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U.S. Forex Market Commentary

Sun, Aug 24 2008, 20:53 GMT
by GCI Financial Team

GCI

EURO

The euro moved lower vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4790 level and was capped around the $1.4910 level.   Technically, today’s intraday low was right around the 38.2% retracement of the move from $1.4630 to $1.4910.  The U.S. dollar gained some ground after state-run Korea Development Bank indicated it may target Lehman Brothers in an acquisition.  Traders await a speech from Federal Reserve Chairman Bernanke later in the day at the Kansas City Fed’s annual Jackson Hole Symposium.  Bernanke is expected to talk about financial stability. In eurozone news, EMU-15 factory orders fell 0.3% m/m and 7.4% y/y in June, worse-than-expected and the fastest annualized rate of decline since December 2001. These data confirm that slowing domestic demand is the source of the pullback in eurozone economic growth because net exports from the eurozone expanded in June.  European Central Bank member Liebscher said EMU-15 economic growth will be around the bottom end of forecasts in 2008 – around +1.5% - but said the economy is not nearing recession.  Euro bids are cited around the US$ 1.4315 level.

 
JPY / CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥109.95 level and was supported around the ¥108.30 level.  Technically, today’s intraday high was right around the 50% retracement of the move from ¥124.15 to ¥95.70.  Finance minister Ibuki reported the government does not plan to issue additional Japanese government bonds to finance the forthcoming economic stimulus and Economics minister Yosano will provide details about the stimulus package next week.  Minutes from Bank of Japan’s Policy Board meeting on 14-15 July expressed policymakers’ concerns with the “degree of deceleration” in overseas economic growth.  Some policymakers also said the central bank needs to “keep close watch for any sign of second-round effects” on inflation expectations.  Data released in Japan overnight saw July supermarket sales rise 0.9% to ¥1.13 trillion.  The Nikkei 225 stock index lost 0.68% to close at ¥12,666.04.  Dollar bids are cited around the ¥106.40 level.  The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥162.95 level and was supported around the ¥161.45 level. The British pound and Swiss franc gained ground vis-à-vis the yen as the crosses tested offers around the ¥204.55 and ¥100.40 levels, respectively.  The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8333 in the over-the-counter market, down from CNY 6.8442.

 
STERLING

The British pound depreciated sharply vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.8545 level and was capped around the $1.8795 level.  Cable came within a few pips of testing a new multi-year low dating to October 2006.  U.K. GDP data revealed the economy recorded zero per cent economic growth in Q2, its weakest showing since the early 1990s.  It now appears the economy may expand by just 1.2% in 2008 and economists ascribe a high probability to the chances of a technical U.K. economic recession in H2 with 2009 faring worse.  Coupled with last week’s dovish quarterly inflation report, today’s GDP data suggest there could be greater pressure on Bank of England’s Monetary Policy Committee to reduce interest rates.  Cable bids are cited around the $1.8015 level.  The euro gained ground vis-à-vis the British pound as the single currency tested offers around the ₤0.7985 level and was supported around the ₤0.7925 level.

 
SWISS

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0970 level and was supported around the CHF 1.0855 level.  Most traders expect Swiss National Bank will reduce interest rates later this year.  U.S. dollar offers are cited around the CHF 1.1135 level.  The euro gained ground vis-à-vis the Swiss franc as the single currency tested offers around the CHF 1.6240 level while the British pound came off vis-à-vis the Swiss franc as sterling tested bids around the CHF 2.0285 level.

Published on  Sun, Aug 24 2008, 20:54 GMT