Wednesday April 9, 2008 - 16:58:30 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (9 April 2008)
The euro jumped
higher vis-√†-vis the U.S. dollar today as the single currency tested offers
around the US$ 1.5810 level and was supported around the $1.5685 level. The common currency was bid higher following
yesterday‚Äôs release of the minutes of the Federal Open Market Committee meeting
from 18 March. Fed policymakers
expressed concern the U.S.
economy would contract this year and most concluded a ‚Äúsubstantial easing‚ÄĚ was
warranted. FOMC officials noted a
deterioration in business and consumer spending and did not see any signs of a
recovery in the U.S.
housing market. Some policymakers noted
there could be a ‚Äúprolonged and severe economic downturn.‚ÄĚ Another FOMC camp warned inflation
expectations might ‚Äúbecome less firmly anchored‚ÄĚ and said some economic
indicators revealed inflation expectations have ‚Äúedged higher of late.‚ÄĚ Data released in the U.S. today saw
February wholesale sales off 0.8% while inventories were up 1.1%. The IMF today warned U.S. subprime write-downs could reach US$ 945
billion and said U.S.
economic growth may not exceed 0.5% this year.
In eurozone news, German Q1
GDP growth expanded 0.6% q/q while eurozone Q4 GDP was up 0.4% q/q, unchanged
from provisional estimates. The European
Central Bank is unlikely to change monetary policy tomorrow and traders will
pay close attention to what ECB President Trichet says following the interest
rate decision. Other data released in
the eurozone today saw the February trade surplus print at ‚ā¨16.9 billion, down
from ‚ā¨17.1 billion. Euro bids are cited
around the US$ 1.5345 level.
The yen appreciated
vis-√†-vis the U.S. dollar today as the greenback tested bids around the
¬•101.75 level and was capped around the ¬•102.80 level. As expected, Japan‚Äôs
Diet accepted the nomination of Bank of Japan Deputy Governor Shirakawa as
the next Governor of the central bank. Shirakawa, who has been the acting
governor for a couple of weeks following the retirement of former BoJ Governor
Fukui, has a hawkish reputation.
Following the central bank‚Äôs decision to keep the overnight call rate
unchanged at 0.50%, Shirakawa noted the Japanese economy said ‚Äúuncertainties
surrounding the Japanese economy are now high. It may be an exaggeration to
describe the current financial environment in the U.S. as being as bad as the one
during the Great Depression. But the current situation is unprecedented in the
post-World War II period anyway.‚ÄĚ He added it will take ‚Äúsome time before the
ongoing correction in the global financial and capital markets is completed.‚ÄĚ The central bank downgraded its overall
economic assessment in its April monthly report on account of escalating energy
prices and higher raw materials.
Notably, the central bank did not use the word ‚Äúexpansion‚ÄĚ in its
monthly assessment for the first time since June 2006. Data released in Japan overnight saw March machine
tool orders rise 2.9% y/y. The Nikkei
225 stock index lost 1.05% to close at ¬•13,111.89. Dollar offers are cited around the ¬•103.65
level. The euro came off vis-√†-vis the yen as the single currency tested
bids around the ¬•160.60 level and was capped around the ¬•161.45 level. The
British pound moved lower vis-√†-vis the yen as sterling tested bids around
the ¬•200.70 level while the Swiss franc
gained ground vis-√†-vis the yen and tested offers around the ¬•101.75
level. The Chinese yuan depreciated vis-√†-vis the U.S. dollar as the
greenback closed at CNY 7.0017 in the over-the-counter market, up from CNY
The British pound appreciated
vis-√†-vis the U.S. dollar today as cable tested offers around the US$
1.9765 level and was supported around the $1.9650 level. Most traders expect Bank of England‚Äôs
Monetary Policy Committee will reduce the repo target rate by 25bps tomorrow
while a minority anticipate a 50bps reduction.
Data released in the U.K.
today saw BRC March shop prices up 0.2% m/m and 1.1% y/y. Also, February manufacturing activity was up
0.4% m/m and 1.9% y/y but it is likely that gains in the industrial sector will
not compensate for recent declines in consumer spending and house prices. Additionally, it was reported that Nationwide
consumer confidence fell last month while REC reported that U.K. wage inflation fell to a 2.5
year low in March. Cable bids are cited
around the US$ 1.9605 levels. The euro gained ground vis-√†-vis the
British pound as the single currency tested offers around the ‚ā§0.8020 level and
was supported around the ‚ā§0.7965 level.
The Swiss franc
appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids
around the CHF 0.9995 level and was capped around the CHF 1.0165 level. U.S. dollar offers are cited around the CHF
1.0375 level. The euro and British pound weakened vis-√†-vis the Swiss franc as
the crosses tested bids around the CHF 1.5830 and CHF 1.9740 levels,
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