Wednesday December 19, 2007 - 15:22:09 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (19 December 2007)
The euro slumped
vis-√†-vis the U.S. dollar today as the single currency tested bids around
the US$ 1.4370 level and was capped around the $1.4420 level. Technically, today‚Äôs intraday low was right
around the 61.8% retracement of the move from $1.4015 to $1.4965. The common currency weakened after the
release of the German December Ifo climate index that fell to 103.0 from 104.2,
its worst showing since February 2006.
European Central Bank President Trichet testified today and hawkishly
said the ECB will not permit second-round inflation effects. ECB‚Äôs Liebscher added ‚Äúdownside risks to
growth projections have increased.‚ÄĚ The ECB yesterday injected ‚ā¨349 billion of
liquidity into EMU-13 money markets and this also put downward pressure on the
common currency as banks borrowed cheaply in euros and swapped into different
currencies. Foreign exchange liquidity
is beginning to dissipate ahead of the Christmas and New Year holiday
period. Many data will be released in
tomorrow including GDP and PCE data. Euro
bids are cited around the US$ 1.4355 level.
The yen appreciated vis-√†-vis the U.S.
dollar today as the greenback tested
offers around the ¬•113.40 level and was supported around the ¬•112.70
level. The pair has traded in a narrow
75-pip range all week ahead of Bank of Japan‚Äôs interest rate decision tonight.
Most traders believe the BoJ‚Äôs Policy Board will keep the overnight rate
unchanged at 0.50% for several more months.
The government confirmed overnight that it expects the GDP deflator will
increase for the first time in a decade in the fiscal year to March 2009. The Nikkei 225 stock index lost 1.17% to close
at ¬•15,030.51. Dollar bids are cited
around the ¬•112.50/ ¬•111.75 levels. The euro weakened vis-√†-vis the yen as
the single currency tested bids around the ¬•162.30 level and was capped around
the ¬•163.45 level. The British pound and Swiss franc came off vis-√†-vis the yen as the
crosses tested bids around the ¬•226.20 and ¬•97.80 levels, respectively. The
Chinese yuan appreciated vis-√†-vis the U.S. dollar as the greenback closed
at CNY 7.3767 in the over-the-counter market, down from CNY 7.3852.
The British pound extended recent
losses vis-√†-vis the U.S. dollar today as cable tested bids around the US$
2.0030 level and was capped around the $2.0195 level. The pair has not been this weak since 20
September. Minutes from Bank of
England‚Äôs Monetary Policy Committee meeting in December were released today and
evidenced a unanimous 9-to-0 vote to ease interest rates by 25bps to
5.50%. MPC officials reported ‚ÄúSigns of
slowing growth in the industrial world were already apparent. That suggested a
substantial loosening in policy might be needed. However, a large reduction in bank rate now
would increase the upside risk to inflation.‚ÄĚ
Most traders believe the MPC will continue reducing interest rates in
2008. MPC‚Äôs Barker reported ‚ÄúIf you look
back to what we were expecting for the economy in November, we were talking
about quite a sharp slowdown in growth but with some downside risks to that,
partly around credit conditions. Credit conditions worsened in the markets as
we went through November and early December so it looked as if some of those
downside risks might be crystalizing, coming in to effect, and that was what
really led us to cut rates.‚ÄĚ Data released in the U.K. today saw the CBI
distributive trades survey sales balance print at +8 in December, its weakest
level since November 2006. Cable bids
are cited around the US$ 2.0005/ 1.9870 levels.
The euro moved higher
vis-√†-vis the British pound as the single currency tested offers around the
‚ā§0.7185 level and was supported around the ‚ā§0.7130 level.
franc depreciated vis-√†-vis the U.S. dollar today as the greenback tested
offers around the CHF 1.1560 level and was supported around the CHF 1.1510 level. The pair has traded in a narrow range this
week between CHF 1.1575 and CHF 1.1480. U.S.
dollar offers are cited around the CHF 1.1680 level. The
euro gained marginal ground vis-√†-vis the Swiss franc as the single
currency tested offers around the CHF 1.6630 level while the British pound weakened vis-√†-vis the Swiss franc and tested
bids around the CHF 2.3075 level.
Australian dollar appreciated vis-√†-vis the U.S. dollar today as the Aussie
tested offers around the US$ 0.8635 level and was supported around the US$
0.8595 level. Data released in Australia today
saw the December skilled vacancies index rise +1.9% m/m. Also, the October Westpac leading index was
up 1.2 index points. Australian dollar
bids are cited around the US$ 0.8535 level. The New Zealand
dollar moved higher vis-√†-vis the U.S. dollar as the kiwi tested offers
around the US$ 0.7585 level and was supported around the US$ 0.7440 level. New Zealand dollar bids are cited
around the US$ 0.7440 level.
The Canadian dollar came off
vis-√†-vis the U.S. dollar today as the greenback tested offers around the
C$ 1.0140 level and was supported around the C$ 1.0010 level. Data released in Canada today saw October wholesale
sales rise 0.5% to C$ 49.3 billion. U.S.
dollar offers are cited around the C$ 1.0175 level.
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