DAILY MARKET COMMENTARY
23 October 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$ 1.2725 level and was capped around the $1.2890 level.  Traders are talking about reports that the Bush administration may implement a US$ 40 billion plan to help troubled homeowners refinance their mortgages.  Along the same lines, Federal Reserve Governor Duke reported the US$ 300 billion Hope for Homeowners program that was announced a couple of weeks ago is nearly ready to become operational. That program would provide financial assistance for borrowers looking to refinance their properties.  Data released in the U.S. today saw weekly initial jobless claims climb 15,000 to 478,000 while continuing jobless claims were off 6,000. Also, the U.S. August house price index fell 0.6%.  U.S. Treasury’s interim assistant secretary for financial stability Kashkari reported there have been signs of improvement in the markets but added they “remain fragile.”   In eurozone news, EMU-15 August industrial new orders fell more-than-expected while the EMU-15 current account deficit expanded to -€8.4 billion, its worst level since December 2000.  European Central Bank member Gonzalez-Paramo reported there “is a confirmation of a slowdown in growth and a deterioration in the outlook for growth in the euro area and globally, which means the pressure on inflation will be lower, and this, together with the lowering of commodity prices, is explaining that we are in a position to diminish rates without adding to inflationary risks in the medium term."  A Group of 20 summit will be held on 15 November to discuss financial reforms.  Euro bids are cited around the US$ 1.2475 level.

¥/ CNY

The yen appreciated sharply vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥96.85 level and was capped around the ¥98.30 level.  Chief Cabinet Secretary Kawamura said “The yen's rise may bring some benefits but we need to pay attention to how it will affect the real economy through exports and imports.”  The yen’s strength is coincident with reports that Japan’s economy is quickly weakening.   Data released in Japan saw September exports expand a mere 1.5% y/y, the latest evidence the economy may be entering a recession.  Capital flows data revealed that foreign investors sold a net ¥792.2 billion in Japanese bonds last week with the four-week total around ¥3.7 trillion.  The Nikkei 225 stock index shed 2.46% to close at ¥8,460.98.  U.S. dollar offers are cited around the ¥104.15 level.  The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥123.40 level and was capped around the ¥126.25 level.  The British pound and Swiss franc moved lower vis-à-vis the yen as the crosses tested bids around the ¥155.45 and ¥82.85 levels, respectively.  The Chinese yuan came off vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8354 in the over-the-counter market, up from CNY 6.8341.

₤

The British pound fell sharply vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.6040 level and was capped around the $1.6345 level.  Traders remain convinced Bank of England’s Monetary Policy Committee will continue reducing interest rates in the coming months, taking the repo rate lower from its current 4.5% level.  MPC member Barker today warned it could be months before businesses see any improvements in conditions while MPC’s Besley said the recent reduction in oil and commodity prices was a welcome development for inflation.  Data released in the U.K. today saw September retail sales off 0.4% m/m and up 1.8% y/y.  U.K. GDP data will be released tomorrow and are expected to have contracted between July and September.  Also, BBA reported that September mortgage approvals were off 56.6% y/y.  Cable bids are seen around the $1.5925 level. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.7980 level and was supported around the ₤0.7835 level.

Technical Outlook at 1230 GMT (EDT + 0400)

             (Bid Price)       (Today’s Intraday Range)                               

EUR/ USD         1.2861                 1.2865, 1.2726
USD/ JPY           97.40                   98.31,   96.86
GBP/ USD        1.6169                 1.6345, 1.6041
USD/ CHF         1.1635                 1.1697, 1.1586
AUD/ USD         0.6668                 0.6759, 0.6525
USD/CAD          1.2571                 1.2740, 1.2525
NZD/USD          0.5951                0.6014, 0.5826
EUR/ JPY         125.29    126.27, 123.42
EUR/ GBP        0.7945                 0.7966, 0.7835
GBP/ JPY         157.58                 160.62, 155.45
CHF/ JPY            83.80                   84.40,   82.84

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, 23 October 2008

all times GMT

(last release in parentheses)

0030     Australia           Q3 house affordability

0645     France              October business confidence (92)

0645     France              September consumer spending (-0.3% m/m)

0645     France              September consumer spending (-0.1% y/y)

0645     France              October production outlook

0800     Eurozone          August current account (-€1.7 billion)

0830     UK                    September retail sales (1.2% m/m)

0830     UK                    September retail sales (3.3% y/y)

0830     UK                    September BBA loans for house purchases (₤2.1086 billion)

0900     Eurozone          August industrial new orders (1.0% m/m)

0900     Eurozone          August industrial new orders (1.6% y/y)

1230     US                    Weekly initial jobless claims (461,000)

1230     US                    Continuing jobless claims (3.711 million)

1400     US                    August house price index (-0.6% m/m)   

1430     Canada             Bank of Canada Monetary Policy Report

Friday, 24 October 2008

all times GMT

(last release in parentheses)

0700     France              October PMI, manufacturing (43.0)

0700     France              October PMI, services (50.1)

0730     Germany           October PMI, manufacturing (47.4)

0730     Germany           October PMI, services (50.2)

0730     Eurozone          October PMI, manufacturing (45.0)

0730     Eurozone          October PMI, services (48.4)

0830     UK                    Q3 GDP (0.0% q/q)

0830     UK                    Q3 GDP (1.5% y/y0

1100     Canada             September consumer price index (-0.2% m/m)

1100     Canada             September consumer price index (3.5% y/y)

1100     Canada             September Bank of Canada CPI, core (0.3% m/m)

1100     Canada             September Bank of Canada CPI, core (1.7% y/y)

1400     US                    September existing home sales (4.91 million)

1400     US                    September existing home sales (-2.2% m/m) 

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.