Friday April 29, 2005 - 15:23:48 GMT
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Forex Market Commentary and Analysis (29 April 2005)
The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ $1.2980 level and was supported around the $1.2890 level. The common currency shied away from testing technical resistance around the $1.2985 level and failed to hold the $1.2960 level a couple of hours into the North American session. Data released in the U.S. today saw March personal income climb +0.5% while personal spending gained +0.6%. Also, March core personal consumption expenditures data were released today and they came in at +1.7%, in-line with expectations. The Q1 employment cost index printed at +0.7%, the small gain in some six years and an indication that recent price pressures in the U.S. economy are not yet materializing in the form of higher wage price pressures. The final April University of Michigan consumer sentiment index came in at 87.7, down from March’s final reading of 92.6. Rounding out the U.S. data releases was the April Chicago PMI number and it declined to 65.6 from 69.2 in March but still came in higher-than-expected. It is also noteworthy that March’s tally was a seventeen-year high. All eyes are on the Federal Open Market Committee’s interest rate deliberations on Tuesday and the current dilemma in traders’ minds is whether or not Fed policymakers will remove the words “measured pace” from their statement. In eurozone news, European Central Bank member Weber reiterated monetary policy is not an obstacle to growth and characterized the euro as being “stable.” German Economy Minister Clement reported it is possible German Q1 GDP could print above 0.5%. Data released in the eurozone today saw the European Commission’s economic sentiment index recede to 96.5 in April from March’s 97.5 level. Also, the business climate indicator fell to -0.28 this month from a downwardly revised -0.09 last month. EMU-12 flash HICP came in at +2.1% y/y in April and German March retail sales were flat m/m. Additionally, France’s ILO jobless rate ticked-up to a 63-month high of 10.2%. Germany trimmed its 2005 GDP forecast to 1.0% from 1.6% today and Italy’s government reported it sees a 2005 public deficit between 2.9% and 3.5% of GDP. Euro bids are seen around the $1.2900 figure.
The yen made significant gains vis-à-vis the U.S. dollar today as the greenback tested bids around ¥105.00 figure and was capped around the ¥106.10 level. Today’s low represented the pair’s lowest print since 22 March and decent stops were hit below the ¥105.55 level, the 50% retracement level of the move from ¥111.70 to ¥101.75. Japanese financial markets were closed for the Greenery Day holiday thus all of the moves were attributable to the intense speculation that mounted overnight regarding an imminent revaluation of China’s yuan currency. Economy Minister Takenaka said the recent diplomatic spat with China hasn’t affected Japanese business sentiment. Prime Minister Koizumi is in India making the case for Japan’s accession of a permanent United Nations Security Council seat. The ¥105.00 figure had been cited as an option barrier. Dollar bids are cited around the ¥104.45 level and dollar offers are seen around the ¥105.55 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥135.70 level and was capped around the ¥136.95 level. Stops were reached below the ¥136.20 level, the 38.2% retracement level of the move from ¥141.60 to ¥132.95. In Chinese news, speculation about an imminent RMB revaluation reached a fevered pitch overnight when an article in the China Securities Journal reported “basic conditions for greater RMB flexibility are ready” and added the exchange rate could be permitted to fluctuate “by several percentage points.” The article, however, said the widening of the RMB’s trading band will be “less than 10%.” The move in the RMB’s one-year non-deliverable forward rate was later attributed to a glitch in an electronic dealing system and a People’s Bank of China official denied any imminent revaluation was at hand. The yuan trades between 8.2760 and 8.2800 to the dollar.
The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.9160 level and was supported around the $1.9055 level. Data released in the U.K. today saw March mortgage approvals at their highest level since August 2004. Net mortgage lending remained strong last month and net consumer credit was up ₤1.851 billion from ₤1.6388 billion. These data suggest the all-important U.K. housing sector may have bottomed out. Also, the April GfK consumer confidence measure came in at 0 from +1 in March. Cable offers are seen around the $1.9165/ 75 level. The euro moved marginally lower vis-à-vis the British pound as the single currency tested bids around the ₤0.6750 level and was capped around the ₤0.6780 level.
The Swiss franc gained ground vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.1840 level, around the 50% retracement level of the move from CHF 1.1477 to CHF 1.2195. Swiss National Bank President Roth said the central bank is technically “still pursuing an expansionary monetary policy” and added the “normalization” of monetary policy is not yet over. Roth also said he expects Swiss GDP to reach 1.5% in 2005 and said the Swiss economy is “well placed” to benefit from the global economic improvement. Data released in Switzerland today saw the KOF leading indicator recede to 0.52 in April from an upwardly revised 0.53 in March and 0.55 in February. Dollar bids are seen around the CHF 1.1845 level and dollar offers are seen around the CHF 1.1920 level. The euro moved lower vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.5355 level and was capped around the CHF 1.5390 level.
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