Friday December 3, 2004 - 14:47:40 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (3 December 2004)
The euro galloped higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3385 level after the release of a much weaker-than-expected November U.S. non-farm payrolls number that only saw 112,000 jobs created last month. The unemployment rate came in at 5.4%. October NFPs were downwardly revised to 303,000 from 337,000 while September NFPs were downwardly revised to 119,000. Estimates were calling for new job creation between 190,000 and 230,000 last month thus these data were disappointing for dollar bulls. It is noteworthy, however, that the dollar quickly clawed back a lot of the ground it ceded immediately following the number. This begets the technical question of whether or not the dollar’s downturn is now exhausted. German sources verbally intervened during European dealing today, saying Berlin is “in contact” with G8 partners and called for “more flexibility.” These comments precede Chancellor Schroeder’s upcoming trip to China and Japan. The same sources, however, said intervention should only take place in “exceptional circumstances.” Data released in the eurozone today saw a weak EMU-12 services PMI report with Germany’s services PMI falling to 51.3 from 52.2. EMU-12 retail sales data, however, improved to 0.7% - the first positive number in four months. Euro bids are cited around the $1.3320 level.
The yen gained a small amount of ground vis-à-vis the U.S. dollar before November non-farm payrolls data were released in the U.S. today as the greenback fell to the ¥102.95 level after peaking around the ¥103.60 level during European dealing. The pair shook off stronger-than-expected capital investment data in Japan during the July-September quarter that evidenced 14.4% gains. These data could see the Japanese government upwardly revised the previously-reported weak GDP data for that quarter. Finance minister Tanigaki repeated his verbal intervention mantra today and added exchange rates do not reflect fundamentals. Tanigaki verbally intervened. New Bank of Japan Policy Board member Mizuno questioned the central bank’s ultra-easy quantitative easing credit policy but no change in policy is seen until 2005 at the earliest. Data released by the Federal Reserve last night saw holdings of U.S. Treasury and agency debt held by overseas banks climb by ¥7.080 billion in the week ending 1 December. The Nikkei 225 stock index climbed 0.9% to close at ¥11,074.89, its first close above the ¥11,000 figure since 19 November. Dollar offers are seen around the ¥103.65 level. The euro gained a small amount of ground vis-à-vis the yen today as the single currency tested offers around the ¥137.75 level and was supported around the ¥136.70 level.
The British pound moved higher vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.9360 level after testing bids around the $1.9190 level. Cable spiked from the $1.9280 level to the $1.9345 level after the release of the weaker-than-expected U.S. NFP data. Chancellor of the Exchequer Brown verbally intervened today, citing “exchange rate imbalances between the euro and the dollar.” Yesterday, Brown gave a pre-Budget speech that many criticized as being too optimistic with regard to 2005 growth forecasts. Cable bids are cited around the $1.9290 level. The euro gained a small amount of ground vis-à-vis the British pound today as the single currency tested offers around the ₤0.6915 level and was supported around the ₤0.6890 level.
The Swiss franc resumed its march higher vis-à-vis the U.S. dollar today as the greenback tested bids just below the CHF 1.1400 figure today. The pair fell from the CHF 1.1480 level to the CHF 1.1415 level in the aftermath of the November U.S. non-farm payrolls data. Traders are growing increasingly skeptical that Swiss National Bank will tighten monetary policy when policymakers convene on 16 December as this could precipitate more franc buying. Dollar offers are seen around the CHF 1.1525 level. The euro came off vis-à-vis the Swiss franc today as the single currency tested bids around the CHF 1.5235 level.
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