Monday August 17, 2009 - 18:21:19 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (17 August 2009)
The euro came off sharply vis-Ã -vis the U.S. dollar
today as the single currency tested bids
around the US$ 1.4045 level and was capped around the $1.4195 level. The common currency extended recent losses on
account of stronger than expected U.S.
economic data and a pullback in U.S.
equity prices. Data released in the U.S. today saw the Federal Reserve Bank of New Yorkâ€™s Empire
State manufacturing index
improve to 12.1 from -0.6 in July. Other
data saw the August NAHB housing market index print at +18, up from +17 in
July, while June net long-term TIC flows printed at US$ 90.7 billion, much
stronger than expected and above the revised May print of â€“US$ 19.4
billion. In contrast, however, total net
TIC flows came in at â€“US$ 31.2 billion, an improvement from the revised â€“US$
65.86 billion May print but below the US$ 23.0 billion forecast. Global equity markets were given today after
Asian markets suffered a sell-off. The
Federal Reserve today extended an emergency program by three to six months
called the Term Asset-Backed Securities Loan Facility (TALF) that is designed
to cushion the commercial real estate market.
In eurozone news, the EMU-16
trade surplus registered a two-year high in June. European Central Bank member Weber reported
the German economy is likely to perform better than expected in the third
quarter. The ECB today reported the
Eurosystem has purchased â‚¬7 billion in covered bonds. Euro
bids are cited around the US$ 1.3900 figure.
The yen appreciated vis-Ã -vis the U.S. dollar today as the
greenback tested bids around the Â¥94.20 level and was capped around the Â¥94.85 level.
The yen was up strongly across the board
as a downturn in global equities dampened demand for higher-yielding
currencies. Data released in Japan overnight
saw Q2 gross domestic product expand 0.9% q/q, less than expected but the first
improvement since Q1 2008. The
improvement means Japan
is no longer in a technical recession but many economists believe economic
growth may slow to an annualized 2.9% pace in the three months ending 30
September. On the political front, Prime
Minister Asoâ€™s Liberal Democratic Party is likely to lose the upcoming lower
house election to the Democratic Party of Japan. Policymakers including Bank of Japan Governor Shirakawa have warned Japanâ€™s
domestic demand is likely to remain very weak.
The Nikkei 225 stock index lost 3.10% to close at Â¥10,268.61. U.S. dollar offers are cited around the
Â¥104.15 level. The euro moved lower vis-Ã -vis the yen as the single currency
tested bids around the Â¥132.50 level and was capped around the Â¥134.50 level. The
British pound moved lower vis-Ã -vis the yen as sterling tested bids around
the Â¥153.45 level while the Swiss franc
moved lower vis-Ã -vis the yen and tested bids around the Â¥87.20 level. In Chinese news, the U.S. dollar gained
ground vis-Ã -vis the Chinese yuan as the greenback closed at CNY 6.8332 in the
over-the-counter market, up from CNY 6.8314.
Chinese equities realized their worst decline since November on account
of declining commodities prices and concerns that Peopleâ€™s Bank of China will
tighten liquidity measures.
British pound extended recent losses vis-Ã -vis the dollar today as cable
tested bids around the US$ 1.6275 level and was capped around the $1.6515
level. Bank of England Monetary Policy
Committee member Sentance reported the U.K. economy is expected to return
to economic growth in the second half of the year and said global economic
growth will in part depend on Asian economies.
Data released in the U.K.
overnight saw the Rightmove August house price index off 2.2% m/m and 3.1%
y/y. Cable is now off seven big figures
over the past ten days. Sterling remains pressured by BoEâ€™s
announcement that it is expanding its bond-buying operations by â‚¤50
billion. Sterling is also being pressured by increased
borrowing and deficit spending. Cable
bids are cited around the US$ 1.5975 level.
The euro moved higher
vis-Ã -vis the British pound as the single currency tested offers around the
â‚¤0.8645 level and was supported around the â‚¤0.8585 level.
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