DAILY MARKET COMMENTARY
28 October 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 lost marginal ground vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2330 level and was capped around the $1.2585 level.  The common currency has recently traded at its lowest levels since April 2006 as dealers continue to speculate European Central Bank will reduce interest rates next week, possibly by as much a 50bps.  Data released in the eurozone saw GfK German consumer confidence steady.  In U.S. news, the October consumer confidence index reached a record low of 38.0, far below expectations and far below September’s revised 61.4 print.   Other data saw the October Richmond Fed’s manufacturing index print at -26, down from September’s -18 level.  It was also reported that the S&P/ Case-Shiller U.S. house price index fell a record 16.6% in August.  Most traders expect the Federal Open Market Committee will cut rates by up to 50bps tomorrow.  Sixteen new U.S. banks accepted more than US$ 33 billion in U.S. government cash, part of the government’s US$ 250 billion recapitalization efforts.  Euro bids are cited around the US$ 1.2135 level.

¥/ CNY

The yen depreciated sharply vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥96.20 level and was supported around the ¥92.45 level.  The Japanese government enacted controls on short-selling overnight in an attempt to restore some stability to embattled equity markets.  Economy minister Yosano verbally intervened against the yen’s rise saying “The yen's rise in the past week is astonishing, but it does not reflect Japan's economic fundamentals. It is caused by unwinding of yen carry trades and selling by investment funds.  The G7 would take the same stance if any other currency showed such excessive moves.  It may be an important proof of international cooperation if Japan lowers rates when other central banks cut them.  But when you think about the real economy, I don't think a rate cut to 0.25 percent from 0.5 percent would suddenly reverse the flow of money or boost corporate appetite for capital spending.”  If yen-selling intervention is conducted in the market, it is largely expected that only Japan would participate and that it would not be a concerted, multilateral effort.  Most traders expect Bank of Japan’s Policy Board will keep its overnight call rate unchanged at 0.50% on Friday.  The Nikkei 225 stock index climbed 6.41% to close at ¥7,621.92.  U.S. dollar offers are cited around the ¥104.15 level.  The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥120.60 level and was supported around the ¥114.35 level. The British pound and Swiss franc gained ground vis-à-vis the yen as the crosses tested offers around the ¥151.25 and ¥83.05 levels, respectively.  The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8390 in the over-the-counter market, down from CNY 6.8523.

₤

The British pound moved higher vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.5755 level and was supported around the $1.5395 level.  Technically, the int***th low was right around the 50% retracement of the move from $1.0520 to $2.0035.  Data released in the U.K. today saw CBI retail sales remain steady at -27 in October.  Also, Land Registry house prices were off 8% y/y in England and Wales.  Bank of England Monetary Policy Committee member Gieve reported authorities need to be prepared to act to counter additional problems and that the system remains “under strain.”  Cable bids are cited around the US$ 1.4155 level.  The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.7955 level and was capped around the ₤0.8050 level.

CHF

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.1655 level and was supported around the CHF 1.1545 level.  Data released in Switzerland today saw the September UBS consumption indicator rise to 1.67 from 1.62 in August.  U.S. dollar offers are cited around the CHF 1.1895 level.  The euro and British pound moved higher vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.4560 and CHF 1.8245 levels, respectively.

Technical Outlook at 1230 GMT (EDT + 0400)

             (Bid Price)       (Today’s Intraday Range)                               

EUR/ USD         1.2480                 1.2587, 1.2328
USD/ JPY           95.57                   96.16,   92.45
GBP/ USD        1.5577                 1.5753, 1.5397
USD/ CHF         1.1604                 1.1644, 1.1543
AUD/ USD         0.6213                 0.6304, 0.6008
USD/CAD          1.2945                 1.3014, 1.2809
NZD/USD          0.5487                0.5569, 0.5401
EUR/ JPY         119.30    120.58, 114.37
EUR/ GBP        0.8006                 0.8050, 0.7957
GBP/ JPY         148.91                 151.23, 142.80
CHF/ JPY            82.35                   83.03,   79.80

