Monday September 8, 2008 - 15:09:09 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (8 September 2008)
The euro depreciated vis-√†-vis the U.S.
dollar today as the single currency
tested bids around the US$ 1.4165 level and was capped around the $1.4425
level. The common currency reached its
lowest level since October 2007 as traders reacted to the U.S. government‚Äôs nationalization of U.S. government-sponsored enterprises Fannie Mae
and Freddie Mac, two entities that own or guarantee about half of the U.S.‚Äôs US$ 12
trillion in outstanding home mortgage debt.
The common currency initially moved sharply higher on the news when
Australasian dealing commenced but its intraday gains quickly evaporated. In the move, the U.S. Treasury is potentially
investing up to US$ 100 billion in each entity in an attempt to stabilize the U.S. home
financing market. Early reaction from U.S. equities
markets was positive as traders speculated the announcement could be the
catalyst the housing markets need to reverse course and address the ongoing
residential credit crunch that began in 2007.
San Francisco Fed President Yellen said the U.S. economy faces more mortgage
defaults, tighter credit conditions, and more downward activity on employment
and business activity. The Federal
Reserve is not expected to change interest rates when the Federal Open Market
Committee convenes on 16 September. In eurozone news, European Central Bank
member Stark acknowledged ‚Äúmost declines‚ÄĚ in oil and commodities prices and
warned global growth looks to be weaker.
Data released in the eurozone today saw Sentix EMU-15 sentiment decline
to a new five-year low. Euro bids are
cited around the US$ 1.3840 level.
The yen depreciated
vis-√†-vis the U.S. dollar today as the greenback tested offers around the
¬•109.05 level and was supported around the ¬•108.15 level. Technically, today‚Äôs intraday low was right
around the 76.4% retracement of the move from ¬•103.75 to ¬•110.65. The pair failed to sustain many of its
intraday gains scored after the U.S.
government‚Äôs bailouts of Fannie Mae and Freddie Mac were announced. The dollar had rocketed sharply higher on the
news on the premise that the short yen carry trade would be back in vogue as
traders would sell yen to seek yield in other markets where risk had been
mitigated by the U.S.
government‚Äôs moves. Bank of Japan
Governor Shirakawa ‚Äúhopes these measures will promote the stability of the
global financial system‚ÄĚ while finance minister Ibuki sees a ‚Äúpositive impact
on the world economy‚Ä¶because the dollar is a key international currency.‚ÄĚ Data released in Japan overnight saw August bank
lending up 2.0% while August service sector sentiment weakened to a seven-year
low. Also, August corporate failures
were off 10.0% m/m. The Nikkei 225 stock
index climbed 3.38% to close at ¬•12,624.46. Dollar bids are cited around the
¬•103.20 level. The euro moved higher vis-√†-vis the yen as the single currency
tested offers around the ¬•157.00 figure and was supported around the ¬•153.60
level. The British pound gained ground vis-√†-vis the yen as sterling
tested offers around the ¬•195.65 level while the Swiss franc moved lower vis-√†-vis the yen and tested bids
around the ¬•95.90 level. The Chinese yuan depreciated vis-√†-vis
the U.S. dollar as the greenback closed at CNY 6.8433 in the over-the-counter
market, up from CNY 6.8422. People‚Äôs
Bank of China Governor Zhou
said the U.S.
government‚Äôs takeover of Fannie Mae and Freddie Mac is a ‚Äúpositive‚ÄĚ
The British pound depreciated
vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.7565
level and was capped around the $1.7975 level.
Sterling moved higher in Australasian
dealing after the U.S.
government‚Äôs bailouts of Fannie Mae and Freddie Mac were announced but
relinquished its intraday gains. Data released in the U.K. today saw
August factory gate prices decline at their fastest rate since 1986 with output
prices off 0.6% m/m and up 9.7% y/y.
These data suggest wholesale price inflation could be moderating in what
would be a welcome development for Bank of England Monetary Policy Committee
members who must reconcile a slowing economy against heightened inflation. Cable bids are cited around the $1.7420
level. The euro moved lower vis-√†-vis the British pound as the single
currency tested bids around the ‚ā§0.8020 level and was capped around the ‚ā§0.8080
The Swiss franc depreciated vis-√†-vis the U.S. dollar today as the
greenback tested offers around the CHF 1.1315 level and was supported around
the CHF 1.1130 level. The pair reached
its lowest level since 2 January 2008.
The pair erased intraday gains after the U.S. nationalization of Fannie Mae
and Freddie Mac was announced. Data released in Switzerland today saw August
unemployment tick up to 2.4% from 2.3% in July. Swiss National Bank expects the
Swiss economy will expand 1.5% to 2.0% in 2008.
U.S. dollar offers are cited around the CHF 1.1390 level. The euro and British pound moved higher
vis-√†-vis the Swiss franc as the crosses tested bids around the CHF 1.5995 and
CHF 1.9845 levels, respectively.
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