Thursday September 30, 2004 - 17:58:53 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (30 September 2004)
The euro rocketed to its highest level in more than two months today as the single currency tested offers around the US$ 1.2440 level after European dealers lifted the pair sharply from the $1.2315 level. The move higher actually commenced before the release of U.S. economic data today so traders are attributing it to decent data released in the eurozone and end-of-quarter volatility. Data released in the eurozone today saw German wholesale business sentiment rise in August while sentiment in the construction and retail sectors weakened. EMU-12 flash September HICP were released today and they evidenced a decline to +2.2% y/y from August’s +2.3% y/y rate. These data were in-line with expectations and potentially lowers the chances of a monetary tightening by the European Central Bank, especially if the ongoing spike in energy prices does not materialize in second-round price effects like wage hikes. Final French Q2 GDP was downwardly revised to +0.7% from +0.8% while the EMU-12 September economic sentiment index fell 0.2 index points to 100.7. Perhaps the biggest surprise in the eurozone today was a +22% y/y rebound in German August machinery orders, also a sharp rise from July’s tally. The focus soon moved to the U.S. economic data released today. August personal income was up +0.4% while personal consumption expenditures were flat after July’s +1.1% gain, in-line with expectations. It is noteworthy, however, that the July-August average for real PCE increased some 4% over the Q2 average, suggesting final private demand will buttress Q3 GDP growth. Other data released in the U.S. today saw weekly initial jobless claims rise 18,000 to 369,000, the highest level since early February. All eyes are on this weekend’s G7 meeting of finance ministers in Washington, D.C. It was also learned today that FX will be topical at the 7 – 9 October Asia-Europe Summit meeting in Hanoi.
The yen appreciated higher vis-à-vis the U.S. dollar today as the greenback tested bids around the psychologically-important ¥110.00 figure, its lowest level since 22 September. Stops were hit below the ¥110.75/35 levels during North American dealing and the pair was unable to get above the ¥111.30 level during Australasian dealing. Today was Japan’s fiscal half-year end and the pair has now retraced more than 50% of the gains it earned in September. Cabinet Secretary Hosoda said there is “no need” to change Japan’s FX policy one day before G7 finance ministers convene in Washington, D.C. Bank of Japan Policy Board member Fukuda said overnight that it is “important for BoJ to continue quantitative easing patiently.” He reiterated the central bank will likely only reduce its quantitative easing policy after the CPI rises “for a few months,” making it highly unlikely anything will happen in Q2 of Japan’s fiscal year through 31 March 2005. Capital flows data released overnight saw net yen inflows of ¥481.1 billion in the three trading days ending 24 September and this was likely attributable to Japan’s fiscal half-year end. The Nikkei 225 stock index ended its nine-day losing streak today, gaining 0.35% to climb to ¥10,823.57, while the TOPIX was up 1.20% to close at ¥1,102.11. The euro came off vis-à-vis the yen today as the single currency tested bids around the ¥136.40 level after testing offers around the ¥137.40 level.
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