GCI Forex Research
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The euro moved higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2760 level and was supported around the $1.2525 level. The common currency snapped back after being given earlier in the week on escalating concerns about Eastern European and Western European banks’ exposure to asset problems in that region. Austria’s central bank said the most important Austrian banks are well-capitalized with sufficient liquidity and can contend with problems in Eastern Europe. Many traders believe these latest developments in Eastern Europe are another reason why the European Central Bank will ease interest rates next month. In U.S. news, the January headline producer price index rose 0.8% m/m, reversing some of December’s 1.9% decline, while the core PPI was up 0.4%, beating expectations of a 0.1% climb. Core PPI was also up 4.2% y/y. These data allayed some concerns that deflationary pressures were mounting in the U.S. though it is premature to conclude downward price pressures are stabilizing. Other data released today saw weekly initial jobless claims remain steady at a revised 627,000 while continuing jobless claims jumped higher to 4.987 million, the highest level in 42 years. Additionally, it was reported that the Philadelphia Fed’s manufacturing survey printed at -41.3 in February and that the U.S. January leading index gained 0.4%. Dealers are paying close attention to the Obama administration’s plans to slow the foreclosures crisis in the U.S. with many traders concluding the plans amounts to moral hazard. Euro bids are cited around the US$ 1.2475 level.
¥/ CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥94.40 level and was supported around the ¥93.30 level. The Japanese government downgraded its economic assessment for the fifth consecutive month, the longest period of consecutive downgrades since 2001. The government reported the economy “is worsening rapidly while in a severe situation” and this is the most pessimistic the government has been since 1975. Many Japan-watchers believe the Aso government will soon draft its fourth fiscal stimulus package since August. Data released in Japan overnight saw the gross domestic product gap print at -4.3% in the October – December period, the worst print since the -4.5% figure in Q1 2002, and this means supply far exceeds demand. This also reflects problems faced by Japan’s all-important export sector where the yen’s relative strength has eroded Japan’s trade surplus. The Nikkei 225 stock index climbed 0.31% to close at ¥7,557.65. U.S. dollar offers are cited around the ¥104.15 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥120.35 level and was supported around the ¥117.30 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥136.35 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥80.55 level. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8348 in the over-the-counter market, down from CNY 6.8378.
Daily Market Commentary provided by GCI Financial Ltd.
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