Weekly Market Commentary by GCI Financial Ltd

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WEEKLY MARKET RECAP, WEEK AHEAD, AND SCHEDULE
2 December 2007

Sunday

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The euro depreciated vis-à-vis the U.S. dollar last week as the single currency tested bids around the $1.4630 level and was capped around the $1.4910 level. The pair lost about 205 pips last week. Early U.S. holiday retail sales look to be fairly robust. Fed?s Kohn cited ?elevated turbulence? from the credit shock and said policymaking must be ?flexible, pragmatic, and nimble.? Philly Fed?s Plosser hawkishly said lowering rates won?t solve the markets? problems. The Fed?s Beige Book cited decelerating GDP growth, ?relatively soft retail spending,? and a ?quite depressed? real estate sector. Fed boss Bernanke said the Fed is ?exceptionally alert and flexible? and sees headwinds for consumers.

Market chatter suggests EMU-13 GDP growth may slow in 2008. ECB?s Ordonez sees GDP growth as having peaked. Germany?s export association is halving 2008 GDP growth forecasts. Germany sees 2008 growth around 2.0%. ECB?s Papademos sees slower growth and higher inflation. ECB?s Tumpel-Gugerell sees 2008 GDP growth around 2%. ECB?s Quaden sees policymaking as being ?data-dependent.? ECB?s Stark seeks ?solid? growth and higher inflation risks. ECB?s Bini Smaghi said the ECB favours a ?strong euro.? ECB?s Garganas said the euro?s recent moves have been ?sharp and abrupt.? Buba sees 2007 and 2008 GDP growth around 2.5% and 2.0%, respectively. ECB?s Liebscher sees upside risks prevailing.

Data released in the U.S. last week saw the Chicago Fed?s National Activity Index fall to -0.73; November consumer confidence worsened to 87.3; October new durable goods orders fell 0.4% and the non-defense capital goods ex-aircraft component was off 2.3%; October existing home sales were off 1.2% m/m; October building permits were downwardly revised to -7.2%; Q3 GDP were upwardly revised to 4.9%; weekly initial jobless claims were up 23,000 to 352,000; October existing home sales were up 1.7% and down 23.5% y/y; October construction spending was off 0.8%; October private spending was off 0.8%; Chicago November PMI improved to 52.9 with the prices paid component up; October consumer spending was up 0.2%; October personal incomes were up 0.2%; and core PCE were up 0.2% and 1.9% y/y.

Data released in the eurozone last week saw German November CPI was up 3.0% y/y; the German November Ifo business climate index improved to 104.2; the German GfK climate index fell to 4.3 in November; EMU-13 money supply growth accelerated to 12.3%; German October wholesale sales were up 0.6% m/m and 1.8% y/y; Q3 EMU-13 GDP was up an annualized 2.7%; and EMU-13 November provisional HICP was up 3.0%.

Technical Outlook

Last week?s high (1) above the 23.6% retracement of the 1.4015-1.4967 range and last week?s low (2) was above the 38.2% retracement of the same range. The 1.4742/ 1.4908/ 1.5030/ 1.5120 levels represent upside resistance targets while the 1.4603/ 1.4491/ 1.4378/ 1.4239 levels represent downside support targets.

¥/ CNY

The yen depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the ¥111.20 level and was supported around the ¥107.20 level. The pair gained about 290 pips last week. The government downgraded its assessment of employment for the first time in three years and sees U.S. sub-prime risk as being the largest risk to the economy. The Nikkei 225 stock index closed at ¥15,680.67.

Data released in Japan last week saw the October corporate services price index increase 1.4% y/y; October retail sales were up 0.8% y/y; October industrial output was up 1.6% m/m; October core CPI was up 0.1% y/y; October all-household spending was up 0.6% y/y; October orders received by 50 largest contractors were off 22.7% y/y; October consumer sentiment worsened; October housing starts fell 35%; and October unemployment was unchanged at 4.0%.

The Chinese yuan appreciated vis-à-vis the U.S. dollar last week as the greenback closed at CNY 7.4000 in the over-the-counter market, down from CNY 7.4060. The pair is now printing with a CNY 7.3 handle. EU officials met with China and ?share a common diagnosis? the euro is too strong vis-à-vis the yuan. China Investment Corp may take Abu Dhabi?s lead and work to ?stabilize? the U.S. economy. China?s end-October FX reserves were US$ 1.455 trillion. French President Sarkozy visited China and announced US$ 30 billion in new trade deals.

Data released in China last week saw October urban fixed-asset investment up 30.7%.

Technical Outlook

Last week?s high (1) was right at the 23.6% retracement of the 124.13-107.20 range and last week?s low (2) was below the 23.6% retracement of the 117.92-107.20 range. Upside resistance targets remain the 112.56/ 113.66/ 115.66/ 117.66 levels while downside support targets remain the 109.73/ 107.20/ 106.53/ 104.19/ 101.67 levels.

