Friday September 26, 2008 - 18:26:22 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (26 September 2008)
The euro lost marginal ground vis-√†-vis
the U.S. dollar today as the single
currency tested bids around the US$ 1.4555 level and was capped around the
$1.4675 level. Technically, today‚Äôs
intraday high was right around the 38.2% retracement of the move from $1.2475
to $1.6040. It appears that U.S.
congressional officials have not completely agreed on the US$ 700 billion
rescue package to transfer under-performing assets from banks‚Äô balance sheets
and this has limited the U.S. dollar‚Äôs upside.
Most traders expect some semblance of a final deal will be in place by
Monday. Data released in the U.S. today saw
Q2 GDP downwardly revised to an annualized 2.8% rate from the original 3.3%
estimate. Following this week‚Äôs weak
durable goods and home sales data, it is quite possible that Q3 economic growth
slowed to near 0%. Other data released
in the U.K.
today saw final September University of Michigan consumer sentiment improve to
70.3 in September from 63.0 in August.
Inflation expectations softened to 4.3% from 4.8%. The Federal Reserve expanded its temporary
swap facility with the European Central Bank by US$ 10 billion. Dallas Federal
Reserve Bank President Fisher said ‚ÄúIn this context, inflation concerns appear to have fallen
to the back burner. The case for a rate
rise seemed both less urgent and potentially disruptive given the clear and
present danger of an imploding financial system and the considerable downside
risks to the economy should that implosion occur.‚ÄĚ U.S. bank Washington Mutual became the
largest U.S. bank failure ever and JP Morgan Chase Bank purchased its deposits.
ECB sources said the ECB is unlikely to
coordinate concerted rate cuts with other global central banks. ECB‚Äôs Papademos reported the economic outlook
is uncertain and reiterated price risks are to the upside. 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
¬•105.00 figure and was capped around the ¬•106.55 level. Traders increased long exposure to the yen as
news emerged that U.S.
officials have not yet completed the details of the US$ 700 billion bailout
plan. The collapse of U.S. bank
Washington Mutual also decreased appetite for overseas assets, leading to
additional yen gains. New finance minister Nakagawa said volatile
exchange rates are ‚Äúnot a plus at all‚ÄĚ for the global economy. He added ‚ÄúI have to be careful about the use of the term 'foreign-exchange
intervention. From the broad perspective, it's necessary to frequently discuss
(policies) with other countries and take action quickly.‚ÄĚ Data released in Japan overnight saw August core
annual consumer price inflation print at 2.4%, consistent with expectations and
the same as July‚Äôs rate. Tokyo-area core CPI rose 1.7% in September. The Nikkei 225 stock index lost 0.94%
to close at ¬•11,893.16. U.S. dollar bids
are cited around the ¬•102.45 level. The euro moved higher vis-√†-vis the yen
as the single currency tested bids around the ¬•153.45 level and was capped
around the ¬•155.80 level. The British pound and Swiss franc came off vis-√†-vis
the yen as the crosses tested bids around the ¬•193.15 and ¬•96.60 levels,
respectively. The Chinese yuan weakened vis-√†-vis the U.S. dollar as the
greenback closed at CNY 6.8485 in the over-the-counter market, up from CNY
6.8170. Bank of China reported Chinese
GDP growth will remain in the single digits in 2008 and 2009.
The British pound gained ground
vis-√†-vis the U.S. dollar today as cable tested offers around the US$
1.8465 level and was supported around the $1.8335 level. Data released in the U.K. today saw
Land Registry August house prices fall 1.9% m/m and 4.6% y/y. Bank of England announced it will lend US$ 30
billion in one-week funds and add ‚ā§40 billion on Monday. Cable bids are cited around the $1.8150
level. The euro came off vis-√†-vis the British pound as the single
currency tested bids around the ‚ā§0.7920 level and was capped around the ‚ā§0.7965
The Swiss franc appreciated vis-√†-vis the U.S. dollar today as the
greenback tested bids around the CHF 1.0830 level and was capped around the CHF
1.0910 level. The Federal Reserve
increased its swap line with Swiss National Bank by US$ 3 billion. Data released in Switzerland today saw the September
KOF indicator fall to 0.62, a five-year low.
U.S. dollar offers are cited around the CHF 1.1430 level. The
euro and British pound moved lower vis-√†-vis the Swiss franc as the crosses
tested bids around the CHF 1.5860 and CHF 1.9945 levels, respectively.
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