WEEKLY MARKET RECAP, WEEK AHEAD, AND SCHEDULE
9 December 2007

Sunday

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GCI Foreign Exchange Research:         www.gcitrading.com/fxnews/
FX Research Desk:                                 fxnews@gcitrading.com
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€

The euro appreciated vis-à-vis the U.S. dollar last week as the single currency tested offers around the $1.4770 level and was supported around the $1.4525 level. The pair gained about 20 pips last week. U.S. parents companies continue to repatriate overseas earnings to window-dress year-end balance sheets. The FOMC is expected to lower rates by at least 25bps on 11 December. Boston Fed’s Rosengren sees worsening mortgage foreclosures. San Francisco Fed’s Yellen said conditions are “deteriorating” and sees GDP growth lower over the coming quarters. The GCC voted to not de-peg from the US$ now but intimated rising inflation could necessitate it. Bush announced a mortgage work-out plan to counter sub-prime problems.

Germany’s Steinbrueck saw recent FX movements as “disorderly.” The ECB kept rates unchanged and Trichet remained hawkish noting a hike was discussed. The ECB lowered its 2008 GDP forecast to 2.0% and upped its 2008 inflation forecast to 2.5%.

Data released in the U.S. last week saw the November ISM manufacturing survey fell to 50.8; November ADP private job gains totaled 189,000; November ISM fell to 54.1 while the prices paid sub-index rocketed to 76.5; October headline factory orders were up 0.5%; non-durable goods orders were up 1.3%; orders for non-defense capital goods ex-aircraft were off 2.0%; Q3 non-farm productivity was up an annualized 6.3% with unit labour costs off 2.0%; weekly initial jobless claims were off 15,000 to 338,000; November non-farm payrolls were up 94,000 with a cumulative -48,000 downward revision in September and October and November average earnings up 0.5% m/m and 3.8% y/y; and preliminary December University of Michigan consumer sentiment fell to 74.5.

Data released in the eurozone last week saw EMU-13 manufacturing PMI improved to 52.8 in November; the EMU-13 unemployment rate ticked lower to 7.2% in October; EMU-13 October PPI was up +0.6% m/m and +3.3% y/y; EMU-13 October retail sales were off 0.7% m/m and up 0.2% y/y; the final EMU-13 November PMI services rose to 54.1; German October manufacturing orders were up 4.0%; and German industrial output was off 0.3% m/m in October.

Technical Outlook

Last week’s high (1) above the 23.6% retracement of the 1.4015-1.4967 range and last week’s low (2) was above the 50.0% retracement of the same range.  The 1.4742/ 1.4908/ 1.5030/ 1.5120 levels represent upside resistance targets while the 1.4603/ 1.4491/ 1.4378/ 1.4239 levels represent downside support targets.

¥/ CNY

The yen depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the ¥111.75 level and was supported around the ¥109.55 level.  The pair gained about 50 pips last week. The Nikkei 225 stock index closed at ¥15,956.37.   BoJ Governor Fukui said “The correction in the housing market is continuing and if it worsens, or if the situation in financial markets worsens, it would hurt the confidence of the household and corporate sectors, trigger the so-called reverse wealth effect and shrink credit, which would lead to a further slowing of the US economy.” The Economic Planning Agency lowered its GDP forecast for Q4 to an annualized 1.02%. The BoJ tankan due on 14 December should evidence weaker sentiment and capex plans. 

Data released in Japan last week saw non-financial capex fall 1.2% y/y in Q3 with pretax profits off 0.7%; the November monetary base was up 1.0% y/y; the September domestic corporate goods price index was up +1.3% y/y; October leading economic indicators improved to +20; Q3 real GDP was downwardly revised to 0.4% q/q and an annualized 1.5%. and foreign reserves were a record US$ 970.18 billion at the end of November.

The Chinese yuan depreciated vis-à-vis the U.S. dollar last week as the greenback closed at CNY 7.4030 in the over-the-counter market, up from CNY 7.4000.  Japan called on the “fastest possible” appreciation of the yuan.  The U.S. – China Strategic Economic Dialogue reconvenes on 12 December.  Final 2007 GDP and CPI are seen around 11.6% and 4.5%, respectively.  PBoC will implement a tighter monetary policy in 2008.

