Friday August 28, 2009 - 19:10:45 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (28 August 2009)
The euro moved lower vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4320
level and was capped around the $1.4390 level.
Data released in the U.S.
today saw July personal income growth at 0.0%, up from June‚Äôs revised -1.1%
decline. July personal spending printed
at +0.2%, down from June‚Äôs revised print of +0.6%. Also, the July personal consumption
expenditures deflator was off 0.8% y/y, worse than the 0.4% June reading. At the core level, the July core rate up 0.1%
m/m and 1.4% y/y. Finally, the University of Michigan consumer sentiment indicator
came in at 65.7, above the prior mid-August reading of 63.2 but below the July
reading of 66.0. The common currency
failed to sustain its gains through the North American session as U.S. equity
prices retreated in the session. St. Louis Fed President Bullard was on the wires earlier
and dovishly said the Fed needs to see much more ‚Äúconvincing‚ÄĚ economic data
before contemplating an increase in rates.
In eurozone news, the European
Commissions‚Äôs economic sentiment indicator improved to 80.6 from a reading of
76 in July. Many economists believe the
eurozone economy will expand around 0.5% q/q in the third quarter. Bundesbank reported German banks expect a
modest increase in lending volumes in the second half of 2009 and in 2010,
corroborating the central bank‚Äôs assessment there is no credit crunch in the eurozone‚Äôs
largest economy. German Chancellor
Merkel today reported the German economy might contract 5% or 6% in 2009. Euro
bids are cited around the US$ 1.3900 figure.
The yen appreciated vis-√†-vis the U.S. dollar today as the
greenback tested bids around the ¬•93.40 level and was capped around the ¬•94.05 level.
All eyes are focused on this weekend‚Äôs general election in Japan where the
long-incumbent Liberal Democratic Party looks poised to lose its stronghold on
power to the Democratic Party of Japan.
Some Japan-watchers believe this will result in increased Japanese
government bond issuance to finance the expected increase in public works
spending. It is unclear how a DPJ
victory would impact the yen. Japan is
expected to battle deflation through early 2012 and will need all the help it
can get from its slumping export sector through a weaker yen. Many data were released in Japan
overnight. First, the July unemployment
rate rose to 5.7% from 5.4 in June, the largest print since World War II and
significantly above expectations. Second,
the July nationwide consumer price index was off 0.3% m/m and off 2.2% y/y with
the core rate off 0.2% m/m and 2.2% y/y.
The Tokyo-area August consumer price index was up +0.3% m/m and +0.1%
y/y with the core component flat m/m and off 0.2% y/y. Other data saw July all household spending
off 2.0% y/y while the trade surplus for the first ten days in August printed
at ¬•48.08 billion, off 69.2% y/y. The
Nikkei 225 stock index climbed 0.57% to close at ¬•10,534.14. 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 ¬•135.00 figure and was supported around the ¬•134.00
figure. The British pound moved higher vis-√†-vis the yen as sterling tested
offers around the ¬•153.60 level while the
Swiss franc moved higher vis-√†-vis the yen and tested offers around the ¬•88.90
level. In Chinese news, the U.S.
dollar lost ground vis-√†-vis the Chinese yuan as the greenback closed at CNY
6.8256 in the over-the-counter market, down from CNY 6.8273. Chinese Premier Wen this week said the
markets need to avoid being ‚Äúblindly optimistic‚ÄĚ about the global economic
recovery and added China
must maintain its ‚Äúmoderately loose‚ÄĚ monetary policy and ‚Äúactive‚ÄĚ fiscal
policy. PBoC has reported it will ensure
‚Äúreasonable and ample‚ÄĚ liquidity.
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