Monday August 23, 2004 - 16:42:19 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (23 August 2004)
The euro extended recent losses vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2180 level after stops were triggered below the $1.2280 level during European dealing. There are no major data releases scheduled for the U.S. today so traders are focusing on technicals, U.S. GDP due later this week, and comments from Fed Chairman Greenspan on Friday. Middle East players were seen pushing the pair lower during Australasian dealing and European players later hit stops below the $1.2220 level, driving the common currency to the $1.2180 level. Data released in the eurozone today saw German July import prices come in below expectations at +0.3% m/m and +2.2% y/y following June’s +2.0% y/y pace. Germany’s Clement spoke today and said his country’s GDP is likely to reach the upper end of the government’s forecast in 2004 of +1.5% to 2.0% and downplayed the recent spike in oil prices. Bank of France issued a report today that was critical of one-off measures to reduce public budget deficits. This is in stark contrast to the French government which is leading the pack of eurozone countries that are calling for easier budget guidelines and possible amendments to the EU’s Stability and Growth Pact. Some German states’ CPI data are scheduled for release tomorrow. Euro offers are cited above the $1.2320 level with additional selling pressure around the $1.2335 level.
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥109.75 level after testing bids around the ¥109.15 level during Australasian dealing. The pair’s upside was limited by a pullback in NYMEX crude futures that saw the price recede to the $46.15 level. Liquidity was reported to be very light for most of the overnight session with mainly interbank participants moving the market. Interestingly, dealers are citing some yen buying linked to Japan’s impressive performance at the Athens Olympics. The Nikkei 225 stock index gained 0.66% today to close at ¥10,960.97 after briefly trading above the psychologically-important ¥11,000 figure for the first time in two weeks. Traders await many Japanese data to be released on Wednesday, Thursday, and Friday. Dollar offers are cited around the ¥109.60/80 levels with stops seen above ¥109.75. Additional selling pressure is seen around the ¥110.20/50 levels. Dollar bids are cited around the ¥108.90 level with stops seen below this area. The euro slumped further vis-à-vis the yen today as the single currency tested bids around the ¥133.35 level after testing offers around the ¥134.75 level. Euro stops are cited above the ¥134.80 level ahead of additional offers around the ¥135.20 level.
The British pound weakened vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.8130 level after encountering decent offers around the $1.8215 level. Data released in the U.K. today saw Hometrack house prices fall 0.1% m/m in August, the second month of declines. This confirms some other indices and anecdotal evidence that suggest the housing market is slowing the in the U.K. and is consistent with the Bank of England’s forecasts. Cable bids are cited around the $1.8125/ $1.8050 levels. The euro weakened vis-à-vis the British pound today as the single currency tested offers around the £0.6785 level before falling to the £0.6715 level. A DNT option structure with legs at £0.6585 and £0.6825 is said to mature on 14 August.
The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2650 level after finding bids around the CHF 1.2480 level. Stops were reached above the CHF 1.2580 level during the upswing. Swiss National Bank will issue its next quarterly policy assessment on 16 September and added one-week liquidity at 0.26% today. The Swiss KOF leading indicator will be released on Wednesday. Three-month EuroSwiss futures are now pricing in rates of 0.62% by the end of September, a reflection of expectations that call for around 25bps of additional monetary tightening in 2004. The euro moved higher vis-à-vis the Swiss franc today as the single currency tested offers around the CHF 1.5440 level.
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