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Daily Market Commentary

Discussion in 'Forex Daily News & Outlook' started by gcitrading, Oct 19, 2009.

  1. gcitrading

    gcitrading Contributing Member

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    EURO
    The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4960 level and was supported around the $1.4825 level. Further strong gains in U.S. equities prices created demand for higher-yielding currencies, including the common currency. The dollar was also pressured lower by a story that the Federal Reserve Bank of New York is making preparations to utilize reverse repurchase agreements to remove liquidity from the financial system. The New York Fed clarified its position, saying the tests it is conducting are “a matter of prudent advance planning by the Federal Reserve, and no inference should be drawn about the timing of monetary policy tightening.” The dollar also came off following remarks from Federal Reserve Chairman Bernanke who warned policymakers need to remain alert against unsustainable global imbalances including U.S. budget deficits. Data released in the U.S. today saw the October NAHB housing market index decline to +18 from the prior reading of +19. Data to be released in the U.S. tomorrow include September producer price inflation numbers. In eurozone news, eurozone finance ministers are convening and will likely discuss the strength of the common currency as it races toward the psychologically-important $1.50 figure. Eurogroup Chairman Juncker said the continued appreciation of the euro “along the lines of recent weeks” could “slow the economic recovery in Europe.” Some dealers believe the ECB is inching closer to selling euro in the market through intervention while others believe the ECB will maintain a hands-off approach. ECB member Bini Smaghi warned lending to companies will continue to move lower before improving. Euro bids are cited around the US$ 1.4445 level.

    JPN/CNY
    The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥90.35 level and was capped around the ¥91.10 level. Bank of Japan released its quarterly regional report overnight and noted “Signs of picking up had appeared throughout the economy, although regional differences remained.” The BoJ last week lifted its assessment of the economy for the second consecutive month. Minutes from the BoJ Policy Board’s 16-17 September meeting were released overnight in which policymakers concluded “A few members were of the view that the positive effects these measures could producer were on the wane.” The central bank is likely to not renew some of its emergency spending programs when they expire at the end of the month. Data released in Japan overnight saw the August tertiary activity index rise 0.3%. The Nikkei 225 stock index lost 0.21% to close at ¥10,236.51. U.S. dollar offers are cited around the ¥94.75 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥135.90 level and was supported around the ¥134.75 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥149.10 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥89.70 level. In Chinese news, the U.S. dollar strengthened vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8244 in the over-the-counter market, up from CNY 6.8243. The Chinese government reported it will reduce industrial overcapacity. The U.S. Treasury last week stopped short of characterizing China as a manipulator of its currency but said China exhibits a “lack of flexibility” on the yuan. China’s State Administration of Foreign Exchange last week reported it does not anticipate any upward pressure on the yuan in the near future and noted it expects China’s international balance of payments and net capital inflows to continue to expand.

    STERLING
    The British pound appreciated further vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.6420 level and was supported around the $1.6240 level. Sterling’s upside was limited by comments from Bank of England Monetary Policy Committee member Posen who this weekend said the central bank may potentially increase the size of its quantitative easing program. Last week, sterling was bid sharply higher on speculation the BoE’s quantitative easing program would be paused at ₤175 billion in size. BoE’s new quarterly inflation forecasts will be known to policymakers at their November MPC meeting. Data released in the U.K. overnight saw Rightmove October house prices climb 2.8% m/m and 0.2% y/y. Also, the U.K. ITEM Club upgraded its 2010 growth forecast to 1% from 0.5%. Cable bids are cited around the US$ 1.6170 level. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.9190 level and was supported around the ₤0.9095 level.
     
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