Monday May 25, 2009 - 19:38:40 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (25 May 2009)
The euro strengthened vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4045
level and was supported around the US$ 1.3955 level. Liqudity
was very thin today as both the U.K.
markets were closed for market holidays.
Data released in Germany
today saw the May Ifo business sentiment index print at 84.2, above April‚Äôs
print of 83.7 but shy of expectations.
The expectations sub-index improved to 85.9 while the current condtions
sub-index worsened to 82.5, a new cyclical trough. The greenback has been pressured
significantly over the past couple of weeks.
There is growing concern that the U.S. may lose its ‚ÄúAAA‚ÄĚ credit
rating and that the U.S. dollar could depreciate significantly as a
result. Many U.S. data will be released tomorrow
including Case-Shiller house price data and consumer confidence numbers. Euro
bids are cited around the US$ 1.3435 level.
The yen appreciated marginally vis-√†-vis the U.S. dollar today as
the greenback tested bids around the ¬•94.40 level and was capped around the ¬•95.20
level. There was little market reaction
to news that North Korea
conducted a large nuclear test in the northeastern part of that country and
test-fired three short-range missiles.
This represented the country‚Äôs first nuclear test in three years. The Japanese government has promised
‚Äúdecisive measures‚ÄĚ in response to today‚Äôs activities by North Korea. Japan‚Äôs
proximity to North Korea and
alliance with the U.S.
render the yen susceptible to geopolitical forces resulting from North Korea‚Äôs
activities. The Japanese government and
Bank of Japan raised their overall economic assessments in May today for the
first time since 2006, reporting exports and industrial production appear to be
bottoming. ‚ÄúWhile the economy is in a difficult situation, the
tempo of worsening has become moderate,‚ÄĚ the government reported in stark
contrast to April‚Äôs statement that it sees the economy ‚Äėworsening rapidly while
in a severe situation.‚ÄĚ Similarly, Bank of Japan today reported ‚ÄúThe pace of
deterioration in Japan's
economic conditions is likely to moderate gradually, leading to a leveling out
of the economy.‚ÄĚ Despite the
government‚Äôs upgrade in its assessment, it added the word ‚Äúsevere‚ÄĚ to
characterize the labour market. Japan‚Äôs jobless
rate was 4.8% in March and some economists believe it could reach 5.5% in the
coming months. On Friday, BoJ Governor
Shirakawa reported Japan
will register positive gross domestic product growth in the April ‚Äď June
quarter. Finance minister Yosano
reported ‚Äúmany downside risks remain.‚ÄĚ The
Nikkei 225 yesterday stock index climbed 1.31% to close at ¬•9,347.00. 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 ¬•133.40 level and was supported around the ¬•132.05
level. The British pound moved lower vis-√†-vis the yen as sterling tested bids
around the ¬•149.80 level while the Swiss
franc moved higher vis-√†-vis the yen and tested offers around the ¬•87.80
level. In Chinese news, the U.S.
dollar appreciated vis-√†-vis the Chinese yuan as the greenback closed at CNY
6.8265 in the over-the-counter market, up from CNY 6.8255. Chinese President Hu Jintao and Brazilian
President Lula suggested bilateral trades should be settled in different
currencies other than the U.S. dollar.
British pound moved lower vis-√†-vis the U.S. dollar today as cable tested bids
around the US$ 1.5835 level and was capped around the $1.5935 level. Liquidity was diminished on account of the
market holiday and will return to normal overnight. Chancellor the Exchequer Darling cautiously
said yesterday ‚ÄúI believe that we
will see a return to growth by the end of the year. I said that in the budget
and I haven't changed my view on that but...there is a lot of uncertainty out
there.‚ÄĚ Data released in the U.K. on Friday
saw Q1 GDP contract 1%, the third consecutive month of declining output. Cable
bids are cited around the US$ 1.5315 level.
The euro gained ground
vis-√†-vis the British pound as the single currency tested offers around the
‚ā§0.8820 level and was supported around the ‚ā§0.8785 level.
franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested
bids around the CHF 1.0815 level and was capped around the CHF 1.0870
level. The franc was bid across the
board, partially reflecting unease over North Korea‚Äôs nuclear test and
missile launches. U.S. dollar offers are
cited around the CHF 1.1165 level. The euro lost ground vis-√†-vis the
Swiss franc as the single currency tested bids around the CHF 1.5160 level
while the British pound moved lower
vis-√†-vis the Swiss franc and tested bids around the CHF 1.7195 level.
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