Daily Forex Market Commentary

EURO

The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.5460 level and was capped around the $1.5575 level.  The common currency reached its lowest level since 17 June as traders positioned themselves ahead of the Federal Open Market Committee’s interest rate decision later today.  Most traders expect the FOMC will keep the federal funds target rate unchanged with a strong possibility that more than one voting member will call for higher rates.  The pair also came off as NYMEX crude oil futures for September delivery tested the US$ 118.00 figure, its lowest level since 5 May.  Data released in the eurozone saw June retail sales decline 0.6% m/m and 3.1% y/y, the fastest rate on record, while May’s results were revised to +0.5% m/m and -0.1% y/y.  Also, the EMU-15 PMI services survey receded to 48.3 in July from 49.1 in June.  Most traders expect the European Central Bank will keep interest rates unchanged when policymakers convene on Thursday.  There are increasing signs of a slowdown in economic growth across the eurozone at a time when inflation remains elevated or is actually increasing.  The German media reported GDP decline by 1% in Q2.  Euro bids are cited around the $1.5380/ 1.5175 levels.

JPN/CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥107.65 level and was capped around the ¥108.30 level.  The pair failed to build on yesterday gains as dollar bulls booked some profits ahead of today’s Federal Reserve announcement.  Finance minister Ibuki reported “it’s hard to move now” regarding a change in Bank of Japan interest rates.  Newly appointed Economy Minister Yosano supports the BoJ’s independence and many Japan-watchers believe his appointment will render it easier for the central bank to lift interest rates when it eventually does, something that is not expected to happen for several months.  Liberal Democratic Party Secretary General Aso today reported the Japanese economy is in a recession while Yosani said the Fukuda government’s economic stimulus package may require a supplementary budget.  The Nikkei reported the Japanese government may eliminate the word “recovery” from its monthly economic assessment in August for the first time in nearly five years.  The Nikkei 225 stock index lost 0.14% to close at ¥12,914.66.  Dollar bids are cited around the ¥106.40 level.  The euro came off vis-à-vis the yen as the single currency tested bids around the ¥166.85 level and was capped around the ¥168.65 level.  The British pound and Swiss franc moved lower vis-à-vis the yen as the crosses tested bids around the ¥210.55 and ¥102.20 levels, respectively.  The Chinese yuan weakened vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8556 in the over-the-counter market, up from CNY 6.8515

STERLING

The British pound came off vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.9520 level and was capped around the $1.9625 level.  Technically, today’s intraday low was right around the 61.8% retracement of the move from $1.8515 to $2.1160.  Data released in the U.K. today saw the July PMI services index improve to 47.4 from 47.1 in June, above expectations but still a contractionary number.  Also, Q1 mortgage repossessions were up 40% y/y.  Many economists believe that other data released today will result in downward revisions to Q2 GDP growth.  June manufacturing output fell 0.5% m/m and has now declined four consecutive months.  Manufacturing output was also off 1.3% y/y and industrial output was off 0.2% m/m. Chancellor of the Exchequer Darling characterized Bank of England’s inflation remit as “perfectly adequate.”  Cable bids are cited around the $1.9140 level.  The euro weakened vis-à-vis the British pound as the single currency tested bids around the ₤0.7915 level and was capped around the ₤0.7945 level.

SWISS

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0550 level and was supported around the CHF 1.0480 level.   Technically, today’s intraday high was right around the 61.8% retracement of the move from CHF 1.1105 to CHF 0.9645.  The pair reached its highest level since 19 May as traders reacted to lower crude oil prices and prepared the Fed’s interest rate announcement.  U.S. dollar offers are cited around the CHF 1.0760 level.  The euro moved higher vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.6300 figure while the British pound gained ground vis-à-vis the Swiss franc and tested offers around the CHF 2.0615 level.

AUD/NZD

The Australian dollar depreciated sharply vis-à-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.9150 level and was capped around the $0.9295 level.  The pair reached its lowest level since 4 April.  As expected, Reserve Bank of Australia kept its official interest rate unchanged at 7.25% overnight, a twelve-year high.  RBA officials noted slowing demand could result in lower interest rates in the coming months.  Data released in Australia overnight saw the July service sector PMI reading decline further.  Australian bids are cited around the US$ 0.8945 level. The New Zealand dollar weakened vis-à-vis the U.S. dollar as the kiwi tested bids around the US$ 0.7220 level and was capped around the $0.7295 level.  The pair reached its lowest level since September 2007.  New Zealand dollar bids are cited around the US$ 0.7010 level.

CAD

The Canadian dollar weakened vis-à-vis the U.S. dollar today as the greenback tested offers around the C$ 1.0450 level and was supported around the C$ 1.0360 level.  Technically, today’s intraday high was right around the 50% retracement of the move from C$ 1.1875 to C$ 0.9055.  July PMI will be released in Canada tomorrow.  U.S. dollar offers are cited around the C$ 1.0795 level.

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