£

The British pound depreciated vis-à-vis the U.S. dollar last week as cable tested bids around the US$ 2.0530 level and was capped around the $2.0830 level. The pair lost about 60 pips last week. BoE?s Bean said rates may have to remain higher ?for a while.? MPC?s Barker said the BoE is ?super alert? to changes in economic conditions while MPC?s Sentance cited ?upside inflationary risks from oil and other commodity prices.? BoE?s King says the economic outlook is ?rather uncomfortable and highly uncertain.? MPC?s Blanchflower sees more credit turmoil.

Data released in the U.K. last week saw Hometrack November house prices off 0.2% m/m and up an annualized 3.6%; Land Registry house prices in England and Wales fell 0.1% m/m; November house prices were off 0.8% m/m; November mortgage approvals fell to 88,000; CBI?s distributive trades balance improved to +13 in November; U.K. November consumer confidence fell to its weakest level since March 2003; and median pay settlements were up 3.5% in the three months to November.

Technical Outlook

Last week?s high (1) was above the 23.6% retracement of the 1.9651-2.1159 range and last week?s low (2) was just above the 50.0% retracement of the 1.9879-2.1159 range. Upside resistance targets include the 2.0583/ 2.0670/ 2.0803/ 2.0857/ 2.0944 levels while downside support targets include the 2.0519 /2.0405/ 2.0368/ 2.0181/ 2.0007 levels.

CHF

The Swiss franc depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the CHF 1.1325 level and was supported around the CHF 1.0955 level. The pair gained about 300 pips last week. SNB?s Hildebrand sees credit market fallout limited to ?only large financial institutions.?

Data released in Switzerland last week saw October producer and import prices up 0.2% m/m and 2.7% y/y; the UBS October private consumption index improved to 2.23 from 2.01; the November KOF economic barometer fell to 2.02 from 2.04 in October; November CPI was up 0.5% m/m and 1.8% y/y; and Q3 GDP was up 0.8% m/m and 2.9% y/y.

Technical Outlook

Last week?s high (1) was above the 38.2% retracement of the 1.1894-1.0885 range and last week?s low (2) was below the 23.6% retracement of the same range. Upside resistance targets include the 1.1389/ 1.1508/ 1.1656 levels while downside support targets include the 1.1270/ 1.1123/ 1.0830/ 1.0740 levels.

CAD

The Canadian dollar depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the C$ 1.0015 level and was supported around the C$ 0.9800 level. The pair gained about 100 pips last week. Traders are increasingly speculating Bank of Canada will reduce interest rates this week.

Data released in Canada last week saw Canadian weekly earnings up 0.3% m/ and 3.2% y/y; September new and renewed unemployment claims were up 2.6% m/m and off 5.8% y/y; and Q3 GDP was up 0.7% q/q and 2.9% y/y.

Technical Outlook

Last week?s high (1) was above the 50.0% retracement of the 1.0866-0.9055 range and last week?s low (2) was above the 38.2% retracement of the same range. Upside resistance targets include the 1.0130/ 1.0174/ 1.0293/ 1.0438 levels while downside support targets include the 0.9747/ 0.9482/ 0.9300/ 0.9230/ 0.9140/ 0.9055 levels.

AUD

The Australian dollar appreciated vis-à-vis the U.S. dollar last week as the Aussie tested offers around the US$ 0.8920 level and was supported around the US$ 0.8670 level. The pair gained about 65 pips last week. Australia?s Labour Party swept to power.

Data released in Australia last week saw Q3 building activity was up +4.0% q/q; November skilled vacancies were up +0.6% m/m; Q3 capital expenditures were off 6.5%; October private sector credit was up 1.0% m/m; and the Q3 current account deficit reached ?A$ 15.9 billion.

Technical Outlook

Last week?s high (1) was just below the 38.2% retracement of the 0.9399-0.8652 range and last week?s low (2) was above the 50.0% retracement of the 0.7673-0.9399 range. Upside resistance targets include the 0.8988/ 0.9062/ 0.9114/ 0.9223/ 0.9340/ 0.9420 levels while downside support targets include the 0 0.8740/ 0.8652/ 0.8587/ 0.8412/ 0.8329 levels.

