Thursday October 4, 2007 - 15:34:11 GMT
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Forex and Commodity Market Commentary and Analysis (4 October 2007)
The euro appreciated vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4150 level and was supported around the $1.4065 level. As expected, the European Central Bank kept interest rates unchanged with the refinancing rate steady at 4.00%. ECB President Trichet reiterated price risks remain to the upside and noted money and credit growth remains vigorous but conspicuously dropped ‚Äúaccommodative‚ÄĚ to characterize the ECB‚Äôs current monetary policy stance. Moreover, Trichet noted there is growing uncertainty over eurozone growth prospects but predicted inflation will remain above 2.0% through early 2008. Trichet also referred to his remarks earlier in the week wherein he said U.S. policymakers have reiterated their strong U.S. dollar policy. Data released in the eurozone today saw August new orders for machinery and plant up 14% y/y. In U.S. news, all eyes are on tomorrow‚Äôs September non-farm payrolls report with most economists expecting that about 100,000 new jobs were created. Traders will also pay close attention to revisions for July‚Äôs and August‚Äôs jobs tallies. Data released in the U.S. today saw August headline factory orders fall 3.3% while the ex-transportation component was off 1.7% and the orders for non-defense capital goods ex-aircraft component was down 0.5%. Weekly initial jobless claims were up 16,000 to 317,000 while continuing jobless claims were off 10,000 to 2.541 million. Euro bids are cited around the US$ 1.4055 levels.
The yen appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the ¬•116.25 level and was capped around the ¬•116.75 level. The pair retraced some of its recent gains and continues to orbit the ¬•116.40 level, representing the 38.2% retracement of the move from ¬•124.15 to ¬•111.60. Bank of Japan Deputy Governor Iwata reported ‚ÄúThe impact of the US subprime mortgage problems on the Japanese financial system is limited at the moment. And our short-term financial markets are showing more stable movements compared with the US and European markets.‚ÄĚ Iwata added ‚ÄúPersistent drops in share prices and a continued high yen would have a negative impact on the economy going forward, and we should watch out for it.‚ÄĚ The Nikkei 225 stock index lost 0.62% to close at ¬•17,092.49. Dollar bids are cited around the ¬•114.80 level. The euro moved higher vis-√†-vis the yen as the single currency tested offers around the ¬•164.90 level and was supported around the ¬•163.90 level. The British pound and Swiss franc gained ground vis-√†-vis the yen as the crosses tested offers around the ¬•237.75 and ¬•99.10 levels, respectively.
The British pound gained ground vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 2.0425 level and was supported around the $2.0275 level. As expected, Bank of England‚Äôs Monetary Policy Committee kept its headline repo rate unchanged at 5.75% and did not issue any policy statement. Minutes from today‚Äôs MPC meeting will be released on 17 October and traders will closely scrutinize the minutes to determine if any policymakers voted to reduce interest rates. Data released in the U.K. today saw Nationwide Q3 annual house price growth at 9.3%, down from 10.2% in Q2, while Halifax September house prices were off 0.6% m/m and up 10.7% y/y. Also, U.K. construction orders were off 8.0% q/q in the three months to August. Cable bids are cited around the US$ 2.0270 level. The euro lost ground vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6910 level and was capped around the ‚ā§0.6950 level.
The Swiss appreciated vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.1815 level and was supported around the CHF 1.1735 level. Technically, today‚Äôs intraday high was just below the 38.2% retracement of the move from CHF 1.2145 to CHF 1.1620. Dollar offers are cited around the CHF 1.1885 level. The euro and British pound came off vis-√†-vis the Swiss franc as the crosses tested bids around the CHF 1.6595 and CHF 2.3900 levels, respectively.
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