Thursday March 4, 2010 - 22:51:03 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (4 March 2010)
The euro depreciated vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3550
level and was capped around the $1.3710 level.
The common currency was unable to gain much traction despite a solid
ten-year bond issuance from Greece
that was well-received by international investors and traded higher in the
market. Greek officials suggested it
will issue two more tranches of debt over the coming months and refinance the
remainder of its debts maturing this year.
Greece is still
expected to receive financial assistance from Germany and possibly from other
eurozone members as it continues to contain its massive debt crisis. As expected, the European Central Bank kept
its main refinancing rate target unchanged at 1.0% today. ECB President Trichet cautiously reported ‚ÄúThe economic recovery in the euro area is
on track‚ÄĚ and added he expects economic growth to expand ‚Äúat a moderate pace‚ÄĚ
this year. Trichet also noted Greece‚Äôs
progress has been ‚Äúpositive.‚ÄĚ Data
released in the eurozone today saw Q4 gross domestic product unrevised at +0.1%
q/q and 2.1% y/y, down from +0.4% q/q in Q3.
In U.S. news, data released
today saw Q4 non-farm productivity climb 6.9%, up from the prior reading of
6.2%, while Q4 unit labour costs were off 5.9%, lower than the -4.4%
reading. Also, weekly initial jobless
claims came in at 469,000, down from an upwardly revised 498,000 the previous
week, and continuing jobless claims printed at 4.500 million. Additionally, January factory orders printed
at 1.7%, up from a revised 1.5%, while January pending home sales were much
weaker-than-expected, off 7.6% m/m and up 8.8% y/y, both below expectations and
December‚Äôs readings. Traders will be
closely watching tomorrow‚Äôs February non-farm payrolls report with many
forecasts calling for jobs losses of 65,000.
Euro bids are cited around
the US$ 1.3335 level.
The yen depreciated vis-√†-vis the U.S. dollar today as the
greenback tested offers around the ¬•89.25 level and was supported around the ¬•88.15
level. Dealers cited semi-official
buying of the pair below the ¬•88.75 level, an indication the government may be
trying to keep the yen from appreciating further. The Japanese government reportedly increased
its allowance for foreign exchange intervention in the draft budget for its
next fiscal year that starts at the end of this month. Some dealers suggest the new government may
have as much as ¬•145 trillion with which to intervene. Bank of Japan Policy Board member Noda reported
‚ÄúMaintaining fiscal discipline, in other words showing a road map and
implementing it decisively in a timely manner, is critical‚ÄĚ to keep interest
rates low. This is the latest indication
that the verbal sparring between the central bank and government
continues. Noda also added deflation
will continue through fiscal year 2011 and said overseas economies are Japan‚Äôs largest
risk factor. The Nikkei 225 stock index
climbed 1.05% to close at ¬•10,145.72. 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 ¬•120.25 level and was capped around the ¬•121.80 level. The
British pound moved higher vis-√†-vis the yen as sterling tested offers
around the ¬•134.80 level while the Swiss
franc moved lower vis-√†-vis the yen and tested bids around the ¬•82.20 level.
In Chinese news, the U.S. dollar appreciated
vis-√†-vis the Chinese yuan as the greenback closed at CNY 6.8264 in the
over-the-counter market, up from CNY 6.8250.
Options traders have become considerably bullish on the prospect on
additional yuan appreciation.‚ÄĚ PBoC is
expected to raise banks‚Äô reserve requirements further this year. The government also reported new bank lending
exceeded CNY 70 billion in February.
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