SCHEDULE

Sunday, 2 December 2007

all times GMT

(last release in parentheses)

2230 Australia November AIG performance of manufacturing index (53.3)

2330 Australia November TD securities inflation (0.3% m/m)

2330 Australia November TD securities inflation (3.3% y/y)

2350 Japan Q3 capital spending (-4.9%)

Monday, 3 December 2007

all times GMT

(last release in parentheses)

N/A Australia Reserve Bank of Australia interest rate meeting

0030 Australia October trade balance (-A$ 1.862 billion)

0030 Australia Q3 inventories (0.4%)

0100 Japan Bank of Japan Governor Fukui speaks

0130 Japan October labour cash earnings (1.4% y/y)

0130 Japan October overtime earnings (1.4% y/y)

0745 France October producer prices (2.7% y/y)

0830 CH November purchasing managers index (60.7)

0850 France November PMI, manufacturing (50.5)

0855 Germany November PMI, manufacturing (51.7)

0900 Eurozone November PMI, manufacturing (52.6)

0930 Eurozone European Central Bank President Trichet speaks

0930 UK November PMI, manufacturing (52.9)

1000 Eurozone October unemployment rate (7.3%)

1300 Italy European Central Bank member Gonzalez-Paramo speaks

1300 US Boston Fed President Rosengren speaks

1500 US November ISM, manufacturing (50.9)

1500 US November ISM, prices paid (63.0)

1530 US Treasury Secretary Paulson speaks

1900 Belgium European Central Bank member Bini Smaghi speaks

2030 US San Francisco Fed President Yellen speaks

2350 Japan November monetary base (0.5% y/y)

Tuesday, 4 December 2007

all times GMT

(last release in parentheses)

0001 UK November BRC retail sales monitor

0030 Australia October retail sales (0.8%)

0030 Australia October building approvals (4.2% y/y)

0930 UK November PMI, construction (57.4)

1000 Eurozone October PPI (0.4% m/m)

1000 Eurozone October PPI (2.7% y/y)

1400 Canada Bank of Canada interest rate decision

2230 Australia November AIG performance of service index (53.2)

2230 Australia Reserve Bank of Australia interest rate decision

Wednesday, 5 December 2007

all times GMT

(last release in parentheses)

N/A UK Bank of England Monetary Policy Committee meets

0001 UK November Nationwide consumer confidence (98.0)

0030 Australia Q3 GDP (0.9% q/q)

0030 Australia Q3 GDP (4.3% y/y)

0200 NZ November ANZ commodity prices (1.8%)

0830 Germany European Central Bank President Trichet speaks

0850 France November PMI, services (58.5)

0855 Germany November PMI, services (55.1)

0900 Eurozone November PMI, services (53.7)

0930 UK November PMI, services (53.1)

1000 Eurozone October retail sales (0.3% m/m)

1000 Eurozone October retail sales (1.6% y/y)

1030 UK November BRC shop price index

1200 US MBA mortgage applications (-4.3%)

1230 US November Challenger job cuts (-8.8% y/y)

1315 US November ADP employment change (106,000)

1330 US Q3 non-farm productivity (4.9%)

1330 US Q3 unit labour costs (-0.2%)

1500 US October factory orders (0.2%)

1500 US November ISM, non-manufacturing (55.8)

2000 NZ Reserve Bank of New Zealand interest rate decision

2350 Japan Net equities and bonds investment

Thursday, 6 December 2007

all times GMT

(last release in parentheses)

N/A Eurozone European Central Bank member Mersch speaks

N/A US November ICSC chain store sales (1.6% y/y)

0500 Japan October leading economic index (0.0%)

0500 Japan October coincident index (60.0%)

0600 Japan November machine tool orders (16.6% y/y)

0645 CH November unemployment rate (2.6%)

0930 UK October industrial production (-0.4% m/m)

0930 UK October industrial production (-0.2% y/y)

0930 UK October manufacturing production (-0.6% m/m)

0930 UK October manufacturing production (-0.1% y/y)

1000 Germany October factory orders (-2.5% m/m)

1000 Germany October factory orders (1.1% y/y)

1200 UK Bank of England interest rate decision

1245 Eurozone European Central Bank interest rate decision

1330 Eurozone European Central Bank President Trichet speaks

1330 US Weekly initial jobless claims (352,000)

1330 US Continuing jobless claims (3.665 million)

1330 Canada October building permits (-1.7% m/m)

1415 Germany European Central Bank member Stark speaks

1500 Canada November Ivey purchasing managers index (57.1)

2230 Australia November AIG performance of construction index (57.4)

2350 Japan Q3 GDP (0.6% q/q)

2350 Japan Q3 GDP, annualized (2.6%)

2350 Japan Q3 GDP deflator (-0.3% y/y)

2350 Japan November official reserve assets (US$ 954.5 billion)

Friday, 7 December 2007

all times GMT

(last release in parentheses)

0001 UK November NIESR GDP estimate (0.7%)

0900 Italy Q3 GDP (1.9% y/y)

1100 Germany October industrial production (0.3% m/m)

1100 Germany October industrial production (6.0% y/y)

1200 Canada November employment, net chance (63,000)

1200 Canada November unemployment rate (5.8%)

1330 US November change in non-farm payrolls (166,000)

1330 US November unemployment rate (4.7%)

1330 US November average hourly earnings (0.2% m/m)

1330 US November average hourly earnings (3.8% y/y)

1500 US December preliminary U. of Michigan consumer sentiment (76.1)

1700 Germany European Central Bank President Trichet speaks

DISCLAIMER: GCI?s Weekly Market Recap and Week Ahead 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.

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