Thursday January 24, 2008 - 15:48:42 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (24 January 2008)
The euro appreciated
vis-√†-vis the U.S. dollar today as the single currency tested offers around
the US$ 1.4735 level and was supported around the $1.4590 level. Stops were reached above the $1.4710 level,
representing the 61.8% retracement of the move from $1.4920 to $1.4365. The common currency scored gains after the
German January Ifo business climate index improved to 103.4 from 103.0 in
December, more-than-expected, with the business assessment sub-index and the
business expectations sub-index both stronger.
The euro largely shrugged off news that a single trader at Societe
Generale committed a massive ‚ā¨4.9 billion fraud. Spanish finance minister Solbes said there is
‚Äúsignificant debate‚ÄĚ within the ECB on whether to cut interest rates while ECB
member Bini-Smaghi said the eight Mediterranean countries that form the
majority of the fifteen-member ECB are more at risk from an economic slowdown
than Germany and the Benelux countries.
news, the fed funds future market is pricing in about an 81% chance the Fed will
reduce its federal funds target rate another 75bps next week to 2.75% following
this week‚Äôs 75bps intermeeting cut.
There is about a 122% chance the Fed will cut by 50bps according to the
future market. Data released in the U.S. today saw
weekly initial jobless claims fall 1,000 to 301,000 while continuing jobless
claims fell 75,000 to 2.672 million.
Also, December existing home sales fell 2.2% m/m to an annualized rate
of 4.89 million units and were down 22.0% y/y. Euro bids are cited around the
US$ 1.4355 level.
The yen appreciated vis-√†-vis the U.S. dollar today as the
greenback tested bids around the ¬•105.95 level and was capped around the ¬•106.95
level. Traders continue to buy the yen
on account of elevated global risk aversion stemming from recent heightened
volatility in the financial markets. The
yen benefits from such risk aversion because the yen is used a funding vehicle
in short yen carry trades in which the yen is borrowed and proceeds are
invested in higher-yielding currencies. When assets in higher-yielding
currencies depreciate, there is less incentive to sell yen in the market and
correspondingly, the yen appreciates.
Data released in Japan
overnight saw the December merchandise trade surplus fall for the second
consecutive month, off 20.9% y/y to ¬•877.87 billion and an acceleration from
November‚Äôs 12.2% y/y decline. In
political news, LDP officials urged Prime Minister Fukuda to take measures to
support the declining stock market as fears mount of a global recession. The Nikkei 225 stock index gained 2.06% to
close at ¬•13,092.78. Dollar bids are
cited around the ¬•104.20 level. The euro moved higher vis-√†-vis the yen
as the single currency tested offers around the ¬•157.35 level and was supported
around the ¬•154.85 level. The British pound and Swiss franc gained
ground vis-√†-vis the yen as the crosses tested offers around the ¬•210.40
and ¬•98.20 levels, respectively. In Chinese news, many Chinese economic
data were released today. First, 2007 GDP was up 11.4% with Q4 GDP up an
annualized 11.2%. Second, 2007 retail
sales expanded 16.8% to CNY 8.92 trillion. Third, 2007 PPI was up 3.1% after
December‚Äôs 5.4% y/y increase. Fourth,
2007 CPI was up 4.8% y/y after December‚Äôs 6.5% rise.
British pound came rallied significantly vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 1.9700 figure
and was supported around the $1.9500 figure.
benefited from increased speculation that Bank of England may hold rates steady
in February despite a slowing global economy. Data released in the U.K. today saw
BBA December mortgage approvals fall to an all-time low while underlying
mortgage lending was steady at ‚ā§4.7 billion. Cable bids are cited around the
US$ 1.9260 level. The euro fell vis-√†-vis the British pound as the single currency
tested bids around the ‚ā§0.7460 level and was capped around the ‚ā§0.7490 level.
franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested
bids around the CHF 1.0865 level and was capped around the CHF 1.0935 level.
Technically, today‚Äôs intraday high were right around the 50% retracement of the
move from CHF 1.0835 to CHF 1.1120. U.S.
dollar offers are cited around the CHF 1.1155 level. The
euro and British pound gained ground vis-√†-vis the Swiss franc as the
crosses tested offers around the CHF 1.6020 and CHF 2.1430 levels,
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