DAILY MARKET COMMENTARY
29 October 2008

Wednesday

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FX Research Desk:                                fxnews@gcitrading.com
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Fundamental Outlook at 1400 GMT (EDT + 0400)

€

The euro moved sharply higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2975 level and was supported around the $1.2650 level.  Traders positioned themselves ahead of this afternoon’s interest rate decision from the Federal Open Market Committee.  Most Fed-watchers expect FOMC policymakers will deliver up to 50bps of monetary easing in the federal funds target rate and possibly the discount rate.  Data released in the U.S. today saw September durable goods orders up 0.8% with the ex-transportation component up 6.3% and non-defense capital goods excluding aircraft were off 1.4%, an improvement from August’s 2.2% decline.  In eurozone news, the German government will likely announce a new fiscal stimulus package next Wednesday in a bid to support economic growth and jobs in the eurozone’s largest economy.  Data released in Germany today saw preliminary October consumer price inflation off 0.2% m/m and up 2.4% y/y.  European Central Bank member Gonzalez-Paramo reported “confidence will not return until we stop to think about the measures which have been taken and we can see financial institutions resuming their normal activity.”  Most traders expect the ECB will cut rates by up to 50bps next week.  Euro bids are cited around the US$ 1.2135 level.

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥96.05 level and was capped around the ¥99.70 level.  There is growing speculation Bank of Japan’s Policy Board will announce the first cut in interest rates in some seven years at the end of the week.  This would signify solidarity between Japanese central bankers and their Group of Seven counterparts in handling the ongoing credit market dislocations.  The Ministry of Finance reduced its assessment of the economy for the third consecutive quarter overnight and BoJ Deputy Governor Nishimura warned “there is a risk that global market and economic conditions could worsen further and affect Japan's economy.” Data released in Japan overnight saw September industrial output climb 1.2% m/m. The government announced the yen’s recent gains resulted in the notional loss of ¥23.9 trillion to Japan’s foreign currency reserves.  The Nikkei 225 stock index climbed 7.74% to close at ¥8,211.90.  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 ¥127.30 level and was supported around the ¥121.40 level. The British pound and Swiss franc moved higher vis-à-vis the yen as the crosses tested offers around the ¥159.50 and ¥86.40 levels, respectively. The Chinese yuan weakened vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8470 in the over-the-counter market, up from CNY 6.8390.  People’s Bank of China cut interest rates today, taking the cost of one-year bank loans lower by 27bps to 6.66% with a corresponding decrease in the benchmark one-year deposit rate to 3.60%.

Technical Outlook at 1230 GMT (EDT + 0400)

             (Bid Price)       (Today’s Intraday Range)                               

EUR/ USD         1.2893                 1.2900, 1.2625
USD/ JPY           97.22                   99.69,   96.07
GBP/ USD        1.6214                 1.6228, 1.5872
USD/ CHF         1.1424                 1.1595, 1.1415
AUD/ USD         0.6610                 0.6621, 0.6338
USD/CAD          1.2375                 1.2867, 1.2355
NZD/USD          0.5834                0.5845, 0.5637
EUR/ JPY         125.42    127.30, 121.38
EUR/ GBP        0.7953                 0.8002, 0.7881
GBP/ JPY         157.55                 159.51, 153.32
CHF/ JPY            85.04                   86.38,   82.92

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

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

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.