Wednesday February 4, 2009 - 19:03:47 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (4 January 2009)
The euro lost
substantial ground vis-√†-vis the U.S. dollar today as the single currency
tested bids around the US$ 1.2810 level and was capped around the $1.3070 level. Traders reduced long exposure to the common
currency ahead of tomorrow‚Äôs European Central Bank meeting. Most dealers do not expect the ECB will
reduce interest rates this month and see March as the most likely time for the
next rate cut. Data released in the
eurozone today saw the January PMI services survey improve to 42.2 from 42.1 in
December while Germany‚Äôs
PMI services reading fell to 45.2 from 46.6 in December. Also, EMU-15 December retail sales were flat
m/m and off 1.6% y/y. In U.S. news, ADP data revealed private
employers shed 522,000 in January, down from the revised 659,000 tally in
December. These data suggest Friday‚Äôs
January non-farm payrolls data may not be as bad as December‚Äôs print. Other data released today saw mortgage
applications improved in the latest week.
The Obama administration‚Äôs proposed fiscal stimulus is now approaching
US$ 900 billion and Obama was forced to drop the protectionist ‚ÄúBuy American‚ÄĚ
caveat. Treasury Secretary Geithner will
next week release details about the government‚Äôs plan to fix the banking system. A Group of Seven official said the G7 meeting
of central bankers and finance ministers in Rome on 13-14 February ‚Äúwill try to send some
reassuring messages about the general economic situation‚ÄĚ and policymakers are unlikely
to launch any new major initiatives. Euro
bids are cited around the US$ 1.2475 level.
The yen depreciated vis-√†-vis the U.S. dollar today as the
greenback tested offers around the ¬•89.80 level and was supported around the ¬•88.80
level. Data released in Japan overnight
saw the service sector decline for a thirteenth consecutive month in January
with the PMI survey falling to 34.1 from 37.0 in December. These data confirm that the recession is
widespread among most or all Japanese industries. Bank of Japan is expected to maintain its
asset-purchase programs for the foreseeable future to keep a lid on market
interest rates. The Nikkei 225 stock
index climbed 2.73% to close at ¬•8,038.94.
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 ¬•114.20 level and was capped around the ¬•117.00 figure. The
British pound moved higher vis-√†-vis the yen as sterling tested offers around
the ¬•130.70 level while the Swiss franc moved
lower vis-√†-vis the yen and tested bids around the ¬•76.55 level. The
Chinese yuan appreciated vis-√†-vis the U.S. dollar today as the greenback
closed at CNY 6.8335 in the over-the-counter market, down from CNY 6.8399. Data released in China today saw the January
purchasing manager‚Äôs index improve to 45.3 from 41.2 in December. Twenty million rural Chinese workers have
recently lost their jobs and many economists believe China must maintain at least 8% annual
economic growth to avoid further problems.
Other data released today saw the December corporate goods price index
decline 3.1% y/y.
British pound appreciated vis-√†-vis the U.S. dollar today as cable tested offers
around the US$ 1.4575 level and was supported around the $1.4320 level. Most traders expect Bank of England‚Äôs
Monetary Policy Committee will ease interest rates by 50bps tomorrow to 1.00%.
Many data were released in the U.K.
today. First, the January PMI services survey improved to 42.5 from 40.2 in
December. Second, U.K. annual shop price inflation
rose to 1.1% in January from 0.5% in December.
Third, Nationwide consumer sentiment fell to a record low last
month. Fourth, REC reported demand for
staff fell at its fastest pace in more than one decade. Some economists are speculating the U.K. economy
may have bottomed out. NIESR is calling
on the BoE to conduct quantitative easing operations such as purchasing
corporate debt. NIESR believes the U.K. economy
will contract 2.7% in 2008. Cable offers
are cited around the $1.4720 level. The euro moved lower vis-√†-vis the
British pound as the single currency tested bids around the ‚ā§0.8840 level and
was capped around the ‚ā§0.9075 level.
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