Daily Market Commentary - GCI Financial

EURO

The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around US$ 1.5770 level and was supported around the $1.5635 level. Technically, today’s intraday high was right around the 23.6% retracement of the move from $1.5340 to $1.5895. The common currency spiked higher following the release of U.S. March non-farm payrolls data that saw job losses of 80,000 last month, worse than the -50,000 expected, while the unemployment rate moved higher to 5.1% fro, 4.8% in February. Today’s result marks the first time since June 2003 that the economy has lost jobs in three consecutive months and today’s loss of 80,000 was the largest since March 2003. Also, average hourly earnings were up 0.3% in March. Federal Governor Mishkin again reiterated that specific inflation targets help anchor long-term inflation expectations while San Francisco Fed President Yellen reported the U.S. economy “could contract” in the first half of this year. In eurozone news, European Central Bank President Trichet warned against “second-round” inflation effects and noted the ECB’s “major goal is to solidly anchor inflation expectations.” Concerning exchange rates, Trichet added “Excessive volatility is counterproductive from a standpoint of (economic) growth. I would say that the recent excessive moves are an element of concern. I appreciate enormously that the U.S. authorities, the secretary of the Treasury and my friend Ben Bernanke say that a strong dollar is in the interests of the U.S. economy.” ECB member Constancio added “I expect a deceleration of growth throughout the year and that will help with inflation, of course.” Data released in the eurozone today saw February manufacturing orders off 0.5% m/m and up 0.9% y/y. German finance minister Steinbrueck said EMU-15 economic growth has been ‘relatively positive.” Euro bids are cited around the US$ 1.5345 level.

JPN/CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥102.70 level and was supported around the ¥101.60 level. There is increasing speculation that Bank of Japan Deputy Governor Shirakawa – the acting Governor – could be named the permanent Governor by the Fukuda government without opposition from lawmakers. Japan wants to fill the top slot ahead of next week’s Group of Seven meeting in Washington, D.C. Finance minister Nukaga said he wants the G7 to reaffirm that sharp FX movements are not good for economies. BoJ’s Policy Board is expected to keep the overnight call rate unchanged at 0.50% next week. The Nikkei 225 stock index shed 0.72% to close at ¥13,293.22. Dollar offers are cited around the ¥103.65 level. The euro gained marginal ground vis-à-vis the yen as the single currency tested offers around ¥161.05 level and was supported around the ¥160.10 level. The British pound depreciated vis-à-vis the yen as sterling tested bids around the ¥203.25 level while the Swiss franc gained ground vis-à-vis the yen and tested offers around the ¥101.65 level. The Chinese yuan lost ground vis-à-vis the U.S. dollar as the greenback closed at CNY 7.0175 in the over-the-counter market. Industrial and Commercial Bank of China is projecting the March consumer price index advanced 8.2%.

STERLING

The British pound moved higher vis-à-vis the U.S. dollar today as cable tested offers around the US$ 2.0045 level and was supported around the $1.9925 level. Technically, today’s intraday high was just above the 38.2% retracement of the move from $2.1160 to $1.9335. Most traders believe Bank of England’s Monetary Policy Committee will reduce the repo rate next week by 25bps or 50bps. Cable bids are cited around the US$ 1.9605 levels. The euro gained ground vis-à-vis the British pound as the single currency tested offers around the ₤0.7885 level and was supported around the ₤0.7840 level.

SWISS

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0025 level and was capped around the CHF 1.0130 level. Technically, today’s intraday low was right around the 38.2% retracement of the move from CHF 0.9645 to CHF 1.0250. Data released in Switzerland today saw March consumer price inflation up 0.3% m/m and 2.6% y/y. 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 1.5780 and CHF 2.0025 levels, respectively.

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