Wednesday August 6, 2008 - 17:01:23 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (6 August 2008)
The euro depreciated vis-Ă -vis the U.S.
dollar today as the single currency
tested bids around the US$ 1.5395 level and was capped around the $1.5515
level. The common currency extended
recent losses and reached its lowest level since 16 June. As expected, the Federal Open Market
Committee kept the federal funds rate unchanged at 2.00% yesterday and contrary
to much speculation, the only dissenter seeking higher rates was Dallas Fed
President Fisher. The FOMC reported
â€śEconomic activity expanded in the second quarter, partly reflecting growth in
consumer spending and exports. However, labor markets have softened further and
financial markets remain under considerable stress. Tight credit conditions,
the ongoing housing contraction, and elevated energy prices are likely to weigh
on economic growth over the next few quarters.â€ť On the inflation front, the Fed
added it â€śexpects inflation to moderate later this year and next year, but the
inflation outlook remains highly uncertain.â€ť
On balance, most traders interpreted the Fedâ€™s statement as being more
dovish than expected, especially since the Fed omitted previous language that
read downside risks to growth â€śappear to have diminished somewhat.â€ť Data released in the U.S. yesterday
saw the July non-manufacturing ISM index climb to 49.5 from the previous
reading of 49.0. In eurozone news, the European Central Bank is expected to keep
interest rates unchanged. Traders will pay close attention to comments from ECB
President Trichet, particularly because the ECB voted for a rate hike last
month and economic data have been deteriorating quickly. Data released in Germany today saw June
manufacturing orders off 2.9% m/m and 6.1% y/y.
Euro bids are cited around the $1.5380/ 1.5175 levels.
The yen depreciated
marginally vis-Ă -vis the U.S. dollar today as the greenback tested offers
around the ÂĄ108.55 level and was supported around the ÂĄ108.20 level. The pair came within a couple of pips of
establishing a new multi-month high dating to January 2008. Data released in Japan overnight saw the June
composite index of leading economic indicators fall 1.7 points to 91.2 in June. Traders await the release of April â€“ June
gross domestic product data next week with most economists expecting a
contraction in growth. Most traders
expect Bank of Japanâ€™s Policy Board will keep the overnight call rate unchanged
at 0.50% for the foreseeable future. Dealers await further details about the
Fukuda governmentâ€™s likely supplementary budget. The Nikkei 225 stock index gained 2.63% to
close at ÂĄ13,254.89. Dollar bids are cited
around the ÂĄ106.40 level. The euro moved higher vis-Ă -vis the yen
as the single currency tested offers around the ÂĄ168.45 level and was supported
around the ÂĄ167.30 level. The British pound and Swiss franc moved
higher vis-Ă -vis the yen as the crosses tested offers around the ÂĄ212.50
and ÂĄ103.15 levels, respectively. The Chinese yuan appreciated vis-Ă -vis
the U.S. dollar as the greenback closed at CNY 6.8482 in the over-the-counter
market, down from CNY 6.8556. A government official reported Chinaâ€™s
consumer price inflation growth will likely be 5.5% in Q3, up from 4.5% in Q4.
The British pound weakened
vis-Ă -vis the U.S. dollar today as cable tested bids around the US$ 1.9465
level and was capped around the $1.9595 level.
reached its lowest level since 16 June. Data
released in the U.K.
today today saw Nationwide July consumer confidence recede to its lowest level
since at least May 2004, printing at +51.
Also, the BRCâ€™s July shop price index was up 3.2% y/y. Most traders expect Bank of Englandâ€™s
Monetary Policy Committee will keep its overnight call rate unchanged at 5.00%
tomorrow. Most recent economic data have been quite weak yet inflation remains
elevated so the minutes from tomorrowâ€™s meeting will be scrutinized in a couple
of weeks. Other data released today saw
REC permanent staff placements decline to 44.1 in July from 48.2 in June. NIESR reported its sees U.K. GDP growth
slowing to 0.1% in the three months to July.
The U.K. media is
reporting Chancellor of the Exchequer Darling may freeze a stamp duty to
support the U.K.
housing market. Cable bids are cited
around the $1.9140 level. The euro moved higher vis-Ă -vis the
British pound as the single currency tested offers around the â‚¤0.7925 level and
was supported around the â‚¤0.7900 figure.
The Swiss franc depreciated vis-Ă -vis the U.S. dollar today as the
greenback tested offers around the CHF 1.0610 level and was supported around
the CHF 1.0500 figure. The pair reached
its highest level since 8 May. U.S.
dollar offers are cited around the CHF 1.0760 level. The
euro moved higher vis-Ă -vis the Swiss franc as the single currency tested
offers around the CHF 1.6345 level while the
British pound came off vis-Ă -vis the Swiss franc and tested bids around the
CHF 2.0545 level.
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