BillyT's Forex Currency-Trading WEEKLY MARKET RECAP for w/e 16 September 2007

BillyT's Forex Currency-Trading WEEKLY MARKET RECAP for w/e 16 September 2007

EURO:

The euro appreciated vis-à-vis the U.S. dollar last week as the single currency tested offers around the $1.3925 level and was supported around the $1.3765 level. The pair gained about 105 pips last week. Most traders believe the FOMC will reduce the federal funds target rate this week. Treasury boss Paulson said the subprime turmoil will last longer than the Asian and Russian crises of the 90s. Most traders see the Fed moving the federal funds target rate lower by 25bps or 50bps on Tuesday. Bernanke will discuss the subprime market before the House on 20 September. Treasury’s Paulson said the economy may pay “some penalty” on account of financial market turmoil. Atlanta Fed’s Lockhart downplayed the weak August jobs report while Philadelphia Fed’s Plosser said the Fed can address disruptions in the financial markets without “having to make a shift in the overall direction of monetary policy.” Fed Governor Mishkin warned of the “important downside risk to economic activity.” Dallas Fed’s Fisher noted a “steady hand” is better than “an itchy trigger finger.”

ECB’s Trichet said there is “no time for complacency” while ECB’s Noyer said EMU-13 economic growth should not be “significantly affected.” The European Commission reduced its 2007 GDP forecast to +2.8% with inflation at 2.0%. Germany’s IfW lowered its 2007 GDP forecast to 2.7%. EMU-13 central bankers and finance ministers are meeting in Porto this weekend.

Data released in the U.S. last week saw the July trade balance narrow to –US$ 59.2 billion; weekly initial jobless claims were up 4,000 to 319,000; continuing jobless claims were off 6,000 to 2.585 million; the Q2 current account deficit narrowed to –US$ 190.8 billion; July business inventories were up 0.5%; August retail sales were up 0.3% with the ex-autos and ex-gasoline component off 0.1%; August industrial output was up 0.2%; August capacity utilization printed at 82.2%; August import prices were off 0.3% m/m; and the University of Michigan mid-September consumer sentiment index improved to 83.8.

Data released in the eurozone last week saw French industrial production rise 1.3% m/m; the German August wholesale price index was up 0.5% m/m and 2.5% y/y; July industrial production was up 0.6% m/m and 3.7% y/y; EMU-13 labour costs were up 2.5% y/y in Q2; EMU-13 Q2 provisional employment was up 0.5% q/q and 1.7% y/y; and EMU-13 August harmonized consumer price inflation fell to 1.7%.

YEN:

The yen depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the ¥115.40 level and was supported around the ¥112.60 level. The pair gained about 180 pips last week. The Nikkei 225 stock index closed the week at ¥16,127.42. BoJ reported the credit market turmoil is “unlikely to significantly affect the stability of Japan’s financial system.” Prime Minister Abe resigned from office and the LDP will name his successor on 19 September with Aso deemed the front-runner. The government kept its assessment of the economy unchanged but lowered its assessment of capital spending for the first time in 30 months.

Data released in Japan last week saw Q2 GDP off 0.3%; outstanding loans by Japanese banks rose 0.5% y/y in August; the M2+CD money supply rose 1.8% y/y; the economy watchers survey receded to 44.1 in August; July core private sector machinery orders rose at their fastest pace since October 2003; the August wholesale goods price index rose 1.9% y/y; August consumer confidence fell to its lowest level in 32 months at 44.0; August revised machine tool orders were up 12.6% y/y; and the July current account surplus gained 4.5% y/y.

CHINESE YUAN:

The Chinese yuan appreciated vis-à-vis the U.S. dollar last week as the greenback closed at CNY 7.5175 in the over-the-counter market, down from CNY 7.5395. PBOC’s Zhou stressed his concern over inflation. China’s new foreign exchange reserves management agency, the China Investment Co. Ltd, began operations last week.

Data released in China last week saw the August PPI index up 2.6% y/y; the August consumer price index was up 6.5% y/y; the August trade surplus printed at US$ 24.97 billion; the M2 money supply was up 18.09% at the end of August; August retail sales were up 17.1% y/y; August wholesale prices were up 6.5% y/y; August property prices in 70 cities were up 8.2% y/y; actual foreign direct investment was up 11.9% y/y; industrial value-added output was up 18.4% y/y between January and August; 2006 direct overseas investment was up 73% y/y at a record US$ 21 billion; and urban fixed-asset investment was up 26.7% between January and August.

BRITISH POUND:

The British pound depreciated vis-à-vis the U.S. dollar last week as cable tested bids around the US$ 2.0055 level and was capped around the $2.0335 level. The pair lost about 180 pips last week. Prime Minister Brown called for wage growth restraint in the public sector. BoE chief King said the current market turmoil has “clouded” the U.K. economic outlook and many traders now believe the BoE will not raise rates again this year. RICS house prices evidenced the first decline in house prices for the first time in nearly two years. News that U.K. mortgage giant Northern Rock PLC rocked sterling as did a leaked Rightmove report that saw asking prices fall 2.6% m/m.

Data released in the U.K. last week saw August manufacturing input prices off 0.5% m/m and up 0.7% y/y with the core component up +0.1% m/m and 1.8% y/y; August manufacturing output prices were up +0.1% m/m and 2.5% y/y with the core rate up +0.2% m/m and +2.4% y/y; DCLG annual house price inflation was up 12.4%; the July trade balance worsened to -₤7.1 billion; the August claimant count rate stood at 2.6; the August ILO unemployment rate printed at 5.4%; and August average earnings growth including bonuses were up 3.5% in the three months to July.

SWISS FRANC:

The Swiss franc depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the CHF 1.1920 level and was supported around the CHF 1.1800 level. The pair gained about 10 pips last week. SNB lifted its three-month Swiss franc Libor target rate band by +25bps to 2.25% - 3.25% and is targeting the mid-point. SNB now sees 2007 inflation around 0.7% and warned against exchange rate risks. KOF lifted its 2007 GDP growth forecast to 2.6% from 2.4%.

Data released in Switzerland last week saw the 2006 trade surplus print at CHF 74 billion from CHF 63 billion while August corporate bankruptcies were up 19.1% y/y.

CANADIAN DOLLAR:

The Canadian dollar appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the C$ 1.0275 level and was capped around the C$ 1.0590 level. The pair lost about 260 pips last week. BoC boss Dodge said rates at 4.5% are “appropriate” and added the BoC’s move to provide liquidity to the market “did not in any way signal a change in our monetary policy.”

Data released in Canada last week saw the July trade surplus fell to C$ 3.66 billion; August housing starts rose 5% to an annualized 226,500; and July manufacturing shipments were up 2.3%

AUSTRALIAN / NEW ZEALAND DOLLAR:

The Australian dollar appreciated vis-à-vis the U.S. dollar last week as the Aussie tested offers around the US$ 0.8425 level and was supported around the US$ 0.8170 level. The pair gained about 155 pips last week. RBNZ kept its official cash rate unchanged at 8.25%.

Data released last week saw the number of Australian dwellings financed in July off 4.1% m/m to 63,599; the NAB August survey of business sentiment fell to +10 from +12; and the September Westpac consumer index was up 4.2%; Q2 housing starts fell 4.0% q/q.



BillyT Daily Forex
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