Daily Market Commentary

EURO

The euro gained marginal ground vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.5545 level and was supported around the $1.5450 level. Technically, today’s intraday low was right around the 23.6% retracement of the move from $1.6020 to $1.5280. Many data were released in the U.S. today. First, net long-term TIC flows rose to US$ 80.4 billion in March from February’s total of US$ 72.5 billion while the monthly net TIC flows component saw an net outflow of US$ 48.2 billion compared with a net inflow of $48.9 billion in February. The March U.S. trade balance registered US$ 58.21 billion. Second, it was also reported that the New York State Empire manufacturing index fell to -3.23 in May. Third, weekly initial jobless claims rose 6,000 to 371,000 while continuing jobless claims were up 28,000 to 3.06 million. Fourth, April industrial production fell 0.7% and April capacity utilization fell sharply to 79.7%. Fifth, the Philadelphia Fed May business index improved to -15.7 from -24.9. In eurozone news, traders were surprised by a strong print in German GDP growth data that saw an economic expansion of 1.5% q/q in Q1, double most forecasts. EMU-15 GDP growth expanded 0.7% q/q in Q1 despite the strong euro but ECB President Trichet warned Q2 data could be “less flattering.” Eurogroup chairman Juncker said the euro’s recent decline is “pointing in a good direction.” Trichet and ECB member Mersch will speak later today. It was also reported that German April final consumer price inflation was off 0.2% m/m and up 2.4% y/y while EMU-15 April provisional harmonized inflation was up 3.3% y/y. ECB member Ordonez reported the central bank “has to continue what we’re doing.” Euro bids are cited around the US$ 1.5230 level.

JPN/CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥104.50 level and was capped around the ¥105.30 level. Technically, today’s intraday low was right around the 23.6% retracement of the move from ¥100.00 to ¥105.70. Data released in Japan overnight saw core private sector machinery orders decline a larger-than-expected 8.3% m/m to ¥956.8 billion and the government downgraded its assessment of machinery orders. This represented the second consecutive monthly decline. Traders await the release of gross domestic product data for the January-through-March period overnight. Most traders expect Bank of Japan’s Policy Board will keep the overnight call rate unchanged at 0.50% for several months. The Nikkei 225 stock index gained 0.94% to close at ¥14,251.74. Dollar bids are cited around the ¥101.35 levels. The euro weakened vis-à-vis the yen as the single currency tested bids around the ¥162.05 level and was capped around the ¥162.95 level. The British pound and Swiss franc weakened vis-à-vis the yen as the crosses tested bids around the ¥203.10 and ¥99.30 levels, respectively. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.9946 in the over-the-counter market, down from CNY 7.0030. Data released in China overnight saw urban fixed-asset investment up 25.7% y/y between January and April.

STERLING

The British pound came off vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.9405 level and was capped around the $1.9500 figure. Prime Minister Brown indicated the U.K. government has no plans to change Bank of England’s remit on fighting inflation. BoE aims to steer inflation to the 2.0% level and inflation remains significantly above this level on account of elevated energy and food prices. Data released in the U.K. today saw home construction fall an annualized 24% in Q1. Cable bids are cited around the US$ 1.9360/ 1.9100 levels. The euro and British pound gained ground vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.6345 and CHF 2.0590 levels, respectively.

SWISS

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0595 level and was supported around the CHF 1.0485 level. Technically, today’s intraday low was right around the 38.2% retracement of the move from CHF 1.0625 to CHF 1.0390. Data released in Switzerland today saw SECO April consumer sentiment decline to +2 from +14 in January. U.S. dollar offers are cited around the CHF 1.0760 level. The euro and British pound moved higher vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.6345 and CHF 2.0590 levels, respectively.

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