Monday October 20, 2008 - 14:13:54 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (20 October 2008)
The euro depreciated vis-√†-vis the U.S.
dollar today as the single currency
tested bids around the US$ 1.3330 level and was capped around the $1.3530
level. The common currency failed to
sustain earlier intraday gains and moved to the downside as U.S. equity
markets moved positively out of the open.
The German government approved strict conditions for the appropriation
of its ‚ā¨500 billion rescue package designed to bolster the German banking
system. European Central Bank member Stark reported
‚ÄúWe are seeing that due to the weakening in growth and the probability of very
flat growth in 2009, the inflation rate will also probably fall somewhat more
strongly than we had earlier expected.‚ÄĚ
ECB member Nowotny reported the ECB‚Äôs recent 50bps rate cut has not made
credit cheaper while ECB member Provopoulos noted current measures being
undertaken by central banks and governments will ease the current credit
crisis. ECB member Tumpel-Gugerell warned the ECB‚Äôs GDP and CPI growth
forecasts were likely to change in December.
Many economists now believe the eurozone could experience economic
growth near zero per cent through the second half of 2009. In
U.S. news, the Bush administration announced it will hold a summit of
global leaders to discuss the global economic crisis. Euro bids are cited around the US$ 1.3320
The yen appreciated vis-√†-vis the U.S. dollar today as the
greenback tested bids around the ¬•101.40 level and was capped around the ¬•102.40
level. Technically, today‚Äôs intraday low was right
around the 61.8% retracement of the move from ¬•95.70 to ¬•110.65. The Japanese government reduced its
assessment of the economy overnight and said ‚ÄúThere is a risk that the
situation surrounding the U.S.
economy will get worse due to the credit crisis. The risk of the European economy falling into
recession is also growing.‚ÄĚ Similarly, Bank of Japan lowered its assessment of
the economy, reporting ‚ÄúWhile there are some regional differences, overall
economic growth has been sluggish mainly because of high energy costs and
weaker export growth.‚ÄĚ BoJ Governor
Shirakawa reported ‚ÄúTensions are heightening in global financial markets and
downside risks exist for the world economy.‚ÄĚ
The Nikkei 225 stock index gained 3.59% to close at ¬•9,005.39. U.S. dollar offers are cited around the ¬•104.15
level. The euro moved lower vis-√†-vis the yen as the single currency
tested bids around the ¬•135.20 level and was capped around the ¬•138.55
level. The British pound and Swiss franc came off vis-√†-vis the yen as the
crosses tested bids around the ¬•174.60 and ¬•88.50 levels, respectively. The
Chinese yuan appreciated vis-√†-vis the U.S. dollar as the greenback closed
at CNY 6.8299 in the over-the-counter market, down from CNY 6.8340. Data released in China overnight saw Q3 GDP up 9.0%
y/y while economic growth was up 9.9% y/y between January and September. Also, September CPI was up 4.6% y/y and
September retail sales were up 23.2% y/y.
Additionally, September industrial value-added output was up 11.4% y/y.
British pound depreciated vis-√†-vis the U.S. dollar today as cable tested
bids around the US$ 1.7215 level and was capped around the $1.7515 level. Technically, today‚Äôs intraday high was right
around the 38.2% retracement of the move from $1.8665 to $1.6790 and today‚Äôs
intraday low was right around the 23.6% retracement of the same range. Data released in the U.K. today
printed a grim economic picture. First,
public sector net debt between April and September stood at ‚ā§37.59 billion, up
from ‚ā§21.46 billion the same period in 2007.
This also means the U.K.
budget deficit reached its largest level in 60 years in the six months to
September and it is likely that the previous full-year deficit forecast of ‚ā§43
billion will be too optimistic. Second,
the public sector net cash requirement in September was ‚ā§12.646 billion, up
from ‚ā§8.719 billion in September 2007 and a record for the month of
September. Third, Rightmove October
house prices were off 4.9% y/y. Cable
bids are seen around the $1.7115 level. The euro moved lower vis-√†-vis the
British pound as the single currency tested bids around the ‚ā§0.7690 level and
was capped around the ‚ā§0.7775 level.
franc came off vis-√†-vis the U.S. dollar today as the greenback tested
offers around the CHF 1.1460 level and was supported around the CHF 1.1320
level. Swiss National Bank reported it
would allot up to ‚ā¨10 billion through its euro-Swiss franc swap facility. Some traders believe Swiss National Bank will
ease monetary policy in December. U.S.
dollar offers are cited around the CHF 1.1610 level. The
euro and British pound moved higher vis-√†-vis the Swiss franc as the
crosses tested offers around the CHF 1.5340 and CHF 1.9905 levels,
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