Data released in China last week saw the CLSA November PMI survey decline to 52.8 while the CFLP November PMI survey improved to 55.4.

Technical Outlook

Last week’s high (1) was above the 23.6% retracement of the 124.13-107.20 range and last week’s low (2) was below the 23.6% retracement of the 117.92-107.20 range. Upside resistance targets remain the 112.56/ 113.66/ 115.66/ 117.66 levels while downside support targets remain the 111.30/ 109.73/ 107.20/ 106.53/ 104.19/ 101.67 levels.

₤

The British pound depreciated vis-à-vis the U.S. dollar last week as cable tested bids around the US$ 2.0220 level and was capped around the $2.0680 level.  The pair lost about 245 pips last week.  BoE took the repo rate lower by 25bps to 5.50%, citing weakening demand, a slowing economy, and deteriorating market conditions.  The government may nationalize Northern Rock if a suitable buyer is not found.

Data released in the U.K. last week saw November manufacturing PMI improve to 54.4 from 52.8; the volume of market loans in the banking system fell from ₤640 billion in August to ₤249 billion at the end of September; BRC November high street sales were up 1.2% m/m, up from 1.0% in October; November PMI construction was off to 54.3; the November CIPS PMI services index worsened to 51.9; Halifax November house price inflation fell to a 20-year low; BRC November annual shop price inflation remained at 1.1%; October manufacturing output was up 0.3% m/m and 0.3% y/y; and Q3 construction output was up 3.0% y/y.

Technical Outlook

Last week’s high (1) was right at the 38.2% retracement of the 1.9879-2.1159 range and last week’s low (2) was right around the 61.8% retracement of the 1.9651-2.1159 range. Upside resistance targets include the 2.0368/ 2.0519/ 2.0670/ 2.0803/ 2.0857/ 2.0944 levels while downside support targets include the 2.0181/ 2.0007/ 1.9879/ 1/9651 levels.

CHF

The Swiss franc appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the CHF 1.1155 level and was capped around the CHF 1.1350 level. The pair lost about 30 pips last week.  SNB’s interest rate announcement is expected on Thursday.  Some traders see higher rates and some traders see no change. SNB pledged to supply the money markets with “generous liquidity.”

Data released in Switzerland last week saw November PMI improve to 63.4 from 60.7 in December and November unemployment rose to 2.7% from 2.6%.

Technical Outlook

Last week’s high (1) was below the 50.0% retracement of the 1.1894-1.0885 range and last week’s low (2) was above the 23.6% retracement of the same range.  Upside resistance targets include the 1.1389/ 1.1508/ 1.1656 levels while downside support targets include the 1.1123/ 1.0830/ 1.0740 levels.

CAD

The Canadian dollar depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the C$ 1.0215 level and was supported around the C$ 0.9975 level.  The pair gained about 60 pips last week.  BoC reduced interest rates by 25bps to 4.25% and noted global market conditions could mean inflation is subsiding.  BoC noted there is an “increased risk to the prospects for demand for Canadian exports as the outlook for the US economy, and in particular the US housing sector, has weakened.”

Data released in Canada last week saw Ivey November PMI improve to 58.1; October building permits were up 6.8% m/m; and 43,000 new jobs were created in November.

Technical Outlook

Last week’s high (1) was above the 61.8% retracement of the 1.0866-0.9055 range and last week’s low (2) was right at the 50.0% retracement of the same range.  Upside resistance targets include the 1.0174/ 1.0293/ 1.0438 levels while downside support targets include the 0.9960/ 0.9747/ 0.9482/ 0.9300/ 0.9230/ 0.9140/ 0.9055 levels.

AUD

The Australian dollar depreciated vis-à-vis the U.S. dollar last week as the Aussie tested bids around the US$ 0.8660 level and was capped around the US$ 0.8855 level. The pair lost about 70 pips last week. RBA’s Corbett said the domestic economy remains “very robust.” RBA kept rates unchanged at 6.75% and said it is concerned with inflation.

Data released in Australia last week saw the October trade deficit print at –A$ 2.98 billion; October building approvals were off 2.8% m/m; October retail sales were up 0.2% m/m; Q2 GDP rose 1.0% q/q and 4.3% y/y; and the performance of construction index fell in November.

