Japan's GDP Falls

Daily Forex Fundamentals | Written by AC-Markets | Dec 09 08 09:08 GMT |

Market Brief The Usd was slightly weaker in the Asian session, as impending hopes of a new fiscal package aimed at aiding US automakers and stimulates the US economy. There is speculation that President-elect Obama's stimulus package could possibly top $1trn. At this point it's too early to tell if we are witnessing a Christmas bounce or just short covering. The EurUsd traded to a high of 1.2967 before retracing to 1.2843, while UsdJpy continued to trend lower down to 92.39 from 93.07. Yesterday Wall Street closed higher, as sentiment shifter to optimistic. Asian regional indexes have failed to hold gains and are now trading lower. Commodities are still firm, with both crude and gold seeing slight gains. In Japan, the Q3's GDP fell to -1.8& vs. -0.9% exp. The primary culprit was inventories and public sector demand. Industrial production for October showed that inventories are at the highest level since 2001, so we would expect that inventories would weigh on futures releases of GDP. Domestic demand printed at -1.0%, while external demand (both import and exports) was soft. Japan has been in a recession since November 2007 and with labor market and consumer sentiment under pressure, consumption looks to stay depressed. Any hopes of a near term recovery are low. However, the Jpy is not currently trading on domestic economic conditions and continues to gain support from larger macro factors at work. In Australia, NAB Survey business conditions in November tumbled again to -17 index points (business confidence fell to -30). For the first time, the index is lower than in the 2000 domestic slowdown. It would be hard to argue that Australia is not in a recession given these indicators and we expect further economic deterioration in the near term. In European session We expect German ZEW investor sentiment to fall a bit further in December, from what was already a troublingly low level. The Bank of Canada's rate decision is announced today and we are expecting at 75bp cut. MMs have priced in roughtly 66bp worth of easing and consensus is for a 50bp cut. However, a weak domestic housing and other economic indicators showing steep deterioration warrant aggressive easing. ACM FOREX Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.