Tuesday August 26, 2008 - 16:27:47 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (26 August 2008)
The euro moved sharply lower vis-Ã -vis
the U.S. dollar today as the single
currency tested bids around the US$ 1.4570 level and was capped around the
$1.4760 level. The common currency
reached its lowest level since 14 February as traders continued to scale back
their expectations concerning regarding eurozone interest rates, especially as
EMU-15 economic data continue to weaken.
Data released in the U.S.
today saw July new home sales climb 2.4% to an annualized 515,000 rate,
following yesterdayâ€™s existing home sales data.
Second, the August Richmond Fed manufacturing index remained steady at
-16. Third, the August consumer
confidence index climbed to 56.9 from 51.9.
Many recent U.S.
economic data have been improving and stabilizing in part, a stark contrast to
what is happening in the eurozone. Other
data saw the S&P/ Case-Shiller
home price index register a record 15.4% decline y/y in Q2, worse than the
14.2% decline in Q1. In eurozone news, the German Ifo
business climate index fell to 94.8 in July from 97.5, a three-year low. Also, the September GfK consumer confidence
index declined to a five-year low with the consumer climate index falling to
1.5 from a downwardly revised 1.9 in August.
The weaker eurozone data suggest the European Central Bank may be forced
to reduce eurozone interest rates sooner rather than later. Other data saw final Q2 gross domestic
product off 0.5% q/q, its first decline in four years. Euro bids are cited around the US$ 1.4315
The yen appreciated
vis-Ã -vis the U.S. dollar today as the greenback tested bids around the
Â¥109.15 level and was capped around the Â¥109.95 level. Technically, todayâ€™s intraday high was right
around the 50% retracement of the move from Â¥124.15 to Â¥95.70. The media reported that negotiations
economic stimulus package are delayed on account of whether or not a temporary
cut in income tax will be included.
Economy minister Yosano have not yet decided the size and funding of the
fiscal stimulus. The August small
business confidence index will be released overnight. The Nikkei 225 stock index lost 0.78% to
close at Â¥12,778.71. Dollar bids are cited
around the Â¥106.40 level. The euro came off vis-Ã -vis the yen as
the single currency tested bids around the Â¥159.95 level and was capped around
the Â¥161.50 level. The British pound and Swiss franc weakened vis-Ã -vis the yen as the
crosses tested bids around the Â¥200.65 and Â¥99.00 levels, respectively. The
Chinese yuan appreciated vis-Ã -vis the U.S. dollar as the greenback closed
at CNY 6.8540 level in the over-the-counter level, down from CNY 6.8481. The Chinese government is said to be
considering up to CNY 300-400 billion in an economic stimulus package.
The British pound depreciated
vis-Ã -vis the U.S. dollar today as cable tested bids around the US$ 1.8325
level and was capped around the $ 1.8530 level.
Technically, todayâ€™s intraday low was just above the 38.2% retracement
of the move from $1.3680 to $2.1160.
Data released in the U.K.
today saw BBA mortgage approvals rise marginally to 22,448 in July but were off
65% y/y while net mortgage lending was steady at â‚¤4.3 billion, off 22.7% y/y. These data underscore the fragile nature of
housing sector. A Bank of England paper
released today concludes that companies are loath to pass on cost increases
when the U.K.
economy is slowing. Cable bids are cited
around the $1.8015 level. The euro gained ground vis-Ã -vis the
British pound as the single currency tested offers around the â‚¤0.7980 level and
was supported around the â‚¤0.7940 level.
The Swiss franc depreciated vis-Ã -vis the U.S. dollar today as the
greenback tested bids around the CHF 1.0955 level and was capped around the CHF
1.1085 level. The pair reached its
highest level since 14 February. Most
traders expect Swiss National Bank may reduce interest rates later in the
year. U.S. dollar offers are cited
around the CHF 1.1135 level. The euro and British pound came off
vis-Ã -vis the Swiss franc as the crosses tested bids around the CHF 1.6115 and
CHF 2.0215 levels, respectively.
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