Tuesday September 1, 2009 - 22:04:08 GMT
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Forex Market Commentary and Analysis (1 September 2009)
The euro moved lower vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4175
level and was capped around the $1.4380 level.
U.S. equity prices
moved lower on a story that a major U.S. financial institution may have
fresh problems with some chatter suggesting Wells Fargo is the bank being
discussed on trading desks. Some dealers
believe more problems could come to roost in the U.S.
economy, particularly with the troubled U.S. commercial real estate
sector. Banks and holders of commercial
mortgage-backed securities could face significant problems when commercial mortgages
come due and borrowers are unable to finance debt on account of lower valuations
even though cash flow is sufficient. Some
traders see the CMBS issue remaining a problem for at least the next two years. European Central Bank member Noyer suggested
other currencies may see their influence expand alongside the U.S. dollar and euro. Noyer also called on banks to rebuild their capital
bases and finance their economies with their profits rather than paying dividends
and bonuses. German finance minister
Steinbrueck warned that corporate insolvencies may rise in Q4 2009 and Q1 2010
and called on banks to pass on lower official interest rates fron the European
Central Bank. Data released in Germany
today saw German retail sales improve for the first time in three months while
German August unemployment fell unexpectedly by 1,000 to 3.46 million. ECB member Nowotny reported ‚ÄúI don‚Äôt see a
perspective of a ‚ÄėW‚Äô-shaped recession if there‚Äôs no premature exit
strategy. What I see is the danger that
we‚Äôll have very low rates of positive growth for some time.‚ÄĚ In
U.S. news, data released in the U.S. today saw the August ISM
manufacturing index improve to 52.9 from 50.5, up from the prior reading of
48.9, while the ISM prices paid component improved sharply to 65.0 from the
prior reading of 55.0. Also, July
construction spending was off 2.2% m/m and July pending home sales were up 3.2%
m/m and 12.9% y/y. Despite the
improvement in today‚Äôs economic data, there is not a sense that official
interest rates will be rising anytime soon.
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 ¬•92.80 level and was capped around the ¬•93.45 level.
Bank of Japan Deputy Governor Nishimura
reported the most ‚Äúpressing‚ÄĚ issue for the central bank remains fighting the
recession, adding deflationary pressures remain a problem. Notably, consumer prices were off 2.2% in
July and Nishimura added ‚Äúmany unconventional policies will eventually be
terminated‚ÄĚ after market conditions improve.
Additionally, he warned the process of rebuilding financial markets will
be ‚Äúlong and slow.‚ÄĚ The yen was bid to a
six-week high as U.S.
equities moved lower on fresh worries about the U.S. banking sector. Likely incoming Prime Minister Hatoyama met
Bank of Japan Governor Shirakawa and finance ministry officials today ahead of
the Group of 20 meeting of central bankers and finance officials later this
week. On Sunday, the Democratic Party of
Japan won a landslide victory in the general election over the long-incumbent
Liberal Democratic Party of Japan. The
DJP won 308 seats in the lower house of parliament and the LDP‚Äôs representation
fell to 119 from 300. Traders are
carefully assessing the election results to determine how well the DPJ will be
able to control spending and manage the government. There is widespread speculation the DPJ will
attempt to inflate public spending through new Japanese government bond
issuance, possibly increasing social spending.
There is also skepticism that the yen‚Äôs post-electoral gains will be sustainable.
Some believe former Ministry of Finance
official ‚ÄúMr Yen‚ÄĚ Sakakibara will get a portfolio in the new government. The Nikkei 225 stock index climbed 0.36% to
close at ¬•10,530.06. U.S. dollar offers
are cited around the ¬•94.75 level. The euro moved lower vis-√†-vis the yen
as the single currency tested bids around the ¬•131.85 level and was capped around
the ¬•134.15 level. The British pound moved lower vis-√†-vis the yen as sterling tested bids
around the ¬•149.80 level while the Swiss
franc moved lower vis-√†-vis the yen and tested bids around the ¬•86.95 level.
In Chinese news, the U.S. dollar lost
ground vis-√†-vis the Chinese yuan as the greenback closed at CNY 6.8257 in the
over-the-counter market, down from CNY 6.8290.
Data released in China
overnight saw the August Purchasing Managers‚Äô Index improve to 54. China
is experiencing its worst export slump in more than two decades and some
economists are predicting China‚Äôs
US$585 billion stimulus could lead to a surge in Chinese imports in the fourth
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