Tuesday November 20, 2007 - 17:58:37 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (20 November 2007)
The euro surged higher vis-√†-vis the U.S. dollar today as the
single currency tested offers around the US$ 1.4815 level and was supported
around the $1.4635 level. The common
currency established a new lifetime high today on reports that Saudi Arabia and the United Arab Emirates are
considering de-pegging their currencies from the greenback. Changes to Middle Eastern exchange rate could
potentially have an adverse impact on the U.S. dollar because Middle Eastern
countries would likely accumulate more euros and British pounds. Furthermore,
these entities control hundreds of billions in petrodollars as a result of
elevated energy prices and a shift in exchange rate policies could have a
dramatic impact. ECB member Liebscher
hawkishly reiterated concern with the pick-up in eurozone inflation. Data released today saw Belgium‚Äôs
November consumer confidence index print at -8 from -1 in October while German
PPI was up 0.4% m/m, above expectations.
Eurogroup chief Juncker noted he is ‚Äúmore concerned‚ÄĚ about inflation and
said officials ‚Äúdeplore sudden changes‚ÄĚ in exchange rates.‚ÄĚ ECB‚Äôs Quaden warned
the slowdown could become more pronounced than expected. In U.S. news, October single-family
housing starts were up 3.0% to 1.229 million units and Redbook retail sales
were up 0.3% m/m in the first two weeks of November. Traders await the release of FOMC meeting
minutes from the end of October today along with the Fed‚Äôs latest economic
forecasts. The December fed funds
futures contract is currently discounting about a 59% chance the FOMC will
reduce its overnight target rate by 50bps to 4.00% at the 11 December FOMC
meeting. Euro bids are cited around the
US$ 1.4575/ 1.4470 levels.
The yen weakened vis-√†-vis the U.S.
dollar today as the greenback tested
offers around the ¬•110.60 level and was supported around the ¬•109.60
level. Technically, today‚Äôs intraday low
was right around the 76.4% retracement of the move from ¬•109.10 to
¬•111.75. The yen was given today despite
a dearth of fresh trading news out of Japan. Japan‚Äôs
Tax Commission today recommended an increase in Japan‚Äôs consumption tax for the
fiscal year to March 2009. Traders await
October trade balance data and the September all-industry activity index
overnight. The Nikkei 225 stock index climbed
1.12% to close at ¬•15,211.52. Dollar
bids are cited around the ¬•109.75 level.
The euro gained ground
vis-√†-vis the yen as the single currency tested offers around the ¬•163.30 level
and was supported around the ¬•160.40 level.
The British pound and Swiss franc
moved higher vis-√†-vis the yen as the crosses tested offers around the
¬•228.30 and ¬•99.60 levels, respectively.
The Chinese yuan appreciated
vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.4218 in the
over-the-counter market, down from CNY 7.4286.
and the European Union will convene a trade summit next week in which the
yuan‚Äôs exchange rate vis-√†-vis the euro will play center stage.
The British pound moved higher
vis-√†-vis the U.S. dollar today as cable tested offers around the US$
2.0670 level and was supported around the $2.0455 level. Technically, today‚Äôs intraday high was right
around the 38.2% retracement of the move from $1.9870 to $2.1160. Many data were released in the U.K. today.
First, CML October gross mortgage lending was up 6% m/m. Second, the U.K. October money supply was up
0.1% m/m and 11.8% y/y. Third, October
public sector net borrowing weakened in October, off 1.0 billion.
Fourth, BSA October mortgage approvals fell sharply by a record
amount. CBI‚Äôs industrial trends survey
was released today and saw the industrial output balance ease to +9 in November
from +10 in October, above forecast. Also, the average prices balance increased
sharply to +21 in November, the second-joint highest tally since 1995. Even though this result will provide less
pressure on BoE‚Äôs MPC to reduce interest rates, most traders believe the repo
rate will fall in 2008. Cable
bids are cited around the US$ 2.0365 level.
The euro moved higher
vis-√†-vis the British pound as the single currency tested offers around the
‚ā§0.7175 level and was supported around the ‚ā§0.7140 level.
The Swiss franc appreciated marginally
vis-√†-vis the U.S. dollar today as
the greenback tested bids around the CHF 1.1065 level and was capped around the
CHF 1.1170 level. The pair established a
new multi-year low as U.S. dollar sentiment crumbled. Data released in Switzerland today saw the October
trade surplus rise 1.1% y/y to CHF 1.558 billion. Most traders believe SNB will tighten
monetary policy next month. U.S. dollar
offers are cited around the CHF 1.1355 level. The
Swiss franc weakened vis-√†-vis the U.S. dollar today as the single currency
and British pound tested offers around the CHF 1.6430 and CHF 2.2950 levels,
Australian dollar gained ground vis-√†-vis the U.S. dollar today as the
Aussie tested offers around the US$ 0.8920 level and was supported around the
$0.8755 level. Australian dollar bids
are cited around the US$ 0.8535 level. The
dollar moved higher vis-√†-vis the U.S. dollar as the kiwi tested offers
around the US$ 0.7635 level and was supported around the $0.7490 level. New Zealand dollar bids are cited
around the US$ 0.7415 level.
Canadian dollar weakened marginally vis-√†-vis the U.S. dollar today as the
greenback tested offers around the US$ 0.9860 level and was supported around
the $0.9740 level. Data released in Canada today
saw October consumer prices climb 2.4% y/y with the core index up 1.8% y/y,
below September‚Äôs 2.0% increase. The core
rate was also lower 0.2% m/m. U.S.
dollar offers are cited around the US$ 0.9960 level.
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