Daily Market Commentary - GCI Financial

EURO

The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.5730 level and was supported around the $1.5585 level. Stops were reached above the $1.5690 level, representing the 61.8% retracement of the move from $1.5905 to $1.5345. European Central Bank President Trichet today said EMU-15 inflation is likely to remain significantly above 2.0% for most of 2008. Trichet added policymakers “remain strongly committed to preventing second-round effects and the materialization of upside risks to price stability over the medium term” but conceded economic uncertainty “remains unusually high.” The common currency moved higher after it was reported that the German Ifo March business climate index improved to 104.8 from 104.1 in February, above forecasts. The business assessment sub-index and the business expectations sub-index both improved. Also, the EMU-15 January current account deficit widened to €10.6 billion from €3.5 billion in December. Additionally, the French March business climate indicator improved to 109 while the Italian March business confidence indicator weakened to 89.0. It was also reported that EMU-15 January industrial new orders were up 2.0% m/m and 7.3% y/y. In U.S. news, February durable goods orders fell 1.7% while the ex-transportation component was off 2.6%. Euro bids are cited around the US$ 1.5560 level.

JPN/CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥99.00 figure and was capped around the ¥100.30 level. Technically, today’s intraday low was right around the 38.2% retracement of the move from ¥95.70 to ¥101.05. Data released in Japan overnight saw the February corporate services price index climb +0.3% m/m and +0.7% y/y, the fifteenth consecutive monthly rise. Also, Japanese exports rose 8.7% y/y in February as the merchandise trade surplus rose 0.9% to ¥969.97 billion. Traders await the release of Bank of Japan’s March Tankan quarterly survey of business sentiment next week and most economists expect sentiment will deteriorate. Dealers are also awaiting any indication that progress is being made in the Fukuda government’s quest to nominate a candidate for the Bank of Japan Governor who will not be rejected by opposition lawmakers. The Nikkei 225 stock index lost 0.30% to close at ¥12,706.63. Dollar offers are cited around the ¥102.15 level. The euro came off vis-à-vis the yen as the single currency tested bids around the ¥155.65 level and was capped around the ¥156.75 level. The British pound and Swiss franc came off vis-à-vis the yen as the crosses tested bids around the ¥198.65 and ¥99.00 levels, respectively. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 7.0318 in the over-the-counter market, down from CNY 7.0448 – the pair’s weakest showing since the yuan revaluation of July 2005.

STERLING

The British pound came off vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.9950 level and was capped around the $2.0110 level. Stops were triggered below the $1.9670 level, representing the 38.2% retracement of the move from $1.9735 to $2.0115. Bank of England Monetary Policy Committee policymakers testified before the Treasury Select Committee today. BoE Governor King reported inflation is likely to spike higher in 2008 and suggested there is not a need for the central bank to aggressively reduce interest rates as Federal Reserve has done. King suggested inflation could fall below 2.0% in 2009 on weaker economic growth and said it is “unrealistic” to expect liquidity issues will be resolved in the short-term. Talking about sterling, MPC member Bean said risks to the pound are “to the downside” while King said the MPC is “not indifferent” to the value of the pound. MPC’s Blanchflower reiterated a gradual depreciation of the pound was part of the BoE’s February quarterly inflation report projections. Cable bids are cited around the US$ 1.9880/ 1.9605 levels. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.7875 level and was supported around the ₤0.7780 level.

SWISS

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 0.9970 level and was capped around the CHF 1.0110 level. Technically, today’s intraday high was right around the 23.6% retracement of the move from CHF 0.9645 to CHF 1.0250. U.S. dollar offers are cited around the CHF 1.0375 level. The euro and British pound came off vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.5680 and CHF 1.9920 levels, respectively.

AUD/NZD

The Australian dollar gained marginal ground vis-à-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.9180 level and was supported around the $0.9120 level. Technically, today’s intraday low was right around the 38.2% retracement of the move from $0.8415 to $0.9495. Australian dollar bids are cited around the US$ 0.9005 level. The New Zealand dollar weakened vis-à-vis the U.S. dollar as kiwi tested bids around the US$ 0.7985 level and was capped around the US$ 0.8075 level. Data released in New Zealand saw Westpac consumer confidence erode to its weakest level in a decade at 96.5. New Zealand dollar bids are cited around the US$ 0.7895 level.

CAD

The Canadian dollar appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the C$ 1.0130 level and was capped around the C$ 1.0195 level. Most traders expect Bank of Canada will continue to ease monetary policy for the foreseeable future. U.S. dollar offers are cited around the C$ 1.0370 level.

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