Tuesday November 30, 2004 - 16:34:12 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (30 November 2004)
The euro roared higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3330 level after testing bids around the $1.3235 level, the 100-hour moving average. Traders are paying close attention to testimony from European Central Bank President Trichet. He reiterated his recent comments that the euro’s moves are overextended and traders want to see if there is any indication the ECB may be tightening monetary policy in the near future. The ECB’s Governing Council is not expected to alter monetary policy when it convenes on Thursday. Data released in the eurozone today saw poor showings in the French business confidence index and consumer confidence index. French unemployment decreased by 5,000 in October but the unemployment rate remained steady at 9.9%. Data released in the U.S. today saw an upward revision to Q3 GDP data to 3.9% from the preliminary 3.7%. Strong consumer spending contributed to this upswing and economists await holiday shopping and sales data to see how robust final private demand is in Q4. Exports and business investments also propelled the number higher. Other data released in the U.S. today was not as solid with the Chicago PMI headline number falling to 65.2 from 68.5 in October. Also, consumer confidence dropped to 90.5 in November from 92.9 in October while the expectations index fell to 87.4. The prices paid component of the PMI data were at a multi-month high, however, and this will focus attention back on the Fed ahead of next month’s final FOMC meeting of the year. Euro bids are seen around the US$ 1.3180 level.
The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥102.40 level after failing to get above the ¥103.40 level during Australasian dealing. The move to intraday lows was precipitated by the weaker-than-expected U.S. economic data. Data released in Japan overnight saw October unemployment climb to 4.7%, the first rise in three months. Also, industrial production fell 1.6% in October, considerably weaker than the 0.2% reading many expected. MoF indicated it did not intervene between 28 October and 26 November and it unlikely MoF has intervened since then. Finance minister Tanigaki verbally intervened overnight, saying the yen’s recent rise “has been too rapid.” Speaking about Japan’s economic malaise, Tanigaki added his “basic view is Japan's economy is in an adjustment phase as it climbs upward. The rise in corporate earnings is gradually spreading to personal consumption and household spending.” The Nikkei 225 stock index came off 0.72% to close at ¥10,899.25. Dollar offers are seen around the ¥103.00 figure. The euro came off marginally vis-à-vis the yen today as the single currency tested bids around the ¥136.35 level and could not get through the ¥136.95 level. In Chinese news, Bank of England Governor King said there was “no pressure at all on China” to revalue the RMB at the recent G20 meeting.
The British pound raced to a fresh multi-month high vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.9135 level, just below its 2004 high. Nationwide reported that house prices rose 1.0% m/m, bucking the trend lower reported by other house price indices recently. Also, the CBI distributive trades survey saw an improvement over October’s sales activity but the outlook for December sales activity is relatively weak. Additionally, Bank of England Chief Economist Bean spoke today and suggested U.K. interest rates could still rise even f U.K. house prices decline sharply. MPC’s Lambert said he expects month-to-month house price movements to be erratic. BoE Governor King spoke about sterling today saying sterling’s decline on a trade-weighted basis will improve the trde deficit. King said the pound “doesn’t pose major competitive problems now.” Cable bids are cited around the $1.9025 level. The euro came off sharply vis-à-vis the British pound today as the single currency tested bids around the £0.6950 level and capped around the £0.7025 level.
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