Thursday April 28, 2005 - 14:21:42 GMT
Share This Story
GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (28 April 2005)
The euro moved lower vis-à-vis the U.S. dollar today as the single currency tested bids around the US$1.2880 level and was capped around the $1.2940 level. The common currency was quite volatile following the release of advance Q1 U.S. GDP data that failed to meet estimates, printing at 3.1%. Nonetheless, the GDP deflator printed at 3.2% - more-than-expected – and traders reacted by immediately pushing the pair below the $1.2900 figure. Bottom-feeders quickly pushed the pair back to the $1.2935 level but the pair has since retreated back to the $1.2900 figure. Technically, the $1.2900 figure remains the short-term pivot point as it represents the 50% retracement of the move from $1.2765 to $1.3120. Personal consumption was up a preliminary 3.5% in Q1 in the U.S. and even though overall advance GDP did not meet estimates, the growth rate of the U.S. economy still outpaces that of the eurozone. This pullback from the Q4 growth rate in the U.S., however, will elicit comments from the USD-bearish school of thought that focuses on the U.S.’s structural imbalances rather than pro-growth cyclical factors. Other data released in the U.S. today saw weekly initial jobless claims up 21,000 to 320,000 while continuing claims printed at 2.55 million, down from 2.63 million. All eyes are on tomorrow’s U.S. personal consumption expenditures data as this is said to be the Fed’s preferred measure of inflation. Stronger-than-expected PCE data could tip the balance in favour of those who expect the Federal Open Market Committee to abandon its “measured pace” language when policymakers convene on Tuesday. Traders continue to talk about yesterday’s decline in oil prices and will continue to watch energy costs. Data released in the eurozone today saw revised German GDP signal that Germany technically entered a recession at the end of 2004 as Q3 GDP were downwardly revised to show a fractional contraction. German Q1 GDP is said to be relatively decent, however, and data released today saw Germany’s April jobless total fall to 4.97 million, as expected. Other data released today saw March German wholesale sales up a real 1.2% m/m but were off 2.1% y/y. German plant and machinery orders were off a whopping 10.0% y/y last month. In European Central Bank news, the ECB reported the eurozone’s Q4 current account surplus of € 14.3 billion largely reflected surpluses with the U.S. and U.K. Italian Prime Minister Berlusconi today urged the ECB to “change its destructive monetary policy” and said Europe is likely to impose quotes on the importation of Chinese textile goods. Euro bids are seen around the $1.2900 figure and euro offers are detected around the $1.2940 level.
The yen was little changed vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥106.25 level and was supported around the ¥105.75 level. Notably, the pair has remained above the technically-significant ¥105.55 level for three days now – the 61.8% retracement level of the move from ¥111.70 to ¥101.75. Traders are talking about several items of note today. First, Bank of Japan released its semiannual Outlook for Economic Activity and Prices today and downwardly revised its forecast for price trends. The central bank does not expect Japan will emerge from deflation until the year ending in March 2007, a year later than earlier thought. Fundamentally, this is likely to be a drag on the yen because it suggests BoJ will begin to unwind its long-standing quantitative easing interest rate policy later rather than sooner meaning official interest rates will be kept lower longer. The central bank is now predicting core CPI will rise 0.3% y/y in the year to March 2007 and downwardly revised its real GDP growth forecast for FY 2005 to 1.3% from 2.5%. Bank of Japan’s Policy Board also convened overnight and voted 7-2 to keep monetary policy unchanged. Policymakers remain split as to whether or not the central bank should reduce its current account surplus target in what would be largely a technical move with no implication for the direction of monetary policy. BoJ Governor Fukui added to the interest rate issue in his remarks when he said the central bank will not necessarily abandon its policy accommodation once core consumer prices stop falling. The three criteria, he reiterated, are that the monthly CPI index must be above 0% for a prolonged period; no prospect of moving below 0%; and the economy must be growing steadily. The BoJ also announced it will utilize a new CPI measure as the basis for policy after the government revises CPI data in 2006. Finance minister Tanigaki today called on China to reform its currency regime ahead of his attendance of a multilateral policymaking meeting in Istanbul next week at which his Chinese counterpart will attend. Data released in Japan today saw March industrial output recede 0.3% m/m and climb 1.1% y/y. Also, March commercial sales were up 0.5% y/y and retail sales were up 0.6%. Moreover, March housing starts came off 2.7% y/y, the first decline in three months and capital flows data released today saw foreign investors as net sellers of Japanese equities last week. Japanese investors sold a net ¥41.9 billion of foreign equities last week, the fourth week of net sales in the previous five weeks. The MoF reported it did not intervene in the FX market last month. Japanese financial markets will be closed tomorrow for a national holiday. The Nikkei 225 stock index gained a mere 0.03% to close at ¥11,008.90. Dollar bids are cited around the ¥105.55 level and dollar offers are seen around the ¥106.70 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥136.45 level and was capped around the ¥137.35 level. Euro bids are seen around the ¥136.25 level. In Chinese news, China announced its January – February trade with Taiwan grew 15.3% y/y to US$ 9.78 billion.
The British pound retraced most of its gains vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.9100 figure – a key short-term retracement level – and was supported around the $1.9015 level. Sterling was volatile in the aftermath of the U.S. GDP data’s release and established a fresh daily high soon thereafter. The pair climbed from intraday lows after the release of Nationwide house price data that saw April house prices rise by 0.9% in April, backtracking from March’s 0.6% drop. U.K. Prime Minister Blair, who faces a re-election vote in early May, today said the U.K. is likely to remain outside of Economic and Monetary Union in the next Parliament and said the five economic tests that will determine whether or not a national referendum is held on the issue remain in place. Cable bids are cited around the $1.9045 level and cable offers are seen around the $1.9100/ 25 levels. The euro came off vis-à-vis the British pound as the single currency tested bids around the ₤0.6765 level and was capped around the ₤0.6795 level.
The Swiss franc gained marginal ground vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.1945 level and was supported around the CHF 1.1885 level. The pair has been unable to gain much of a foothold above the technically-important CHF 1.1920 level, the 38.2% retracement of its move from CHF 1.1475 to CHF 1.2195. Swiss National Bank President Roth is likely to speak today. Dollar bids are seen around the CHF 1.1875/ 50 levels. The euro moved lower vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.5380 level and was capped around the CHF 1.5420 level.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."