Thursday February 19, 2009 - 20:00:47 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (19 February 2009)
The euro moved
higher vis-√†-vis the U.S. dollar today as the single currency tested offers
around the US$ 1.2760 level and was supported around the $1.2525 level. The common currency snapped back after being
given earlier in the week on escalating concerns about Eastern European and Western
European banks‚Äô exposure to asset problems in that region. Austria‚Äôs
central bank said the most important Austrian banks are well-capitalized with
sufficient liquidity and can contend with problems in Eastern
Europe. Many traders believe these latest developments in Eastern Europe are another reason why the European
Central Bank will ease interest rates next month. In
U.S. news, the January headline producer price index rose 0.8% m/m,
reversing some of December‚Äôs 1.9% decline, while the core PPI was up 0.4%,
beating expectations of a 0.1% climb.
Core PPI was also up 4.2% y/y.
These data allayed some concerns that deflationary pressures were
mounting in the U.S.
though it is premature to conclude downward price pressures are
stabilizing. Other data released today
saw weekly initial jobless claims remain steady at a revised 627,000 while
continuing jobless claims jumped higher to 4.987 million, the highest level in
42 years. Additionally, it was reported
that the Philadelphia Fed‚Äôs manufacturing survey printed at -41.3 in February
and that the U.S.
January leading index gained 0.4%.
Dealers are paying close attention to the Obama administration‚Äôs plans
to slow the foreclosures crisis in the U.S. with many traders concluding
the plans amounts to moral hazard. Euro
bids are cited around the US$ 1.2475 level.
The yen depreciated vis-√†-vis the U.S. dollar today as the
greenback tested offers around the ¬•94.40 level and was supported around the ¬•93.30
level. The Japanese government
downgraded its economic assessment for the fifth consecutive month, the longest
period of consecutive downgrades since 2001.
The government reported the economy ‚Äúis worsening rapidly while in a severe situation‚ÄĚ and this is the most
pessimistic the government has been since 1975.
Many Japan-watchers believe the Aso government will soon draft its
fourth fiscal stimulus package since August.
Data released in Japan overnight saw the gross domestic product gap
print at -4.3% in the October ‚Äď December period, the worst print since the
-4.5% figure in Q1 2002, and this means supply far exceeds demand. This also reflects problems faced by Japan‚Äôs all-important export sector where the
yen‚Äôs relative strength has eroded Japan‚Äôs trade surplus. The Nikkei 225 stock index climbed
0.31% to close at ¬•7,557.65. U.S. dollar
offers are cited around the ¬•104.15 level. The
euro moved higher vis-√†-vis the yen as the single currency tested offers
around the ¬•120.35 level and was supported around the ¬•117.30 level. The
British pound moved higher vis-√†-vis the yen as sterling tested offers
around the ¬•136.35 level while the Swiss
franc moved higher vis-√†-vis the yen and tested offers around the ¬•80.55
level. The Chinese yuan appreciated vis-√†-vis the U.S. dollar as the
greenback closed at CNY 6.8348 in the over-the-counter market, down from CNY
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