Wednesday May 7, 2008 - 17:45:01 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (7 May 2008)
The euro fell
sharply vis-Ã -vis the U.S. dollar today as the single currency tested bids
around the US$ 1.5365 level and was capped around the $1.5540 level. The common currency came within a few pips of
reaching its lowest level since 12 March.
The pair weakened after Kansas City Federal Reserve President Hoenig
reported inflation may force the Fed to raise interest rates, principally on
account of food and energy prices. Data released in the U.S. today saw
Q1 non-farm labour productivity up 2.2% while unit labour costs were also up
2.2%. Also, March pending home sales
were off 1.0% m/m and 20.1% y/y, further evidence of the weakness in the
beleaguered housing sector. In eurozone news, March EMU-15 retail
sales were off 0.4% m/m, below expectations.
Traders dumped the euro on this news on the premise that the downturn in
eurozone economic activity is gathering steam.
The European Central Bank is expected to to keep interest rates
unchanged tomorrow and ECB President Trichet is expected to acknowledge ongoing
concerns with heightened levels of inflation.
At the same time, however, many ECB-watchers believe Trichet will
acknowledge the pullback in economic activity and this could lead to increased
speculation the ECB may lower rates later this year or earlier next year. It was also reported that March manufacturing
orders were off 0.6% m/m while EMU-15 March retail sales were off 0.4% m/m and
1.6% y/y. Euro bids are cited around the
US$ 1.5345 level.
The yen depreciated
vis-Ã -vis the U.S. dollar today as the greenback tested offers around the
Â¥105.60 level and was supported around the Â¥104.65 level. Technically, todayâ€™s intraday high was right
around the 76.4% retracement of the move from Â¥108.60 to Â¥95.70. Japanese financial markets reopened after a
couple of Golden Week market holidays and liquidity returned to near-normal
levels. The leading economic index and
coincident index will be released tomorrow night. Bank of Japanâ€™s Policy Board is expected to
keep the overnight call rate unchanged at 0.50% for the foreseeable
future. The Nikkei 225 stock index gained
0.38% to close at Â¥14,102.48. Dollar
bids are cited around the Â¥103.65/ Â¥101.35 levels. The
euro moved lower vis-Ã -vis the yen as the single currency tested bids
around the Â¥161.75 level and was capped around the Â¥163.05 level. The
British pound and Swiss franc weakened vis-Ã -vis the yen as the crosses
tested bids around the Â¥205.30 and Â¥99.40 levels, respectively. The Chinese yuan appreciated marginally
vis-Ã -vis the U.S. dollar as the greenback closed at CNY 6.9871 in the
over-the-counter market, down from CNY 6.9873.
The British pound depreciated
sharply vis-Ã -vis the U.S. dollar today as cable tested bids around the US$
1.9500 figure and was capped around the $1.9735 level. The pair reached its lowest level since 21
February as traders continue to discount the likelihood of additional monetary
easing from Bank of Englandâ€™s Monetary Policy Committee. Some dealers believe the MPC may reduce
interest rates tomorrow while others believe a move is more likely in
June. The central bankâ€™s quarterly
inflation report will be released this month and is likely to evidence ongoing
concern with inflation pressures, particularly with crude oil futures setting
new records above US$ 123 per barrel.
Nationwide reported its consumer confidence indicator fell to its lowest
level in its four-ear history. Other
data released today saw April shop price inflation up an annualized 1.2% while
March manufacturing output was off 0.5% m/m, the largest decline since
September 2007. Finally, REC reported
April wage growth was it its weakest level since July 2003. Cable bids are cited around the US$ 1.9360
level. The euro moved higher vis-Ã -vis the British pound as the single
currency tested offers around the â‚¤0.7920 level and was supported around the
The Swiss franc
depreciated vis-Ã -vis the U.S. dollar today as the greenback tested offers
around the CHF 1.0595 level and was supported around the CHF 1.0510 level. The pair came within a few pips of
establishing its highest level since 28 June.
U.S. dollar offers are cited around the CHF 1.0760 level. The
euro and British pound moved lower vis-Ã -vis the Swiss franc as the crosses
tested bids around the CHF 1.6260 and CHF 2.0600 levels, respectively.
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