Friday August 8, 2008 - 15:29:26 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (8 August 2008)
The euro depreciated sharply vis-Ã -vis
the U.S. dollar today as the single
currency tested bids around the US$ 1.5005 level and was capped around the
$1.5335 level. The common currency
reached its lowest level since 27 February and has now fallen ten big figures
in the past month. A massive unwinding
of short dollar positions in the foreign exchange and commodities markets led
to the euroâ€™s decline, as did growing speculation that eurozone interest rates
will not support EMU-15 economic growth.
European Central Bank Wellink warned that if inflation rises above 5%,
it will be difficult for monetary policy to have an effect. The ECBâ€™s July Bank Lending Survey confirmed
banks tightened lending standards in Q2 on account of the weakening economic
outlook. In U.S. news, Q2 non-farm
productivity grew an annualized 2.2% in Q2, less than the 2.7% gain that was
expected, while unit labour costs were up 1.3%, down from the 2.5% increase in
Q1. Additionally, June wholesale
inventories were up 1.1% with wholesale sales up 2.8%. Euro bids are cited around the US$ 1.5175
The yen depreciated
vis-Ã -vis the U.S. dollar today as the greenback tested offers around the
Â¥110.25 level and was supported around the Â¥109.30 level. The pair reached its highest level since 2
January as traders continued to unwind short U.S. dollar positions en
masse. Data released in Japan
overnight saw the July economy watchersâ€™ survey recede to its lowest level
ever, printing at 30.8. Also, July corporate failures were up 6.2% m/m and
23.6% y/y and July bank lending was up 2.0%.
Three-month euroyen futures jumped to a four-month high of 99.240,
signaling expectations that Bank of Japan will not increase interest rates
anytime soon and could move to lower rates.
In contrast, swap contracts on the overnight call rate indicate traders
believe thereâ€™s about a 5% chance the BoJ could lift the overnight call rate
from 0.50% before the end of the current fiscal year to March 2009. Other data released overnight saw July bank
lending up 2.0%. The Nikkei 225 stock
index climbed 0.33% to close at Â¥13,168.41.
Dollar bids are cited around the Â¥106.40 level. The
euro moved lower vis-Ã -vis the yen as the single currency tested bids
around the Â¥165.30 level and was capped around the Â¥167.80 level. The British pound and Swiss franc came off
vis-Ã -vis the yen as the crosses tested bids around the Â¥210.80 and Â¥101.75
levels, respectively. The Chinese yuan appreciated vis-Ã -vis
the U.S. dollar as the greenback closed at CNY 6.8588 in the over-the-counter
market, down from CNY 6.8614. A
government think-tank reported Q3 GDP growth may print around 10.2% y/y with
CPI up 6.6% y/y.
The British pound weakened
vis-Ã -vis the U.S. dollar today as cable tested bids around the US$ 1.9145
level and was capped around the $1.9435 level.
Technically, todayâ€™s intraday low was right around the 76.4% retracement
of the move from $1.8515 to $2.1159. Data released in the U.K. today saw CML mortgage
repossessions reach its highest level in twelve years, jumping to 18,900. Cable
bids are cited around the $1.8615 level.
The euro came off vis-Ã -vis
the British pound as the single currency tested bids around the â‚¤0.7830 level
and was capped around the â‚¤0.7895 level.
The Swiss franc depreciated vis-Ã -vis the U.S. dollar today as the
greenback tested offers around the CHF 1.0835 level and was supported around
the CHF 1.0605 level. The pair reached
its highest level since 26 February.
Data released in Switzerland
overnight saw the July unemployment rate stand at 2.3%. U.S. dollar offers are cited around the CHF
1.1135 level. The euro came off vis-Ã -vis the Swiss franc as the single currency
tested offers around the CHF 1.6295 level while the British pound moved higher vis-Ã -vis the Swiss franc as
sterling tested offers around the CHF 2.0765 level.
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