WEEKLY MARKET RECAP for w/e 30 Sept 2007

BillyT's Forex Currency-Trading WEEKLY MARKET RECAP for w/e 30 Sept 2007


EURO:

The euro appreciated vis-à-vis the U.S. dollar last week as the single currency tested offers around the $1.4280 level and was supported around the $1.4060 level. The pair gained about 170 pips last week. HKMA’s Yam warned the U.S. dollar’s weakness could see Asian central banks’ reserves management strategies change. ECB’s Noyer said changes in the dollar’s value “could seriously hamper economic growth” and noted U.S. authorities continue their strong dollar policy. Fed funds futures are pricing is as much as a 90% chance the FOMC will take rates lower another 25bps next month. Weak business spending data could see U.S. Q3 growth print on the weak side. Philly Fed’s Plosser foresees slower growth over the coming quarters. ECB’s Trichet stressed the market turmoil has not resulted in the ECB shifting its growth or inflation forecasts. Traders now believe the FOMC easing cycle may be deeper and/ or longer than previously estimated.

ECB’s Garganas hawkishly noted “the upside risks to inflation dominate any effects stemming from the appreciation of the euro.” France’s Lagarde verbally intervened against the yuan.

Data released in the U.S. last week saw September consumer confidence fall to 99.8; August existing home sales were off 4.3% to an annualized 5.5 million units; Redbook retail sales were up +0.5% m/m in the first three weeks of September; the September Richmond Fed manufacturing index improved to +14 from +7 in August; August durable goods orders were off 4.9% with the ex-transportation component off 1.8%; Q2 GDP was downwardly revised to an annualized 3.8%; the Q2 overall PCE price index rose 4.3% with the core PCE price index upwardly revised to +1.4%; weekly initial jobless claims were off 15,000 to 298,000; continuing jobless claims were up 11,000 to 2.551 million; August building permits were upwardly revised to -4.8% from -5.9%; August new home sales were off 8.3% to 795,000; core personal consumption expenditures fell to 1.8% from 1.9%; August personal incomes were up 0.3%; August personal spending was up 0.6%; the final September University of Michigan consumer sentiment index was steady at 83.4; and the Chicago NAPM business index rose to 54.2 with the prices paid index falling sharply to 59.0.

Data released in the eurozone last week saw the Belgian National Bank September business confidence index fall to 1.5; EMU-13 July industrial orders were off 4.0% m/m and up 10.9% y/y; the German August import price index was off 0.7% m/m and 0.6% y/y; the GfK consumer climate index printed at 6.8 in October; the German unemployment rate fell to its lowest level since 1990 at 8.8%; EMU-13 money supply growth printed at 11.6%; the EMU-13 economic sentiment indicator fell to 107.1; provisional EMU-13 HICP rocketed to 2.1%; French GDP and PPI moved higher in August; and German retail sales were off 1.4% m/m and 2.2% y/y.

YEN:

The yen appreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the ¥114.00 figure and was capped around the ¥115.85 level. The pair lost about 80 pips last week. The Nikkei 225 stock index closed the week at ¥16,785.69. Yasuo Fukuda was named Japan’s new Prime Minister and is inserting moderates into key LDP slots. BoJ Policy Board minutes saw a consensus to lift rates “gradually.” Monday’s BoJ tankan survey will be closely watched, as will its capital expenditures data. BoJ’s Suda said the economy could overheat if the BoJ raises rates too slowly;

Data released in Japan last week saw August supermarket sales off 0.5% m/m; the August corporate services price index was off 0.5% m/m and up 1.0% y/y; the August trade surplus printed at ¥743.24 billion; the core CPI level was off 0.1% y/y; the August unemployment rate printed at 3.8%; August industrial production was up 3.4% m/m; August housing starts were off 43.3% y/y; August orders received by the 50 largest contractors were off 14.2% y/y; and August household spending was up 1.6% y/y.

CHINESE YUAN:

The Chinese yuan depreciated vis-à-vis the U.S. dollar last week as the greenback closed at CNY 7.5061 in the over-the-counter market, up from CNY 7.5036. China’s foreign reserves exceeded US$ 1.4 trillion at the end of the August. PBOC reported it will increase the flexibility of the yuan and keep it “basically stable.” PBOC also sees 2007 CPI growth at 4.6% with GDP growth around 11.6%.

Data released in China last week saw consumer confidence marginally improve in September; August consumer confidence improved to 97.3; and industrial firms’ profits were up 37% y/y between January and August.

BRITISH POUND:

The British pound appreciated vis-à-vis the U.S. dollar last week as cable tested offers around the US$ 2.0465 level and was supported around the $2.0885 level. The pair gained about 255 pips last week. PM Brown reiterated his support for BoE chief King. The Independent reported the bank deposit protection scheme has a mere ₤4.4 billion. BoE MPC’s Sentence warned demand and inflation could fall on account of markets turmoil. A BoE ₤10 billion auction for three-month liquidity failed to attract bids, suggesting a normalization in money markets. Sterling shrugged off more emergency buying from Northern Rock at the end of the week.

Data released in the U.K. last week saw public sector net borrowing print at ₤9.1 billion; Q2 business investment was revised to 0.4% from 0.8%; Q2 GDP was upwardly revised to 3.1% from 3.0%; CBI’s retail sales balance fell back to 12% of retailers reporting higher sales than one year ago; BBA August mortgage approvals dropped; Nationwide house prices were up in September; Q2 productivity growth receded to 2.7%; July service sector output was up 0.3% m/m; September GfK/ NOP consumer confidence fell to -7; Land Registry house prices were up in England and Wales; and the U.K.’s deficit fell to 2.5% of GDP in the fiscal year to April 2007.

SWISS FRANC:

The Swiss franc appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the CHF 1.1625 level and was capped around the CHF 1.1755 level. The pair lost about 90 pips last week. SNB’s quarterly review confirmed its previous economic growth forecast of 2.5% for 2007 on robust growth in June, July, and August, citing staff shortages and high capacity utilization rates. KOF raised its Swiss 2007 GDP forecast to 2.8% from 2.4% and lowered its 2008 GDP forecast to 1.9%.

Data released in Switzerland last week saw the August private consumption index fall to 1.93 from 2.26 and the September KOF economic barometer rose to 2.14 from 2.12 in August.

CANADIAN DOLLAR:

The Canadian dollar appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the C$ 0.9910 level and was capped around the C$ 1.0095 level. The pair lost about 70 pips last week. BoC boss Dodge noted the C$ and economy are now far above previous forecasts. Traders believe the loonie’s level may see the BoC keep rates unchanged at 4.50% on 16 October. Canada realized a C$ 13.8 billion budget surplus in the latest fiscal year.

Data released in Canada last week saw August industrial product prices off 0.1% m/m; the August raw materials price index was off 2.8% m/m; and July GDP was up 0.2% m/m.

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$ 0.8885 level and was supported around the US$ 0.8610 level. The pair gained about 215 pips last week. RBA warned there could be “further bouts of market turbulence and strained liquidity conditions.”

Data released last week the September skilled vacancies index improve +0.1% m/m; August quarterly job vacancies were up 2.9% q/q; August private sector credit growth was up 1.5% m/m and 16.2% y/y; and the TD Securities-Melbourne Institute monthly inflation gauge was up 0.2% in September.


BillyT Daily Forex
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