Technical Outlook

Last week’s high (1) was just above the 23.6% retracement of the 0.9399-0.8652 range and last week’s low (2) was below the 38.2% retracement of the 0.7673-0.9399 range.  Upside resistance targets include the 0.8828/ 0.8988/ 0.9062/ 0.9114/ 0.9223/ 0.9340/ 0.9420 levels while downside support targets include the 0 0.8740/ 0.8652/ 0.8587/ 0.8412/ 0.8329 levels.

SCHEDULE

Sunday, 9 December 2007

all times GMT

(last release in parentheses)

N/A       NZ                    November QZ house prices (12.7% y/y)

2350     Japan               October machine orders (-7.6% m/m)

2350     Japan               October machine orders (-7.0% y/y)

2350     Japan               November M2+CD money supply (1.9% y/y)

2350     Japan               November broad liquidity (3.6% y/y)

2350     Japan               November bank lending (0.7% y/y)

Monday, 10 December 2007

all times GMT

(last release in parentheses)

0001     UK                    December Rightmove house prices (-0.7% m/m)

0001     UK                    December Rightmove house prices (7.9% y/y)

0030     Australia           November ANZ job advertisements (2.7% m/m)

0030     Australia           October home loans (-2.4%)

0030     Australia           October investment lending (-3.3%)

0500     Japan               November economy watchers survey, current (41.5)

0500     Japan               November economy watchers survey, outlook (43.1)

0700     Germany           October trade balance (€18.1 billion)

0700     Germany           October current account (€15.4 billion)

0745     France              October industrial production (1.1% y/y)

0745     France              October manufacturing production (1.4% y/y)

0900     Finland European Central Bank member Liikanen speaks

0930     UK                    November PPI, input (1.8% m/m)

0930     UK                    November PPI, input (8.6% y/y)

0930     UK                    November PPI, output (0.6% m/m)

0930     UK                    November PPI, output (3.8% y/y)

0930     UK                    November PPI, output core (0.3% m/m)

0930     UK                    November PPI, output core (2.3% y/y)

0930     UK                    October DCLG house prices (10.8% y/y)

1315     Canada             November housing starts (219,500)

1500     US                    October pending home sales (0.2% m/m)

1530     UK                    October leading indicator (-0.1% m/m)

1530     UK                    October coincident indicator (0.1% m/m)

2145     NZ                    Q3 terms of trade index (0.6% q/q)

Tuesday, 11 December 2007

all times GMT

(last release in parentheses)

0030     Australia           November NAB business confidence (9)

0030     Australia           November NAB business conditions (20)

0500     Japan               November consumer confidence (42.9)

0700     Australia           Reserve Bank of Australia Governor Stevens speaks

0700     Germany           November wholesale price index (0.5% m/m)

0700     Germany           November wholesale price index (4.7% y/y)

0930     UK                    October trade balance, visible (-₤7.754 billion)

0930     UK                    October trade balance, total (-₤5.051 billion)

1000     Germany           December ZEW survey, economic sentiment (-32.5)

1000     Germany           December ZEW survey, current situation (70.0)

1000     Eurozone          December ZEW survey, economic sentiment (-30.0)

1500     US                    October wholesale inventories (0.8%)

1915     US                    Federal Open Market Committee interest rate decision

2145     NZ                    November food prices (0.6% m/m)

2330     Australia           December Westpac consumer confidence (-4.2%)

2350     Japan               November domestic corporate goods price index (0.3% m/m)

2350     Japan               November domestic corporate goods price index (2.4% y/y)

2350     Japan               October current account (¥2.883 trillion)

2350     Japan               October trade balance (¥1.769 trillion)

Wednesday, 12 December 2007

all times GMT

(last release in parentheses)

