Currency Trading Update - 12/04/08

The leader board remained virtually unchanged as the top four contestants held their spots. All four continued to make the GBP/JPY their pair of choice with only contestant 4 deviating for a small position in EUR/USD. Although contestant 1 was able to increase their portfolio to $356,391 from $346,754, contestant 2 was able to close the gap as they saw their profits increase by nearly $25,000.

After European event risk dominated price action with a BoE and ECB rate cut, the U.S. will take a turn with Non-Farm payrolls scheduled for release.

Asian Trading Session
12/04, 17:30 ET
Australian AiG Performance of Construction Index (NoV) – Construction activity in Australia has contracted for the past eight months. The prospect of a global recession has weighed on consumer confidence which has sunk demand for new homes. Last month saw the reading improve slightly from its record low in September, but was still the second lowest ever recorded. The RBA lowering interest rates to a six year low of 4.25% could have inspired demand and lead to a second month of improvement. There is no forecast for the second tier indicator which typically doesn’t impact price action. Although, an improvement in activity is a positive sign for the Australian economy and could lend support to the Australian Dollar.

European Trading Session
12/05, 06:00 ET
Germany Factory Orders (OCT) – German factory orders are expected to have declined 0.5% in October after an 8.0% decline the month prior according to a Bloomberg survey of economists. Tight credit conditions have continued to weigh on demand which is expected to drag year-over-year orders down by 12.1% which would be the lowest since 2003.The indicator is a predictor of future growth in the region and typically influences price action. However, this month’s release may be overshadowed by the ECB’s deeper than expected rate cut of 75 bps.

US Trading Session
12/05, 07:00 ET
Canadian Net Change In Employment (NoV) – The Canadian labor market is expected to start showing signs of weakness as a job loss of 15,000 is expected for November following a 9,500 increase the month prior. Election driven hiring has dissipated which is expected to drive the unemployment rate to 6.4% which would be the highest since September, 2006. Falling commodity prices and the U.S -its main trading partner- in a recession has lowered growth expectations for the economy. A weakening labor market will stall domestic growth which could be a weighing factor on the Canadian dollar. The release typically presents significant event risk and could spark volatility in price action.

12/05, 08:30 ET
U.S. Change In Non-Farm Payrolls (Nov) – The U.S. economy is expected to have given back another 334,000 jobs in November which would bring the total for the year to over 1.5 million. An inline print would equal the largest monthly decline since 1982, surpassing the worst levels following 9/11. Employers have cut payrolls every month this year and with the U.S. economy officially in a recession more are expected. The report is typically one of the biggest market moving events and could spark significant volatility. The monumental drop in employment could spark a bout of risk aversion and lead to dollar strength on the back of safe-haven flows.

John Rivera
Currency Analyst

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