Daily Market Commentary

EURO

The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.5695 level and was capped around the $1.5815 level. The common currency reached its highest level since 24 April before retreating. The pair initially tracked NYMEX July crude oil futures higher above the $135 level but came off after oil moved lower to the $133 handle. Traders are still talking about yesterday’s Federal Open Market Committee meeting minutes from the Fed’s policy deliberations of 29-30 April. The minutes confirmed it is not inclined to reduce interest rates further despite an acute downgrade to their economic growth forecasts for this year. The Fed reported the decision was a “close call” despite its view that economic activity was “likely to be particularly weak in the first half of 2008.” Fed officials were “also concerned about the upside risks to the inflation outlook, given the continued increases in oil and commodity prices.” The FOMC is expected to keep borrowing costs unchanged when it convenes on 24-25 June. Fed governor Warsh yesterday said “Even if the economy were to weaken somewhat further, we should be inclined to resist expected, reflexive calls to trot out the hammer again.” The Fed now expects GDP growth of 0.3% to 1.2% in 2008. Data released in the U.S. today saw weekly initial jobless claims fall 9,000 to 365,000 while continuing jobless claims were steady at 3.073 million. Also, the March housing price index was off 0.4% m/m and 3.4% y/y. In eurozone news, EMU-15 new industrial orders registered their largest year-on-year decline in March in more than four years, off 1.0% m/m and 2.5% y/y. The European Commission reported it may have to reduce its GDP growth forecast for the eurozone if oil prices remain elevated. Euro bids are cited around the US$ 1.5230 level.

JPN/CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥104.05 level and was supported around the ¥102.70 level. Technically, today’s intraday high was right around the 23.6% retracement of the move from ¥98.55 to ¥105.70. As expected, the Japanese government kept its assessment of the economy unchanged this month, noting the economic recovery is “pausing.” The government, however, downgraded its assessment on housing construction and exports and highlighted the “recession risk in the U.S. economy and fluctuations in the stock and foreign exchange markets mainly caused by the subprime mortgage loan problem, and the impact of developments in oil prices.” Bank of Japan Governor Shirakawa reported “While capital investment and private consumption has so far been firm, we now need to assess if a weakening of the growth momentum of income, stemming from the deterioration of the terms and conditions of trade, will pose downside risks to domestic private demand.” Data released in Japan overnight saw April supermarket sales of 0.8%, the first decline in three months, while the April merchandise trade surplus fell 46.3% y/y. Also, the March all-industries index rose 0.5%. The Nikkei 225 stock index gained 0.37% to close at ¥13,978.46. Dollar bids are cited around the ¥103.00/ 101.35 levels. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥163.50 level and was supported around the ¥162.25 level. The British pound and Swiss franc gained ground vis-à-vis the yen as the crosses tested offers around the ¥206.10 and ¥100.75 levels, respectively. The Chinese yuan appreciated sharply vis-à-vis the U.S. dollar as the greenback closed at CNY 6.9430 in the over-the-counter market, down from CNY 6.9597 – the pair’s lowest close since the yuan revaluation of July 2005.

STERLING

The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.9845 level and was supported around the $1.9685 level. Technically, today’s intraday low was right around the 50% retracement of the move from $2.0025 to $1.9360. Today’s intraday high was the pair’s strongest showing since 2 May. Data released in the U.K. today saw April retail sales off 0.2% and up 4.2%, better-than-expected. March’s retail sales tallies were also upwardly revised to -0.2% m/m and +4.7% y/y. Also, CBI industrial activity weakened in May while a balance of +30% of manufacturers plan to raise prices over the next three months, the highest positive reading since February 1995. It was also reported that Q1 business investment was off 1.4% q/q, the largest decline since Q4 2004. Cable bids are cited around the US$ 1.9360/ 1.9100 levels. The euro weakened vis-à-vis the British pound as the single currency tested bids around the ₤0.7925 level and was capped around the ₤0.8010 level.

SWISS

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0350 level and was supported around the CHF 1.0230 level. Technically, today’s intraday low was just below the 38.2% retracement of the move from CHF 0.9645 to CHF 1.0625. U.S. dollar offers are cited around the CHF 1.0760 level. The euro and British pound gained ground vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.6250 and CHF 2.0495 levels, respectively.

Subscribe by RSS Subscribe by Email