0130     Australia           Reserve Bank of Australia member Battellino speaks

0430     Japan               November bankruptcies (8.1% y/y)

0600     Japan               November machine tool orders (13.0% y/y)

0900     Italy                  Q3 labour costs (2.6% y/y)

0930     UK                    November jobless claims change (-9,900)

0930     UK                    November claimant count rate (2.6%)

0930     UK                    October average earnings, bonus (4.1% y/y)

0930     UK                    October ILO unemployment rate (5.4%)

1000     CH                    December ZEW survey (-28.9)

1000     Eurozone          Q3 employment (0.5% q/q)

1000     Eurozone          Q3 employment (1.7% y/y)

1000     Eurozone          October industrial production (-0.7% m/m)

1000     Eurozone          October industrial production (3.5% y/y)

1200     US                    MBA mortgage applications

1330     Germany           European Central Bank member Papademos speaks

1330     US                    October trade balance (-US$ 56.5 billion)

1330     US                    November import price index (1.8% m/m)

1330     US                    November import price index (9.6% y/y)

1330     Canada             October international merchandise trade

1330     Canada             October international merchandise trade

2145     NZ                    October retail sales (1.0% m/m)

2145     NZ                    October retail sales, ex-autos (0.5% m/m)

2300     NZ                    November PMI (56.9)

2330     Australia           December consumer inflation expectations (13.4%)

2350     Japan               Net equities and bonds investment

Thursday, 13 December 2007

all times GMT

(last release in parentheses)

0001     UK                    November RICS house price balance (-22.2%)

0030     Australia           November employment change (12,900)

0030     Australia           November unemployment rate (4.3%)

0400     Japan               November Tokyo-area condominium sales (-9.1% y/y)

0430     Japan               October industrial production (1.6% m/m)

0430     Japan               October industrial production (4.7% y/y)

0430     Japan               October capacity utilization

0700     Japan               Bank of Japan Deputy Governor Iwata speals

0745     France              November CPI (2.0% y/y)

0745     France              November CPI, harmonized (0.3% m/m)

0745     France              November CPI, harmonized (2.1% y/y)

0830     CH                    Swiss National Bank interest rate decision

0900     Eurozone          December ECB monthly report

0900     Italy                  November CPI, harmonized (2.5% y/y)

1000     Eurozone          Q3 labour costs (2.5% y/y)

1330     UK                    December CBI industrial trends

1330     US                    Weekly initial jobless claims (338,000)

1330     US                    Continuing jobless claims (2.599 million)

1330     US                    November PPI (0.1% m/m)

1330     US                    November PPI (6.1% y/y)

1330     US                    November PPI, ex-food and energy (0.0% m/m)

1330     US                    November PPI, ex-food and energy (2.5% y/y)

1330     US                    November advance retail sales (0.2%)

1330     US                    November retail sales, ex-autos (0.2%)

1330     Canada             October new housing price index (0.3% m/m)

1330     Canada             October manufacturing shipments (-0.9% m/m)

1330     Canada             Q3 labour productivity (0.2% q/q)

1500     US                    October business inventories (0.4%)

2145     NZ                    Q3 manufacturing activity (1.7%)

2350     Japan               Q4 tankan, large manufacturers index (23)

2350     Japan               Q4 tankan, large manufacturers outlook (19)

2350     Japan               Q4 tankan, non-manufacturing index (20)

2350     Japan               Q4 tankan, non-manufacturing index (21)

2350     Japan               Q4 large all-industrial capital expenditures (8.7%)

Friday, 14 December 2007

all times GMT

(last release in parentheses)

0700     Germany           November CPI (0.4% m/m)

0700     Germany           November CPI (3.0% y/y)

0700     Germany           November CPI, harmonized (0.4% m/m)

0700     Germany           November CPI, harmonized (3.3% y/y)

0800     Luxembourg      ECB member Mersch speaks

0900     Austria              ECB member Liebscher speaks

1000     Eurozone          November CPI (0.5% m/m)

1000     Eurozone          November CPI (2.6% y/y)

1000     Eurozone          November CPI, core (1.9% y/y)

1330     US                    Q3 capacity utilization rate (83.0%)

1330     US                    November consumer price index (3.5% y/y)

1330     US                    November CPI, ex-food and energy (0.2% m/m)

1330     US                    November CPI, ex-food and energy (2.2% y/y)

1415     US                    November industrial production (-0.5%)

1415     US                    November capacity utilization (81.7%)

DISCLAIMER: GCI’s Weekly Market Recap and Week Ahead is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be used as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.