What’s Happening With Currencies – November 30, 2011
Central bank coordination has boosted speculation in the markets, supporting higher valuations int he Euro and Australian dollar against the US dollar. The news has also boosted commodity markets and equity markets – with crude oil jumping by over 1.5% following the announcement. The economic schedule today is chock full of events – both major and emerging market economics. Nonetheless, the extension of credit lines has boosted market spirits despite further indecision by European officials.
1. In a coordinated effort, global central banks simultaneously agreed to lower dollar funding costs on swap lines. The US Federal Reserve lowered dollar funding by 50 basis points, while central banks in Canada, Europe, Japan, Switzerland and England agreed to extend bilateral swap lines to provide currency on extended market volatility.
2. The People’s Bank of China, for the first time in 3 years, lowered the reserve requirement for banks in an attempt to support growth in the face of the European debt crisis. Rates were lowered by 50 basis points from a record 21.5%, and will commence on December 5th.
3. Canadian gross domestic product reversed course in the third quarter, rising by 3.5%. Second quarter results were contractionary as the economy shrank by 0.5%. Exports led the charge on the country’s expansion – which is now almost double the pace of the US.
4. Growth in India grew at the slowest pace in 2 years, according to the Central Statistical Office. Third quarter expansion was at a 6.9% pace, compared to 7.7% in the second quarter. The headline figure is likely to confirm a shift in monetary policy as the Reserve Bank of India prepares to halt its recent string of rate hikes.
5. The index of pending home sales showed a surge in homebuying according to the National Association of Realtors. Survey results soared higher by 10.4%, reversing a 4.6% decline in September.
6. Chicago purchasing managers index readings jumped higher in November – at the fastest pace since the beginning of the year. Boosted by a resurgence in orders and production, the index advanced to a reading of 62.6, rising above a 58.4 reading in the month of October.
7. ADP payrolls rose by 206,000 workers in November, a sign that the labor market may actually be improving as we head into year end. The figure rose above estimates of a 130,000 worker addition and boosts speculation that the upcoming non-farm payrolls report may show a better than expected release.