Thursday November 29, 2007 - 17:00:28 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (29 November 2007)
The euro depreciated vis-√†-vis the U.S. dollar today as the single
currency tested bids around the US$ 1.4720 level and was capped around the
$1.4845 level. The common currency
extended its recent pullback on growing doubts the European Central Bank will
continue to tighten monetary policy. Traders also added to U.S. dollar exposure
after U.S. GDP growth between July and September was upwardly revised to 4.9%
from 3.9%, its strongest level in four years.
The dollar‚Äôs gains were limited, however, that GDP growth in the current
October-to-December period could be weak around 1.5% or so. There is also a changing perception in the
market concerning interest rate differentials.
Some traders are now buying U.S. dollars on the premise lower rates will
help bolster U.S. economic growth, rather than unfavourable diminish U.S.
interest rate differentials. Remarks
from Fed Vice Chairman Kohn were dovish yesterday and the November Beige Book cited
decelearing growth, ‚Äúrelatively soft retail spending,‚ÄĚ and a ‚Äúquite depressed‚ÄĚ
real estate sector. Most traders believe the FOMC will ease monetary policy by
25bps or 50bps on 11 December. Other
data released in the U.S.
today saw weekly initial jobless claims up 23,000 to 352,000 while continuing
jobless claims were up 112,000 to 2.67 million.
Additionally, existing home sales were up 1.7% to an annualized 728,000
in October and were off 23.5% y/y while the government‚Äôs Q3 home price index
fell 0.36%, the first decline in thirteen years. Fed Governor Mishkin speaks later in the U.S. session. In
eurozone news, Bundesbank sees 2007 German GDP growth at 2.5% and around
2.0% in 2008 and warned of ‚Äúabrupt‚ÄĚ movements in exchange rates. The German
government reported November‚Äôs jobless figure fell 53,000. European Central Bank
official Liebscher reported upside inflation risks continue to prevail. Euro bids are cited around the US$ 1.4690/ 25
The yen appreciated vis-√†-vis the U.S.
dollar today as the greenback tested
bids around the ¬•109.65 level and was capped around the ¬•110.30 level. Technically, today‚Äôs intraday low was right
around the 23.6% retracement of the move from ¬•107.20 to ¬•110.45. Data released in Japan today saw October industrial
output up 1.6% m/m. Also, the Shoko
Chukin Bank‚Äôs business sentiment index for small- and medium-size companies
fell 0.9 points to 46.9 in November, the second consecutive monthly decline. The Nikkei 225 stock index gained 2.38% to
close at ¬•15,513.74. Dollar bids are
cited around the ¬•106.55 level. The euro moved lower vis-√†-vis the yen
as the single currency tested bids around the ¬•161.60 level and was capped
around the ¬•163.60 level. The British
pound and Swiss franc came off vis-√†-vis the yen as the crosses tested bids
around the ¬•225.75 and ¬•97.95 levels, respectively. The Chinese yuan appreciated vis-√†-vis the U.S. dollar as the
greenback closed at CNY 7.3824 in the over-the-counter market, down from CNY
7.3945. China Investment Corp. announced it may play a ‚Äústabilization‚ÄĚ role in
economy following the ongoing subprime mortgage crisis. China‚Äôs foreign reserves as of the
end of October aggregated US$ 1.455 trillion.
The British pound weakened
sharply vis-√†-vis the U.S. dollar today as cable tested bids around the US$
2.0595 level and was capped around the $2.0830 level. Bank of England Governor King said the U.K.
economic outlook in the short-term is ‚Äúrather uncomfortable and highly
uncertain‚ÄĚ and these remarks contributed to greater speculation that BoE MPC
may move to ease monetary policy as early as December. MPC‚Äôs Blanchflower reported the credit crisis
has more room to go. Also, Nationwide
reported November house prices were off 0.8% m/m while mortgage approvals pulled
back to 88,000. In contrast, CBI‚Äôs distributive trades survey confirmed H1
November‚Äôs sales balance improve to +13 from +10 in October. Cable bids are cited around the US$ 2.0365
level. The euro moved higher vis-√†-vis the British pound as the single
currency tested offers around the ‚ā§0.7165 level and was supported around the
The Swiss franc moved lower vis-√†-vis
the U.S. dollar today as the
greenback tested offers around the CHF 1.1210 level and was supported around
the CHF 1.1105 level. Many traders
believe Swiss National Bank will tighten monetary policy in December. Dollar offers are cited around the CHF 1.1270
level. The euro moved higher vis-√†-vis the Swiss franc as the single
currency tested offers around the CHF 1.6505 level while the British pound weakened vis-√†-vis the Swiss franc as sterling
tested bids around the CHF 2.3010 level.
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