• Home ::
• Fundamental ::
• Market View ::
• Daily U.S. Forex Summary

• Send
• Print
• Add To
• Rss

Daily U.S. Forex Summary

The US dollar initially weakened against its European counterpart

Fri, May 16 2008, 05:56 GMT
by Union Bank of California Team

Union Bank of California

The US dollar initially weakened against its European counterpart, but soon gained its footing, despite the release of net capital outflows of $48.2 billion for March after receiving inflows of $48.9 billion in February. The dollar remained little changed after the Philly Fed. manufacturing index released slightly better than expected, while U.S. weekly jobless claims rose. The Philadelphia Fed's general business index increased in May to a five-month high of -15.6 from -24.9 in April. The survey indicates that the region's manufacturing executives are more optimistic about future activity and growth.

Look for the greenback to remain range bound against its major counterparts ahead of the U.S. consumer sentiment release on Friday.

The euro initially shot up against the dollar after the release of strong euro zone growth figures. In the first quarter strong German and French growth data pushed the overall euro zone gross domestic product to 0.7 percent, while figures showed that annual inflation came in at 3.3 percent in April, below March's record 3.6 percent. The euro, however, couldn’t sustain its gains after ECB President Jean-Claude Trichet warned growth might not be as strong in coming months, prompting some analysts to think that a rate cut will be on the table later this year.

Sterling continued to hold close to three month lows on the prospects of stagflation, where inflation continues to climb higher in an environment of slow to no growth. UK Prime Minister Gordon Brown, however, continues to assuage analysts stating that he hopes that the Bank of England will be able to cut rates further later this year stimulating growth in the economy.

The Japanese yen managed to gain ground against its U.S. counterpart after yesterday’s dollar rally. With little data out of Japan and quiet equity markets, look for USD/JPY to remain range bound trading between 103.90 and 105.94.

The Canadian dollar pushed above parity against the greenback as oil remained high, but the loonie couldn’t sustain its momentum after the market digested weak manufacturing sales data. Data showed a 1.6 percent drop in Canadian manufacturing sales in March, far from analyst’s expectations of a 0.2 percent rise. The data will cement expectations that the Bank of Canada will cut overnight rates by 25 basis points to 2.75 percent at its next meeting on June 10. Look for USD/CAD to remain close to parity with oil prices pushing back above $125 a barrel.

The Australian dollar held close to familiar ranges against its U.S. counterpart, while the New Zealand dollar continued its slide hitting a four month low against the dollar after lackluster retail sales released in New Zealand. Retail sales came in at -1.2 percent m/m and - 1.0 percent y/y, the largest drop in over ten years. The release helped push AUD/NZD higher as the market focused on interest rate expectations as New Zealand’s central bank will most likely cut rates later this year.

The Mexican peso held its ground against the dollar as the market awaited tomorrows Bank of Mexico's monetary policy decision, where it is widely expected that interest rates will remain on hold at 7.5 percent. Look for the peso to remain well supported heading into tomorrow’s announcement as the market focuses on widening interest rate differentials between the U.S. and Mexico.

Published on  Fri, May 16 2008, 05:58 GMT

Archive

• With oil prices forecast to be at elevated levels for the foreseeable future
  Published On Fri, Jul 18 2008, 05:49 GMT
• The US dollar regained its footing against the euro
  Published On Thu, Jul 17 2008, 05:40 GMT
• The US dollar weakened vs. major currencies
  Published On Wed, Jul 16 2008, 13:08 GMT
• Initially, the USD gained on the report
  Published On Mon, Jul 14 2008, 05:53 GMT
• The US dollar remains within its recent ranges
  Published On Fri, Jul 11 2008, 05:45 GMT

[ View All ]

• More Reports from this Author
• More Reports from this Contributor

Union Bank of California http://www.uboc.com | info@uboc.com