U.K. Outputs Fall Further While Home Prices Tumble Lower, Reinforcing The Dour Outlook for Growth

Fundamental Headlines

• Yahoo Closer to Naming CEO – Wall Street Journal
• Chrysler Ends Talks With China's Chery Automotive – Wall Street Journal
• Detroit bail-out agreed in principle – Financial Times
• Sony Will Cut 16,000 Jobs as Recession Curbs Demand – Bloomberg
• China Encourages Airlines to Cancel 2009 Deliveries – Bloomberg

• GBPUSD –The U.K. trade deficit widened to GBP -7.750B from a revised reading of GBP -7.359B in September as export demands weakened further. Exports plunged 3.4% during the month despite the depreciation in the British pound, while imports slipped 1.2% from the previous month, which suggests that economic activity is likely to weaken further over the coming months as trade conditions falter. Meanwhile, industrial production in the U.K. fell 1.7% in October, followed by a 0.3% contraction in the previous month, and conditions are likely to get worse as Europe’s second largest economy heads into its worst recession since 1991. The breakdown of the report showed that mining activity slipped 7.3% after rising 6.8% last month, while energy outputs plunged 7.6% from September. In addition, manufacturing activity fell 1.4% during the month despite expectations for a 0.5% decline, and continues to reflect a dour outlook for the U.K. as economic activity deteriorates at a rapid pace. Moreover, the DCLG UK house price index fell another 7.4% in October, followed by a 5.1% decline in the previous month, and conditions are likely to get worse over the near-term as credit conditions remain far from normal. Discuss the topic and your trade ideas in the GBP/USD Forum.

• EURUSD – Investor confidence in Germany improved to -45.2 from -53.5 in November despite expectations for a drop to -57.0. In addition, the ZEW survey for the Euro-Zone also increased to -46.1 from -54.0 in the previous month, which suggests that investors are less pessimistic towards the future as a result of the extraordinary efforts by European policymakers. Despite the enhanced outlook, the current economic assessment amongst investors weakened further as the index slipped to -64.5 from -50.4, and the data continues to reflect a dour outlook for Europe’s largest economy as it heads into a recession. Nevertheless, Germany’s trade surplus unexpectedly widened to EUR 16.4B from EUR 15.0B in September despite weakening demands from the global economy. A deeper look into the report showed that exports slipped 0.5% from the previous month, while imports plunged 3.5% amid expectations for a 2.7% contraction. Furthermore, the current account surplus narrowed to EUR 15.0B from a revised reading of EUR 15.4B last month, and trade conditions are likely to deteriorate further as fears of a global meltdown intensify. Growth prospects for Europe’s largest economy has weakened considerably throughout the second half of the year, and the economy may face its worst recession in 16 years as global credit conditions remain far from normal. Discuss the topic and your trade ideas in the EUR/USD Forum.

• CHFUSD –The unemployment rate in Switzerland unexpectedly increased to 2.7% from 2.6% as economic activity deteriorates at a record pace. Fading demands from the home and abroad paired with instability in the global credit market has certainly dragged on growth as the economy contracted in the third quarter, and conditions may only get worse as the Swiss National Bank expects economic activity to remain subdued throughout the next year. Deteriorating fundamentals may lead the central bank to lower borrowing costs even further as policymakers are scheduled to meet tomorrow, and may continue to ease policy in 2009 as economic activity falters. For more news and resources, visit the new Swiss franc Currency Room.