Hot Forex News Today - 10 Dec 2007

Dollar Gains vs Euro, Yen on hopes US rate cut will be limited to 25 bps

The US dollar edged higher against the euro and yen in afternoon Asian trade Monday as investors bet the anticipated cut in US interest rates won't be as deep as 50 basis points as some analysts had predicted earlier. 'If the rate cut comes in at only 25 basis points and still be able to help the US economy avoid a recession, then it will be good for the dollar,' said Mark Wan, chief analyst at Hang Seng Investment Services Ltd.

'A 50 basis point cut is too much and that will be bad for the dollar.' At 1.00 pm (0500 GMT), the euro was quoted at 1.4642 dollars, down from 1.4657 in Sydney this morning. One dollar was buying 111.56 yen, up from 111.40. Friday's better-than-expected jobs data, the US government's move to help subprime borrowers and optimism that Christmas retail sales will be strong are helping boost confidence on the dollar, which has fallen to record lows against the euro after the Fed trimmed rates by a total of 75 basis points in September and October.

Lower rates reduce the attractiveness of dollar-denominated assets because it would mean lower returns on investments. But it would boost the economy and help win back investors. 'The market is looking for a cut in rates of 25 basis points to 4.25 percent. Pricing in the market currently indicates a 90 percent chance that the Fed will cut the funds rate to 4.25 percent,' said Robert Henderson, chief markets economist at National Australia Bank.

Nonfarm payrolls increased by 94,000 in November compared with the market's consensus forecast for an increase of about 80,000, easing fears the US economy is on the brink of slipping into recession. Unemployment was steady at 4.7 percent. 'The market is no longer pricing any chance of a cut of 50 basis points, as was the case a week or so ago,' said Henderson. The euro will probably weaken further to 1.43 dollars by year-end, Hang Seng's Wan said. He didn't have an estimate for the dollar/yen. Investors will be keenly watching for the Christmas retail sales numbers expected to be out end of the month, he said.

'We have to wait and see if the retail sales this month will be strong enough to lift the economy. There are hopes that it may come as strong as Thanksgiving sales,' Wan said. The International Monetary Fund is predicting the US economy will expand 1.9 percent in 2008, the same pace as this year. That's less than the 2.9 percent growth posted in 2006. The Fed will probably be on an easing mood until next year, Wan said. Hong Kong 100 pm (0500 GMT) US dollar 111.56 yen 1.1294 sfr Euro 1.4642 usd 163.35 yen 1.6538 sfr 0.7208 stg Sterling 2.0311 usd 226.58 yen 2.2941 sfr Australian dollar 0.8762 usd 0.4313 stg 97.74 yen New Zealand dollar 0.7731 usd.

Dollar steady as investors await US Internes Rate decision tomorrow

The dollar was steady against major currencies as investors await tomorrow evening's key interest rate decision by the US Federal Open Market Committee. The Fed is fully expected to deliver a further rate cut, which now looks more likely to be a smaller 25 basis point cut than a more aggressive 50 points given Friday's solid US jobs data, but uncertainty remains.

Peter Stoneham at Thomson IFR Markets said today has seen 'an understandably slow start for the euro (against the dollar) as the market uses the uncertainty surrounding tomorrow's US FOMC rate news as an excuse to take stock and weigh up the chances of a 1/4 or 1/2-point cut in rates'. Trading activity is also starting to slow ahead of the year end, he added.

On Friday, data revealed that the US economy created a solid 94,000 jobs in November, confirming that the slowdown in the country is probably not significant enough to prompt a half point rate cut. The news was slightly offset, however, by news that the University of Michigan measure of US consumer confidence sank to a 2-year low in December. Mitul Kotecha believes, however, that the market may still be 'overly dovish' on the prospect of further interest rate cuts next year, and the dollar is likely to gain if the Fed opts for a smaller quarter point rate cut.

'The dollar could benefit if the Fed does deliver a 25 basis point cut given the more dovish expectation priced into the futures market,' he said. Elsewhere, the pound was firmer in a moderate recovery after last week's hefty losses and ahead of the release of UK producer prices figures and government house price data this morning. Meanwhile, the focus in terms of data this week will centre on inflation indicators, with US PPI and CPI released on Thursday and Friday, while the final reading for euro zone CPI is also due out on Friday. Also of interest will be tomorrow's German ZEW economic sentiment survey.

