Friday December 14, 2007 - 18:30:08 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (14 December 2007)
The euro depreciated
sharply vis-√†-vis the U.S. dollar today as the single currency tested bids
around the US$ 1.4415 level and was capped around the $1.4655 level. Stops were reached below the $1.4490 level,
representing the 50% retracement of the move from $1.4015 to $1.4965. Traders drove the common currency lower on
stronger-than-expected U.S. November consumer price inflation data that saw
headline CPI up 0.8% - above forecasts ‚Äď while core CPI printed at +0.3%. These data follow yesterday‚Äôs torrid producer
price inflation data and collectively, they suggest the Federal Open Market
Committee cannot declare inflation dead.
The FOMC next deliberates interest rates on 30-31 January and many
traders believe the Fed will lower the fed funds target rate by another
25bps. Other data released in the U.S. today saw
November industrial production up 0.3% while capacity utilization gained 0.1%
to close 81.5%. In eurozone news, EMU-13 harmonized inflation was upwardly revised
to 3.1% from 3.0%. The European
Commission called this a ‚Äúclear matter of concern‚ÄĚ and eurozone-wide inflation
is now more than 50% above the ECB‚Äôs target ceiling rate of 2.0%. ECB‚Äôs Mersch sees inflation at an elevated
level ‚Äúuntil the end of 2008.‚ÄĚ Notably, German final November CPI was up 0.5%
m/m and 3.1% y/y. Euro bids are cited
around the US$ 1.4355 level.
The yen depreciated vis-√†-vis the U.S.
dollar today as the greenback tested
offers around the ¬•113.40 level and was supported around the ¬•112.20
level. The pair rocketed higher to its
strongest showing since 7 November and stops were hit above the ¬•112.60 level,
representing the 61.8% retracement of the move from ¬•115.90 to ¬•107.20. Data released in Japan overnight saw the
December quarterly tankan survey post disappointing results with the index of
sentiment among large manufacturers fall to +19 from +23 in September, the
first decline in three quarters. This
was also below forecasts and most traders believe Bank of Japan will not change
interest rates next week when its Policy Board convenes. The big question on traders‚Äô minds is whether
or not the central bank will downgrade its assessment of the economy in its
monthly report. The Nikkei 225 stock
index lost 0.14% to close at ¬•15,514.51.
Dollar bids are cited around the ¬•110.70 level. The
euro came off vis-√†-vis the yen as the single currency tested bids around
the ¬•163.25 level and was capped around the ¬•164.65 level. The
British pound and Swiss franc weakened vis-√†-vis the yen as the crosses
tested bids around the ¬•228.30 and ¬•98.00 levels, respectively. The
Chinese yuan depreciated vis-√†-vis the U.S. dollar as the greenback closed
at CNY 7.3720 in the over-the-counter market, up from CNY 7.3692. Data released in China today saw urban fixed-asset
investment up 26.8% between January and November.
The British pound weakened
sharply vis-√†-vis the U.S. dollar today as cable tested bids around the US$
2.0185 level and was capped around the $2.0445 level. Technically, today‚Äôs intraday lows were right
around the 76.4% retracement of the move from $1.9870 to $2.1160. Bank of England MPC member Baker dovishly
said the U.K.
economy is not moving back to a high inflation environment and added ‚Äúgrowth
has been strong.‚ÄĚ Most traders believe BoE‚Äôs MPC will continue lowering
interest rates in 2008. Cable bids are
cited around the US$ 2.0175 level. The euro came off vis-√†-vis the British
pound as the single currency tested bids around the ‚ā§0.7140 level and was
capped around the ‚ā§0.7175 level.
franc depreciated vis-√†-vis the U.S. dollar today as the greenback tested
offers around the CHF 1.1545 level and was supported around the CHF 1.1400
figure. The pair has not been this
strong since 5 November 2007 and stops were hit above the 38.2% retracement of
the move from CHF 1.2475 to CHF 1.0885.
Swiss National Bank voted yesterday to keep interest rates unchanged for
the first time in two years. U.S. dollar
offers are cited around the CHF 1.1680 level.
The euro and British pound came
off vis-√†-vis the Swiss franc as the crosses tested bids around the CHF
1.6630 and CHF 2.3245 levels, respectively.
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