Friday February 5, 2010 - 23:03:42 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (5 February 2010)
The euro depreciated vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3585
level and was capped around the $1.3745 level.
It was a very volatile day in the global financial markets as traders
reacted to a mixed bag of U.S.
January employment data that saw non-farm payrolls off 20,000, an improvement
from a downwardly revised -150,000. At the same time, the unemployment rate fell
to 9.7% from the prior reading of 10.0%, probably reflecting workers who have
left the labour force. Factories added
an unexpected 11,000 workers to payrolls last month, the first increase since
January 2007 and the largest climb since April 2006. Another positive indication is that average
hours worked and overtime hours worked both increased. Nonetheless, more than 5.9 million factory
jobs have been shed over the last decade.
The U.S. employment
picture ‚Äď when coupled with the increase in Q4 2010 gross domestic product ‚Äď
suggests the U.S. economy is
on the mend but economists are fiercely split as to when the U.S. economy
may be able to record some real jobs growth.
Other data released today saw January average hourly earnings up 0.2%
m/m and 2.0% y/y while December consumer credit printed at ‚ÄďUS$ 1.7 billion, up
from the previous reading of ‚ÄďUS$ 21.8 billion.
Traders will pay close attention to remarks from G7 finance ministers
and central bankers on Baffin Island this
weekend. In eurozone news, traders continue to punish the common currency on
account of mounting debt concerns in Greece
and other eurozone countries including Portugal,
Spain, Ireland, and Italy. One school of thought suggests that as credit
quality for sovereigns deteriorates, the credit quality for non-sovereign debt
must worsen too. This would lead to less
demand for higher-yielding assets and the euro is suffering as a result. Data released in the eurozone today saw
German December industrial production off 2.6% m/m and 7.1% y/y. Euro bids are cited around the US$ 1.3530
The yen depreciated vis-√†-vis the U.S. dollar today as the
greenback tested offers around the ¬•89.90 level and was supported around the ¬•88.80
level. Canadian finance minister
Flaherty reported Group of Seven countries will continue to stimulate their
economies even as budget deficits mount.
Finance minister Kan reported the
economy is on the verge of escaping deflation but most economists believe Japan will continue
to battle deflation for at least another year.
Traders are paying close attention to see how much pressure Japan and other G7 countries exert on China this
weekend regarding its yuan currency. BoJ
Policy Board member Nakamura yesterday called on the government to improve the
country‚Äôs fiscal health and said it would be ‚Äúdisastrous‚ÄĚ if interest rates
move higher on debt woes. Furthermore,
Nakamura reported the downward pressure on prices in Japan will continue. Data released in Japan this week saw January PMI
services decline to 54.5 from 56.8 in December.
The Nikkei 225 stock index lost 2.89% to close at ¬•10,057.09. 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 ¬•120.70 level and was capped around the ¬•123.30 level. The
British pound moved lower vis-√†-vis the yen as sterling tested bids around
the ¬•138.25 level while the Swiss franc moved
lower vis-√†-vis the yen and tested bids around the ¬•82.30 level. In Chinese news, the U.S. dollar depreciated
vis-√†-vis the Chinese yuan as the greenback closed at CNY 6.8265 in the
over-the-counter market, down from CNY 6.8268. The government reported China‚Äôs current
account surplus weakened 35% y/y in 2009 to US$ 284.1 billion. Beijing
reacted coolly yesterday to pressure from the Obama administration regarding
its yuan currency, saying ‚Äúit is China‚Äôs own business.‚ÄĚ Li also said
there ‚Äúwill not be any sudden or major yen appreciation.‚ÄĚ
The British pound moved lower vis-√†-vis the
U.S. dollar today as cable tested bids around the US$ 1.5555 level and was capped
around the $1.5775 level. Data released
in the U.K.
today saw January output producer price inflation up 0.4% m/m and 3.8% y/y
while input PPI was up 2% m/m and 8.4% y/y.
Sterling is moving lower as traders shun
higher-yielding assets and for escalating concerns over the amount of debt the U.K.
government has accumulated, including a perception of deteriorating credit
quality. As expected, Bank of England‚Äôs Monetary Policy Committee yesterday
voted to keep its benchmark Bank Rate unchanged at 0.50% and decided to pause
its ‚ā§200 billion asset purchase program for the first time since March
2009. BoE kept the door open to enact more
purchases if need be in the future. Cable
bids are cited around the US$ 1.5340 level.
The euro moved higher
vis-√†-vis the British pound as the single currency tested offers around the
‚ā§0.8750 level and was supported around the ‚ā§0.8685 level.
franc depreciated vis-√†-vis the U.S. dollar today as the greenback tested
offers around the CHF 1.0795 level and was supported around the CHF 1.0645
level. Swiss National Bank is rumoured
to have intervened during the European session, possibly by purchasing euro for
francs around the CHF 1.4620 level. U.S.
dollar offers are cited around the CHF 1.0810 level. The
euro moved higher vis-√†-vis the Swiss franc as the single currency tested
offers around the CHF 1.0795 level while the
British pound came off vis-√†-vis the Swiss franc and tested bids around the
CHF 1.6750 level.
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