Thursday August 6, 2009 - 22:33:43 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (6 August 2009)
The euro lost ground vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4330
level and was capped around the $1.4430 level. Traders are focusing on several key factors.
First, the all-important July non-farm payrolls report will be released in the
morning and most forecasts are calling for job losses of 275,000 to 325,000 in
what would be a moderation of weakness in the labour market. Second, Council of Economic Adveriser Chairwoman
Romer noted the federal stimulus package has helped stabilize the U.S. economy but
added a full recovery is still a ‚Äútremendous distance‚ÄĚ away. Third, the Federal Reserve continues to gradually
unwind its massive monetary stimulus program.
Assets on the Fed‚Äôs balance sheet decline for the third straight week
and now stand at US$ 1.99 trillion. The
Fed has more than doubled its total assets over the past year to help thaw
credit markets and provide sufficient liquidity. Fourth, U.S. economic
data continues to be a mixed bag. Data
released today saw weekly initial jobless claims fall 38,000 to 550,000 while
continuing claims increased 69,000 to 6.31 million. In
eurozone news, the European Central Bank kept its main refinancing rate
unchanged at a historic low of 1.0%, as expected. ECB President Trichet reported further monetary
stimulus is not likely, noting current interest rate policy is ‚Äúappropriate‚ÄĚ and policymakers are ‚Äúsatisfied‚ÄĚ with their asset
purchase program and policies to improve the flow of credit. Data released in the eurozone today saw
German June manufacturing orders climb 4.5% m/m, exceeding forecasts, but were
off 25.3% y/y. Euro
bids are cited around the US$ 1.3900 figure.
The yen depreciated vis-√†-vis the U.S. dollar today as the
greenback tested offers around the ¬•95.80 level and was supported around the ¬•94.75
level. Traders are talking about a story
suggesting Bank of Japan will likely forecast deflation through March 2010 on
account of weak domestic demand.
Currently, the central bank is estimating the core consumer price index
will fall 1.3% in the year to March 2010 and another 1.0% the following fiscal
year. The BoJ will issue its first price
forecast for the year to March 2010 on 30 October. Dealers expect the BoJ will keep its
assessment of the economy unchanged when its Policy Board convenes next
week. BoJ Governor Shirakawa is likely
to reiterate the likelihood of the economy entering a deflationary spiral is
low. Shirakawa will attend a conference
from tomorrow in China
sponsored by People‚Äôs Bank of China and Bank for International
Settlements. Data released in Japan today saw
the June leading index improve to 70.0 on a diffusion basis and 79.8 on a
composite basis. The Nikkei 225 stock
index climbed 1.32% to close at ¬•10,388.09.
U.S. dollar offers are cited around the ¬•104.15 level. The
euro moved higher vis-√†-vis the yen as the single currency tested bids around
the ¬•137.95 level and was supported around the ¬•136.60 level. The
British pound moved lower vis-√†-vis the yen as sterling tested bids around
the ¬•159.95 level while the Swiss franc
moved higher vis-√†-vis the yen and tested offers around the ¬•90.20 level. In Chinese news, the U.S. dollar gained
ground vis-√†-vis the Chinese yuan as the greenback closed at CNY 6.8283 in the
over-the-counter market, up from CNY 6.8279.
Traders expressed caution over a suspected bank fraud involving a major
Chinese financial institution. A Chinese
government think tank is predicting GDP will likely expand 8% with the trade
surplus around US$ 220 billion this year.
pound lost significant ground vis-√†-vis the U.S. dollar today as cable
tested bids around the US$ 1.6750 level and was capped around the $1.7030
level. Sterling fell sharply after Bank of England
unexpectedly increased its quantitative easing program by ‚ā§50 billion, an
indication the central bank remains concerned about the economic outlook. Recent U.K. economic data have evidenced
improvement and led to speculation the BoE would suspend or reduce its bond
purchase programs. GDP fell 0.8% q/q and
5.6% y/y, the largest annual decline since at least 1955. RICS reported it expects house prices to rise
slightly this year, an improvement from the previous 10% decline. Cable
bids are cited around the US$ 1.6485 level.
The euro moved higher vis-√†-vis
the British pound as the single currency tested offers around the ‚ā§0.8560 level
and was supported around the ‚ā§0.8455 level.
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