD at NEW 6-year LOW, with Head-&-Shoulder target eyeing $1.4330 in the interim.

Ashraf's forex forecasts topped the #1 spot on FX Week's 1-month poll. Read more http://www.ashraflaidi.com/content/media/fxweek-20081201.pdf

Risk aversion trades quickly being put back in with the yen dragging down all major currencies as USDJPY, EURJPY and GBPJPY near 92.50, 116.85 and 136.33. GBJPY had remained supported above the 136.50s over the past 5 weeks but may fail to hold in light of the major event risk ahead -- tomorrows BoE rate decision and Fridays payrolls, And even though USDJPY remains consolidated in a declining channel, with 91.30 acting as a possible target for downside surprise in event risk. But I warned yesterday of the potentially positive impact on GBP, EUR ...

Just when risk appetite encountered a fresh blow following the bigger than expected 250K decline in the ADP survey for private payrolls, the services ISM dipped to a record low of 37.3 last month from Octobers 44.4. While market pundits have cited the worst than expected ADP as an ominous sign for Fridays job report, the 10-point plunge in the employment subcomponent of the services ISM to 31.3 from 41.5 reflects the accelerating erosion in services jobs. Wire services are already sending out new surveys requesting ... Rest of Available to Subscribers.

Short-covering in US equity futures was empowered by Congress' decision against allowing the bankruptcy of US Automakers. Markets also exploited a Tuesday data vacuum in Europe and US, allowing repositioning in the various market segments to ahead of re-emerging market swings ahead of Thursday's twin central bank decisions from Europe and Friday's release of the US November jobs report. Wednesday's release of the US November ADP survey on private payrolls could offer a snapshot on the direction of non-farm payrolls, while the services ISM index will be mulled for its new orders and jobs components, as well as for the dinsinflationary impact in the prices paid index.

EURUSDs rebound pales compared to that of GBPUSD mainly because its Monday retreat was more modest than cables. This was best exposed in yesterdays +3 pence jump in EURGBP to 0.8540. Euros relative stability against USD contrasts with sterlings sharp fluctuations, suggesting a markets perception of policy makers containment of the challenges at hand. The fact that there are higher odds for a smaller easing from the ECB (50 bps) than in the case of the BoE reflects that not only the latter is well behind the curve, but may need to push down rates towards 1.00% next year. EURUSD has accumulated more confidence and stability to carry bids into $1.38 into Q1, while EURGBP stands improving odds reaching parity by Q3 of 2009. EURUSDs interim resistance seen imposed at $1.2820, with support pushing up towards $1.2560 and $1.2620.

I am in the process of moving to London from New York to join CMC Markets as Chief Market Analyst, therefore, the Intraday Market Thoughts and articles will be updated less frequently. Frequency of analysis and updates will return to normal by week's end. Ashraf