Thursday August 7, 2008 - 18:31:24 GMT
Share This Story
GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (7 August 2008)
The euro weakened vis-√†-vis the U.S.
dollar today as the single currency
tested bids around the US$ 1.5315 level and was capped around the $1.5500
figure. The common currency came within
a few pips of establishing a new multi-month low dating to 8 May. There were two major reasons for the extension
of the euro‚Äôs recent losses. First,
traders were displeased with comments from European Central Bank President
Trichet following the central bank‚Äôs decision to keep interest rates unchanged
at 4.25%. Trichet remained hawkish in
his comments saying ‚ÄúIt has confirmed that annual inflation rates are likely to
remain well above levels consistent with price stability for a protracted
period of time and that risks to price stability over the medium term remain on
the upside.‚ÄĚ Trichet said recent inflation data have justified last month‚Äôs
rate hike. Dealers sold the euro on
these comments because recent economic data have deteriorated and traders
believe the ECB should be lowering rates to counter weaker economic growth.
Trichet said the eurozone‚Äôs economic fundamentals remain ‚Äúsound‚ÄĚ but
acknowledged GDP growth in Q3 will not be much above the pace seen in Q2. Second, U.S. housing data surprised traders
and may have signaled a possible bottom in the housing market there. Data released in the eurozone today saw
German industrial production rise 0.2% m/m and 4.1% y/y. In
U.S. news, weekly initial jobless claims rose 7,000 to 455,000, the highest
level since March 2002, while continuing jobless claims rose 31,000 to 3.311
million, the highest level since December 2003.
pending homes sales rose 5.3% in June, defying expectations of a decline. Euro bids are cited around the US$ 1.5175
The yen appreciated
vis-√†-vis the U.S. dollar today as the greenback tested bids around the
¬•109.10 level and was capped around the ¬•109.75 level. Technically, today‚Äôs intraday high was right
around the 50% retracement of the move from ¬•124.15 to ¬•95.70. As expected, the Japanese government
downgraded its economic assessment in its August monthly report on account of
weakening exports, industrial production, and employment. The government also removed the word
‚Äúrecovery‚ÄĚ from its assessment for the first time in 56 months and government
policymakers have suggested the economy is already in a recession. Data released in Japan overnight saw June machinery
orders off 2.6% m/m, less-than-forecast and the first decline in three
months. The Nikkei 225 stock index lost
0.98% to close at ¬•13,124.99. Dollar
bids are cited around the ¬•106.40 level.
The euro moved lower
vis-√†-vis the yen as the single currency tested bids around the ¬•167.75 level
and was capped around the ¬•169.45 level.
The British pound and Swiss franc
came off vis-√†-vis the yen as the crosses tested bids around the ¬•212.55
and ¬•103.00 levels, respectively. The
Chinese yuan weakened vis-√†-vis the U.S. dollar as the greenback closed at
CNY 6.8614 in the over-the-counter market, up from CNY 6.8482. China announced the most
significant change to its foreign exchange regulations since 1997 overnight.
The government loosened capital controls by permitting domestic companies to
hold foreign exchange income overseas and by allowing foreign companies to
issue securities in China.
The British pound weakened
vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.9420
level and was capped around the $1.9535 level.
The pair reached its lowest level since 13 June. As expected, Bank of England‚Äôs Monetary
Policy Committee kept its headline repo rate unchanged at 5.00%. BoE‚Äôs quarterly inflation report will be
released next week and policymakers will likely have a difficult time
reconciling elevated rates of inflation with slumping economic growth. Data
released in the U.K. today
house prices off 1.7% m/m and 8.8% y/y. Cable
bids are cited around the $1.9140 level. The
euro moved lower vis-√†-vis the British pound as the single currency tested
bids around the ‚ā§0.7880 level and was capped around the ‚ā§0.7935 level.
The Swiss franc came off vis-√†-vis the U.S. dollar today as the
greenback tested offers around the CHF 1.0635 level and was supported around
the CHF 1.0525 level. The pair reached
its highest level since 26 February. Swiss National Bank‚Äôs three-month Swiss
franc LIBOR target has remained unchanged at 2.75% since June. U.S. dollar offers are cited around the CHF
1.0760 level. The euro and British pound slumped vis-√†-vis the Swiss franc as the
crosses tested bids around the CHF 1.6275 and CHF 2.0560 levels, respectively.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."