Friday February 11, 2005 - 14:40:53 GMT
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Forex Market Commentary and Analysis (11 February 2005)
The euro was little changed vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2880 level and remained supported around the $1.2845 level. The common currency has retained most of its sharp appreciation that followed yesterday’s better-than-expected U.S. December trade deficit data. Traders renewed their focus on the size of the 2004 trade deficit and the U.S.’s structural imbalances and pushed the pair back to the $1.2900 figure. Liquidity is said to be reduced today on account of continued Asian holidays and yesterday’s volatility. Some traders are already focusing on Fed Chairman Greenspan’s Senate testimony next Wednesday, curious to see if the Fed chief yields any clues about the direction of monetary policy and probability of “measured” interest rate hikes. Minneapolis Fed President Stern spoke yesterday and said the “stage is set for further economic expansion.” Stern also said financial market conditions are “reasonably accommodative” and added the “preponderance of evidence suggests that inflation is going to stay modest.” Fed names scheduled to speak today include Fed Governor Bernanke, San Francisco Fed President Yellen, and Treasury undersecretary Taylor. Date released in the eurozone today saw France’s 2004 trade deficit come in around €7 billion, its first annual deficit in four years. Despite a strong Q4, France’s economy only grew 2.3% last year, below estimates of a 2.5% expansion. Other EMU-12 data released today saw German wholesale price inflation decelerate in January for the third consecutive month, up 0.1% m/m and 3.4% y/y. The IMF today announced it will reduce its German GDP forecast for 2005 to 1% to 1.5%. Germany’s economy expanded 1.7% in 2004. European Central Bank Chief Economist Issing said the eurozone economy today lauded business investment in the eurozone but said consumer spending remains less-than-robust. In other German news, the German press is reporting February’s jobless number for Germany will reach another record above 5.1 million people. Euro offers are cited around the US$ 1.2880/1.2900 levels with stops seen above the $1.2910 level.
The yen traded in a relatively tight range vis-à-vis the U.S. dollar today as the greenback failed to get above the ¥105.90 level and was supported around the ¥105.50 level. Japanese financial markets were closed on account of Foundation Day and many Asian markets remained closed following this week’s Lunar New Year. Dealers reported a general lack of fresh trades today and noted many positions were chopped during yesterday’s volatility, rendering traders less likely to put on new positions today. Market participants continue to closely monitor the situation involving North Korea which yesterday confirmed it has nuclear weapons and today is said to have demanded unilateral talks with the U.S. – and not the six-party talks favoured by the U.S. and North Korea’s neighbours. Technically, the dollar appears poised to register its largest gains vis-à-vis the yen since the first week of January. The pair tested key technical resistance around the ¥106.70 level this week and traders cite additional resistance above this area around the ¥107.85 level. The ¥105.50 level holds the key for the pair on the downside along with the ¥104.80/103.70 levels. Dollar bids are also cited around the ¥104.30 level. The euro came off vis-à-vis the yen as the single currency tested bids around the ¥135.80 level and was capped around the ¥136.35 level. In Chinese news, China State Council’s Development and Research Center today reported China’s economy should grow 8% annually over the next five years.
The British pound moved lower vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.8625 level and was capped around the $1.8705 level. Cable was given at intraday highs ahead of short-term technical resistance around the $1.8710 level. The BCC upwardly revised its 2005 GDP forecast to 2.5% from its November estimate of 2.4%. These estimates are both below the 3.1% rate of growth the economy registered in 2004. Minor data released in the U.K. today saw John Lewis Partnership sales fall 3.6% to ₤38.09 million in the week to 5 February. Chancellor of the Exchequer Brown today said the Labour government “is the only government that can be trusted with the British economy.” Cable bids are seen around the $1.8645/ $1.8520 levels. The euro gained marginal ground vis-à-vis the British pound as the single currency tested offers around the ₤0.6900 figure and was supported around the ₤0.6875 level.
The Swiss franc was little-changed vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2105 level and was supported around the CHF 1.2065 level. The pair is poised to finish the week on a down note and slightly below last week’s close. Technically, the pair remains enveloped between the key CHF 1.2250 and CHF 1.2030 levels. Data released in Switzerland today saw December retail sales fall 0.5% y/y but were 1.4% higher y/y in 2004. Dollar offers are seen around the CHF 1.2240 level. The euro held steady vis-à-vis the Swiss franc as the single currency tested offers around the CHF 1.5565 level and was supported around the CHF 1.5530 level.
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