Support                        Resistance                   Support                     Resistance

EUR/ USD                                                              USD/ JPY

L1.        1.2130                          1.2925                             89.30             100.75 

L2.        1.1590                          1.3205                            84.20             103.10
L3.        1.1210                          1.3595                             81.10             106.00

   GBP/ USD                                                          USD/ CHF

L1.        1.5065                          1.6435                          1.1335                          1.1895

L2.        1.4580                          1.7150                          1.1080                          1.2425

L3.        1.4155                          1.7725                          1.0875                          1.3285

 AUD/ USD                                                           USD/ CAD

L1.        0.5535                          0.6380                          1.2375                          1.3460

L2.        0.5380                          0.6620                          1.2100                          1.3980

L3.        0.4775                          0.6980                          1.1655                          1.4505

 NZD/ USD                                                           EUR/ JPY

L1.        0.5120                          0.5875                          110.20                          119.90

L2.        0.4915                          0.6055                          108.05                          121.90

L3.        0.4650                          0.6340                          102.95                          129.15

  EUR/ GBP                                                           EUR/ CHF

L1.        0.7565                          0.8195                          1.3750                          1.4655

L2.        0.7365                          0.8400                          1.3210                          1.5060

L3.        0.7170                          0.8840                          1.2940                          1.5560

  GBP/ JPY                                                           CHF/ JPY

L1.        138.60                          156.95                            76.50                           84.80

L2.        124.20                          168.25                            69.75                           87.40

L3.        103.90                          177.35                            58.85                           91.70

SCHEDULE

Tuesday, 28 October 2008

all times GMT

(last release in parentheses)

N/A       Japan                October PMI, manufacturing (44.3)

0030     Australia           Q3 NAB business confidence (-8)

0710     Germany           November GfK consumer confidence (1.8)

0745     France              October consumer confidence (-44.0)

0745     France              September housing starts (13.1%)

0745     France              September housing permits (-19.6%)

0830     Italy                  October retailers’ confidence (111)

0830     Italy                  October services survey (-2)

0900     Italy                  September hourly wages (4.2% y/y)

0900     CH                    September UBS consumption indicator (1.618)

1100     UK                    October CBI distributive trades report

1200     US                    Former Federal Reserve Chairman Volcker speaks

1300     US                    August S&P. Case-Shiller home prices

1400     US                    October consumer confidence (59.8)

1400     US                    October Richmond Fed manufacturing index (-18)

1400     US                    Treasury Secretary Paulson speaks

2145     NZ                    September trade balance (-NZ$ 750 million)

2350     Japan                September industrial production (-3.5% m/m)

2350     Japan                September industrial production (-6.9% y/y)

Wednesday, 29 October 2008

all times GMT

(last release in parentheses)

N/A       Germany           October consumer price index (-0.1% m/m)

N/A       Germany           October consumer price index (2.9% y/y)

N/A       Germany           October CPI, harmonized (-0.1% m/m)

N/A       Germany           October CPI, harmonized (3.0% y/y)

0000     Australia           October DEWR skilled vacancies (-3.5% m/m)

0930     UK                    September net consumer credit (₤1.2 billion)

0930     UK                    September net lending secured on dwellings (₤100 million)

0930     UK                    September mortgage approvals (32,000)

0930     UK                    September M4 money supply (1.4% m/m)

0930     UK                    September M4 money supply (12.2% y/y)

1100     US                    MBA mortgage applications

1230     US                    September durable goods orders (-4.8%)

1230     US                    September durable goods orders, ex-transportation (-3.3%)

1300     US                    Federal Open Market Committee meeting

1555     US                    Former Federal Reserve Chairman Volcker speaks

1815     US                    Federal Open Market Committee interest rate decision

2145     NZ                    September building permits (-7.9% m/m)

2230     Australia           Reserve Bank of Australia Deputy Governor Battelino speaks

2300     Australia           August leading index (0.0%)

2350     Japan                Japanese purchases of foreign equities and bonds

2350     Japan                Foreign purchases of Japanese equities and bonds

Thursday, 30 October 2008

all times GMT

(last release in parentheses)

