DAILY MARKET COMMENTARY
27 August 2008

Wednesday

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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 1400 GMT (EDT + 0400)

€

The euro moved higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4775 level and was supported around the $1.4630 level.  Different factors led to gains by the common currency. First, tropical storm Gustav is nearing the U.S. oil-rich gulf region and chased NYMEX crude oil futures for October delivery above the $119 handle, leading to U.S. dollar weakness.  Second, the U.S. Federal Deposit Insurance Corporation reported more U.S. banks are at risk for failure than anytime since 2003 and the U.S. media reported the FDIC may need to tap U.S. Treasury funds to finance the expected wave of bank failures.  Third, some hawkish comments are still being offered by European Central Bank officials.  ECB Vice President Papademos today said a “stronger degree” of ECB monetary tightening may be required if prices and wages remain elevated and heighten inflation expectations.  EMU-15 inflation is now around a sixteen-year high of 4.0%.  Fourth, minutes from the Federal Open Market Committee’s 5 August meeting were released in which policymakers suggested were non-committal as to when Fed policymakers may raise rates.  The minutes reported “most participants anticipated that core inflation would edge back down during 2009.”  Data released in the U.S. today saw July durable goods orders rise 1.3% with the ex-transportation component up 0.7%.  In eurozone news, ECB’s Weber said a pick-up in growth could lead to higher rates while ECB’s Bini-Smaghi dismissed talk of rates being cut from their current 4.25% level.  ECB’s Stark said the eurozone is now suffering from second-round inflation effects.  ECB staff forecasts for growth and inflation will be released at the 4 September ECB meeting.  Data released in the eurozone today saw German July import prices up 0.6% m/m and 9.3% y/y.  Also, preliminary August consumer price inflation was off 0.3% m/m and up 3.1% y/y.  Euro bids are cited around the US$ 1.4315 level.

¥/ CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥109.85 level and was supported around the ¥108.70 level.  Technically, today’s intraday high was right around the 50% retracement of the move from ¥124.15 to ¥95.70.  Traders continue to speculate that 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 lost 0.20% to close at ¥12,752.96.  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 ¥161.50 level and was supported around the ¥160.05 level. The British pound and Swiss franc came off vis-à-vis the yen as the crosses tested bids around the ¥200.50 and ¥99.30 levels, respectively.  The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8380 in the over-the-counter market, down from CNY 6.8450.  Data released in China overnight saw the July consumer confidence index improve to 94.5 from 94.1 in June. 

₤

The British pound depreciated vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.8285 level and was capped around the $1.8490 level.  Technically, today’s intraday low was just below the 38.2% retracement of the move from $1.3680 to $2.1160.  U.K. economic data continue to weaken and sterling is coming off as a consequence on the premise that Bank of England’s Monetary Policy Committee may be forced to reduce interest rates. The major problem for the MPC remains elevated rates of inflation in the U.K.  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 ₤0.8030 level and was supported around the ₤0.7960 level.

CHF

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.1025 level and was supported around the CHF 1.0915 level.  Swiss National Bank Chairman Roth said the central bank sees inflation easing from its current fifteen-year high as the economy slows.  Some traders expect the SNB will lower interest rates in September or December.  U.S. dollar offers are cited around the CHF 1.1135 level.  The euro moved higher vis-à-vis the Swiss franc as the single currency tested offers around the CHF 1.6170 level while the British pound moved lower vis-à-vis the Swiss franc and tested bids around the CHF 2.0125 level.

Technical Outlook at 1230 GMT (EDT + 0400)

             (Bid Price)       (Today’s Intraday Range)                               

EUR/ USD         1.4620                 1.4772, 1.4632
USD/ JPY         109.02                 109.71, 108.66
GBP/ USD        1.8457                 1.8489, 1.8368
USD/ CHF         1.0923                 1.1008, 1.0915
AUD/ USD         0.8624    0.8632, 0.8530
USD/CAD          1.0433                 1.0488, 1.0426
NZD/USD          0.7018                0.7036, 0.6941
EUR/ JPY         160.96    161.05, 160.05
EUR/ GBP        0.7999                 0.7999, 0.7960
EUR/ CHF         1.6128                 1.6135, 1.6102
GBP/ JPY         201.30                 201.74, 200.50
CHF/ JPY            99.83      99.84,   99.32

Support                        Resistance                   Support                     Resistance

EUR/ USD                                                              USD/ JPY

L1.        1.4260                          1.4975                            106.60                        113.30 

L2.        1.3840                          1.5175                            102.45                        115.90
L3.        1.3320                          1.5380                            101.95                        117.45

