Wednesday September 16, 2009 - 17:33:49 GMT
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Forex Market Commentary and Analysis (16 September 2009)
The euro extended recent gains vis-√†-vis the U.S.
dollar today as the single currency
tested offers around the US$ 1.4730 level and was supported around the $1.4645
level. Federal Reserve Chairman Bernanke
yesterday reported the U.S.
recession ‚Äúappears to be over‚ÄĚ and this gave a bid to some global asset
markets. Many data were released in the U.S.
today. First, the August consumer price
index was up 0.4% m/m, exceeding expectations and stronger than the previous
0.0% reading, while the ex-food and energy component was up 0.1%, matching July‚Äôs
print and expectations. August CPI was
off 1.5% y/y, up from the prior reading of -2.1% y/y, and the core ex-food and
energy rate came at +1.4%, down from the prior reading of +1.5%. Other data released today saw the Q2 current
account balance print at ‚ÄďUS$ 98.8 billion, an improvement from the previous
reading of ‚ÄďUS$ 101.5 billion but worse than expectations. Moreover, July total net TIC flows printed at
‚ÄďUS$ 97.5 billion, down from the revised ‚ÄďUS$ 56.8 billion June total. Net long-term TIC flows were also lower at
US$ 15.3 billion, down from a revised US$ 90.2 billion in June. Data revealed that both China and Japan
continue to be net purchasers of U.S.
assets while Russia appears
to be selling U.S.
assets. Both China
have been vocal proponents of replacing the U.S. dollar as the main
international reserve currency. Other
data released today saw August capacity utilization improve to 69.6% with
industrial production falling to +0.8% from a revised +1.0%, still above
expectations. Finally, the September
NAHB housing market index matched expectations with a reading of +19, up from
+18 in August. The U.S. Treasury
reported it will reduce some borrowing on behalf of the Federal Reserve to keep
government debt under a legal limit. In
other Fed news, the Fed has tightened its review of commercial real estate. Bernanke is expected to testify before
Congress about regulatory change on 1 October.
The Federal Open Market Committee‚Äôs interest rate decision is expected
next Wednesday. In eurozone news, the German retail sector reported it believes
most of the worst of the recession is still ahead of us. Data released in the eurozone today saw EMU-16
August consumer price inflation off 0.2% y/y, unrevised from the provisional
estimate, and was up 0.3% m/m. 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 ¬•90.15 level and was capped around the ¬•91.35 level.
Incoming finance minister Fujii talked
about recent movements in exchange rates, reporting they ‚Äúare not fluctuating
rapidly now.‚ÄĚ There is definitely less
concern in the market now over actual intervention than there was when the
Liberal Democratic Party was in charge.
Fujii also said it is important to respect the central bank‚Äôs
independence and said the central bank should not finance spending. Most traders believe BoJ will not change
interest rates when its policy decision is announced overnight. There is a
possibility the central bank could make an announcement about the renewal or
non-renewal of some emergency programs that are currently expected to expire by
year‚Äôs end. The yen has recently
benefited from its positive interest rate differential over the U.S. dollar and
from the repatriation of overseas yen proceeds ahead of the fiscal half-year
end at the end of the month. The new
head of the banking and postal service ministry said he will seek to assist
small companies get through the credit crunch by extending their loan payments
for three years. Today‚Äôs U.S. TICS flows data revealed Japan was a net
buyer of U.S. Treasuries last month. The
Nikkei 225 stock index climbed 0.52% to close at ¬•10,270.62. 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 ¬•132.45 level. The
British pound moved lower vis-√†-vis the yen as sterling tested bids around
the ¬•148.60 level while the Swiss franc moved
higher vis-√†-vis the yen and tested offers around the ¬•87.15 level. In Chinese news, the U.S. dollar lost ground
vis-√†-vis the Chinese yuan as the greenback closed at CNY 6.8187 in the
over-the-counter market, down from CNY 6.8225.
Today‚Äôs U.S. TICS investment flows data revealed China was a net buyer of U.S. government
assets last month.
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