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U.S. Forex Market Commentary

Sun, Aug 3 2008, 22:06 GMT
by GCI Financial Team

GCI

EURO

The euro weakened vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.5515 level and was capped around the $1.5605 level.  The common currency traded at its lowest level since 24 June.  U.S. non-farm payrolls data for July were released and were off 51,000, better-than-expected.  The U.S. unemployment rate rose to 5.7%, its highest level in more than four years, and average hourly wages rose 0.3% m/m and 3.4% y/y in July.  The U.S. economy has shed 463,000 jobs since January and many economists believe the weakening U.S. labour market will worsen.  Other data released today saw June total construction spending fall 0.4% as June housing spending fell to its lowest level in nearly seven years while July ISM manufacturing fell to 50.0 from 50.2 in June with the prices index decline to 88.5 from 91.5 in June.  In eurozone news, German retail sales fell 3.9% y/y while German final July manufacturing PMI printed at 50.9.  Also, EMU-15 July manufacturing PMI fell to 47.4.  Euro bids are cited around the $1.5585/ 1.5230 level.

 
JPY / CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥107.30 level and was capped around the ¥107.90 level.  As expected, Prime Minister Fukuda reshuffled his cabinet and named some fiscal hawks to key government positions including Bunmei Ibuki who is the new finance minister. When the pair was trading below the psychologically-important ¥100 figure, Ibuki is quoted as having said it is “undesirable.”  Fukuda said his country faces “acute economic hardship” but the new Cabinet members are more known for their views regarding cutting the national debt by raising taxes.  The pair moved to intraday lows after the release after the release of U.S. jobs data for July.  The Nikkei 225 stock index lost 2.11% to close at ¥13,094.59.   Dollar bids are cited around the ¥106.40 level.  The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥166.95 level and was capped around the ¥168.30 level.  The British pound and Swiss franc came off vis-à-vis the yen as the crosses tested bids around the ¥212.00 figure and ¥102.30 levels, respectively.  The Chinese yuan weakened vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8425 in the over-the-counter market, up from CNY 6.8317.  Data released in China overnight saw the CFLP July PMI weaken to 48.4 while the CLSA July PMI was unchanged at 53.3.

 
STERLING

The British pound fell sharply vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.9725 level and was capped around the $1.9840.  The pair fell to its lowest level since 10 July.  Bank of England Monetary Policy Committee member Tucker reported “My take at our recent July meeting was, broadly, that since the May inflation report, the near-term outlook for inflation had deteriorated, underlining the risk that the rise in commodity prices will feed through to wage and price setting. The outlook for demand and output had also deteriorated, which in degree should help to contain those upside risks to inflation.”  Data released in the U.K. today saw July factory activity decline for a third consecutive month while Q2 company liquidations rose in England and Wales. In mergers and acquisitions news, it is being reported that Electricite de France SA has abandoned its proposed ₤12 billion bid for British Energy. Also, U.K. manufacturing PMI fell to 44.3.  Cable bids are cited around the $1.9360 level.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.7890 level and was supported around the ₤0.7845 level.

 
SWISS

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0510 level and was supported around the CHF 1.0460 level.  U.S. dollar offers are cited around the CHF 1.0515/ 1.0625 levels.  The euro and British pound came off vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.6285 and CHF 2.0680 levels, respectively.

Published on  Sun, Aug 3 2008, 22:07 GMT