Friday February 22, 2008 - 15:51:13 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (22 February 2008)
The euro appreciated
vis-√†-vis the U.S. dollar today as the single currency tested offers around
the US$ 1.4860 level and was supported around the US$ 1.4790 level. The common
currency reached its strongest level since 1 February as traders sold U.S. dollars
ahead of the weekend. Data released in
the eurozone today saw EMU-13 December industrial orders fall 3.6% m/m with
annualized growth around 2.1%, much weaker-than-expected. In contrast, the EMU-15 January composite
Purchasing Managers Index improved to 52.7 from 51.8 in January, primarily on
account of growth in the services sector. Notably, manufacturing PMI weakened
marginally to 52.3 from 52.8 in January.
European Central Bank member Gonzalez-Paramo reported ‚ÄúWe still see
solid fundamentals to growth, with high growth in employment and corporate
profits, though, it's true, with downside risks.‚ÄĚ ECB member Orphanides said
‚ÄúWe clearly don't have enough information about how the economy will evolve to
determine whether it will be necessary to hike rates or to cut rates.‚ÄĚ In U.S. news, December producer price
inflation was downwardly revised to -0.3% from -0.1%. Most traders believe the
Federal Open Market Committee will reduce the federal funds target rate by
25bps or 50bps on 18 March. Euro bids are cited around the US$ 1.4490 level.
The yen appreciated
marginally vis-√†-vis the U.S. dollar today as the greenback tested bids
around the ¬•106.85 level and was capped around the ¬•107.55 level. Technically, today‚Äôs intraday low was right
around the 38.2% retracement of the move from ¬•110.10 to ¬•104.95. As expected,
the Japanese government downgraded its assessment of the economy for the first
time since November 2006, citing slowed exports and industrial production
growth, weakness if consumption, and problems in housing construction. The
government also increased its concern over U.S. economic weakness. Bank of Japan Governor
Fukui reported ‚ÄúJudging from the volatility of the forex and stock markets,
investors are still showing a strong aversion to risk. Against the background
of unstable financial and capital markets, uncertainties about the global
economy are growing.‚ÄĚ Fukui
will retire in March and is likely to be replaced by BoJ Deputy Governor Muto.
Data released in Japan
overnight saw January supermarket sales fall for the 25th
consecutive month. The Nikkei 225 stock
index lost 1.37% to close at ¬•13,500.46.
Dollar bids are cited around the ¬•106.15 level. The
euro moved higher vis-√†-vis the yen as the single currency tested offers
around the ¬•159.25 level and was supported around the ¬•158.55 level. The
British pound and Swiss franc appreciated vis-√†-vis the yen as the crosses
tested offers around the ¬•211.50 and ¬•98.70 levels, respectively. The Chinese yuan appreciated vis-√†-vis
the U.S. dollar as the greenback closed at CNY 7.1418 in the over-the-counter
market, up from CNY 7.1413. People‚Äôs
Bank of China reported consumer price inflation will remain relatively high in
2008. PBoC also reported the yuan will be allowed to appreciate gradually.
British pound rallied sharply vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 1.9705 level
and was supported around the $1.9610 level.
Cable has been bid since Wednesday‚Äôs North American session on
increasing speculation Bank of England‚Äôs Monetary Policy Committee will not be
as aggressive in lowering interest rates on account of resurgent retail sales
and heightened inflation risks. Data
released in the U.K.
today saw IRS January pay deals remain steady at 3.5% in the three months to
January. Cable bids are cited around the
US$ 1.9260 level. The euro weakened vis-√†-vis the British pound tested bids around
the ‚ā§0.7520 level and was capped around the ‚ā§0.7555 level.
franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested
bids around the CHF 1.0835 level and was capped around the CHF 1.0915
level. Technically, today‚Äôs intraday
high was right around the 50% retracement of the move from CHF 1.0725 to CHF
1.1105. U.S. dollar offers are cited
around the CHF 1.1155 level. The euro and British pound came off
vis-√†-vis the Swiss franc as the crosses tested bids around the CHF 1.6080 and
CHF 2.1315 levels, respectively.
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