Friday October 15, 2004 - 19:51:23 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (15 October 2004)
The euro appreciated vis-ŗ-vis the U.S. dollar today as the single currency spiked above the US$ 1.2500 figure to test offers around the $1.2505 level. This represented the pairís highest level since early March 2004 and was in response to weaker-than-expected U.S. economic data. It was reported that September industrial production came in at +0.1%, below expectations and Augustís downwardly revised -0.1% figure. Also, the preliminary University of Michigan consumer sentiment index was reported at 87.5 in October, significantly below forecasts of a 94.5 rate and the previous reading of 94.2. Additionally, the expectations index fell from 88.0 to 79.6. Capacity utilization also came in below expectations at 77.2%. One of the only bright spots for the dollar today was the September retail sales index that gained +1.5%, above expectations, while the ex-autos rate came in at +0.6%, also above expectations. The August retail sales index was also upwardly revised. Those dollar bears who fear foreign central banks may be reducing their exposure to U.S. assets were surprised by Fed data today that reported its overall holdings of Treasury and agency debt held of overseas central banks rose US$1.604 billion to $1.290 trillion in the week ending 14 October. Fed Chairman Greenspan today said he is not overly concerned with the recent spike in energy prices while ECB President Trichet today said risk and uncertainties in the eurozone economy have increased on account of surging oil costs. Traders will pay close attention to the oil market next week. Euro bids are seen around the $ 1.2360 level.
The yen appreciated vis-ŗ-vis the U.S. dollar today as the greenback failed to get above the •109.70 level during Australasian dealing and tested bids around the •108.80 level during North American dealing. The move to an intraday low was precipitated by weaker-than-expected U.S. economic data but some bottom-feeding below the •109.00 figure saw some shorts squeezed to the •109.30 level. Traders are closely watching developments in the oil market even though there has been a recent decoupling between front-month NYMEX crude futures and the yenís performance. The yen has gained ground for the second straight week despite oilís spike to an all-time record high with front-month futures at a November contract high of $54.83. Japan is a major importer of oil and has not fared well during the current run-up in energy prices but has fared well more recently with the dollar plunging more than two yen in two weeks. Data released in Japan overnight saw the corporate goods price index climb +0.1%, the ninth consecutive monthly increase. These data suggest deflation is decelerating after several years of stubborn persistence in Japan but it is noteworthy that retail inflation continues to weaken. The Nikkei 225 stock index came off 0.47% today to close at •10,982.95, the first time it has closed below •11,000 since 1 October. Dollar bids are cited around the • 108.75 level. The euro moved higher vis-ŗ-vis the yen today as the single currency tested offers around the •136.40 level.
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