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U.S. Forex Market Commentary

Sun, Aug 10 2008, 23:06 GMT
by GCI Financial Team

GCI

EURO

The euro depreciated sharply vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.5005 level and was capped around the $1.5335 level.  The common currency reached its lowest level since 27 February and has now fallen ten big figures in the past month.  A massive unwinding of short dollar positions in the foreign exchange and commodities markets led to the euro’s decline, as did growing speculation that eurozone interest rates will not support EMU-15 economic growth.  European Central Bank Wellink warned that if inflation rises above 5%, it will be difficult for monetary policy to have an effect.  The ECB’s July Bank Lending Survey confirmed banks tightened lending standards in Q2 on account of the weakening economic outlook. In U.S. news, Q2 non-farm productivity grew an annualized 2.2% in Q2, less than the 2.7% gain that was expected, while unit labour costs were up 1.3%, down from the 2.5% increase in Q1.  Additionally, June wholesale inventories were up 1.1% with wholesale sales up 2.8%.  Euro bids are cited around the US$ 1.5175 levels.

 
JPY / CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥110.25 level and was supported around the ¥109.30 level.  The pair reached its highest level since 2 January as traders continued to unwind short U.S. dollar positions en masse.  Data released in Japan overnight saw the July economy watchers’ survey recede to its lowest level ever, printing at 30.8. Also, July corporate failures were up 6.2% m/m and 23.6% y/y and July bank lending was up 2.0%.  Three-month euroyen futures jumped to a four-month high of 99.240, signaling expectations that Bank of Japan will not increase interest rates anytime soon and could move to lower rates.  In contrast, swap contracts on the overnight call rate indicate traders believe there’s about a 5% chance the BoJ could lift the overnight call rate from 0.50% before the end of the current fiscal year to March 2009.  Other data released overnight saw July bank lending up 2.0%.  The Nikkei 225 stock index climbed 0.33% to close at ¥13,168.41.  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 ¥165.30 level and was capped around the ¥167.80 level. The British pound and Swiss franc came off vis-à-vis the yen as the crosses tested bids around the ¥210.80 and ¥101.75 levels, respectively.  The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8588 in the over-the-counter market, down from CNY 6.8614.  A government think-tank reported Q3 GDP growth may print around 10.2% y/y with CPI up 6.6% y/y.

 
STERLING

The British pound weakened vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.9145 level and was capped around the $1.9435 level.  Technically, today’s intraday low was right around the 76.4% retracement of the move from $1.8515 to $2.1159. Data released in the U.K. today saw CML mortgage repossessions reach its highest level in twelve years, jumping to 18,900. Cable bids are cited around the $1.8615 level.  The euro came off vis-à-vis the British pound as the single currency tested bids around the ₤0.7830 level and was capped around the ₤0.7895 level.

 
SWISS

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0835 level and was supported around the CHF 1.0605 level.  The pair reached its highest level since 26 February.  Data released in Switzerland overnight saw the July unemployment rate stand at 2.3%.  U.S. dollar offers are cited around the CHF 1.1135 level.  The euro came off vis-à-vis the Swiss franc as the single currency tested offers around the CHF 1.6295 level while the British pound moved higher vis-à-vis the Swiss franc as sterling tested offers around the CHF 2.0765 level.

Published on  Sun, Aug 10 2008, 23:08 GMT