Thursday October 2, 2008 - 17:01:25 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (2 October 2008)
The euro fell sharply vis-Ã -vis the U.S.
dollar today as the single currency
tested bids around the US$ 1.3745 level and was capped around the $1.4030
level. The common currency reached its
lowest level since September 2007 as traders reacted to news that the U.S.
Senate approved a US$ 700 billion to bail out the troubled U.S. financial
system. A similar vote could come in the U.S. House of Representatives tonight
or tomorrow. European Union officials
rejected talk of an EU bailout plan saying there was no need for one. Several EU leaders will convene in Paris on Saturday. Data released in the U.S. today saw
August factory orders fall 4%m the sharpest contraction since October 2006,
while the ex-transportation component was off 3.3% and non-defense, ex-aircraft
capital orders were off 2.4%. Other data
saw weekly initial jobless claims rise 1,000 to 497,000 while continuing
jobless claims rose 48,000 to 3.591 million.
interest rates futures are discounting about a 70% chance the Federal Reserve
will reduce interest rates by 50bps later this month. The Wall Street Journal reported Fed
officials are contemplating a rate cut even if the bailout package passes
Congress. As expected, the European
Central Bank kept its main refinancing rate target unchanged at 4.25% today but
many dealers believe the ECB will soon lower rates. Trichet reported inflation pressures have
lessened but remain an economic threat.
Data released in the eurozone today saw EMU-15 August producer price
inflation moderate. Three-month interbank rates hit a yearly high at 5.355%
today, evidencing the ongoing strains in the money market. Euro bids are cited around the US$ 1.3320
The yen appreciated
vis-Ã -vis the U.S. dollar today as the greenback tested bids around the
Â¥105.10 level and was capped around the Â¥106.30 level. Data released in Japan overnight saw the September
monetary base climb 0.9% y/y. Prime Minister Aso said the government will work
closely with Bank of Japan to maintain financial stability. The Nikkei 225 stock index lost 1.88% to
close at Â¥11,154.76. U.S. dollar bids
are cited around the Â¥102.45 level. The euro came off vis-Ã -vis the yen as
the single currency tested bids around the Â¥144.85 level and was capped around
the Â¥148.70 level. The British pound and
Swiss franc moved lower vis-Ã -vis the yen as the crosses tested bids around
the Â¥184.80 and Â¥92.30 levels, respectively.
The British pound came off vis-Ã -vis the U.S. dollar today as cable
tested bids around the US$ 1.7550 level and was capped around the $1.7725
level. Data released in the U.K.
today saw Nationwide house prices register their largest decline in seventeen
years, off 1.7% m/m in September. Bank
of Englandâ€™s quarterly credit conditions survey worsened again in Q3 and
confirmed that British banks are likely to tighten credit to households and
businesses further. Also, the September
U.K. construction sector shrank and ISD pay deals rose in the three months to
August. Cable bids are cited around the
$1.7420 level. The
euro slumped vis-Ã -vis the British pound as the single currency tested bids
around the â‚¤0.7825 level and was capped
around the â‚¤0.7920 level.
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