   GBP/ USD                                                          USD/ CHF

L1.        1.8305                          1.9135                          1.0705                          1.1475

L2.        1.7420                          1.9525                          1.0505                          1.1610

L3.        1.6540                          1.9835                          1.0340                          1.1910

 AUD/ USD                                                           USD/ CAD

L1.        0.8430                          0.8885                          1.0440                          1.0795

L2.        0.8095                          0.9220                          1.0130                          1.1205

L3.        0.7685                          0.9370                          0.9720                          1.1870

 NZD/ USD                                                           EUR/ JPY

L1.        0.6760                          0.7275                          159.10                          164.35

L2.        0.6440                          0.7520                          156.80                          165.40

L3.        0.5930                          0.8105                          153.90                          167.80

  EUR/ GBP                                                           EUR/ CHF

L1.        0.7730                          0.8120                          1.5975                          1.6250

L2.        0.7555                          0.8310                          1.5855                          1.6470

L3.        0.7440                          0.8570                          1.5730                          1.6760

  GBP/ JPY                                                           CHF/ JPY

L1.        200.60                          208.50                            98.70                         103.30

L2.        197.55                          211.35                            97.00                         105.40

L3.        192.70                          217.15                            95.85                         107.70

SCHEDULE

Wednesday, 27 August 2008

all times GMT

(last release in parentheses)

N/A       Japan                August small business confidence (39.9)

N/A       Germany           August Ifo business climate survey

0130     Australia           Q2 construction work done (2.3%)

0730     Italy                  August consumer confidence

1230     US                    July durable goods orders (0.8%)

1230     US                    July durable goods orders, ex-transportation (2.0%)

1235     US                    Atlanta Fed President Lockhart speaks

2350     Japan                Foreign investment in Japanese equities and bonds

2350     Japan                Japanese investment in foreign equities and bonds

Thursday, 28 August 2008

all times GMT

(last release in parentheses)

N/A       Australia           July new home sales (4.0% m/m)

N/A       Germany           August consumer price index (0.6% m/m)

N/A       Germany           August consumer price index (3.3% y/y)

N/A       Germany           August CPI, harmonized (0.7% m/m)

N/A       Germany           August CPI, harmonized (3.5% y/y)

0000     Australia           June leading index (-0.1%)

0300     NZ                    August NBNZ business confidence (-43.2)

0300     NZ                    July M3 money supply (7.4% y/y)

0600     Germany           July ILPO unemployment rate (7.3%)

0645     France              July industrial investment

0715     CH                    Q2 employment level (3.899 million)

0755     Germany           August unemployment change (-20,000)

0800     France              August PMI, retail (51.3)

0800     Germany           August PMI, retail (46.4)

0800     Eurozone          August PMI, retail (46.0)

0800     Eurozone          July M3 money supply (9.9%)

0800     Eurozone          July M3 money supply (9.5% y/y)

0900     Eurozone          August business climate indicator (-0.21)

0900     Eurozone          August consumer confidence (-20)

0900     Eurozone          August economic confidence (89.5)

0900     Eurozone          August industrial confidence (-8)

0900     Eurozone          August services confidence (1)

1000     UK                    August CBI distributive trades report

1230     US                    Q2 GDP, annualized (1.9%)

1230     US                    Q2 GDP price index (1.1%)

1230     US                    Q2 personal consumption expenditures, core (2.1% q/q)

1230     US                    Weekly initial jobless claims

1230     US                    Continuing jobless claims

1230     Canada             Q2 current account (C$ 5.6 billion)

2245     NZ                    July building permits (-20.1% m/m)

2301     UK                    August GfK consumer confidence (-39)

2315     Japan                August PMI, manufacturing (47)

2330     Japan                August Tokyo-area CPI (1.6% y/y)

2330     Japan                August Tokyo-area CPI, ex-food and energy (0.3% y/y)

2330     Japan                July nationwide CPI (2.0% y/y)

2330     Japan                July nationwide CPI, ex-food and energy (0.1% y/y)

2330     Japan                July household spending (-1.8% y/y)

2330     Japan                July jobless rate (4.1%)

2330     Japan                July retail trade (0.0% m/m)

2330     Japan                July retail trade (0.3% y/y)

2330     Japan                July large retailers’ sales (-4.0%)

2350     Japan                July industrial production (-2.2% m/m)

2350     Japan                July industrial production (0.0% y/y)

Friday, 29 August 2008

all times GMT

(last release in parentheses)

0130     Australia           July private sector credit (0.4% m/m)

0130     Australia           July private sector credit (11.7% y/y)

0130     Japan                Bank of Japan Policy Board member Suda speaks

0500     Japan                July housing starts (-16.7% y/y)

0500     Japan                July housing starts, annualized (1.130 million)

0500     Japan                July construction orders (-11.7% y/y)

0800     Italy                  June retail sales

0900     Eurozone          July unemployment rate (7.3%)

0900     Eurozone          August consumer price index, estimate (4.1% y/y)

0900     Italy                  August consumer price index

0930     CH                    August KOF leading indicator (0.9)

1230     US                    July personal consumption expenditures, core (0.3% m/m)

1230     US                    July personal consumption expenditures, core (2.3% y/y)

1230     US                    July personal consumption expenditures deflator (4.1% y/y)

1230     US                    July personal spending (0.6%)

1230     US                    July personal income (0.1%)

1230     Canada             June gross domestic product (-0.1% m/m)

1230     Canada             Q2 GDP, annualized (-0.3%)

1230     Canada             July industrial product prices (1.3% m/m)

1230     Canada             July raw materials price index (4.4% m/m)

1345     US                    August Chicago PMI (50.8)

1400     US                    August University of Michigan consumer sentiment  

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