Monday March 10, 2008 - 17:04:05 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (10 March 2008)
gained marginal ground vis-√†-vis the U.S. dollar today as the single
currency tested offers around the US$ 1.5405 level and was supported around the
$1.5310 level. The common currency
established a new lifetime high on Friday before coming off and has been
rangebound today, hemmed in by comments from European Central Bank President
Trichet who indicated he is concerned about ‚Äúpresent excessive foreign exchange
market moves.‚ÄĚ Most traders do not expect central banks to conduct intervention
to slow the dollar‚Äôs descent and many dealers view the euro‚Äôs dips as buying
opportunities. Data released in the
eurozone today saw Germany‚Äôs
January trade surplus rise to ‚ā¨17.1 billion from ‚ā¨10.7 billion in
December. In U.S. news, the markets are currently pricing in a 75bps monetary
easing from the Federal Open Market Committee on 18 March and that would lower
the federal funds target rate to 2.25%. The
markets are pricing in about a 183% chance of a 50bps easing with the prospect
of another rate cut on 30 April and the likelihood of lower interest rates is
keeping the U.S. dollar on the defensive.
Data released in the U.S.
today saw January wholesale inventories up +0.8% from +1.1% in December. Euro bids are cited around the US$ 1.5145
The yen appreciated
vis-√†-vis the U.S. dollar today as the greenback tested bids around the
¬•101.80 level and was capped around the ¬•102.50 level. The pair consolidated some of the losses it
incurred on Friday following the pair‚Äôs move to multi-year lows. Finance minister Nukaga verbally intervened
against the yen saying he‚Äôs monitoring foreign exchange rates‚Äô recent movements
carefully.‚ÄĚ Most traders do not
anticipate Bank of Japan or other central banks will conduct yen-selling
intervention but there is a heightened risk at these levels. Morever, most major central banks including
the BoJ, Fed, ECB, etc. have made it clear that they are communicating closely
about the markets. Data released in Japan overnight
saw the February money supply up +2.3%, an increase from January‚Äôs +2.1%
expansion. Also, February bank lending
was up +0.9% y/y to ¬•391.92 trillion, the 25th consecutive month of
gains. The Fukuda government faces a
tough uphill battle getting Toshiro Muto, its nominated successor for outgoing
BoJ Governor Fukui, approved by the Parliament.
retires from the central bank on 19 March.
Other data released in Japan
overnight saw the February economy watchers‚Äô survey improve to 33.6 from 31.8,
the first improvement in eleven months.
The biggest news overnight was a report that private sector machinery
orders surged 19.6% m/m in January, the largest gain since August 2000. The Nikkei 225 stock index lost 1.96% to
close at ¬•12,532.13. U.S. dollar bids
are cited around the ¬•101.20 level. The euro moved lower vis-√†-vis the yen
as the single currency tested bids around the ¬•101.80 level and was capped
around the ¬•157.60 level. The British pound and Swiss franc weakened
vis-√†-vis the yen as the crosses tested bids around the ¬•205.30 and ¬•99.70
levels, respectively. The Chinese yuan appreciated vis-√†-vis
the U.S. dollar as the greenback closed at CNY 7.1029 in the over-the-counter
market, down from CNY 7.1110, the pair‚Äôs lowest close since the yuan
revaluation of July 2005. Data released
overnight saw the February trade surplus print at US$ 8.56 billion while the
February producer price index was up 6.6% y/y.
It was also estimated that China‚Äôs consumer price inflation
measure reached 8.3% last month. The
Chinese government reported China‚Äôs
employment situation will worsen severely with up to twenty million new
jobseekers entering the labour market annually.
The British pound appreciated
sharply vis-√†-vis the U.S. dollar today as cable tested offers around the
US$ 2.0220 level and was supported around the $2.0145 level. The pair reached its highest level since 18
December 2007 after data were released that confirmed producers‚Äô input prices
reached a record level in February, up 1.7% m/m and 19.3% y/y, the largest
annual increase since at least 1986.
Output prices rose 0.3% m/m and 5.7% y/y, its highest level since July
1991. These data suggest pipeline
inflation is accelerating and traders lifted sterling on the premise that Bank
of England‚Äôs Monetary Policy Committee may not be able to lower interest rates
as quickly as the markets anticipated. Consumer
price inflation data will be released on 17 March. It was also reported that January manufacturing
production rose 0.4% but industrial production fell 0.1%. Cable bids are cited around the US$ 2.0040
level. 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§0.7595 level.
The Swiss franc
appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids
around the CHF 1.0170 level and was capped around the CHF 1.0255 level. Most traders do not expect Swiss National
Bank to change interest rates this week.
U.S. dollar offers are cited around the CHF 1.0475 level. The
euro and British pound weakened vis-√†-vis the Swiss franc as the crosses tested
bids around the CHF 1.5635 and CHF 2.0505 levels, respectively.
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