Thursday September 11, 2008 - 15:55:32 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (11 September 2008)
The euro came off vis-√†-vis the U.S.
dollar today as the single currency
tested bids around the US$ 1.3880 level and was capped around the $1.3995
level. The common currency reached its
lowest level since 18 September as traders reduced exposure to currencies with
positive interest rate differentials following Reserve Bank of New Zealand‚Äôs
larger-than-expected rate cut overnight.
Data released in the U.S.
today saw the July trade balance balloon to US$ 62.2 billion, the largest
deficit since March 2007. This was much worse-than-expected and it remains to
be seen if the U.S.
imported enough investment capital in July to cover its massive current account
and trade deficits that month. Traders
are closely watching the shares of U.S. investment banking giant
Lehman Brothers. After trading above $17
on Monday, the shares are now trading below $5.00 and traders are waiting to
see if the financial institution will be taken over or bailed out by federal
regulators. Other data released in the U.S. today saw
August import prices off a record 3.7% m/m and up 16% y/y with food prices up
15.9% y/y, the largest rate since at least September 1977. Additionally, weekly initial jobless claims
fell 6,000 to 445,000 while continuing jobless claims jumped 122,000 to 3.525
million, the highest level since October 2003.
In eurozone news, European
Central Bank member Noyer said eurozone banks ‚Äúremain robust and well equipped
to withstand shocks.‚ÄĚ ECB member Papademos hawkishly reported ‚ÄúThere are
indications that broad based second-round effects are materializing, and it is
essential that broader-based second-round effects are avoided.‚ÄĚ Similarly, ECB‚Äôs Mersch reported ‚ÄúThe recent
fall in oil prices does not rule out that the pressures from past rises could
still unleash a 'wage-price' spiral which would harm jobs and competitiveness.‚ÄĚ
IfW institute reduced its 2008 German GDP growth forecast to 1.9%. Euro bids are cited around the US$ 1.3840
The yen appreciated
vis-√†-vis the U.S. dollar today as the greenback tested bids around the
¬•106.20 level and was capped around the ¬•107.85 level. Stops were reached below the ¬•106.60 level,
representing the 38.2% retracement of the move from ¬•124.15 to ¬•95.70. The yen gained ground across the board after
Reserve Bank of New Zealand
reduced interest rates by a larger-than-expected 50bps to 7.50%, defying
expectations of a 25bps reduction.
RBNZ‚Äôs move caused some short yen carry trades to be unwound as yield
differentials between Japanese interest rates and overseas interest rates
narrowed. Data released in Japan
overnight saw July core private-sector machinery orders fall 3.9% m/m, the
latest evidence that manufacturers are trimming their capital expenditures
budgets. The Nikkei 225 stock index lost
1.98% to close at ¬•12,102.50. U.S. dollar bids are cited around the ¬•102.45
level. The euro moved lower
vis-√†-vis the yen as the single currency tested bids around the ¬•147.50 level
and was capped around the ¬•150.75 level. The
British pound and Swiss franc weakened vis-√†-vis the yen as the crosses
tested bids around the ¬•185.95 and ¬•93.05 levels, respectively. The
Chinese yuan depreciated vis-√†-vis the U.S. dollar as the greenback closed
at CNY 6.8465 in the over-the-counter market, up from CNY 6.8385.
The British pound moved lower
vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.7440
level and was capped around the $1.7590 level.
Technically, today‚Äôs intraday low was right around the 50% retracement
of the move from $1.3680 to $2.1160.
Bank of England
Governor King called on the government to keep fiscal spending in line after
Chancellor of the Exchequer Darling said there is scope for the government to
increase spending. Sterling moved lower after
BoE Monetary Policy Committee member Blanchflower said he anticipates multiple
months of 60,000-plus increases in unemployment and a deepening of the U.K.‚Äôs economic
pullback. BoE also released its
quarterly public inflation expectations survey and the public‚Äôs inflation
expectations over the next twelve months increased to 4.4% from 4.3% in
May. BoE will release more details to
provide additional liquidity next week. Cable
bids are cited around the $1.6540 level.
The euro moved lower
vis-√†-vis the British pound as the single currency tested bids around the
‚ā§0.7920 level and was capped around the ‚ā§0.7995 level.
The Swiss franc depreciated vis-√†-vis the U.S. dollar today as the
greenback tested offers around the CHF 1.1415 level and was supported around
the CHF 1.1335 level. Swiss National
Bank is expected to keep interest rates unchanged next week. U.S. dollar offers are cited around the CHF
1.1390 level. The euro and British pound moved lower vis-√†-vis the Swiss franc as
the crosses tested bids around the CHF 1.5840 and CHF 1.9885 levels, respectively.
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