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U.S. Forex Market Commentary

Mon, Jun 29 2009, 22:05 GMT
by GCI Financial Team

GCI

EURO

The euro extended recent gains vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4100 figure and was supported around the $1.3980 level.  Australasian dealers sold the common currency but European and North American dealers lifted the pair higher on improving eurozone economic data that saw June overall economic sentiment rise sharply to 73.3 from 70.2 in May.  This represented the third consecutive monthly increase.  German Chancellor Merkel reported the German economy “might reach the bottom of the crisis soon, but the international crisis won’t be over with.”  European Economic and Monetary Affairs Commissioner Alumnia reported “There is a need to do stress tests  (at banks), in a coordinated way (across Europe), so that we can send information that is as clear as possible to financial markets.  There is a deficit of transparency about the real state of the balance sheets of many banks which creates uncertainty.”  In U.S. news, the Chicago Fed reported its National Activity Index weakened to -2.30 in May from -2.27 in April.  June non-farm payrolls data will be released on Thursday.  Euro bids are cited around the US$ 1.3435 level.

JPY / CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥96.00 figure and was supported around the ¥95.10 level.  Bank of Japan Governor Shirakawa reported “No central bankers believe that a bubble can or should be prevented by monetary policy alone.”  BoJ Deputy Governor Yamaguchi reported price stability is a key objective for the central bank and added Japan’s economy is not in a deflationary spiral.  Yamaguchi added the core consumer price index decline will moderate from this summer.  Prime Minister Aso on Friday said he hopes to avoid an increase in long-term interest rates.  Data released in Japan overnight saw May industrial output up 5.9% m/m and off 29.5% y/y, the third consecutive monthly increase.  Also, Japan registered a merchandise trade deficit of ¥37.87 billion in the first ten days of June. Additionally, May overall retail sales were off 2.8% y/y.  The Nikkei 225 stock index lost 0.95% to close at ¥9,783.47.  U.S. dollar offers are cited around the ¥104.15 level.  The euro strengthened vis-à-vis the yen as the single currency tested offers around the ¥135.50 level and was supported the ¥133.35 level.  The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥159.25 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥88.80 level. In Chinese news, the U.S. dollar moved lower vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8325 in the over-the-counter market, down from CNY 6.8360.  China ruled out “sudden” changes to its foreign exchange reserves policy and suggested the U.S. dollar may continue to dominate global trade. People’s Bank of China Governor Zhou added China’s reserves policy is “always quite stable.”

STERLING

The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.6575 level and was supported around the $1.6425 level.  Many data were released in the U.K. today.  First, the M4 money supply was up an revised 0.2% m/m and 16.6% y/y in May.  Second, it was reported that U.K. net mortgage lending reached a record low in May.  Net lending growth to individuals fell to ₤600 million from ₤1.1 billion. U.K. banks have not increased their lending activities significantly deposit ₤125 billion in fresh liquidity from Bank of England and capital injections from the government.  CBI reported the U.K.’s financial services sector will likely improve in the third quarter after 21 months of contraction.  Cable bids are cited around the US$ 1.6125 level.  The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.8475 level and was capped around the ₤0.8525 level. 

Published on  Mon, Jun 29 2009, 22:07 GMT