DAILY MARKET COMMENTARY
9 September 2008

Tuesday

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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 appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4225 level and was supported around the $1.4045 level.  The common currency reached its lowest level since 9 October 2007 before moving higher.  The U.S. dollar is lower on rumours that Lehman Brothers is facing significant funding problems, and on ongoing ease regarding the U.S. financial sector.  The Federal Reserve convenes in one week to deliberate monetary policy and is expected to keep the overnight federal funds rate unchanged at 2.25%.  The fed funds futures market is currently only pricing in about a 2% chance the Fed will lift the fed funds target rate before the end of year, down from 22% yesterday.  Data released in the U.S. today saw July wholesale inventories rise 1.4% while sales were off 0.3%.  Additionally, the U.S. July pending home sales index was off 3.2% to 86.5, the latest evidence that the beleaguered U.S. housing market remains in the doldrums.  In eurozone news, European Central Bank member Gonzalez-Paramo reported “serious efforts are need to improve the financial markets.   The euro shook off data that saw Germany’s trade surplus narrow to €13.9 billion from €19.9 billion in June.  The European Central Bank is expected to keep interest rates unchanged for at least the next couple of months.  Euro bids are cited around the US$ 1.3840 level.

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥107.05 level and was capped around the ¥108.40 level.  Technically, today’s intraday low was right around the 23.6% retracement of the move from ¥95.70 to ¥110.65.  The yen gained ground on growing concerns that U.S. investment banking giant Lehman Brothers is unable to secure necessary funding in the capital markets.  Lehman traded as high as $66.58 this year and traded as low as $8.00 today, its lowest price since October 1998.  Many traders believe the U.S. government and/ or Federal Reserve may need to facilitate a bail out Lehman Brothers, much as Bear Stearns was taken over in March.  The yen gained ground on this speculation as traders were less inclined to sell yen and invest the proceeds in higher-yielding overseas asset markets.  Data released in Japan overnight saw August machine tool orders off 14.2% y/y.  The Nikkei 225 stock index climbed 1.77% to close at ¥12,400.65. Dollar bids are cited around the ¥103.20 level.  The euro came off vis-à-vis the yen as the single currency tested bids around the ¥150.85 level and was capped around the ¥153.50 level. The British pound and Swiss franc moved lower vis-à-vis the yen as the crosses tested bids around the ¥187.90 and ¥94.65 levels, respectively.  The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8381 in the over-the-counter market, down from CNY 6.8433.

₤

The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.7705 level and was supported around the $1.7505 level.  Cable retraced some of yesterday’s intraday losses despite the release of soft U.K. economic data.  First, July U.K. manufacturing output was off 0.4% m/m and 1.4% y/y, the fifth consecutive monthly decline in output.  Second, BRC August retail sales were off 1.0% y/y, evidencing the worst summer period for U.K. retailers since 2005. Dealers await U.K. trade balance data next.  Cable bids are cited around the $1.7420 level.  The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.8005 level and was capped around the ₤0.8175 level.

CHF

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.1220 level and was capped around the CHF 1.1365 level.  Staffing firm Manpower reported Swiss companies plan to increase their staffs in Q4.  U.S. dollar offers are cited around the CHF 1.1390 level. The euro and British pound came off vis-à-vis the yen as the crosses tested bids around the CHF 1.5925 and CHF 1.9815 levels, respectively.

Technical Outlook at 1230 GMT (EDT + 0400)

             (Bid Price)       (Today’s Intraday Range)                               

EUR/ USD         1.4089                 1.4200, 1.4045
USD/ JPY         107.91                 108.40, 107.22
GBP/ USD        1.7584                 1.7667, 1.7503
USD/ CHF         1.1352                 1.1353, 1.1267
AUD/ USD         0.8081    0.8176, 0.8021
USD/CAD          1.0671                 1.0688, 1.0601
NZD/USD          0.6713                0.6788, 0.6605
EUR/ JPY         151.91    153.52, 150.83
EUR/ GBP        0.8009                 0.8050, 0.8007
EUR/ CHF         1.5987                 1.6022, 1.5923
GBP/ JPY         189.56                 190.95, 187.88
CHF/ JPY            94.99      95.86,   94.63

Support                        Resistance                   Support                     Resistance

EUR/ USD                                                              USD/ JPY

L1.        1.3840                          1.4975                            106.60                        113.30 

L2.        1.3320                          1.5175                            102.45                        115.90
L3.        1.2675                          1.5380                            101.95                        117.45

