Thursday September 27, 2007 - 15:34:18 GMT
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GCI Financial - www.gcitrading.com
Forex and Commodity Market Commentary and Analysis (27 September 2007)
The euro appreciated vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4190 level and was supported around the $1.4125 level. The common currency‚Äôs intraday high represents a new lifetime high for the pair and traders are eyeing the $1.4200 figure as the pair‚Äôs next big obstacle. As the euro inches higher, traders anticipate there will be more jawboning from EMU-13 finance ministers and European Central Bank officials. Many data were released in the U.S. today. First, there was a downward revision to Q2 GDP from an annualized 4.0% to 3.8% while the overall PCE price index rose 4.3%, upwardly revised from 4.2%. Likewise, the core PCE price index ‚Äď the Federal Reserve‚Äôs preferred measure of inflation ‚Äď was upwardly revised to a 1.4% quarterly gain from 1.3%. Even though these data are backwards-looking, they suggest the Federal Open Market Committee cannot become overly complacent about inflation. Second, weekly initial jobless claims fell 15,000 to 298,000 while continuing jobless claims rose 11,000 to 2.551 million. Third, August building permits were upwardly revised to -4.8% from -5.9% but the numbers still evidence a very weak U.S. housing sector. Fourth, August new home sales were off 8.3% to 795,000 annualized units, the weakest showing in seven years. Traders await comments from Fed Chairman Bernanke and other Fed officials today. Traders are beginning to shift their thinking concerning the European Central Bank and many are now speculating the ECB will not follow the Fed‚Äôs lead and cut interest rates. ECB President Trichet noted he has ‚Äúfull respect‚ÄĚ for the Fed and acknowledged there is heightened uncertainty but emphasized that economic conditions are different in Europe and added the financial market turmoil hasn‚Äôt seen the ECB revise its baseline projections for growth and inflation. Data released in the eurozone today saw the number of Germans unemployed recede to its lowest level since unification in 1990 as the unemployment rate fell to 8.8% in September from 8.9% in August. Also, EMU-13 money supply growth printed at 11.6% in August, down from 11.7% in July but still above the ECB‚Äôs perceived comfort zone. These data will maintain pressure on the ECB to not move to an easing bias. Euro bids are cited around the US$ 1.4030 level.
The yen depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•115.70 level and was supported around the ¬•115.10 level. The yen failed to strengthen after Bank of Japan Policy Board member Suda warned the economy could overheat if the central bank raises interest rates too slowly. Most traders now believe the BoJ‚Äôs Policy Board will not lift the overnight call rate by 25bps to +0.75% before the end of the year. Impressive gains for other currencies on the yen crosses overnight render it clear that the short yen carry trade is alive and well. Many economic data will be released in Japan tonight including CPI and household spending numbers. The Nikkei 225 stock index gained 2.41% to close at ¬•16,832.22. Dollar bids are cited around the ¬•114.55/ 112.55 levels. The euro moved higher vis-√†-vis the yen as the single currency tested offers around the ¬•163.75 level and was supported around the ¬•163.00 figure. The British pound and Swiss franc gained ground vis-√†-vis the yen as the crosses tested offers around the ¬•234.10 and ¬•98.90 levels, respectively. The Chinese yuan gained marginal ground vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.5146 in the over-the-counter market, down from CNY 7.5150. Data released in China saw the August consumer confidence index improve to 97.3 from 96.7 while China‚Äôs foreign reserves totaled more than US$ 1.4 trillion at the end of August. Also, it was reported that industrial firms‚Äô profits were up 37% y/y between January and August.
The British pound appreciated vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 2.0285 level and was supported around the $2.0135 level. Technically, today‚Äôs intraday low was just below the 50% retracement of the move from $2.0655 to $1.9650. Data released in the U.K. today saw the CBI‚Äôs monthly distributive trades survey report a balance of +12% of retailers noting higher sales in September than one year ago, down from +15% in August and the lowest reading since November 2006. Also, BBA reported that August mortgage approvals for house purchases slowed while Nationwide saw house prices gain this month despite financial market turmoil. Other data saw Q2 productivity growth recede to 2.7% y/y while July service sector output was up 0.3% m/m in July. Many traders believe Bank of England‚Äôs Monetary Policy Committee will not ease interest rates this year and will keep them on hold through the beginning of 2007. Cable bids are cited around the US$ 2.0090 level. The euro came off vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6990 level and was capped around the ‚ā§0.7015 level.
The Swiss lost ground vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.1735 level and was supported around the CHF 1.1675 level. Swiss National Bank‚Äôs quarterly review was published today and the central bank reported economic growth was robust in June, July, and August, confirming its economic growth forecast of 2.5% for 2007. SNB also reported capacity utilization is high and the economy is facing staff shortages. U.S. dollar offers are cited around the CHF 1.1760 level. The euro and British pound gained ground vis-√†-vis the Swiss franc as the crosses tested offers around the CHF 1.6600 and CHF 2.3735 levels, respectively.
The Australian dollar appreciated vis-√†-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.8835 level and was supported around the $0.8745 level. Data released in Australia today saw job vacancies climb 2.9% q/q in the August quarter. Australian dollar bids are cited around the US$ 0.8700 figure. The New Zealand dollar moved higher vis-√†-vis the U.S. dollar as the kiwi tested offers around the US$ 0.7520 level and was supported around the $0.7435 level. New Zealand dollar bids are cited around the US$ 0.7375 level.
The Canadian dollar appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the C$ 0.9975 level and was capped around the C$ 1.0055 level. Technically, yesterday‚Äôs intraday high was right at the 23.6% retracement of the move from C$ 1.0590 to C$ 0.9935 and today‚Äôs intraday low was right at the 76.4% retracement of the move from $0.9935 to $1.0095. Sizable gains in crude oil futures helped to push the loonie higher today. GDP and industrial prices data will be released tomorrow. U.S. dollar offers are cited around the C$ 1.0090 level.
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