Daily Market Commentary - GCI Financial

EURO

The euro weakened vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.5860 level and was capped around the $1.6000 figure. Technically, today’s intraday low was right around the 23.6% retracement of the move from $1.5350 to $1.6020. The common currency established a new lifetime high yesterday around the $1.6020 level before ceding gains. The German government verbally intervened against the euro’s strength, reporting it will continue to “closely watch” the exchange rate. Similarly, Eurogroup chairman Juncker said “We are observing excessive volatility at the moment” and added the markets did not properly comprehend the Group of Seven’s statement about foreign exchange in its communiqué. The pair also came off after the release of the EMU-15 April manufacturing PMI survey that fell to 50.8, its lowest reading since August 2005. The services PMI survey improved to 51.8 and the prices charged sub-index rose to 54.2, its highest level since April 2007. Also, EMU-15 February industrial orders were up 0.6% m/m and 9.9% y/y. In U.S. news, traders are beginning to focus more closely on the Federal Open Market Committee’s interest rate decision one week from today. Most traders expect the Fed will lower rates by 25bps or 50bps, and the current consensus is that the Fed could continue easing through mid-summer. Euro bids are cited around the US$ 1.5765/ 1.5345 levels.

JPN/CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥103.30 level and was supported around the ¥102.75 level. Traders await tonight’s corporate services price index data followed by tomorrow’s consumer price inflation data to assess increasing price pressures, particularly price pressures related to the global spike in energy prices and Japan’s massive food shortage. Data released in Japan overnight saw the March merchandise trade surplus fall 30.2% y/y to ¥1.12 trillion. Bank of Japan is expected to increase its inflation forecast for the year to March 2009 next week and reduce its GDP forecast for the same period. The Nikkei 225 stock index gained 0.23% to close at ¥13,579.16. Dollar bids are cited around the ¥102.15 level. The euro weakened vis-à-vis the yen as the single currency tested bids around the ¥163.80 level and was capped around the ¥164.95 level. The British pound and Swiss franc weakened vis-à-vis the yen as the crosses tested bids around the ¥204.10 and ¥101.70 levels, respectively. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.9827 in the over-the-counter market, down from CNY 6.9897 and the pair’s lowest close since the yuan revaluation of July 2005.

STERLING

The British pound weakened vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.9770 level and was capped around the $1.9975 level. Technically, today’s intraday high was just above the 61.8% retracement of the move from $1.9360 to $2.0395. Minutes from Bank of England’s April Monetary Policy Committee were released today and they revealed a three-way split to reduce interest rates by 25bps with MPC members Besley and Sentance voting for no change in rates and MPC member Blanchflower voting for a 50bps cut. Most traders believe the MPC will continue to lower interest rates. Data released in the U.K. today saw BBA mortgage approvals fall to 35,417 in March, the worst result since at least September 1997. BoE released a business survey today that reported the economy will continue to slow on account of weaker consumer spending and lower property values. Cable bids are cited around the US$ 1.9605/ 1.9505 levels. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ₤0.8040 level and was supported around the ₤0.7995 level.

SWISS

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0170 level and was supported around the CHF 1.0020 level. Technically, today’s intraday low was right around the 38.2% 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 strengthened vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.6145 and CHF 2.0135 levels, respectively.

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