Monday February 18, 2008 - 17:21:35 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (18 February 2008)
The euro came
off vis-√†-vis the U.S. dollar today as the single currency tested bids
around the US$ 1.4610 level and was capped around the $1.4690 level. Technically, today‚Äôs intraday low was right
around the 38.2% retracement of the move from $1.4015 to $1.4965. The common currency ceded some of the gains
it scored on Friday following the weak U.S. Federal Reserve Bank of New York
Empire manufacturing index and University
of Michigan consumer
sentiment index prints. Liquidity was
reduced on account of market holidays in the U.S.
and Ontario. Bundesbank‚Äôs monthly report indicated ‚ÄúThe
concern with regards to long-term inflation risks, which had previously
prompted the ECB Governing Council to withdraw in stages the degree of
expansion, remains unchanged in their view. Stability risks are also linked
with the robust economy as well as the increasing tensions in labour markets.‚ÄĚ
Notably, EMU-13 harmonized consumer prices were up 2.9% y/y in Q4 and EMU-15
harmonized consumer prices were up 3.2% y/y.
The German media reported a major German trade union may call for
strikes in the public service sector and seek wage growth of 8%. In
U.S. news, fed funds futures are currently pricing in about a 45% chance
the Federal Open Market Committee will ease the fed funds target rate by 75bps
on 18 March. This week‚Äôs housing data
will be closely watched by traders. Euro
bids are cited around the US$ 1.4490 level.
The yen depreciated vis-√†-vis the U.S. dollar today as the
greenback tested offers around the ¬•108.30 level and was supported around the
¬•107.75 level. Technically, the pair
continues to orbit the ¬•108.15 level, representing the 61.8% retracement of the
move from ¬•110.10 to ¬•104.95. Data
released in Japan
overnight saw the December index of leading economic indicators upwardly
revised to 45.0 from 40.0 while the coincident index was upwardly revised to
70.0. Other data saw average monthly
cash earnings including bonuses off 1.7% y/y in December while the December
tertiary index was off 0.6% m/m in December.
Bank of Japan
Governor Fukui speaks later in the week and the central bank is expected to
keep the overnight call rate unchanged at 0.50% for the foreseeable
future. The Nikkei 225 stock index
climbed 0.09% to close at ¬•13,365.40. Dollar
bids are cited around the ¬•105.65/ 104.95 levels. The
euro gained ground vis-√†-vis the yen as the single currency tested offers
around the ¬•158.55 level and was supported around the ¬•158.10 level. The
British pound and Swiss franc moved lower vis-√†-vis the yen as the crosses
tested bids around the ¬•210.55 and ¬•97.95 levels, respectively. The
Chinese yuan appreciated vis-√†-vis the U.S. dollar as the greenback closed
at CNY 7.1623 in the over-the-counter market, down from CNY 7.1825. Data released in China saw January actual foreign
direct investment print at US$ 11.2 billion, up 109.78% y/y. Also, January producer price inflation was up
British pound depreciated vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.9475 level and
was capped around the $1.9635 level. Technically,
today‚Äôs intraday high was right around the 50% retracement of the move from
$1.8090 to $2.1160. Sterling
was pressured lower on news that that the U.K.
government plans to nationalize troubled U.K. financial institution Northern
Rock Plc. Traders pushed the pair lower
on concerns that other U.K.
financial institutions might have significant exposure to asset-backed
securities and collateralized debt obligations.
Additionally, Bank of England Monetary Policy Committee member Besley ‚Äď
a putative monetary hawk ‚Äď dovishly said ‚ÄúWith credit conditions tightening, we
might expect a significant reduction in consumption growth over the coming
months.‚ÄĚ Traders await Wednesday‚Äôs MPC meeting minutes to see if Besley voted
for a rate cut this month. Besley added
‚ÄúMy time on the MPC, before and after the events of last summer, has reinforced
my view that considerable weight should be placed on conditions in financial
markets in understanding the transmission of monetary policy to the real
economy.‚ÄĚ Data released in the U.K. today saw January retail sales in central London climb 3.7% y/y,
the second slowest rise since November 2005.
Cable bids are cited around the US$ 1.9260 level. The
euro moved higher vis-√†-vis the British pound as the single currency tested
offers around the ‚ā§0.7520 level and was supported around the ‚ā§0.7480 level.
franc depreciated vis-√†-vis the U.S. dollar today as the greenback tested
offers around the CHF 1.1045 level and was supported around the CHF 1.0930
level. Technically, today‚Äôs intraday low
was right around the 23.6% retracement of the move from CHF 1.1595 to CHF
1.0730. Data released in Switzerland
today saw December retail sales up 1.2% y/y.
U.S. dollar offers are cited around the CHF 1.1155 level. The
euro and British pound appreciated vis-√†-vis the Swiss franc as the crosses
tested offers around the CHF 1.6170 and CHF 2.1540 levels, respectively.
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