Thursday November 1, 2007 - 11:49:08 GMT
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GCI Financial - www.gcitrading.com
Forex and Commodity Market Commentary and Analysis (1 November 2007)
The euro moved lower vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4410 level and was capped around the $1.4485 level. The common currency established a new lifetime high yesterday after the Federal Open Market Committee reduced the federal funds target rate by 25bps to 4.50%. Even though Kansas City Fed President Hoenig dissented and the Fed noted upside risks to inflation are ‚Äúroughly balanced‚ÄĚ with downside growth risks, the U.S. dollar was still given after the rate announcement. Many traders will continue to scale back their FOMC rate expectations, especially if upcoming non-farm payrolls data are resilient in the wake of this summer‚Äôs credit crunch. The Fed‚Äôs policy neutrality also reflects the fact that U.S. exports are at or near record highs and have balanced out the losses from the beleaguered U.S. housing sector. Data to be released in the U.S. today include September personal income and September personal consumption expenditures. Most traders believe tomorrow‚Äôs October non-farm payrolls data will print above 100,000 following yesterday‚Äôs strong ADP private jobs data. Euro bids are cited around the US$ 1.4220 level.
The yen depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•115.75 level and was supported around the ¬•115.15 level. Technically, today‚Äôs intraday low was right around the 50% retracement of the move from ¬•112.55 to ¬•117.90. The dollar pressed higher in response to the FOMC‚Äôs policy statement that was deemed more hawkish than expected. Data released in Japan overnight saw Japanese investors purchase a net ¬•461.3 billion of foreign bonds last week while foreign investors were net buyers of Japanese equities last week. These capital flows data suggest the short yen carry trade is still alive and well. The Nikkei 225 stock index gained 0.79% to close at ¬•16,870.40. Dollar bids are cited around the ¬•113.85/ ¬•112.55 levels. The euro moved lower vis-√†-vis the yen as the single currency tested bids around the ¬•166.60 level and was capped around the ¬•167.20 level. The British pound moved higher vis-√†-vis the yen as sterling tested offers around the ¬•240.65 level while the Swiss franc moved lower vis-√†-vis the yen and tested bids around the ¬•99.30 level. The Chinese yuan appreciated sharply vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.4543 in the over-the-counter market, down from CNY 7.4630 ‚Äď the pair‚Äôs weakest closing rate since the July 2005 yuan revaluation. Data released in China saw the CLSA October PMI survey improve to 55.2 while the CFLP October manufacturing PMI survey fell to 53.2
The British pound lost marginal ground vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 2.0750 level and was capped around the $2.0815 level. Cable establish a new multi-year high yesterday after the FOMC‚Äôs rate decision was announced. Sterling was underpinned today after BoE Chief Economist Bean spoke and hawkishly indicated inflation remains a concern despite the possibility of a deceleration in economic growth. Most traders now believe the MPC may be on hold through the end of the year and continue to scale back expectations of a rate cut next week. Data released in the U.K. today saw October CIPS manufacturing PMI fall to 52.9, its lowest print since December 2006. Also, Hometrack reported U.K. house sales are set to decline 16.5% in 2008. Cable bids are cited around the US$ 2.0420 level. The euro extended recent losses vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6925 level and was capped around the ‚ā§0.6965 level.
The Swiss franc depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.1640 level and was supported around the CHF 1.1580 level. The pair reached a new multi-year low yesterday dating to March 2005 after the Fed‚Äôs rate announcement. Notably, however, the Swiss franc has not been a major mover in line with other major currencies during the U.S. dollar‚Äôs recent sell-off. Data released in Switzerland today saw the October PMI manufacturing survey improve to 60.7 from 57.6 in September. Dollar offers are cited around the CHF 1.1665 level. The euro came off vis-√†-vis the Swiss franc as the single currency tested bids around the CHF 1.6745 level while the British pound moved higher vis-√†-vis the Swiss franc and tested offers around the CHF 2.4180 level.
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