Monday July 4, 2005 - 15:32:43 GMT
Share This Story
GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (4 July 2005)
The euro extended recent losses vis-à-vis the U.S. dollar today as the single currency traded as low as the US$ 1.1890 level and was capped around the $1.1950 level. Today’s low represented the pair’s lowest level since May 2004 and follows wild selling pressure on Friday when stops were reached below the $1.2030 level. The Independence Day holiday in the U.S. may limit the pair’s downside as liquidity will be thin. All eyes will be on this week’s G8 summit in Gleneagles, Scotland where global leaders will try to push an agenda that includes debt relief for Africa. President Bush this weekend called on the European Union to scrap farm subsidy payments as they are distributed in their current form, a very contentious issue in the European Union now. By doing so, Bush appears to be siding with the U.K. which has recently stated it will not renegotiate its multi-million euro annual rebate from the EU unless France agrees to change agricultural subsidy payments and invest the funds in future development projects. Another impetus for the euro’s decline was a statement from European Central Bank Governing Council member Noyer who indicated it is possible for a eurozone member country to exit the eurozone. This comment follows weeks of political wrangling in Italy where some officials are trying to at least partially bring back the lira. The common currency’s downside could be protected by bids ahead of a reported option barrier cited around the $1.1850 level. The German media is reporting that the conservative opposition party will raise the German value-added tax to 18% from 16% if they defeat Chancellor Schroeder in the early general election planned for 18 September. Data released in the eurozone today saw EMU-12 May PPI fall 0.2% m/m and rise 3.5% y/y while April’s tally was revised to +0.5% m/m and +4.3% y/y. Also, German June services PMI printed at 52.3, down from May’s 52.6 level and weaker-than-expected. All eyes will be on this week’s U.S. June non-farm payrolls report with consensus forecasts calling for around 190,000 new jobs created last month. Euro offers are seen around the $1.1940 level.
The yen established a new multi-month low vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥111.85/ 90 level in early Asian dealing. The pair could not sustain its early gains, however, and receded back to the ¥111.40 level in early North American dealing. Today’s activity follows strong buying activity in Friday’s North American session when the pair leapt from the ¥110.75 level to the ¥111.80 level. The yen was also strong today on its crosses where it registered gains vis-à-vis the euro, British pound, Swiss franc, Australian dollar, and others. Data released in Japan today saw the June monetary base increase 1.7% y/y, down from May’s 2.2% y/y rise. In political news, the ruling Liberal Democratic Party lost some assembly seats in Tokyo elections this weekend but it should not have a material impact on Prime Minister Koizumi’s policies. The Nikkei 225 stock index climbed 0.18% to close at ¥11,651.55. Dollar bids are cited around the ¥110.60/ 30 levels. The euro came off significantly vis-à-vis the yen as the single currency tested bids around the ¥132.50 level and was capped around the ¥133.45 level. Euro bids are cited around the ¥131.90 level. The British pound and Swiss franc depreciated to the ¥195.85 and ¥85.50 levels, respectively.
The British pound extended its recent downturn vis-à-vis the U.S. dollar today as cable tested bids around the $1.7570 level, its lowest print since May 2004. Selling pressure on sterling was firm on Friday with major stops hit below the $1.7900 figure and forced cable to close around the $1.7670 level. Likewise, the pair gapped down at the Australasian open overnight. Traders are selling the pound because there is a belief that Bank of England will be the next major central bank to ease monetary policy, possibly with an interest rate cut this month or next. To this end, the British Retail Consortium – which advocates lower interest rates – has accelerated the release of monthly sales data by one week to evidence the weak status of spending activity in the U.K. economy. The BoE’s Monetary Policy Committee will deliberate policy on Wednesday and Thursday. In M&A news, there is talk that T-Mobile may sell its U.S. subsidiary for as much as US$ 25 billion and there is speculation that Vodafone may be interested in acquiring it. In political news, there is talk the U.K. Treasury may postpone its planned 2006 spending review until 2006. Cable offers are seen around the $1.7670 level. The euro came off marginally vis-à-vis the British pound as the single currency tested bids around the ₤0.6755 level and was capped around the ₤0.6785 area.
The Swiss franc moved lower vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.3025 level and was supported around the $1.2965 level. The pair has not been this strong since May 2004 and technically has now retraced 23.6% of its move from CHF 1.8230 (July 2001) to CHF 1.1285 (December 2004). Dollar bids are seen around the CHF 1.2930 level. The euro came off vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.5455 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."