EUR/USD
European leaders will take another run at fixing the debt crisis this week after the failure of their fourth rescue blueprint sparked intensified concern the 17-nation euro area was on the brink of unraveling. With a European Union summit in Brussels looming Dec. 9, U.S. Treasury Secretary Timothy Geithner arrives in Frankfurt tomorrow to prod political leaders and the European Central Bank holds a policy meeting Dec. 8. Today, Chancellor Angela Merkel and French President Nicolas Sarkozy will hold talks in Paris in an attempt to bridge differences on a crisis resolution. Safeguarding banks, limiting the damage to Italy and Spain and finding additional rescue funds may hinge on the response to Franco-German demands for closer economic integration and tougher policing of fiscal rules. Markets climbed last week as investors looked toward the latest plan to rescue to the 17- nation euro, betting that a new regime of budget rules at the summit may clear the way for more intervention from the ECB. “The door should swing open for the ECB to become more aggressive,” Erik Nielsen, global chief economist at UniCredit SpA, wrote in a note to clients yesterday. Stepped-up bond purchases by the ECB will “restore a degree of sanity.”The German and French leaders continue to differ on matters such as the role of the ECB and sanctions mechanisms for euro-area states that violate deficit rules, Le Journal du Dimanche reported yesterday. The two nations are leading the push for closer economic ties among euro nations and locking in tougher enforcement of budget rules to counter the debt crisis.
GBP/USD
The Bank of England should expand stimulus by 50 billion pounds ($78 billion) this week to bolster the economy rather than wait for its current round of bond purchases to end, the British Chambers of Commerce said. The London-based BCC called on the central bank to increase the target for asset purchases after it was raised by 75 billion pounds to 275 billion pounds in October. The central bank’s Monetary Policy Committee meets this week and will announce its decision at noon on Dec. 8 in London. “With the government persevering with its deficit-cuts, and the problems in the euro zone creating worldwide banking risks, U.K. monetary policy must be as expansionary as possible to protect our economy from any adverse effects,” BCC Chief Economist David Kern said in an e-mailed statement today. The Bank of England and the Office for Budget Responsibility cut their growth forecasts last week, with the former saying risks from the euro crisis have increased. While policy makers said more stimulus may be needed in the future, they’ve indicated they will wait until the current four-month program of bond purchases is completed in early February. The OBR sees growth of 0.7 percent next year, less than a third of the previously predicted 2.5 percent. Chairman Robert Chote said on Nov. 29 the underlying momentum of the economy will weaken further in the current quarter and there will be little growth until the second half of next year.“While many commentators expect the MPC to wait until January or February, we believe that an early announcement would strengthen confidence,” Kern said. It would “help to counter the negative mood that has become apparent following the grim projections issued by the OBR.”
USD/JPY
Honda Motor Co. says replenished vehicle inventory and new Honda and Acura models planned for the next 24 months will spur a U.S. sales rebound next year after natural disasters dashed its 2011 goals. Honda’s loss of some North American output in October and November due to parts shortages caused by floods in Thailand led to it being the only large automaker to post a U.S. sales decline last month as total sales jumped 14 percent. That came after six months of declines resulting from reduced auto inventory triggered by Japan’s March earthquake and tsunami. “I’m going to the shrine to pray to avoid any more such disasters from Mother Nature,” Tetsuo Iwamura, Honda’s top North American executive, said in an interview on Dec. 2 in Las Vegas. “Next year, even starting this month, we’ll recover.”Japan’s third-largest automaker counts on the U.S. for the largest portion of its global sales. Tight inventory and competition from Ford Motor Co., Hyundai Motor Co. and Kia Motors Corp. and others cut Tokyo-based Honda’s U.S. sales 5.3 percent through November. While Honda’s market share has fallen to 9 percent from 10.5 percent so far in 2011, combined share for South Korean affiliates Hyundai and Kia rose to 9 percent from 7.8 percent a year ago.“It is a year to forget, and then push the reset button, “said Rebecca Lindland, an analyst with researcher HIS Automotive. “We’re now seeing heavy replacement demand, so there is a lot of sales opportunity out there.”IHS Automotive estimates U.S. sales of new cars and trucks will rise to about 13.7 million units in 2012, from about 12.7 million this year, she said.
USD/CAD
Canada’s dollar staged its biggest five-day rally since October after central banks including the Bank of Canada took steps this week to make it cheaper for lenders to borrow dollars during emergencies. The Canadian dollar touched a two-week high yesterday as speculation about a possible European lending plan involving the International Monetary Fund buoyed demand for higher-yielding assets. Bank of Canada Governor Mark Carney is forecast to keep his key interest rate at 1 percent on Dec. 6, three days before European Union leaders meet in Brussels to discuss proposals aimed at progressing toward fiscal union. “What is going on in Canada is pretty much irrelevant in the context of what will go on in Europe next week,” Shaun Osborne, chief foreign-exchange strategist at Toronto-Dominion Bank in Toronto, said in a telephone interview yesterday. “No one expects rates to budge for quite some time. People will move on pretty quickly and refocus on Europe. The big day is Friday, when everyone is waiting for a rabbit to be pulled out of the hat.” The loonie, as the currency is also known for the image of the aquatic bird on the C$1 coin, gained 2.6 percent this week to C$1.0195 per U.S. dollar in Toronto, its biggest weekly climb since Oct 14. Canada’s dollar, the world’s seventh-most-traded currency, declined 1.6 percent in November. One Canadian dollar buys 98.09 U.S. cents.
