Friday October 8, 2004 - 15:44:23 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (8 October 2004)
The euro made sharp gains vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2420 level after traders dumped dollars on a weaker-than-expected U.S. September non-farm payrolls report. It was reported that a mere 96,000 new jobs were created last month and the Bureau of Labor Statistics reported that the recent hurricanes in the southeast United States did not have a “material” effect on the data. The unemployment rate was steady at +5.4% while average hourly earnings decelerated to +0.2% m/m and +2.4% y/y. Traders basically ignored a revision for the March 2004 reference month that added around 20,000 per month to payrolls. The non-farm payrolls report was somewhat consistent with a 221,000 drop in the household survey of the labour force. Also, it was noteworthy that August’s non-farm payrolls report was downwardly revised to +128,000 from +144,000. These labour data take on heightened significance ahead of the U.S. November presidential election and tonight’s debate between Bush and Kerry will be monitored closely. Liquidity will be reduced on Monday in the U.S. on account of the Columbus Day holiday. Stops were triggered above the $1.2320/40 levels during the euro’s spike higher and the pair took out the $1.2400 figure right around the time an option barrier around the figure was reported to have matured. Other data released in the U.S. today saw August wholesale trade at US$275.8 billion, up 1.2% m/m and 15.0% y/y. Data released in the eurozone today saw German industrial output fall 1.0% m/m in August while Germany’s August trade surplus came in less-than-expected. Fed Governor Bernanke talked the dollar down this week when he said changes in “interest rates and the value of the dollar” will reduce the trade deficit. Overnight, Dallas Fed Governor McTeer was more blatant when he said “over time, there is only one way for the dollar to go – lower.” He also spoke theoretically when he said “rapidly rising interest rates and a rapidly depreciating dollar” could precipitate a crisis. President Bush has also been on the wires this week talking down the dollar. Euro bids are cited around the $1.2325 level.
The yen appreciated sharply vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥109.70 level, its lowest level since 22 September. Dealers sold the greenback from the Australasian session with stops hit below the ¥110.20 level during North American dealing. Data released overnight contributed to the pair’s losses with household spending climbing a real 0.6% y/y in August, its ninth increase in ten months. Similarly, August core machine orders climbed +3.1% m/m and +5.4% y/y. Japanese markets will be closed on Monday along with U.S. markets. Dealers cited unsubstantiated talk again overnight of China deciding to revalue its RMB currency – a recurring story that will resurface and be a convenient excuse to buy yen. The Nikkei 225 stock index shed 0.05% to close at ¥11,349.35 while the TOPIX was off 0.16% to close at ¥1,140.06. Dollar bids are cited around the ¥109.50 level. The euro slumped vis-à-vis the yen today as the single currency tested bids around the ¥ 135.80 level after testing offers around the ¥136.65 level.
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