Daily Market Commentary - GCI Financial

EURO

The euro plummeted vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.5395 level and was capped around the $1.5650 level. The common currency gave back ground as traders reacted to comments from European Central Bank officials Mersch and Quaden that imply the central bank’s monetary policy may be shifting from its current hawkish stance. Data released in the U.S. today saw the February consumer confidence index fall 0.3% while the March Philadelphia Fed manufacturing index rose to -17.4. Also, weekly initial jobless claims were up 22,000 to 378,000 while continuing jobless claims rose 32,000 to 2.865 million – the highest level since August 2004. Traders are also squaring their positions ahead of the long Easter holiday weekend when liquidity is expected to dry up in many trading centers. Additionally, traders have been reducing their short U.S. dollar exposure on a growing concern that global monetary officials could intervene to strengthen the U.S. dollar on a major scale. In eurozone news, the EMU-15 March PMI services survey fell to 51.7 from 52.3 in February while the manufacturing PMI survey fell to 52.0 from 52.3. The European Central Bank launched a fine-tuning operation today to provide additional liquidity to the market. Other data released today saw February producer price inflation up 0.7% m/m and 3.8% y/y. Euro bids are cited around the US$ 1.5610 level.

JPN/CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥98.55 level and was capped around the ¥100.20 level. The pair continues to creep higher from this week’s low levels that had not been reached since 1995. Risk aversion has been lessening a little bit over the past couple of days as the U.S. dollar has regained some lost ground and commodities markets have been selling-off. Traders are still awaiting the next news from the Fukuda government as to who a compromise candidate may be to replace former Bank of Japan Governor Fukui, who retired yesterday. The Nikkei 225 stock index gained 2.48% to close at ¥12,260.44. Dollar offers are cited around the ¥102.05 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥152.40 level and was capped around the ¥155.15 level. The British pound and Swiss franc came off vis-à-vis the yen as the crosses tested bids around the ¥195.40 and ¥97.50 levels, respectively. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 7.0516 in the over-the-counter market, down from CNY 7.0630, the pair’s lowest close since the yuan revaluation of July 2005. People’s Bank of China reported urban Chinese have a high dissatisfaction with the record high levels of current price levels.

STERLING

The British pound weakened vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.9735 level and was capped around the $1.9875 level. Many data were released in the U.K. today. First, February retail sales were up 0.1% m/m and 5.5% y/y. Second, public sector net borrowing reached a net ₤2.7 billion in February. Third, CML February gross mortgage lending fell 7% m/m. Fourth, February provisional M4 money supply growth registered 0.3% m/m and 12.3% y/y. Bank of England offered ₤10.93 billion of reserves for its weekly auction today and the liquidity was oversubscribed by nearly three times. Cable bids are cited around the US$ 1.9605 level. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.7770 level and was capped around the ₤0.7890 level.

SWISS

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0165 level and was supported around the CHF 0.9955 level. Data released in Switzerland today saw February producer and import prices rise 0.2% m/m and 3.6% y/y. Also, the Swiss February trade surplus rose to CHF 1.55 billion. Swiss finance minister Merz said the government currently has no reason to intervene in the current financial and market crisis. U.S. dollar offers are cited around the CHF 1.0375 level. The euro and British pound moved higher vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.5705 and CHF 2.0125 levels, respectively.

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