   GBP/ USD                                                          USD/ CHF

L1.        1.7420                          1.9135                          1.0705                          1.1475

L2.        1.6450                          1.9525                          1.0505                          1.1610

L3.        1.5445                          1.9835                          1.0340                          1.1910

 AUD/ USD                                                           USD/ CAD

L1.        0.8095                          0.8885                          1.0440                          1.0940

L2.        0.7910                          0.9220                          1.0130                          1.1205

L3.        0.7685                          0.9370                          0.9720                          1.1870

 NZD/ USD                                                           EUR/ JPY

L1.        0.6590                          0.7275                          153.00                          164.35

L2.        0.6440                          0.7520                          153.30                          165.40

L3.        0.5930                          0.8105                          145.65                          167.80

  EUR/ GBP                                                           EUR/ CHF

L1.        0.7730                          0.8310                          1.5895                          1.6250

L2.        0.7555                          0.8570                          1.5730                          1.6470

L3.        0.7440                          0.8790                          1.5610                          1.6760

  GBP/ JPY                                                           CHF/ JPY

L1.        188.55                          200.50                            94.15                         100.15

L2.        181.15                          206.00                            91.30                         103.30

L3.        173.75                          214.65                            87.40                         105.30

SCHEDULE

Tuesday, 9 September 2008

all times GMT

(last release in parentheses)

N/A       NZ                    August REINZ house sales (-32.6% y/y)

0130     Australia           July retail sales (-1.0%)

0130     Australia           August NAB business confidence (-9)

0130     Australia           August NAB business conditions (-5)

0130     Australia           July home loans (-3.7%)

0130     Australia           July value of loans (-1.1% m/m)

0130     Australia           July investment lending (-0.3%)

0600     Germany           July trade balance (€19.7 billion)

0600     Germany           July current account (€18.5 billion)

1215     Canada             August housing starts (186,500)

1400     US                    July pending home sales (5.3% m/m)

1400     US                    July wholesale inventories (1.1%)

2245     NZ                    Q2 terms of trade index (4.1% q/q)

2350     Japan                August domestic corporate goods price index (2.0% m/m)

2350     Japan                August domestic corporate goods price index (7.1% y/y)

2350     Japan                July trade balance (¥252.1 billion)

2350     Japan                July current account (¥493.9 billion)

Wednesday, 10 September 2008

all times GMT

(last release in parentheses)

0030     Australia           September Westpac consumer confidence (9.1%)

0500     Japan                July leading index (91.3)

0500     Japan                July coincident index (101.6)

0645     France              July trade balance (-€5.6 billion)

0645     France              July industrial production (-0.4% m/m)

0645     France              July industrial production (-1.6% y/y)

0645     France              July manufacturing production (-0.8% m/m)

0645     France              July manufacturing production (-2.1% y/y)

0830     UK                    July visible trade balance (-₤7.684 billion)

0900     Italy                  Q2 GDP

1100     UK                    MBA mortgage applications

1230     Canada             Q2 labour productivity (-0.3% q/q)

2100     NZ                    Reserve Bank of New Zealand interest rate decision

2245     NZ                    August food prices (0.6% m/m)

2350     Japan                July machine orders (-2.6% m/m)

2350     Japan                July machine orders (9.7% y/y)

2350     Japan                Foreign purchases of Japanese equities and bonds

2350     Japan                Japanese purchases of foreign equities and bonds

Thursday, 11 September 2008

all times GMT

(last release in parentheses)

0000     NZ                    August PMI (48.8)

0100     Australia           September consumer inflation expectations (4.9%)

0130     Australia           August unemployment rate (4.3%)

0130     Australia           August employment, change (10,900)

0645     France              Q2 non-farm payrolls

0800     Eurozone          European Central Bank monthly report

0945     Eurozone          European Commission economic growth forecasts

1230     US                    July trade balance (-US$ 56.8 billion)

1230     US                    August import price index (1.7% m/m)

1230     US                    Weekly initial jobless claims

1230     US                    Continuing jobless claims

1230     Canada             July international merchandise trade (C$ 5.8 billion)

1230     Canada             July new housing price index (0.1% m/m)

2245     NZ                    July retail sales (0.9% m/m)

2245     NZ                    July retail sales, ex-autos (0.0% m/m)

2350     Japan                Q2 GDP (-0.6% q/q)

2350     Japan                Q2 GDP, annualized (-2.4%)

2350     Japan                Q2 GDP, deflator

Friday, 12 September 2008

all times GMT

(last release in parentheses)

0430     Japan                July industrial production

0430     Japan                July capacity utilization (-1.7% m/m)

0630     France              August Bank of France business sentiment (92)

0645     France              August consumer price index (-0.2% m/m)

0645     France              August consumer price index (3.6% y/y)

0645     France              August CPI, harmonized (-0.3% m/m)

0645     France              August CPI, harmonized (4.0% y/y)

0800     Italy                  July industrial production (0.1% m/m)

0800     Italy                  July industrial production (-1.8% y/y)

0900     Eurozone          Q2 employment (1.6% y/y)

0900     Eurozone          July industrial production (0.0% m/m)

0900     Eurozone          July industrial production (-0.5% y/y)

1230     US                    August retail sales (-0.1%)

1230     US                    August retail sales, ex-autos (0.4%)

1230     US                    August PPI (1.2% m/m)

1230     US                    August PPI (9.8% y/y)

1230     US                    August PPI, ex-food and energy (0.7% m/m)

1230     US                    August PPI, ex-food and energy (3.5% y/y)

1230     Canada             Q2 capacity utilization (79.8%)

1400     US                    September University of Michigan consumer sentiment

1400     US                    July business inventories (0.7%)

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 used as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.