Wednesday June 9, 2004 - 19:23:18 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (9 June 2004)
The euro depreciated sharply vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2060 level after failing to get through the $1.2275 level overnight. The move to intraday highs reflected Asian dealers getting short on account of the uptick in federal funds futures prices under the pretense of a possible 50bps increase in the fed funds target rate by the FOMC later this month. Stops were reached below the $1.2220/ 1.2190 levels and easily absorbed bids around the $1.2150 bids. Data released in the U.S. today saw April wholesale trade up 0.8% m/m and 15.1% y/y. All eyes continue to focus on the price of oil with August NYMEX crude futures experiencing a volatile day given a terror attack on an Iraqi pipeline earlier in the session. Traders are also closely watching developments at the G8 summit in Sea Island, Georgia but these events are being partially overshadowed by the President Reagan memorial. France’s finance ministry today called on the ECB to revise its mandate in favour of a more growth-oriented approach with less emphasis on fighting inflation. The finance minister called the ECB’s 2.0% inflation target “a problem” while Belgium’s finance ministry said the eurozone economy is “in a good situation” and said “we will see” if the ECB cuts rates. Data released in the eurozone today saw Germany’s trade surplus at €14.6 billion in April, above forecasts, while German final May HICP was downwardly revised to +0.2% m/m and +2.1% y/y. Traders await the release of May PPI data at 1900 GMT tomorrow and some expect a volatile day on Friday on account of many markets being closed in observance of President Reagan’s funeral. Euro offers are cited around the $1.2250/ 75 levels.
The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥108.65 level after peaking around the ¥109.85 level. Stops were triggered below the ¥109.30 level during the descent and more stops were triggered below the ¥109.00 figure. Traders bought yen during Australasian dealing when it was learned that January-March real GDP growth was upwardly revised to +1.5% q/q from a preliminary +1.4% with FY 2003/2004 GDP growth unrevised at +3.2% y/y. These data were tempered by a downward revision to January-March capital spending from +2.4% to +1.7% q/q. Bank of Japan Governor Fukui spoke today and said damage to Japan’s economy from an oil price rise would be limited and added core CPI will continue to fall slightly. He reiterated the central bank has not conquered deflation. The move lower was clearly led by aggressive sales of the euro/ yen cross rate. The Nikkei 225 stock index fell 0.63% to close at ¥11,449.74. Dollar bids are cited around the ¥108.50/ 35 levels with dollar offers seen around the ¥109.20/ 40 levels. The euro came off sharply and tested bids around the ¥132.05 level after peaking around the ¥134.60 level overnight. Major stops were hit below the ¥134.20 level during the move lower and additional stops were reached below the ¥133.00 figure. In Chinese news, a State Council economist was quoted as saying “In a market transition, it is impossible for market adjustments without administrative measures. The government must lead the market with calming measures." It was also announced that China will introduce more FX products in the interbank this year.
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