Monday October 18, 2004 - 14:51:48 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (18 October 2004)
The euro extended recent gains vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2525 level, its highest level since 1 March 2004. The pair’s move today was hastened by the release of weaker-than-expected August TIC capital flows data that saw foreign purchases of domestic U.S. securities at a net US$60.2 billion in August, down sharply from July’s $79.2 billion. These data suggest a declining appetite for U.S. securities abroad and dollar bears suggest the U.S. is closer to officially having a problem in financing its mammoth current account deficit. Philadelphia Fed President Santomero over the weekend said he has revised down his personal growth outlook by around 0.5% to 3.5% to 4.0%. Many Fed speakers are on the docket tomorrow, including Chairman Greenspan, and traders are curious to see if other policymakers will be downwardly revising their growth estimates as well. Euro offers are cited around the US$ 1.2595 level.
The yen lost modest ground vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥109.60 level and was supported around the ¥109.15 level. Dealers cited the rocketing price of oil as the primary factor leading to yen weakness today, given Japan’s major dependence on imported sources of energy. Front-month November NYMEX crude futures escalated to $55.33 today, a new contract high. On an inflation-adjusted basis, however, crude prices are lower than they were in the 1970s during that decade’s energy cost spike. Bank of Japan Governor Fukui today said he expects Japan’s economy will regain momentum even though high oil prices remain a concern. Minutes from the BoJ Policy Board meeting of 8-9 September were released today and policymakers suggested the increase in technology spending and capital expenditures would compensate for the escalating price of oil and keep the economy moving ahead. Dollar bids are cited around the ¥109.10 and ¥108.70 levels. The euro moved higher vis-à-vis the yen today as the single currency tested offers around the ¥ 136.80 level as the cross appreciated for the fourth consecutive day. Euro bids are seen around the ¥135.80 level. Traders will carefully watch China’s GDP data this week.
The British pound was little changed vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.8070 level and was supported around the US$ 1.8000 figure. Traders await the release of this month’s Bank of England MPC meeting minutes on Wednesday to see how the debate on the future course of monetary policy in the U.K. proceeded. BoE Governor King last week suggested interest rates may not have peaked and this is currently supporting sterling. The pound, however, has not rallied as much as the euro in recent sessions and this has many believing cable will remain dovish. Traders await the release of the tomorrow’s RICS data and Wednesday’s mortgage lending data. The euro climbed higher vis-à-vis the British pound as the single currency tested offers around the £0.6945 level.
The Swiss franc gained ground vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.2270 level after failing to get through the CHF 1.2355 level. Swiss National Bank President Roth speaks on Tuesday and Switzerland’s trade balance will be released on Thursday. Dollar bids are cited around the CHF 1.2250 level. The euro moved marginally higher vis-à-vis the Swiss franc today as the single currency tested offers around the CHF 1.5410 level.
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