Daily Market Commentary - GCI Financial

EURO

The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.5510 level and was capped around the $1.5695 level. The common currency erased most of yesterday’s gains as traders reacted to disappointing retail sales data from the eurozone. EMU-15 February retail sales fell 0.5% m/m and 0.2% y/y, below expectations, on account of weaker consumer spending in Germany. Other data released today saw EMU-15 March services PMI print at 51.6 while German March final services PMI slipped to 51.8. These weaker data could scale back expectations that European Central Bank may tighten monetary policy on account of significantly elevated inflation rates. In U.S. news, weekly initial jobless claims rose 38,000 to 407,000 while continuing jobless claims gained 97,000 to 2.937 million. It was also reported that the March services ISM index improved to 49.6 from 49.3. Traders await tomorrow’s February non-farm payrolls data. Federal Reserve Chairman Bernanke and other high-ranking officials testified today about their role in the failure of U.S. investment bank Bear Stearns. Euro bids are cited around the US$ 1.5345 level.

JPN/CNY

The yen appreciated modestly vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥102.10 level and was capped around the ¥102.95 level. The pair reached its highest level since 12 March. Bank of Japan released a survey today that reported consumers’ economic sentiment worsened to the lowest level since March 2003 at -57.7. This report follows Monday’s very weak Tankan survey of corporate sentiment for the January – March period. The Fukuda government reported it is trying to nominate a suitable successor to become the Governor of Bank of Japan by next week’s Group of Seven meetings in Washington, D.C. Deputy Governor Shirakawa is currently governing the central bank and some Japan-watchers believe the opposition Democratic Party is in no hurry to fill the vacancy. BoJ’s Policy Board will meet on 8-9 April and is unlikely to change monetary policy at that meeting. Data released in Japan overnight saw foreign investors as net sellers of Japanese shares for the sixth consecutive week. The Nikkei 225 stock index gained 1.52% to close at ¥13,389.90. Dollar offers are cited around the ¥103.65 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥159.30 level and was capped around the ¥161.05 level. The British pound gained ground vis-à-vis the yen as sterling tested offers around the ¥204.55 level while the Swiss franc weakened vis-à-vis the yen and tested bids around the ¥100.65 level. The Chinese yuan strengthened vis-à-vis the U.S. dollar as the greenback closed at CNY 7.0158 in the over-the-counter market, down from CNY 7.0184. Treasury Secretary Paulson indicated it is “dangerous” if the yuan does not move in concert with fundamentals.

STERLING

The British pound moved higher vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.9910 level and was supported around the $1.9760 level. Technically, today’s intraday level was right around the 23.6% retracement of the move from $2.1160 to $1.9335. Data released in the U.K. today saw the March PMI services index recede to 52.1 from February’s 54.0 level, a larger-than-expected decline. Also, Bank of England’s credit conditions survey noted less credit has been available to households and added there has been a corresponding increase in default rates on secured household lending. Most traders believe Bank of England’s Monetary Policy Committee will lower the repo rate by 25bps next week. MPC member Tucker last night said “Given this unusual combination of significant downside and upside risks to the medium-term inflation outlook, the broad policy strategy is to offset some but not all of the adverse shock to demand from tighter credit conditions. And to do so by changing Bank Rate gradually and with transparency about that broad strategy.” Cable bids are cited around the US$ 1.9605 levels. The euro came off vis-à-vis the British pound as the single currency tested bids around the ₤0.7820 level and was capped around the ₤0.7910 level.

SWISS

The Swiss franc came off vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0215 level and was supported around the CHF 1.0075 level. Technically, today’s intraday high was just above the 38.2% retracement of the move from CHF 1.1105 to CHF 0.9645. U.S. dollar offers are cited around the CHF 1.0375 level. The euro and British pound appreciated vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.5855 and CHF 2.0255 levels, respectively.

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