Monday December 10, 2007 - 16:46:48 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (10 December 2007)
The euro strengthened
vis-√†-vis the U.S. dollar today as the single currency tested offers around
the US$1.4735 level and was supported around the $1.4640 level. Technically, today‚Äôs intraday high was right
around the 23.6% retracement of the move from $1.4015 to $1.4965. Traders expect the Federal Open Market
Committee to reduce the federal funds target rate by 25bps or 50bps tomorrow
with the former the most likely scenario following Friday‚Äôs non-farm payrolls tally. Many traders also believe the FOMC will lower
the target rate at the end of January.
Data released in the U.S.
today saw November pending home sales up 0.6%.
In eurozone news, European Central Bank member Bini Smaghi say the
current rise in interbank rates is unjustified.
ECB‚Äôs Stark said the ECB‚Äôs Governing Council believe interest rate risks
are ‚Äúpointed upwards,‚ÄĚ a different conclusion than the forecasts published by
the ECB on Thursday that saw inflation between 2.0% and 3.0% in 2007 and 1.2%
to 2.4% in 2009. Data released in Germany today
saw the October trade surplus print at ‚ā¨18.7 billion, up from ‚ā¨18.1 billion in
September. Euro bids are cited around
the US$ 1.4565 level.
The yen weakened vis-√†-vis the U.S.
dollar today as the greenback tested
offers around the ¬•111.85 level and was supported around the ¬•111.35
level. The pair reached its strongest
level since 9 November as traders positioned themselves ahead of tomorrow‚Äôs
FOMC interest rate decision. Data
released in Japan overnight saw core private-sector machinery orders up 12.7%
m/m to ¬•1.08 trillion in October, the first improvement in three months and
above expectations. Also, November bank
lending was up 0.7% y/y, the same rate as October‚Äôs increase, while the M2 + CD
money supply was up 2%. The government‚Äôs
economy watchers‚Äô survey was released overnight and declined for the eighth
consecutive month in November, printing at 41.5. Most traders believe BoJ‚Äôs Policy Board will
keep the overnight rate unchanged at 0.5% for at least several months. The Nikkei 225 stock index lost 0.20% to
close at ¬•15,924.39. Dollar bids are
cited around the ¬•109.25 level. The euro gained ground vis-√†-vis the
yen as the single currency tested offers around the ¬•164.56 level and was
supported around the ¬•163.20 level. The
British pound and Swiss franc appreciated vis-√†-vis the yen as the crosses
tested offers around the ¬•228.70 and ¬•99.40 levels, respectively. The
Chinese yuan appreciated vis-√†-vis the U.S. dollar as the greenback closed
at CNY 7.3954 in the over-the-counter market, down from CNY 7.4030. Data released in China overnight saw November PPI up
4.6% y/y. China‚Äôs banking regulator sees 2007
CPI above 4.4%. People‚Äôs Bank of China
announced it will raise the reserve requirement on bank deposits by 100bps to
14.5%, effective 25 December. An unnamed
source also announced that China‚Äôs
trade surplus totaled US$ 26.28 billion in November, taking the year-to-date
total to US$ 238.12 billion.
The British pound moved higher
vis-√†-vis the U.S. dollar today as cable tested offers around the US$
2.0345 level and was supported around the $2.0220 level. Cable extended Friday‚Äôs gains after November
annual output price inflation surged to its highest level in more than sixteen
years, up 4.5%, while input prices were up 1.7% m/m and 10.2% y/y, the largest
annual gain since July 2006. These data
followed Bank of England‚Äôs decision to reduce its repo target rate by 25bps
last Thursday and these data could lessen the chances of an additional BoE MPC
monetary tightening in early 2008. Other
data released today saw BRC November retail sales growth at its weakest level
since October 2005, up an annual 0.4%.
Also, the government reported October house prices were up 11.3% y/y. Cable bids are cited around the US$ 2.0175
level. The euro came off vis-√†-vis the British pound as the single currency
tested bids around the ‚ā§0.7180 level and was capped around the ‚ā§0.7220 level.
franc gained marginal ground vis-√†-vis the U.S. dollar today as the
greenback tested bids around the CHF 1.1235 level and was capped around the CHF
1.1300 figure. Most traders believe Swiss National Bank will not raise interest
rates later this week while others believe the central bank will lift rates by
25bps or so. Dollar offers are cited
around the CHF 1.1390 level. The euro and British pound moved higher
vis-√†-vis the Swiss franc as the crosses tested offers around the CHF 1.6595
and CHF 2.3100 levels, respectively.
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