Thursday February 28, 2008 - 16:29:54 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (28 February 2008)
The euro appreciated
vis-√†-vis the U.S. dollar today as the single currency tested offers around
the US$ 1.5150 level and was supported around the $1.5075 level. The pair established a new lifetime low after
the release of generally weak U.S.
economic data. First, it was reported
that weekly initial jobless claims rose 19,000 to 373,000 with the four-week
moving average at 360,500 and continuing jobless claims up 21,000 to 2.807
million, the highest level since October 2005.
Second, Q4 GDP expanded an unrevised 0.6% on an annualized basis,
significantly lower than Q3‚Äôs 4.9% print.
The weak GDP print was coincident with higher inflation activity. The headline PCE index was upwardly revised
to 4.1% from 3.9% while the core PCE index printed at 2.7%, significantly above
the Fed‚Äôs perceived comfort ceiling around 2.0%. Federal Reserve Chairman
Bernanke is testifying before the Senate today and is likely to repeat much of
his comments from yesterday in which he suggested interest rates may need to
fall further. Today‚Äôs data evidence the
difficult economic environment in the U.S. where economic activity is
slowing and inflation pressures are accelerating. In
eurozone news, Eurogroup chairman Juncker verbally intervened in the
markets saying the eurozone ‚Äúdoesn‚Äôt like excessive volatility in exchange
rates. We think that the financial markets are reacting too hastily to very
short-term projections.‚ÄĚ Data released
in the eurozone today saw German February jobless rate fall to 8.0% from
January‚Äôs 8.1% level, the lowest level since 1992. Also, French January producer price inflation
was up 0.5% m/m and 4.9% y/y. European
Central Bank member Weber said the market‚Äôs current expectations regarding
interest rates ‚Äúunderestimate‚ÄĚ inflation risks.
Continued comments such as Weber‚Äôs evidence the ongoing hawkishness of
ECB policymakers. It was also reported
that German January wholesale sales were up 3.8% m/m and 4.8% y/y. Also, EMU-15 retail PMI rose to 52.4 in
February from 48.1 in January. Euro bids
are cited around the US$ 1.4940 level.
The yen appreciated
vis-√†-vis the U.S. dollar today as the greenback tested bids around the ¬•105.80
level and was capped around the ¬•106.65 level.
The pair is now less than 100 pips away from its lowest level since May
2005. Data released in Japan overnight
saw January retail sales rise 1.5% y/y, the sixth consecutive month of higher
retail sales. In contrast, January
industrial output fell 2.0% m/m, the first decline in two months. Data to be released tonight include consumer
inflation, unemployment, and housing. The
government released a fiscal assessment overnight that concludes the overall
fiscal situation ‚Äúremains severe.‚ÄĚ Bank
of Japan Policy Board member Mizuno reported ‚ÄúThe Japanese economy, beset with
troubles both at home and abroad, is now in a soft patch-like situation, and I
also see the risk that this situation may be prolonged. While problems in Japan are expected to fade in the year to March
2009, downside risks stemming from factors outside Japan, such as the volatile
financial markets, may grow. Given the
increased downside risks, we can not rule out the possibility of the Japanese
economy posting lower growth than its potential growth rate.‚ÄĚ There is growing
speculation the Japanese economy has become more susceptible to downside
economic risks in the U.S.
economy. The Nikkei 225 stock index lost
0.75% to close at ¬•13,925.51. Dollar
bids are cited around the ¬•104.20 level.
The euro weakened vis-√†-vis
the yen as the single currency tested bids around the ¬•160.10 level and was
capped around the ¬•161.05 level. The British pound and Swiss franc
depreciated vis-√†-vis the yen as the crosses tested bids around the ¬•210.15
and ¬•99.90 levels, respectively. The
Chinese yuan appreciated sharply vis-√†-vis the U.S. dollar as the greenback
closed at CNY 7.1133 in the over-the-counter market, down from CNY 7.1420 ‚Äď the
pair‚Äôs lowest close since the yuan revaluation of July 2005. A government think-tank reported Q1 GDP will
be up about 10.5% with consumer price inflation up 6.9%.
The British pound appreciated vis-√†-vis the U.S. dollar today as
cable tested offers around the US$ 1.9905 level and was supported around the
$1.9760 level. Cable reclaimed much of
yesterday‚Äôs losses following some fairly hawkish comments from Bank of England
Monetary Policy Committee member Besley.
He said ‚ÄúWhat is key is that we are going to see a run-up due to food
and electricity prices. The Bank is committed, and will remain committed, to
bringing inflation back to target over the medium term. There is quite a long
chain of links before import prices hit you and me. Some we buy as raw
materials, such as petrol, hit us more immediately. But for a lot of goods
there is a chain through which it will eventually come. The speed with which it
comes through and by how much is something about which there is much
uncertainty.‚ÄĚ Data released in the U.K. today saw Land Registry January house
prices in England and Wales rose 0.9%
m/m and 6.4% y/y. Cable bids are cited around the US$ 1.9730/
1.9660 levels. The euro gained marginal ground vis-√†-vis the British pound as the
single currency tested offers around the ‚ā§0.7635 level and was supported around
the ‚ā§0.7610 level.
franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested
bids around the CHF 1.0515 level and was capped around the CHF 1.0645
level. The pair established a new
multi-decade low. Data released in Switzerland today saw the number of employed
persons in Switzerland
rise 2.7% y/y in Q4 2007. U.S. dollar
offers are cited around the CHF 1.0635 level.
The euro and British pound depreciated
vis-√†-vis the Swiss franc as the crosses tested bids around the CHF 1.5975 and
CHF 2.0925 levels, respectively.
The Australian dollar appreciated
vis-√†-vis the U.S. dollar today as
the Aussie tested offers around the US$ 0.9480 level and was supported around
the $0.9365 level. The pair established
a fresh 24-year high after data were released that saw private sector
investment up a quarterly 5.1% in Q4, above expectations. Many traders believe Reserve Bank of Australia will
tighten monetary policy twice this year.
Australian dollar bids are cited around the US$ 0.9340 level. The New Zealand
dollar weakened vis-√†-vis the U.S. dollar as the greenback tested bids
around the US$ 0.8105 level and was capped around the $0.8180 level. New Zealand dollar bids are cited
around the US$ 0.7970 level.
The Canadian dollar appreciated
vis-√†-vis the U.S. dollar today as
the greenback tested bids around the C$ 0.9725 level and was capped around the
C$ 0.9820 level. Technically, today‚Äôs
intraday low was right around the 23.6% retracement of the move from C$ 1.1875
to C$ 0.9055. U.S. dollar offers are
cited around the C$ 0.9960 level.
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