Wednesday: Daily Forex Analysis

Euro

The euro depreciated vis-à-vis the U.S. dollar Wednesday as the single currency tested bids around the US$ 1.4670 level and was capped around the $1.4805 level. The common currency gave up ground after NYMEX crude oil futures came off to the $112 handle after trading as high as the $117 figure. In eurozone news, Germany’s economy ministry reported “economic dynamic could be somewhat subdued in the coming months. Noticeable reductions in consumer confidence and a collapse in the sentiment of retailers don’t show any signs of pickup in the coming months. Improvement should be expected when inflation falls notably.” Most traders believe the European Central Bank will keep interest rates unchanged for the next few months while a minority of dealers expect the ECB will move interest rates lower after inflation shows some signs of moderating.

In U.S. news, weekly initial jobless claims, the Philadelphia Fed manufacturing index, and leading economic indicators data will be released Thursday. Euro bids are cited around the US$ 1.4315 level.

Yen/ CNY

The yen weakened marginally vis-à-vis the U.S. dollar Wednesday as the greenback tested bids around the ¥109.60 level and was capped around the ¥110.25 level. Technically, the pair continues to orbit the ¥109.95 level, representing the 50% retracement of the move from ¥124.15 to ¥95.70. Bank of Japan downgraded its economic assessment yesterday but BoJ Governor Shirakawa tempered rate cut expectations by saying the economy will eventually return to moderate growth. Wednesday, the central bank downgraded its views of private consumption and industrial production, the latest evidence the domestic Japanese economy is “sluggish.” Data released in Japan overnight saw the June all-industries index fall 0.9% m/m and 1.2% y/y. Also, the June tertiary index was off 0.8%. The Nikkei 225 stock index lost 0.10% to close at ¥12,851.69. 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 ¥161.45 level and was capped around the ¥162.60 level. The British pound and Swiss franc fell vis-à-vis the yen as the crosses tested bids around the ¥204.10 and ¥99.70 levels, respectively. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8546 in the over-the-counter market, down from CNY 6.8655. Data released in China today saw July wholesale prices up 9.4% y/y.

British Pound

The British pound slumped vis-à-vis the U.S. dollar Wednesday as cable tested bids around the US$ 1.8540 level and was capped around the $1.8680 level. The pair came within a few pips of testing a new multi-month low dating to October 2006. CBI’s August industrial trends survey confirmed British manufacturers plan on trimming output at the fastest rate in nearly seven years. The total orders books balance printed at -13, down from -8 in July, and the output expectations balance fell to -13 in August from -7 in July. As expected, minutes from Bank of England’s August Monetary Policy Committee meeting were released today and evidenced a 7-to-2 vote to keep the headline repo rate unchanged at 5.00%. MPC’s Besley voted for a hike in rates while MPC’s Blanchflower voted for a cut in rates. The majority of MPC members said the current monetary policy stance is “broadly appropriate.” Cable bids are cited around the $1.8015 level.

The euro came off vis-à-vis the British pound as the single currency tested bids around the ₤0.7900 figure and was capped around the ₤0.7935 level.

Swiss Franc

The Swiss franc depreciated vis-à-vis the U.S. dollar Wednesday as the greenback tested offers around the CHF 1.1040 level and was supported around the CHF 1.0895 level. The pair reached its highest level since 18 February as the broad-based U.S. dollar retracement higher continued. U.S. dollar offers are cited around the CHF 1.1135 level.

The euro and British pound moved higher vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.6205 and CHF 2.0495 levels, respectively.

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