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U.S. Forex Market Commentary

Thu, Aug 28 2008, 22:33 GMT
by GCI Financial Team

GCI

EURO

The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4670 level and was capped around the $1.4810 level.  Data released in the U.S. today saw Q2 gross domestic product growth of an annualized 3.3%, above the 2.7% forecast.  The gains were attributable to exports growth and increased consumer spending.  Also, the core personal consumption expenditures price index was unchanged at 2.1%, still above the Federal Reserve’s implied upper comfort zone of 2.0%.  Overall inflation remained unchanged at 4.2% in Q2.  Other data saw weekly jobless claims fall 10,000 to 425,000 while continuing jobless claims expanded 64,000 to 3.423 million, its highest level since November 2003.  In eurozone news, the EMU-15 July M3 money supply expanded at 9.3% and German August unemployment fell 40,000 while French unemployment was up +0.1% in July.  The pair is still reacting to tropical storm Gustav in the Gulf of Mexico.  The storm is said to be gathering strength and could impact U.S. oil installations over the coming days.  Euro bids are cited around the US$ 1.4315 level.

 
JPY / CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥109.70 level and was supported around the ¥108.75 level.  Bank of Japan Policy Board member Suda reported the central bank should move rates once it is sure about the economy, adding “inflation should be directly confronted.”  Traders were stunned by a report in Nikkei that claims the U.S., Japan, and Europe were planning a concerted intervention to support the U.S. dollar in March when U.S. investment banking giant Bear Stearns collapsed.  The “aggressive” contingency plan was reportedly drawn up over the weekend of 15-16 March but was apparently never enacted because JPMorgan Chase Bank emerged as a buyer of Bear Stearns and the greenback stabilized.  These three currency areas have not overly intervened in a concerted manner since September 2000 and Japan last overly intervened in March 2004.  In the plan, Japan would have supplied yen through currency swaps and bought the yen and euro would have been sold.  The Nikkei 225 stock index gained 0.12% to close at ¥12,768.25.  Dollar bids are cited around the ¥106.40 level.  The euro weakened vis-à-vis the yen as the single currency tested bids around the ¥160.70 level and was capped around the ¥162.00 figure. The British pound and Swiss franc came off vis-à-vis the yen as the crosses tested bids around the ¥199.80 and ¥99.55 levels, respectively. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8275 in the over-the-counter market, down from CNY 6.8380.  People’s Bank of China reported that a top priority for the rest of the year is curbing inflation.

 
STERLING

The British pound depreciated vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.8400 figure and was capped around the $ 1.8240 level.  Cable reached its lowest level in about two years on account of weak U.K. economic data.  First, Nationwide reported U.K. house prices were off 10.5% y/y in August.  Second, the CBI’s monthly distributive trades survey’s retail sales balance worsened to -46 from -36 in July, its weakest level since July 1983.  These data underscore the fragile nature of final private demand in the U.K.  Bank of England Monetary Policy Committee member Blanchflower – an archdove – warned two million U.K. residents may be out of work by year-end and said large interest rate cuts are now needed to prevent the U.K. economy from softening further.  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 ₤0.8060 level and was supported around the ₤0.8015 level.

 
SWISS

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.1010 level and was supported around the CHF 1.0885 level.  Swiss National Bank Vice Chairman Hildebrand reported Swiss banks need to improve their capital and liquidity to contend with future crises. Data released in Switzerland today saw Q2 non-farm payrolls up 2.4% y/y.  U.S. dollar offers are cited around the CHF 1.1135 level.  The euro and British pound came off vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.6105 and CHF 1.9990 levels, respectively.

Published on  Thu, Aug 28 2008, 22:35 GMT