Tuesday September 8, 2009 - 21:42:38 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (8 September 2009)
The euro moved sharply higher vis-√†-vis the U.S.
dollar today as the single currency
tested offers around the US$ 1.4535 level and was supported around the $1.4330
level. Today‚Äôs intraday high represented
the pair‚Äôs strongest print since 18 December 2009. Traders are talking about a few key factors.
First, trading desks resumed normal operations today after the summer and long U.S. holiday
weekend. Second, one ongoing theme
involves the record amount of U.S. Treasury supply projected for this year and
its impact on the U.S. dollar. The Obama
administration today sought an increase in the debt ceiling so that more supply
can be issued and a major concern among traders is that the value of the U.S.
dollar will be eroded. The United
Nations was on the tape over the weekend suggesting Special Drawing Rights
should replace become another major global reserve currency alongside the U.S.
which holds an appreciable amount of U.S. dollars, has been very vocal saying
must protect the value of the U.S. dollar.
Third, it is unlikely the Federal Reserve is going to raise interest
rates anytime soon. While some of the
Fed‚Äôs quantitative easing programs will expire on their own, the Fed is likely
to maintain an ultra-accommodative monetary policy for at least the next couple
of business quarters. In eurozone news, European Central Bank
member Weber reported the central bank is closely examining developments in
money and credit aggregates. Weber added
‚ÄúWhen upward risks to
medium-term price stability become apparent, then the time has come to raise
the level of monetary policy restriction.
The negative late effects of the preceding (economic) downturn, in
particular rising unemployment, have at this point not fully cropped up.‚ÄĚ Weber sees a ‚Äúgradual‚ÄĚ withdrawal from the
ECB‚Äôs quantitative easing. German
finance minister Steinbrueck today said German gross domestic product growth is
likely to contract by between 5% and 6% in 2009. Data released in Germany today saw July industrial
production fell 0.9% m/m and 17% y/y while the July trade surplus rose to ‚ā¨13.9
billion from ‚ā¨12.1 billion. 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 ¬•92.00 figure and was capped around the ¬•93.10
level. The main catalyst was a
considerably weaker U.S. dollar that fell relative to most other major currencies.
The Japanese government kept its
economic assessment unchanged today, noting the economy is ‚Äúpicking up‚ÄĚ while
reducing its view of the labour market on account of record unemployment. Economists cite declining income and spending
as ongoing risk factors. Data released
overnight saw August economic sentiment decline to 41.7 from 42.4 in July, the
first decline in eight months and the 29th consecutive month the
index has been below the neutral 50.0 level.
Other data saw August corporate bankruptcies up 2.4% y/y while bank
lending growth decelerated to +1.8% y/y.
Additionally, the August M3 money supply index was up 2% and the
unadjusted current account surplus was off 19.4% y/y at ¬•1.266 trillion. Some Japan-watchers believe the new
Democratic Party of Japan government may worsen Japan‚Äôs finances despite the DPJ‚Äôs
statements that they‚Äôll do not plan to dramatically increase supply of Japanese
government bonds. The Nikkei 225 stock
climbed 0.70% to close at ¬•10,393.23. U.S.
dollar offers are cited around the ¬•94.75 level. The
euro moved higher vis-√†-vis the yen as the single currency tested offers around
the ¬•133.85 level and was supported around the ¬•132.80 level. The
British pound moved lower vis-√†-vis the yen as sterling tested bids around
the ¬•151.30 level while the Swiss franc moved
higher vis-√†-vis the yen and tested offers around the ¬•88.30 level. In Chinese news, the U.S. dollar lost ground
vis-√†-vis the Chinese yuan as the greenback closed at CNY 6.8231 in the
over-the-counter market, down from CNY 6.8245.
People‚Äôs Bank of China adviser Fan Gang yesterday reported
‚Äúmacroeconomic policies must be preemptive. Some PBOC-watchers believe China is
unlikely to lift interest rates or reserve requirements within the next six
British pound appreciated vis-√†-vis the U.S. dollar today as cable tested offers
around the US$ 1.6495 level and was supported around the $1.6485 level. Chancellor of the Exchequer Darling reported
now is not the correct time to reduce U.K. fiscal spending. Data released in the U.K. overnight
saw like-for-like retail sales off 0.1% y/y in August, in contrast to overall
retail sales growth of 2.2%. NIESR
reported the U.K.
economy returned to growth in the three months ending in August with GDP up
0.2% from a 0.3% decline in the three months to July. Other data saw July manufacturing output up
0.9% m/m and off 10.1% y/y. Cable bids
are cited around the US$ 1.6030 level. The euro moved higher vis-√†-vis the
British pound as the single currency tested offers around the ‚ā§0.8790 level and
was supported around the ‚ā§0.8730 level.
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