Wednesday September 2, 2009 - 21:33:30 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (2 September 2009)
The euro moved higher vis-Ă -vis the U.S. dollar today as the single currency tested offers around the US$ 1.4295
level and was supported around the $1.4190 level. The common currency retraced some of
yesterdayâ€™s losses as U.S.
economic data were generally weaker-than-expected. First, it was reported that
MBA mortgage appications were off 2.2% in the latest week, down from the prior
reading of +7.5%. Second, August
Challenger job cuts were off 13.8% y/y, down from the prior reading of
-5.7%. Third, the August ADP employment
report evidenced a 298,000 contraction in private sector jobs, worse than
forecast but better than Julyâ€™s revised reading of -360,000. Fourth, July factory orders printed at +1.3%,
below estimates but above the revised June print of +0.9%. Fifth, Q2 unit labour costs were off 5.9%,
down from the preliminary reading of -5.8%.
Sixth, it was reported that Q2 non-farm productivity grew a healthy
6.6%, up from the prior reading of 6.4%.
While productivity growth is generally seen as a long-term benefit to
the economy, it is also coincident with a decrease in payrolls and that means
companies are accomplishing more with fewer workers. Seventh, August personal
bankruptices were up 24% y/y. Minutes
from the Federal Open Market Committeeâ€™s interest rate deliberations on 12
August were released today and they did not offer much guidance about the Fedâ€™s
plans to maintain significant amounts of liquidity in the banking system to
support the economy. In eurozone news, the German finance
ministry reported the state of the economy has â€śstabilizedâ€ť following a meeting
of Ecofin finance ministers in Brussels. The hot button in the eurozone and U.K. now is a
plan to limit bankersâ€™ bonuses. Data
released in the eurozone today saw EMU-16 industrial producer prices register
their sharpest annual decline in more than 27 years, off 0.8% m/m and 8.5% y/y.
Also, EMU-16 Q2 GDP was off 0.1% q/q and 4.7% y/y. Euro
bids are cited around the US$ 1.3900 figure.
The yen appreciated vis-Ă -vis the U.S. dollar today as the
greenback tested bids around the ÂĄ92.10 level and was capped around the ÂĄ93.05 level.
The pair reached a seven-week low as
traders reacted to a worse-than-expected U.S. private sector jobs report.
Risk aversion remains strong with the VIX index â€“ a measure of stock market
volatility â€“ at its highest level since 10 July. Bank of Japan
Governor will attend the Group of Twenty meeting in London
this week followed by the Bank for International Settlements meeting in Basel. Democratic Party of Japan legislator Kohei
Otsuka said the new DPJ government â€śwonâ€™t meddleâ€ť in the central bankâ€™s
monetary policy and market operations and added the new government will â€śrespond
appropriatelyâ€ť to excessive currency moves.
Data released in Japan
overnight saw the August monetary base climb 6.1% y/y. The Nikkei 225 stock lost 2.02% to close at
ÂĄ10,280.46. U.S. dollar offers are cited
around the ÂĄ94.75 level. The euro moved lower vis-Ă -vis the yen
as the single currency tested bids around the ÂĄ131.00 figure and was capped around
the ÂĄ132.50 level. The British pound moved lower vis-Ă -vis the yen as sterling tested bids
around the ÂĄ149.00 figure while the
Swiss franc moved lower vis-Ă -vis the yen and tested bids around the ÂĄ86.40
level. In Chinese news, the U.S.
dollar gained ground vis-Ă -vis the Chinese yuan as the greenback closed at CNY
6.8273 in the over-the-counter market, up from CNY 6.8257. China announced today that it plans
to purchase US$ 50 billion in International Monetary Funds bonds. Chinese benchmark money rates rose by the
most in one month on speculation that demand for capital will increase ahead of
Metallurgical Corp. of China Ltdâ€™s first share issuance next week. Data released in China yesterday saw the August
Purchasing Managersâ€™ Index improve to 54.
China is experiencing
its worst export slump in more than two decades and some economists are predicting
US$585 billion stimulus could lead to a surge in Chinese imports in the fourth
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