Thursday August 28, 2008 - 19:16:13 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (28 August 2008)
The euro depreciated vis-√†-vis the U.S.
dollar today as the single currency
tested bids around the US$ 1.4670 level and was capped around the $1.4810
level. Data released in the U.S. today saw
Q2 gross domestic product growth of an annualized 3.3%, above the 2.7%
forecast. The gains were attributable to
exports growth and increased consumer spending.
Also, the core personal consumption expenditures price index was
unchanged at 2.1%, still above the Federal Reserve‚Äôs implied upper comfort zone
of 2.0%. Overall inflation remained
unchanged at 4.2% in Q2. Other data saw
weekly jobless claims fall 10,000 to 425,000 while continuing jobless claims
expanded 64,000 to 3.423 million, its highest level since November 2003. In
eurozone news, the EMU-15 July M3 money supply expanded at 9.3% and German
August unemployment fell 40,000 while French unemployment was up +0.1% in
July. The pair is still reacting to
tropical storm Gustav in the Gulf of Mexico. The storm is said to be gathering strength
and could impact U.S.
oil installations over the coming days. Euro
bids are cited around the US$ 1.4315 level.
The yen depreciated
vis-√†-vis the U.S. dollar today as the greenback tested offers around the
¬•109.70 level and was supported around the ¬•108.75 level. Bank of Japan Policy Board member Suda
reported the central bank should move rates once it is sure about the economy,
adding ‚Äúinflation should be directly confronted.‚ÄĚ Traders were stunned by a report in Nikkei
that claims the U.S., Japan, and Europe were planning a concerted
intervention to support the U.S. dollar in March when U.S. investment banking giant Bear
Stearns collapsed. The ‚Äúaggressive‚ÄĚ
contingency plan was reportedly drawn up over the weekend of 15-16 March but
was apparently never enacted because JPMorgan Chase Bank emerged as a buyer of
Bear Stearns and the greenback stabilized.
These three currency areas have not overly intervened in a concerted
manner since September 2000 and Japan
last overly intervened in March 2004. In
the plan, Japan
would have supplied yen through currency swaps and bought the yen and euro
would have been sold. The Nikkei 225
stock index gained 0.12% to close at ¬•12,768.25. Dollar bids are cited around the ¬•106.40
level. The euro weakened vis-√†-vis the yen as the single currency tested
bids around the ¬•160.70 level and was capped around the ¬•162.00 figure. The British pound and Swiss franc came off
vis-√†-vis the yen as the crosses tested bids around the ¬•199.80 and ¬•99.55
levels, respectively. The Chinese yuan
appreciated vis-√†-vis the U.S. dollar as the greenback closed at CNY 6.8275
in the over-the-counter market, down from CNY 6.8380. People‚Äôs Bank of China reported that a top
priority for the rest of the year is curbing inflation.
The British pound depreciated
vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.8400
figure and was capped around the $ 1.8240 level. Cable reached its lowest level in about two
years on account of weak U.K.
economic data. First, Nationwide
house prices were off 10.5% y/y in August.
Second, the CBI‚Äôs monthly distributive trades survey‚Äôs retail sales
balance worsened to -46 from -36 in July, its weakest level since July
1983. These data underscore the fragile
nature of final private demand in the U.K. Bank of England Monetary Policy Committee
member Blanchflower ‚Äď an archdove ‚Äď warned two million U.K. residents may be out of work by year-end
and said large interest rate cuts are now needed to prevent the U.K. economy from
softening further. Cable bids are cited
around the $1.8015 level. The euro gained ground vis-√†-vis the
British pound as the single currency tested offers around the ‚ā§0.8060 level and
was supported around the ‚ā§0.8015 level.
The Swiss franc depreciated vis-√†-vis the U.S. dollar today as the
greenback tested offers around the CHF 1.1010 level and was supported around
the CHF 1.0885 level. Swiss National
Bank Vice Chairman Hildebrand reported Swiss banks need to improve their
capital and liquidity to contend with future crises. Data released in Switzerland
today saw Q2 non-farm payrolls up 2.4% y/y.
U.S. dollar offers are cited around the CHF 1.1135 level. The
euro and British pound came off vis-√†-vis the Swiss franc as the crosses
tested bids around the CHF 1.6105 and CHF 1.9990 levels, respectively.
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