Euro Moving Up Against Dollar

EURO

The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.5550 level and was supported around the $1.5460 level. Technically, today’s intraday low was just above the 23.6% retracement of the move from $1.6020 to $1.5280. The common currency gained ground after it was reported that EMU-15 provisional May harmonized consumer price inflation printed at 3.6%, up from 3.3% in April and the same level as March’s rate. These data make it clear the European Central Bank officials will remain clearly focused on inflation and will not have much of an opportunity to publicly acknowledge the slower growth prospects for the eurozone economy. ECB President Trichet today said “My colleagues in the ECB Governing Council — like Juergen Stark and Axel Weber — and I are concerned about the current high prices. We have to take care that the current price shocks in oil and food prices do not lead to increases in other goods and inflated wage agreements, which in turn will trigger inflation and a wave of wage increases. It was also reported that EMU-15 April unemployment was unchanged from March’s level of 7.1%. Additionally, German retail sales were off 1.7% m/m in April. In U.S. news, April personal income and personal spending were up 0.2%. Also, personal consumption expenditures were up 3.2% y/y at the headline level, 0.1% m/m at the core level, and 2.1% y/y at the core level. The Federal Reserve’s perceived upper comfort zone limit for inflation is around 2.0%. It was also reported that May final University of Michigan consumer sentiment weakened to a 28-year low of 59.8, down from 62.6 at the end of April while the May Chicago purchasing managers’ index rose to 49.1. Euro bids are cited around the $1.5230 level.

JPN/CNY

The yen depreciated modestly vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥105.75 level and was supported around the ¥105.25 level. Today’s intraday high was within fifteen pips of eclipsing market levels not seen since 28 February. Many data were released in Japan overnight. First, the nationwide April core inflation rate fell to 0.9% in April from a ten-year high of 1.2% in March, below expectations. Second, the April unemployment rate rose to 4.0% from 3.8% in March. Third, April household spending fell 2.7% y/y, worse than forecast. Fourth, April industrial output weakened 0.3% m/m, the second consecutive monthly decline. Fifth, April construction orders were off 8.4% y/y. Sixth, April housing starts were off 8.7%. The Nikkei 225 stock index gained 1.52% to close at ¥14,338.54. 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 ¥164.00 figure and was supported around the ¥163.05 level. The British pound came off vis-à-vis the yen as sterling tested bids around the ¥207.65 level and was capped around the ¥208.90 level. The Swiss franc moved higher vis-à-vis the yen as the cross tested offers around the ¥100.90 level. The Chinese yuan weakened vis-à-vis the U.S. dollar as the greenback closed at CNY 6.9400 figure. Deutsche Bank cautioned that an appreciation of the yuan to CNY 6.0000 could evidence a large outflow of speculative funds from China.

STERLING

The British pound gained ground vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.9800 figure 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 $1.9360. Data released in the U.K. today saw GfK consumer confidence fall to -29 in May, its weakest level since November 1990. Cable bids are cited around the US$ 1.9360/ 1.9100 levels. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.7875 level and was supported around the ₤0.7830 level.

SWISS

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0410 level and was capped around the CHF 1.0525 level. Technically, today’s intraday low was right around the 38.2% retracement of the move from CHF 1.0215 to CHF 1.0520. Data released in Switzerland today saw the May KOF leading indicator fall to 1.09 from 1.21 in April. U.S. dollar offers are cited around the CHF 1.0760 level. The euro and British pound weakened vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.6210 and CHF 2.0615 levels, respectively.

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