Friday September 17, 2004 - 19:01:41 GMT
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GCI Financial - www.gcitrading.com
Forex Market Analysis and Commentary (17 September 2004)
The euro lost some ground vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2160 level after moving to the $1.2220 level during European dealing. The pair moved to intraday lows during North American dealing after the University of Michigan’s preliminary September consumer sentiment survey came in at 105.8, greatly exceeding expectations around of around 96.9 and the final August reading of 95.9. The sentiment data was a welcome reprieve after the dollar spun lower following yesterday’s weaker-than-expected Philadelphia Fed survey that raised some questions about the ongoing economic recovery. Fed Governor Gramlich offered some hawkish remarks yesterday saying the “worst” thing a central bank could so is “let inflation come loose from its moorings.” He intimated the best monetary policy response to a spike in oil prices is to strike a balance somewhere between “temporary” inflation and “temporary” unemployment. The FOMC will convene on Tuesday to deliberate monetary policy and is expected to tighten policy by 25bps. Data released in the eurozone today saw EMU-12 July industrial output come in less-than-expected while German August PPI was up 0.3% m/m and +2.2% y/y in August. ECB policymaker today said EMU-12 inflation is “not a great concern” at the moment but cited oil as a potential price risk. Euro bids are cited around the $1.2150 level.
The yen weakened vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥110.25 level and remained comfortably bid above the psychologically-important ¥110.00 figure after the release of U.S. economic data. The pair first spiked above the ¥110.00 figure during North American dealing and has been bid since Australasian dealing when the pair was trading around the ¥109.30 level. Former MoF mouthpiece Mizoguchi verbally intervented today saying MoF is “still a possibility” even though the government has not implemented massive intervention since mid-March. Mizoguchi also said the yen would be much stronger had the MoF not intervened in large size over the past year and added he expects stability in the FX markets for some time. The Nikkei 225 stock index fell 0.51% to close at ¥11,082.49 while the TOPIX was off 0.31% to close at ¥1,118.55. Dollar bids are cited around the ¥109.30/00 levels with additional support seen around the ¥108.70/30 levels. Dollar offers are seen around the ¥110.30/60 levels with additional selling pressure expected around the ¥111.00/50 levels and an option barrier is cited around the ¥112.00 figure. The euro gained ground vis-à-vis the yen as the single currency tested offers around the ¥134.45 level but moved back below the ¥134.00 figure during North American dealing.
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