Wednesday April 16, 2008 - 16:33:51 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (16 April 2008)
The euro appreciated
sharply vis-√†-vis the U.S. dollar today as the single currency tested
offers around the US$ 1.5965 level and was supported around the US$ 1.5755
level. The common currency established
another new lifetime high on account of eurozone economic data that were
released and increasing speculation of additional monetary easing from the
Federal Reserve. It was reported that U.S.
March industrial production rose 0.3% m/m and was off 0.5% q/q while capacity
utilization printed at 80.5%. Also, U.S. March
headline inflation was up 0.3% m/m and 4.0% y/y. These data evidence the difficult position
the Fed is in having to manage a slowing economy, credit market dislocations,
and ailing housing market simultaneously with ongoing elevated inflationary
pressures. Other data released in the U.S. today saw
March building permits fall 5.8% to 927,000 while March housing starts were off
11.9% to 947,000 units. In eurozone news, EMU-15 March consumer
prices were up 3.6% y/y from 3.3% y/y in February, significantly above the
ECB‚Äôs ceiling target rate of 2.0%. On
core basis, inflation was up 2.0% in March from 1.8% in February. The common currency also moved higher on news
investment banking giant Merrill Lunch will announce a Q1 loss of US$ 6
billion+ tomorrow. Traders are also
shorting dollars ahead of additional earnings reports from JPMorgan Chase and
Wells Fargo. Germany‚Äôs economic
institutes see 2008 GDP growth around 1.8% while German March final CPI was up
0.5% m/m and 3.1% y/y. European Central Bank member Garganas today said ‚ÄúThe
short-term outlook (in the euro zone) for inflation isn't satisfactory.
Inflation is likely to remain at elevated levels for the coming months and is
likely to moderate to the 2% level only very gradually. The balance of risks to the short-term global
outlook remains tilted toward the downside. Meanwhile, inflation remains strong
mainly because of oil and food prices.
In this environment, the greatest contribution that central banks can
make is the firm anchoring of medium- to long-term inflation expectations.‚ÄĚ ECB member Tumpel-Gugerell was similarly
hawkish saying ‚ÄúLooking ahead, the annual harmonized index of consumer price
inflation rate is likely to remain significantly above 2% in the coming months,
moderating only gradually over the course of 2008.‚ÄĚ Euro bids are cited around the US$ 1.5345
The yen appreciated
vis-√†-vis the U.S. dollar today as the greenback tested bids around the
¬•100.80 level and was capped around the ¬•101.90 level. Bank of Japan Governor Shirakawa talked
about the yen saying ‚ÄúOf course, foreign exchange moves have an impact on
various sectors of the economy. I will keep closely monitoring how (the recent
dollar/yen moves) will affect the overall economy. In principle, foreign
exchange levels should reflect economic fundamentals and I won't comment on
daily moves or levels. But just to recap, the recent trend is that the yen has
been strengthening versus the dollar, but not necessarily against the euro.‚ÄĚ He also testified today that the economy is
unlikely to face a severe downturn and will return to its trend growth rate.
Data released in Japan
today saw March revised machine tool orders up 3.3% y/y. The Nikkei 225 stock index climbed 1.20% to
close at ¬•13,146.13. Dollar offers are
cited around the ¬•103.65 level. The euro moved higher vis-√†-vis the yen
as the single currency tested offers around the ¬•161.85 level and was supported
around the ¬•160.40 level. The British pound and Swiss franc
appreciated vis-√†-vis the yen as the crosses tested offers around the
¬•200.75 and ¬•101.60 levels, respectively.
The Chinese yuan appreciated
vis-√†-vis the U.S. dollar as the greenback closed at CNY 6.9918 in the
over-the-counter market, down from CNY 6.9925.
The Chinese State Council reported China will continue to tighten its
monetary policy with ‚Äúprudent‚ÄĚ measures.
Data released in China
today saw Q1 GDP growth of 10.6% y/y while inflation printed at 8.0% in Q1 with
March inflation at 8.3%.
The British pound gained significant
ground vis-√†-vis the U.S. dollar today as cable tested offers around the
US$ 1.9805 level and was supported around the $1.9600 figure. Sterling gained ground on news that Bank of England may be
finalizing an arrangement to purchase problem mortgage loans that remain on
banks‚Äô balance sheets. The central bank
plan could involve swapping U.K.
mortgage-backed securities for government bonds for one-to-three years. It was reported that U.K. March
unemployment fell for the eighteenth consecutive month in March, down 1,200 to
2.5%. Cable bids are cited around the
US$ 1.9605/ 1.9505 levels. The euro gained ground vis-√†-vis the
British pound as the single currency tested offers around the ‚ā§0.8090 level and
was supported around the ‚ā§0.8025 level.
The Swiss franc
appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids
around the CHF 0.9940 level and was capped around the CHF 1.0110 level. Technically, today‚Äôs intraday high and low
were right around the 23.6% and 50.0% retracements of the move from CHF 0.9645
to CHF 1.0250. U.S. dollar offers are
cited around the CHF 1.0375 level. The euro moved higher vis-√†-vis the
Swiss franc as the single currency tested offers around the CHF 1.5950 level
while the British pound weakened
vis-√†-vis the Swiss franc and tested bids around the CHF 1.9645 level.
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