London 0854 GMT Hong Kong 0500 GMT US dollar yen 111.67 up from 111.56 yen sfr 1.1294 unchanged Euro usd 1.4651 up from 1.4642 stg 0.7187 down from 0.7208 yen 163.62 up from 163.35 sfr 1.6547 up from 1.6538 Sterling usd 2.0381 up from 2.0311 yen 227.63 up from 226.58 sfr 2.3012 up from 2.2941 Australian dollar usd 0.8797 up from 0.8762 stg 0.4314 up from 0.4313 yen 98.24 up from 97.74 New Zealand dollar usd 0.7771 up from 0.7731.

Forex Calendar at Tue - 11 Dec 2007

Forex Calendar for Tomorrow Tue - 11 Dec 2007

Time(GMT):	Currency:	Event:	Forecast:	Previous:
5:00am	JPY	Household Confidence	42.8	42.8
	Measures the mood of households in regard to economic conditions. The reading is derived from a monthly survey that asks households to evaluate the prospects for the economy in the future. Higher readings point to higher consumer optimism. When consumers are optimistic they tend to purchase more goods and services, which stimulates the economy.
7:00am	AUD	RBA Governor Stevens Speaks
H O T	Reserve Bank of Australia (RBA) Governor Glenn Stevens will speak at the Sydney Institute, in Sydney. As head of the central bank's governing body, which is responsible for setting the nation's short term interest rate, his speeches can sometimes cause market volatility as traders react to clues regarding future monetary policy.
9:30am	GBP	Trade Balance	-7.4B	-7.8B
H O T	Measures the difference in value between imported and exported goods. A positive Trade Balance indicates that more goods were exported than imported over a given period. A rising trend has a positive effect on the nation's currency. When higher levels of exports are sold to the world, demand for the nation's currency is elevated as foreigners convert their native currency to purchase the exports. The Trade Balance also has a sizable impact on GDP because high demand for exports creates increased employment and production, as domestic factories work to fill this demand.
9:30am	GBP	German ZEW Economic Sentiment	-34.5	-32.5
H O T	Zentrum für Europäische Wirtschaftsforschung (ZEW) Economic Sentiment measures institutional investor sentiment. The monthly indicator reflects the difference between the share of investors that are optimistic and the share of investors that are pessimistic. For example, if 30% of participants expect the economic situation to improve within the next six months, 30% expect no change and 40% expect the economic situation to deteriorate, the ZEW Indicator of Economic Sentiment would take a value of -10. Thus, a positive number means that the share of optimists outweighs the share of pessimists.
7:15pm	USD	Sentix Investor Confidence	4.25%	4.50%
H O T	Eight times per year the Federal Open Market Committee (FOMC) votes on where to set the nation's short term interest rate (i.e., "federal funds rate"). Shortly after each vote, the FOMC releases a statement that contains the outcome of their vote, a brief commentary of the economic conditions that effected their decision, and most importantly, clues regarding the outcome of future votes. A rising trend in interest rates has a positive effect on the nation's currency. Short term rates are the paramount factor in currency valuation; traders look at most other indicators merely to predict how interest rates may change in the future. High interest rates attract foreigners looking for the best "risk-free" return on their money, which can dramatically increases demand for the nation's currency. The decision on where to set interest rates depends mostly on inflation. The primary objective of the central bank is to achieve price stability; when inflation rises above an annualized rate of approximately 2%, they will respond by raising interest rates in an attempt to bring prices down.
1:15pm	CAD	Discount Rate	4.75%	5.00%
H O T	Eight times per year the Federal Open Market Committee (FOMC) votes on where to set the nation's short term interest rate (i.e., "federal funds rate"). The discount rate, which is the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank's lending facility, is usually moved in tandem with the federal funds rate, but can also be moved independently. A rising trend in interest rates has a positive effect on the nation's currency.
11:50pm	JPY	CGPI y/y
	The Corporate Goods Price Index (CGPI) measures the rate of inflation (i.e., the rate of price changes) experienced by corporations when purchasing goods. A rising trend has a positive effect on the nation's currency because when businesses pay more for goods, they are likely to pass the higher costs to the consumer.