DAILY MARKET COMMENTARY
14 February 2008

Thursday 

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GCI Foreign Exchange Research:         www.gcitrading.com/fxnews/
FX Research Desk:                                 fxnews@gcitrading.com
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Fundamental Outlook at 1500 GMT (EDT + 0500)

€

The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4640 level and was supported around the $1.4550 level.  Traders pushed the common currency to intraday highs following testimony from Federal Reserve Chairman Bernanke and Treasury Secretary Paulson regarding the U.S. economy.  Bernanke reiterated that downside economic risks to growth persist on account of the housing, employment, and credit markets.    He added “My baseline outlook involves a period of sluggish growth, followed by a somewhat stronger pace of growth starting later this year as the effects of monetary and fiscal policy stimulus begin to be felt…(the Fed) will act in a timely manner as needed to support growth and provide adequate insurance against downside risks.” Paulson said the government is continuing “aggressive action” to assist homeowners who are facing difficulties on account of the credit crunch.  The May federal funds futures contract is now pricing in about a 94% chance the fed funds target rate will be lowered by 25bps at the 20-30 April Federal Open Market Committee meeting.  Data released in the U.S. today saw weekly initial jobless claims fall 9,000 to 348,000 while continuing jobless claims rose to 2.76 million.  Also, the December trade balance improved to –US$ 58.8 billion from –US$ 63.1 billion in November.  The U.S.’s trade deficit with China improved to –US$ 18.79 billion from –US$ 23.95 billion in November.  In eurozone news, EMU-13 Q4 GDP growth slowed to 0.4% in the three months to December from 0.8% in Q3.  On an annualized basis, the economy expanded 2.3% in Q4, down from 2.7% in Q3.  The European Central Bank reported housing prices are “normalizing” and economists surveyed by the ECB cut their 2008 GDP growth forecasts and raised their 2008 inflation forecasts.  The ECB acknowledged EMU-15 economic growth risks are “tilted to the downside” and ECB’s Quaden said the ECB’s December baseline scenario for growth forecasts may need to be reviewed.  Euro bids are cited around the US$ 1.4380 level.

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids  ¥108.00 figure and was capped around the ¥108.60 level.  Technically, today’s intraday high was right around the 38.2% retracement of the move from ¥114.65 to ¥104.95.  Some demand for yen emerged overnight after decent Japanese economic data were released and Japanese markets responded favourably.  First, December industrial output was up 1.4% m/m with shipments up 1.6%.   Second, January machine tool orders wwre flat y/y at ¥119.9 billion, up from the provisional 1.0% y/y decline. Third, GDP was up a real 0.9% in the October – December quarter, or an annualized 3.7% - above estimates.  Capital spending and consumption improved in the most recent quarter. Most traders believe Bank of Japan’s Policy Board will keep the overnight call rate unchanged at 0.50% for the foreseeable future.  The Nikkei 225 stock index gained 4.27% to close at ¥13,626.45.  Dollar bids are cited around the ¥105.65/ 104.95 levels.  The euro gained ground vis-à-vis the yen as the single currency tested offers around the ¥158.45 level and was supported around the ¥157.30 level.  The British pound and Swiss franc moved higher vis-à-vis the yen as the crosses tested offers around the ¥213.85 and ¥98.25 levels, respectively.  The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 7.1904 in the over-the-counter market, down from CNY 7.2000. 

₤

The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.9740 level and was supported around the $1.9610 level.    Technically, today’s intraday high was right around the 61.8% retracement of the move from $1.9955 to $1.9385.  There was a dearth of data released in the U.K. today and traders bid sterling higher on improving risk appetites.  Cable bids are cited around the US$ 1.9670 level.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.7430 level and was supported around the ₤0.7405 level.

CHF

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0980 level and was capped around the CHF 1.1095 level. Data released in Switzerland today saw the ZEW February economic expectations indicator fall to -55.5 from -32.7 in January.  U.S. dollar offers are cited around the CHF 1.1155 level.  The euro and British pound weakened vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.6070 and CHF 2.1625 levels, respectively.

