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U.S. Forex Market Commentary

Mon, Aug 4 2008, 23:17 GMT
by GCI Financial Team

GCI

EURO

The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.5630 level and was supported around the $1.5555 level.  The common currency gave back most of its intraday gains as traders continued to position themselves ahead of this week’s interest rate decisions. First, the Federal Open Market Committee is expected to keep interest rates unchanged tomorrow with many Fed-watchers expecting at least one rate-setter calling for higher rates. Second, the European Central Bank’s interest rate decision will be announced on Thursday and policymakers are expected to keep the ECB’s main refinancing rate unchanged.  Policymakers at both central banks have to contend with heightened inflation pressures and decelerating economic growth.  Data released in the U.S. today saw June core personal consumption expenditures up 0.3% m/m and 2.3% y/y. Also, June factory orders were up 1.7% with the ex-transportation component up 2.3% while June consumer spending and personal income were up 0.6% and 0.1%, respectively.  In eurozone news, the International Monetary Fund is predicting EMU-15 inflation will fall sharply next year.  EMU-15 June producer price inflation rose 0.9% m/m and 8.0% y/y, above expectations.  Euro bids are cited around the $1.5585/ 1.5230 levels.

 
JPY / CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥108.25 level and was supported around the ¥107.45 level.  The pair recovered from Friday’s sell-off and came within 30 pips of establishing a new multi-month high.  Prime Minister Fukuda reshuffled his Cabinet last week and called on his government to formulate a fiscal stimulus package to assist companies who are hurting from inflation.  Most traders believe Bank of Japan will keep the overnight call rate unchanged at 0.50% for the foreseeable future.    New finance minister Ibuki warned Japan may be facing the risk of cost-push stagflation on account of rising raw materials.  The Nikkei 225 stock index lost 1.23% to close at ¥12,933.18.  Dollar bids are cited around the ¥106.40 level.  The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥168.70 level and was supported around the ¥167.30 level.  The British pound came off vis-à-vis the yen as sterling tested offers around the ¥212.05 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥103.40 level.  The Chinese yuan weakened vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8515 in the over-the-counter market, up from CNY 6.8425. A government policymaker reported China’s macroeconomic control policies are having a positive impact and there is no longer a need to promote slower economic growth. Goldman Sachs estimates July CPI growth eased to 6.6% y/y.

 
STERLING

The British pound fell sharply vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.9600 figure and was capped around the $1.9760 level.  Technically, today’s intraday high and low were right around the 38.2% and 23.6% retracements of the move from $2.0395 to $1.9365, respectively.  The Independent reported Halifax will report an annual house price decline of more than 10% this week.  July construction PMI fell to 36.7, the weakest since at least 1997.  Bank of England’s Monetary Policy Committee is expected to keep interest rates on hold on Thursday.  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 ₤0.7945 level and was supported around the ₤0.7880 level.

 
SWISS

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0435 level and was capped around the CHF 1.0505 level.  Data released in Switzerland today saw the July purchasing managers’ index fall to 54.1 from 54.9 in June, a three-year low while costs soared.  U.S. dollar offers are cited around the CHF 1.0515/ 1.0625 levels.  The euro and British pound weakened vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.6310 and CHF 2.0530 levels, respectively.

Published on  Mon, Aug 4 2008, 23:19 GMT