DAILY MARKET COMMENTARY
10 September 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 came off vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4010 level and was capped around the US$ 1.4180 level.  The common currency reached its lowest level since 20 September 2007 as traders reacted to a variety of factors.  First, troubled U.S. investment banking giant Lehman Brothers accelerated its earnings release and was trading higher than yesterday’s close of US$ 7.79.  Second, Eurogroup chairman Juncker said there is a risk of a “technical recession” in the eurozone.  Third, EMU-15 finance ministers and central bank governors will meet in Nice on Friday and Saturday and their agenda has changed so policymakers can address the abrupt slowdown in European economies. Fourth, the European Commission slashed its 2008 eurozone growth forecast to 1.3%, half of 2007’s growth rate of 2.6%. Fifth, European Central Bank President Trichet acknowledged the eurozone is facing a slowdown in economic growth.  Data released in the eurozone today saw French July industrial production climb 1.2% m/m. Traders await July trade balance data tomorrow in the U.S. along with weekly jobless claims data.  Euro bids are cited around the US$ 1.3840 level.

¥/ CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥107.95 level and was supported around the ¥106.60 level.  Technically, today’s intraday low was right around the 38.2% retracement of the move from ¥124.13 to ¥95.70.  Data released in Japan overnight saw August wholesale inflation remain near a 27-year high as the corporate goods price index rose 7.2% m/m and the core consumer price index rose 2.4% y/y.  Other data saw the July current account surplus fall 17.3% y/y.  Traders await the release of April-June GDP data on Friday and many economists expect a larger economic contraction than previously thought.  Other data saw the July coincident indicator index climb +0.9 points.  The Nikkei 225 stock index lost 0.44% to close at ¥12,346.63.  Dollar bids are cited around the ¥103.20 level.  The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥152.50 level and was supported around the ¥150.15 level.  The British pound and Swiss franc gained ground vis-à-vis the yen as the crosses tested offers around the ¥190.10 and ¥95.45 levels, respectively.  The Chinese yuan depreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8385 in the over-the-counter market, up from CNY 6.8381.  Data released in China today saw August consumer price inflation up 4.9% y/y while August producer price inflation was up 10.1% y/y. Also, actual foreign direct investment was up 41.6% y/y at US$ 67.73 billion between January and August and the August trade surplus stood at a record US$ 28.69 billion in August.

₤

The British pound depreciated vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.7540 level and was capped around the $1.7675 level.  Cable traded at its lowest level since April 2006.  NIESR reported the U.K. economy contracted 0.2% in the three months to August after contracting 0.1% in the three months to July.  Also, the U.K.’s global goods deficit shrank to -₤7.7 billion in July from a revised -₤8.0 billion in June.  Bank of England Monetary Policy Committee member Gieve reported “At 4.4 percent it certainly hasn't peaked yet. We're expecting it to rise further in the next month or two and probably to stay there for several months.  Our latest forecast in August did show a period of flat output for most of the coming year, and certainly this is a sharp slowdown. But it's what we're expecting and what is required given the current level of inflation at 4.4 per cent. We've got to make sure this is a spike, a temporary move, and that inflation does come down next year towards target. But on the other hand we're very aware of the risk of perhaps overdoing it and causing an unnecessary slowdown in activity."  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 ₤0.7985 level and was capped around the ₤0.8040 level.

CHF

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.1365 level and was supported around the CHF 1.1240 level.  Swiss National Bank directorate member Jordan reported Switzerland’s mortgage market has avoided a credit crunch.  SNB is expected to keep its target rate for three-month Swiss franc LIBOR unchanged at 2.75% on 18 September.  U.S. dollar offers are cited around the CHF 1.1390 level. The euro and British pound moved higher vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.5985 and CHF 1.9945 levels, respectively.

Technical Outlook at 1230 GMT (EDT + 0400)

             (Bid Price)       (Today’s Intraday Range)                               

EUR/ USD         1.4138                 1.4178, 1.4073
USD/ JPY         107.50                 107.66, 106.59
GBP/ USD        1.7612                 1.7676, 1.7549
USD/ CHF         1.1282                 1.1328, 1.1241
AUD/ USD         0.8116    0.8127, 0.7979
USD/CAD          1.0680                 1.0725, 1.0656
NZD/USD          0.6706                0.6719, 0.6645
EUR/ JPY         152.17    152.49, 150.14
EUR/ GBP        0.8031                 0.8040, 0.8009
EUR/ CHF         1.5950                 1.5983, 1.5906
GBP/ JPY         189.37                 190.08, 187.17
CHF/ JPY            95.36      95.46,   94.33

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

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.