N/A       Japan                Bank of Japan Policy Board meeting minutes

N/A       Japan                Bank of Japan Policy Board interest rate decision

N/A       Germany           September retail sales (3.1% m/m)

N/A       Germany           September retail sales (-3.0% y/y)

0200     NZ                    October NBNZ business confidence (1.6)

0200     NZ                    September M3 money supply (7.2% y/y)

0600     Germany           September ILO unemployment rate (7.2%)

0745     France              September producer prices (-0.5% m/m)

0745     France              September producer prices (6.9% y/y)

0855     Germany           October unemployment change (-29,000)

0900     Italy                  October PMI, retail

0900     France              October PMI, retail

0900     Germany           October PMI, retail

0900     Eurozone          October PMI, retail

1000     Eurozone          October business climate indicator (-0.79)

1000     Eurozone          October consumer confidence (-19)

1000     Eurozone          October economic confidence (87.7)

1000     Eurozone          October industrial confidence (-12)

1000     Eurozone          October services confidence (0)

1230     US                    Q3 GDP, annualized (2.8% q/q)

1230     US                    Q3 GDP price index (1.1%)

1230     US                    Q3 personal consumption expenditure, core (2.2% q/q)

1230     US                    Weekly initial jobless claims (478,000)

1230     US                    Continuing jobless claims (3.720 million)

1230     Canada             September industrial product prices (-0.2% m/m)

1230     Canada             September raw materials prices (-7.7% m/m)

1915     US                    San Francisco Fed President Yellen speaks

2330     Japan                October Tokyo CPI (1.4% y/y)

2330     Japan                October Tokyo CPI, ex-food and energy (0.5% y/y)

2330     Japan                September CPI, national (2.1% y/y)

2330     Japan                September CPI, ex-food and energy (0.0% y/y)

2330     Japan                September jobless rate (4.2%)

2330     Japan                September household spending (-4.0% y/y)

Friday, 31 October 2008

all times GMT

(last release in parentheses)

0000     Japan                Bank of Japan Policy Board meeting

0001     UK                    October GfK consumer confidence (-32)

0030     Australia           September private sector credit (0.5% m/m)

0030     Australia           September private sector credit (10.5% y/y)

0030     Australia           Reserve Bank of Australia Assistant Governor Debelle speaks

0100     Australia           September HIA new home sales (-1.3% m/m)

0500     Japan                September housing starts (53.6% y/y)

0500     Japan                September housing starts, annualized (1.130 million)

0500     Japan                September construction orders (-0.3% y/y)

0600     Japan                Bank of Japan semi-annual economic outlook report

0900     Italy                  September producer price index (-0.2% m/m)

0900     Italy                  September producer price index (8.2% y/y)

1000     Eurozone          October consumer price index estimate (3.6% y/y)

1000     Eurozone          September unemployment rate (7.5%)

1030     CH                    October KOF leading indicator (0.62)

1230     US                    September personal consumption expenditures, core (0.2% m/m)

1230     US                    September personal consumption expenditures, core (2.6% y/y)

1230     US                    September personal consumption expenditures (4.5% y/y)

1230     US                    September personal income (0.5%)

1230     US                    September personal spending (0.0%)

1230     US                    Q3 employment cost index (0.7%)

1230     Canada             August gross domestic product (0.7% m/m)

1345     US                    October Chicago PMI (56.7)

1400     US                    October University of Michigan consumer sentiment (57.5)

1800     US                    Federal Reserve Chairman Bernanke speaks

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