Tuesday October 5, 2004 - 17:49:34 GMT
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GCI Financial - www.gcitrading.com
FX Market Commentary and Analysis (5 October 2004)
The euro moved higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2325 level, partially retracing some of yesterday’s losses. Data released in the U.S. today saw the ISM’s September non-manufacturing report ease to 56.7 from 58.2 in August. This represented the 18th consecutive month of expansion in the non-manufacturing sector and increases were cited in new orders, employment, order backlogs, imports, exports, and inventories. Also, prices paid by non-manufacturing companies for purchased materials and services expanded for the 30th consecutive month but at a slower rate than August’s increase. Treasury Secretary Snow continued to talk up the U.S. economy yesterday, saying “good job numbers” will be evident for some time to come. He added “I think we are out of the soft patch. You know the soft patch wasn't all that soft. GDP was 3.3% after revisions in the second quarter, which is pretty good.” All eyes are on this Friday’s September U.S. non-farm payrolls report that may be skewed on account of the recent hurricane activity in the U.S. Data released in the eurozone today saw EMU-12 August unemployment stable at 9.0%, as expected – the fifth consecutive month at this rate and in-line with forecasts and expectations. In contrast, German September unemployment rose 27,000 m/m, the eight consecutive monthly increase. Additionally, EMU-12 services PMI slowed in September with new orders decelerating and rising costs noted. The headline index reached a 13-month low of 53.3. The European Commission today characterized the EMU-12 economic recovery as “relatively timid.” Bundesbank’s and ECB’s Weber today said he only sees a small risk of a “dollar dive” in response to the U.S.’s so-called twin deficit but cautioned against the speed of the growth in the U.S. budget deficit. Euro bids are cited around the $1.2290/60 levels.
The yen weakened further vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥111.40 level and was supported around the ¥110.65 level. The pair gained a quick half yen during North American dealing after stops were reached above the ¥ 110.90/ ¥111.05 levels. Australasian dealers had tested intraday lows just below the ¥110.70 level, a level that was re-tested again during North American dealing. A spike in NYMEX November crude futures to a record high of $50.91 dented confidence in the yen, given Japan’s high dependence on imported sources of energy. Economic and Fiscal Policy Minister Takenaka today said growth in Japan’s economy has decelerated to a “cruising speed.” The Nikkei 225 stock index gained 0.02% to close at ¥11,281.83 while the TOPIX was up 0.06% to close at ¥1,140.12. Dollar bids are cited around the ¥110.50 level. The euro moved higher vis-à-vis the yen today as the single currency tested offers around the ¥ 137.00 figure and was supported around the ¥135.90 level. Good demand emerged for the pair around the ¥136.60 level during North American dealing.
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