Thursday August 13, 2009 - 20:41:04 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (13 August 2009)
The euro gained ground vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4325
level and was supported around the $1.4180 level. The common currency improved on
July retail sales data that saw a 0.1% decline, down sharply from a revised
reading of +0.8%, while the ex-autos component was off 0.6%, down from the
revised June reading of 0.5%. Also, the
July import price index was off 0.7% m/m, down significantly from the 2.6%
prior reading, and off 19.3% y/y. Other
data saw weekly initial jobless claims print at 558,000, up 4,000, whole
continuing jobless claims were off 141,000 to 6.202 million. Other data saw June business inventories off
1.1%. July consumer price inflation will
be released tomorrow. The euro was also
supported by stronger than expected eurozone economic data that saw EMU-16
gross domestic product fall a mere 0.1% in the second quarter, up dramatically
from a 2.5% decline in the first quarter.
Notably, both the German and French economies notched growth of 0.3%,
suggesting the two largest eurozone economies are no longer in a technical
recession. These data may prompt the
European Central Bank to begin unwinding its expansionary monetary policy
measures earlier than previously believed.
Eonia interest rate futures are now predicting a 25bps interest rate
hike to 1.25% by May 2010, while overnight index swaps indicated the ECB will
raise its benchmark rate in February 2010.
bids are cited around the US$ 1.3900 figure.
The yen appreciated vis-√†-vis the U.S. dollar today as the
greenback tested bids around the ¬•95.05 level and was capped around the ¬•96.50 level.
The yen moved higher as the U.S. dollar
was given across the board on increasing risk appetite and a positive day for U.S. equities
markets. Yesterday, Bank of Japan Governor
Shirakawa reported a ‚Äúbuilt-in mechanism‚ÄĚ is required to end the central bank‚Äôs
unconventional monetary policy and ensure smooth functioning of markets. He specifically reported ‚ÄúIt would be important to have an appropriate
built-in exit mechanism which reduces the incentive to use the (unconventional
fund provision) facility as market functioning recovers," so that market
players don't become reliant on those steps and hurt the market's functioning.‚ÄĚ The central bank, like other central banks,
continues to discuss an exit strategy from its significant amount of monetary
stimuli. Shirakawa was in the news again
today for criticizing economists‚Äô suggestion that the central bank should establish
an inflation target to overcome deflation.
The central bank‚Äôs monthly report of recent economic and financial
developments was released yesterday in which the BoJ reported ‚Äúeconomic conditions
have stopped worsening‚ÄĚ but noted ‚Äúbusiness fixed investment has declined
substantially‚ÄĚ and ‚Äúprivate consumption has remained generally weak.‚ÄĚ The Nikkei 225 stock index climbed
0.79% to close at ¬•10,517.91. 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 ¬•135.55 level and was capped around the ¬•137.85 level. The
British pound moved lower vis-√†-vis the yen as sterling tested bids around
the ¬•157.35 level while the Swiss franc
moved higher vis-√†-vis the yen and tested offers around the ¬•89.95 level. In Chinese news, the U.S. dollar lost
ground vis-√†-vis the Chinese yuan as the greenback closed at CNY 6.8306 in the
over-the-counter market, down from CNY 6.8321.
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