Wednesday September 29, 2004 - 17:58:02 GMT
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GCI Financial - www.gcitrading.com
Forex Market Analysis and Commentary (29 September 2004)
The euro moved lower vis-à-vis the U.S. dollar today as the single currency drifted lower to the US$ 1.2290 level after testing offers around the $1.2340 level. Traders reacted to the release of final U.S. Q2 GDP data that saw an upward revision in economic expansion to an annualized rate of +3.3% y/y. This is down from Q1’s +4.5% rate but is an improvement over the provisional 2.8% estimate from August. Economists note that personal consumption expenditures, non-residential fixed investment, and private inventory investment added to the U.S. economy last quarter. Real final sales were up +2.5% compared with the earlier 2.1% estimate. Traders are also interested in the core PCE prices and they were little changed, up 1.7%, but with the price of oil hovering around the US$ 50.00 mark, Q3 GDP data may suffer. In the eurozone today, ECB Chief Economist Issing said “there are still no signs of second round effects (from the oil surge) detectable” and added “the labour market is (in a) way too critical (condition) for that.” Data released in the eurozone today saw the provisional Italian NIC consumer prices index decelerate, leading to speculation that Italian prices may be flat this month. Also, Greece today estimated that its 2004 budget deficit will be 5.3% of its GDP but fall back below 3% next year. The EU will now decide whether or not to withhold some fiscal allocations to Greece pending review of the budget. Traders await this weekend’s G7 meeting and Friday’s U.S. University of Michigan consumer sentiment data.
The yen moved higher vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥110.65 level after failing to get through the ¥111.40 level during Australasian dealing. The pair briefly spiked back above the ¥111.00 figure during North American dealing but fell back below the 100-hour moving average. Dealers cited repatriation flows ahead of Japan’s fiscal year-end tomorrow as one reason for the yen’s move higher. Data released in Japan today saw August retail sales fall 1.8% y/y while sales at large retailers came off 5.4% on a same-store basis. The Nikkei 225 stock index extended its losing streak to nine consecutive sessions today, falling 0.27% to close at ¥10,786.10 while TOPIX was off 0.12% to close at ¥1,089.02. Dollar bids are cited around the ¥110.60 level. The euro weakened vis-à-vis the yen today as the single currency tested bids around the ¥136.30 level after falling from the ¥137.30 level. In Chinese news, sources are saying the G7 will not publicly press the Chinese government to enact a more flexible exchange rate regime. Finance ministers attending this weekend’s G7 meeting are likely to focus on the surging price of oil.
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