Friday February 1, 2008 - 17:39:24 GMT
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Forex and Commodity Market Commentary and Analysis (1 February 2008)
The euro weakened vis-Ã -vis the U.S. dollar today as the single currency tested bids around the US$ 1.4785 level and was capped around the $1.4950 level. Technically, todayâ€™s intraday low was right around the 76.4% retracement of the move from $1.4920 to $1.4360. The common currency lost ground despite the release of a weak U.S. January non-farm payrolls report that saw 17,000 jobs lost last month, the first decline in years. Also, the January unemployment rate printed at 4.9% and average hourly earnings were up 0.2% m/m and +3.7% y/y. There was a 55,000 jobs downward revision to Novemberâ€™s tally and a +64,000 upward revision to Decemberâ€™s tally. Economists were expecting new jobs creation of about 75,000 last month. Aside from growing weakness in the U.S. labour market, todayâ€™s data suggest that wages are not keeping pace with inflation and this may give the Federal Reserve more scope to expand monetary policy further, absent second-round inflation effects. Other data released in the U.S. saw the January ISM manufacturing index print at 50.7 while the prices paid sub-index jumped to 76.0, up from 59.0 in September. Additionally, final January University of Michigan consumer sentiment fell to 78.4 from 80.5 previously and December construction spending was off 1.1%. In eurozone news, the EMU-15 January manufacturing PMI survey improved to 52.8 while Germanyâ€™s improved to 54.4. Euro bids are cited around the US$ 1.4685 level.
The yen appreciated vis-Ã -vis the U.S. dollar today as the greenback tested bids around the Â¥105.75 level and was capped around the Â¥106.70 level. Technically, todayâ€™s intraday high was right around the 38.2% retracement of the move from Â¥104.95 to 107.85. Risk aversion increased after the weakest U.S. payrolls data in years were released. There is less incentive for traders and investors to borrow yen via short yen carry trades and invest the proceeds in overseas markets, particularly with U.S. equity markets on the defensive. There are some rumblings that Bank of Japanâ€™s Policy Board may reduce interest rates this year but the consensus view calls for continuity in the current 0.50% overnight call rate. The Nikkei 225 stock index lost 0.70% to close at Â¥13,497.16. Dollar bids are cited around the Â¥105.65/ 104.95 levels. The euro weakened vis-Ã -vis the yen as the single currency tested bids around the Â¥157.15 level and was capped around the Â¥158.85 level. The British pound and Swiss franc came off vis-Ã -vis the yen as the crosses tested bids around the Â¥208.95 and Â¥98.05 levels, respectively. The Chinese yuan depreciated vis-Ã -vis the U.S. dollar as the greenback closed at CNY 7.1890 in the over-the-counter market, up from CNY 7.1818. Data released in China overnight saw CLSA January PMI fall to 53.2 from 53.3. PBoC Vice Governor Yi Gang suggested China may continue to impose more interest rate and reserve ratio hikes.
The British pound fell sharply vis-Ã -vis the U.S. dollar today as cable tested bids around the US$ 1.9655 level and was capped around the $1.9940 level. Technically, todayâ€™s intraday low was right around the 50.0% retracement of the move from $1.9335 to $1.9955. Data released in the U.K. today saw the January CIPS headline manufacturing survey fall to 50.6 from 52.9 in December. In contrast, however, the output prices sub-index spiked to 57.9, its highest level since the survey began in 1999 and input prices increased to 69.3. Todayâ€™s data suggest an important component of the U.K. economy is slowing but price pressures continue to escalate. This may render it more difficult for the Bank of England to decrease interest rates over an extended period if time, especially as second-round price pressures may potentially be increasing. Some traders believe BoEâ€™s MPC may lower interest rates next week. Cable bids are cited around the US$ 1.9640/ 1.9260 levels. The euro appreciated vis-Ã -vis the British pound as the single currency tested offers around the â‚¤0.7545 level and was supported around the â‚¤0.7460 level.
The Swiss franc depreciated vis-Ã -vis the U.S. dollar today as the greenback tested offers around the CHF 1.0865 level and was supported around the CHF 1.0730 level. The pair established a fresh multi-decade low one day after Swiss National Bank member Jordan suggested the central bank is not yet ready to lower interest rates. Data released in Switzerland today saw January PMI improve to 61.6 from 60.8 in December. U.S. dollar offers are cited around the CHF 1.1155 level. The euro and British pound weakened vis-Ã -vis the Swiss franc as the crosses tested bids around the CHF 1.6005 and 2.1250 levels, respectively.
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