DAILY MARKET COMMENTARY
25 September 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 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$ 1.4585 level and was capped around the $1.4770 level.  The markets are quite volatile as traders await the release of details regarding the US$ 700 billion bailout of troubled U.S. financial institutions.  Congressional and governmental leaders continue to meet and there is an indication that the US$ 700 billion disbursement may be “phased” in stages to satisfy congressional Democrats.  Some dealers are speculating a deal could be announced today while others don’t see a deal being reached before today or Monday.  Others believe the US$ 700 billion figure is too high while others believe the US$ 700 billion figure will not be sufficient.  Data released in the U.S. today saw August new home sales down 11.5% to an annualized 460,000 rate, the lowest level since the early 1980s.  Also, durable goods orders fell sharply in August by 4.5%, worse-than-expected.  Additionally, weekly initial jobless claims were up 32,000 to 493,000 while continuing jobless claims were up 63,000 to 3.542 million.  In eurozone news, European Central Bank member Ordonez said the U.S. financial situation is “worrisome and unpredictable” while ECB member Bini-Smaghi said price stability must be maintained. ECB member Nowotny added there is no room for a rate cut while German October GfK consumer confidence ticked higher to 1.8 from 1.6 in September.  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 ¥106.70 level and was supported around the ¥105.45 level.  Technically, today’s intraday high was right around the 38.2% retracement of the move from ¥124.15 to ¥95.70.  Data released in Japan overnight saw the August corporate services prices index up +1.4% y/y and August consumer price index data will be released tonight.  Also, August exports were up 0.3% y/y, weaker-than-expected, and the trade balance moved into a deficit position last month at -¥324 billion.   Bank of Japan Policy Board member Noda reported “In the near term, downside risks to the economy are more visible” than upside inflation risks” and sees an economic recovery in H2 2009.  The Nikkei 225 stock index lost 0.90% to close at ¥12,006.53.  U.S. dollar bids are cited around the ¥102.45 level.  The euro gained ground vis-à-vis the yen as the single currency tested offers around the ¥156.30 level and was supported around the ¥155.10 level.  The British came off vis-à-vis the yen as sterling tested bids around the ¥195.55 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥98.10 level.  The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8170 in the over-the-counter market, down from CNY 6.8237.  The China Banking Regulatory Commission denied a report it told Chinese banks to stop lending to U.S. banks in the interbank market.

₤

The British pound fell sharply vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.8305 level and was capped around the $1.8670 level.  Stops were reached below the $1.8380 level, representing the 23.6% retracement of the move from $1.7440 to $1.8670.  Bank of England Monetary Policy Committee member Barker reported it may prove “demanding” to bring inflation below its 2.0% inflation target.  Barker’s hawkish comments detracted from views the MPC may cut rates by 25bps to 4.75% by November.  MPC member Sentance reported the U.K. economy may contract by H1 2009 but the contraction should not last long.  Cable bids are cited around the $1.8150 level.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.7975 level and was supported around the ₤0.7900 figure.

CHF

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0940 level and was supported around the CHF 1.0800 figure.  Swiss National Bank is expected to keep rates unchanged through the end of the year.  U.S. dollar offers are cited around the CHF 1.1430 level.  The euro and British pound weakened vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.5905 and CHF 1.9995 levels, respectively.

Technical Outlook at 1230 GMT (EDT + 0400)

             (Bid Price)       (Today’s Intraday Range)                               

EUR/ USD         1.4627                 1.4768, 1.4603
USD/ JPY         106.58                 106.68, 105.47
GBP/ USD        1.8407                 1.8668, 1.8390
USD/ CHF         1.0897                 1.0932, 1.0800
AUD/ USD         0.8351    0.8424, 0.8324
USD/CAD          1.0341                 1.0387, 1.0296
NZD/USD          0.6829                0.6903, 0.6817
EUR/ JPY         156.02    156.32, 155.08
EUR/ GBP        0.7950                 0.7952, 0.7900
GBP/ JPY         196.21                 197.17, 195.90
CHF/ JPY            97.82      98.12,   97.15

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

Thursday, 25 September 2008

all times GMT

(last release in parentheses)

N/A       Australia           Reserve Bank of Australia Financial Stability Review

N/A       Australia           August HIA new home sales (-7.2% m/m)

N/A       Germany           October GfK consumer confidence (1.5)

N/A       UK                    September Nationwide house prices (-1.9% m/m)

N/A       UK                    September Nationwide house prices (-10.5% y/y)

0800     Eurozone          August M3 money supply (9.6%)

0800     Italy                  July trade balance

1230     US                    August durable goods orders (1.3%)

1230     US                    August durable goods orders, ex-transportation (0.7%)

1230     US                    Weekly initial jobless claims

1230     US                    Continuing jobless claims

1400     US                    August new home sales (515,000)

1400     US                    August new home sales (2.4% m/m)

1440     US                    Chicago Fed President Evans speaks

1700     US                    Federal Reserve Governor Warsh speaks

2245     NZ                    Q2 GDP (-0.3% q/q)

2245     NZ                    Q2 GDP (1.9% y/y)

2330     Japan                September Tokyo CPI (1.3% y/y)

2330     Japan                September Tokyo CPI, ex-food, energy (0.2% y/y)

2330     Japan                August CPI (2.3% y/y)

2330     Japan                August CPI (0.2% y/y)

2330     US                    Dallas Federal Reserve President Fisher speaks

2350     Japan                Foreign purchases of Japanese equities and bonds

2350     Japan                U.S. purchases of foreign equities and bonds

Friday, 26 September 2008

all times GMT

(last release in parentheses)

0645     France              Q2 GDP (-0.3% q/q)

0645     France              Q2 GDP (1.1% y/y)

0645     France              September consumer confidence

0800     Italy                  August hourly wages

0930     CH                    September leading indicator (0.68)

1230     US                    Q2 GDP, annualized (3.3% q/q)

1230     US                    Q2 personal consumption expenditure (2.1% q/q)

1400     US                    September University of Michigan consumer sentiment

1400     US                    St. Louis Federal Reserve Bank President Bullard 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 used as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.