Technical Outlook at 1330 GMT (EDT + 0500)

             (Bid Price)       (Today’s Intraday Range)                                

EUR/ USD        1.4628                 1.4638, 1.4548
USD/ JPY         108.18    108.45, 108.00
GBP/ USD        1.9721                 1.9726, 1.9612
USD/ CHF         1.1014                 1.1097, 1.1007
AUD/ USD        0.9059                 0.9064, 0.8952
USD/CAD         0.9943                 0.9990, 0.9942
NZD/USD         0.7898                0.7905, 0.7832
EUR/ JPY         158.22    158.46, 157.32
EUR/ GBP        0.7415                 0.7428, 0.7404
EUR/ CHF         1.6117                 1.6181, 1.6106
GBP/ JPY         213.42                 213.62, 211.90
CHF/ JPY           98.18                   98.24,   97.54

Support                        Resistance                   Support                     Resistance

EUR/ USD                                                              USD/ JPY

L1.        1.4160                          1.4970                          104.20                          109.20 

L2.        1.4045                          1.5260                          101.65                          111.55
L3.        1.3950                          1.5845                            96.95                          113.85

   GBP/ USD                                                          USD/ CHF

L1.        1.9640                          1.9985                          1.0600                          1.1020

L2.        1.9260                          2.0165                          1.0365                          1.1130

L3.        1.8815                          2.0435                          1.0075                          1.1215

 AUD/ USD                                                           USD/ CAD

L1.        0.8740                          0.8990                          0.9750                          1.0175

L2.        0.8535                          0.9055                          0.9485                          1.0440

L3.        0.8330                          0.9185                          0.9060                          1.0865

 NZD/ USD                                                           EUR/ JPY

L1.        0.7555                          0.8080                          156.30                          160.65

L2.        0.7415                          0.8310                          153.60                          163.20

L3.        0.7290                          0.8525                          149.20                          166.65

  EUR/ GBP                                                          EUR/ CHF

L1.        0.7300                          0.7530                          1.5970                          1.6295

L2.        0.7155                          0.7615                          1.5770                          1.6550

L3.        0.7030                          0.7705                          1.5440                          1.6920

  GBP/ JPY                                                           CHF/ JPY

L1.        199.55                          215.50                            97.00                           99.55

L2.        187.40                          222.30                            94.45                         101.85

L3.        172.35                          226.75                            92.15                         102.90

SCHEDULE

Thursday, 14 February 2008

all times GMT

(last release in parentheses)

0030     Australia           January employment change (20,100)

0030     Australia           January unemployment rate (4.3%)

0400     Japan               Bank of Japan Policy Board meeting

0400     Japan               January Tokyo condominium sales (-20.2% y/y)

0400     Japan               December industrial production (1.4% m/m)

0400     Japan               December industrial production (0.7% y/y)

0400     Japan               December capacity utilization (108.4)

0600     Japan               January machine tool orders

0700     Germany           Q4 GDP (0.7% q/q)

0700     Germany           Q4 GDP (2.5% y/y)

0730     Finland European Central Bank member Liikanen speaks

0730     France              January Bank of France sentiment (103)

0745     France              Q4 GDP

0900     Eurozone          February European Central Bank monthly report

1000     Eurozone          Q4 GDP (0.7% q/q)

1000     Eurozone          Q4 GDP (2.7% y/y)

1000     CH                    February ZEW survey, expectations (-32.7)

1330     US                    December trade balance (-US$ 63.1 billion)

1330     US                    Weekly initial jobless claims

1330     US                    Continuing jobless claims

1330     Canada             December international merchandise trade

1500     US                    Fed Chairman Bernanke testifies

1500     US                    U.S. Treasury Secretary Paulson testifies

1615     Eurozone          December current account (-€2.450 billion)

1700     Spain                European Central Bank President Trichet speals

1830     US                    Chicago Fed President Evans speaks

2145     NZ                    December retail sales (2.0% m/m)

2145     NZ                    December retail sales, ex-autos (0.9% m/m)

2350     Japan               Equities and fixed-income investments

Friday, 15 February 2008

all times GMT

(last release in parentheses)

0030     US                    Former Federal Reserve Chairman Greenspan speaks

0500     Japan               January nationwide department store sales (-2.3% y/y)

0500     Japan               January Tokyo department store sales (-1.6% y/y)

0500     Japan               Bank of Japan Policy Board meeting

0500     CH                    December real retail sales (2.9% y/y)

0600     Japan               Bank of Japan monthly report

0745     France              Q4 non-farm payrolls

0745     France              Q4 wages

1000     Eurozone          December trade balance (€2.6 billion)

1045     Belgium            European Central Bank members Quaden and Liikanen speak

1330     US                    January import price index (0.0% m/m)

1330     US                    January import price index (10.9% y/y)

1330     US                    February Empire manufacturing index (9)

1330     Canada             December manufacturing shipments (1.1% m/m)

1400     US                    December net long-term TIC flows (US$ 90.9 billion)

1400     US                    December total net TIC flows (US$ 149.9 billion)

1415     US                    January industrial production (0.0%)

1415     US                    January capacity utilization (81.4%)

1445     Spain                European Central Bank President Trichet speaks

1500     US                    February University of Michigan consumer sentiment (78.4)

1745     US                    Fed Governor Mishkin speaks 

DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.