European leaders will take another run at fixing the debt crisis this week after the failure of their fourth rescue blueprint sparked intensified concern the 17-nation euro area was on the brink of unraveling. With a European Union summit in Brussels looming Dec. 9, U.S. Treasury Secretary Timothy Geithner arrives in Frankfurt tomorrow to prod political leaders and the European Central Bank holds a policy meeting Dec. 8. Today, Chancellor Angela Merkel and French President Nicolas Sarkozy will hold talks in Paris in an attempt to bridge differences on a crisis resolution. Safeguarding banks, limiting the damage to Italy and Spain and finding additional rescue funds may hinge on the response to Franco-German demands for closer economic integration and tougher policing of fiscal rules. Markets climbed last week as investors looked toward the latest plan to rescue to the 17- nation euro, betting that a new regime of budget rules at the summit may clear the way for more intervention from the ECB. “The door should swing open for the ECB to become more aggressive,” Erik Nielsen, global chief economist at UniCredit SpA, wrote in a note to clients yesterday. Stepped-up bond purchases by the ECB will “restore a degree of sanity.”The German and French leaders continue to differ on matters such as the role of the ECB and sanctions mechanisms for euro-area states that violate deficit rules, Le Journal du Dimanche reported yesterday. The two nations are leading the push for closer economic ties among euro nations and locking in tougher enforcement of budget rules to counter the debt crisis.
GBP/USD
The Bank of England should expand stimulus by 50 billion pounds ($78 billion) this week to bolster the economy rather than wait for its current round of bond purchases to end, the British Chambers of Commerce said. The London-based BCC called on the central bank to increase the target for asset purchases after it was raised by 75 billion pounds to 275 billion pounds in October. The central bank’s Monetary Policy Committee meets this week and will announce its decision at noon on Dec. 8 in London. “With the government persevering with its deficit-cuts, and the problems in the euro zone creating worldwide banking risks, U.K. monetary policy must be as expansionary as possible to protect our economy from any adverse effects,” BCC Chief Economist David Kern said in an e-mailed statement today. The Bank of England and the Office for Budget Responsibility cut their growth forecasts last week, with the former saying risks from the euro crisis have increased. While policy makers said more stimulus may be needed in the future, they’ve indicated they will wait until the current four-month program of bond purchases is completed in early February. The OBR sees growth of 0.7 percent next year, less than a third of the previously predicted 2.5 percent. Chairman Robert Chote said on Nov. 29 the underlying momentum of the economy will weaken further in the current quarter and there will be little growth until the second half of next year.“While many commentators expect the MPC to wait until January or February, we believe that an early announcement would strengthen confidence,” Kern said. It would “help to counter the negative mood that has become apparent following the grim projections issued by the OBR.”
USD/JPY
Honda Motor Co. says replenished vehicle inventory and new Honda and Acura models planned for the next 24 months will spur a U.S. sales rebound next year after natural disasters dashed its 2011 goals. Honda’s loss of some North American output in October and November due to parts shortages caused by floods in Thailand led to it being the only large automaker to post a U.S. sales decline last month as total sales jumped 14 percent. That came after six months of declines resulting from reduced auto inventory triggered by Japan’s March earthquake and tsunami. “I’m going to the shrine to pray to avoid any more such disasters from Mother Nature,” Tetsuo Iwamura, Honda’s top North American executive, said in an interview on Dec. 2 in Las Vegas. “Next year, even starting this month, we’ll recover.”Japan’s third-largest automaker counts on the U.S. for the largest portion of its global sales. Tight inventory and competition from Ford Motor Co., Hyundai Motor Co. and Kia Motors Corp. and others cut Tokyo-based Honda’s U.S. sales 5.3 percent through November. While Honda’s market share has fallen to 9 percent from 10.5 percent so far in 2011, combined share for South Korean affiliates Hyundai and Kia rose to 9 percent from 7.8 percent a year ago.“It is a year to forget, and then push the reset button, “said Rebecca Lindland, an analyst with researcher HIS Automotive. “We’re now seeing heavy replacement demand, so there is a lot of sales opportunity out there.”IHS Automotive estimates U.S. sales of new cars and trucks will rise to about 13.7 million units in 2012, from about 12.7 million this year, she said.
USD/CAD
Canada’s dollar staged its biggest five-day rally since October after central banks including the Bank of Canada took steps this week to make it cheaper for lenders to borrow dollars during emergencies. The Canadian dollar touched a two-week high yesterday as speculation about a possible European lending plan involving the International Monetary Fund buoyed demand for higher-yielding assets. Bank of Canada Governor Mark Carney is forecast to keep his key interest rate at 1 percent on Dec. 6, three days before European Union leaders meet in Brussels to discuss proposals aimed at progressing toward fiscal union. “What is going on in Canada is pretty much irrelevant in the context of what will go on in Europe next week,” Shaun Osborne, chief foreign-exchange strategist at Toronto-Dominion Bank in Toronto, said in a telephone interview yesterday. “No one expects rates to budge for quite some time. People will move on pretty quickly and refocus on Europe. The big day is Friday, when everyone is waiting for a rabbit to be pulled out of the hat.” The loonie, as the currency is also known for the image of the aquatic bird on the C$1 coin, gained 2.6 percent this week to C$1.0195 per U.S. dollar in Toronto, its biggest weekly climb since Oct 14. Canada’s dollar, the world’s seventh-most-traded currency, declined 1.6 percent in November. One Canadian dollar buys 98.09 U.S. cents.