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U.S. Forex Market Commentary

Mon, May 12 2008, 23:26 GMT

GCI

EURO

The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.5545 level and was supported around the US$ 1.5365 level.  Technically, today’s intraday high was just below the 38.2% retracement of the move from $1.6020 to $1.5280.  Chicago Fed President Evans reported the U.S. economy will begin to expand in H1 2008 “but not enough to prevent economic activity from still running at a relatively sluggish pace.”  Many Fed officials will speak this week and traders will closely monitor their latest assessment of monetary policy.  The dollar received a little jolt from a Wall Street Journal article that quoted an unnamed U.S. Treasury official who said the Bush administration is promoting a stronger dollar with G7 counterparts. Consumer price inflation data will be closely watched this week.  In eurozone news, traders await comments from European Central Bank President Trichet later this afternoon.  ECB member Gonzalez-Paramo reported the liquidity operations of the world’s largest central banks have reduced volatility in the financial markets.  Euro bids are cited around the US$ 1.5230 level.

 
JPY / CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥102.55 level and was capped around the ¥104.05 level.  The pair retraced about 50% of last week’s intraweek losses.   Bank of Japan Governor Shirakawa spoke today and said the central bank needs to raise interest rates but reiterated downside economic risks remain in the near-term.  BoJ last month moved to a neutral bias from a rate normalization bias.  Data released in Japan overnight saw the April economy watchers’ index decline for the first time in three months.  Also, April corporate failures were off 10.1% m/m and the April money supply growth slowed to +1.9%.  Additionally, April bank lending was up 1.3%.  The Nikkei 225 stock gained 0.64% to close at ¥13,743.36.  Dollar bids are cited around the ¥101.35 levels.  The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥160.95 level and was supported around the ¥158.60 level.  The British pound and Swiss franc appreciated vis-à-vis the yen as the crosses tested offers around the ¥203.70 and ¥99.25 levels, respectively.  The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.9882 in the over-the-counter market, down from CNY 6.9918.  Data released in China today saw April consumer price inflation up 8.5% y/y.  People’s Bank of China announced it will lift its reserve requirement ratio by 50bps on 20 May.

STERLING

The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.9630 level and was supported around the $1.9440 level.  Cable reached its lowest level since 21 February.  Sterling shot higher after it was reported that U.K. producer input prices rose 2.4% and an annualized 23.0% gain while April output producer price inflation was up 7.5% y/y, the highest level on record.  Other data released today saw the March trade balance improve to -₤7.4 billion.  Today’s data may render it more difficult for the central bank to ease monetary policy next month.  BoE will release its quarterly inflation report on Wednesday and consumer price inflation data tomorrow.  Cable bids are cited around the US$ 1.9360 level.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.7950 level and was supported around the ₤0.7875 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 1.0405 level.  Technically, today’s intraday low was right around the 23.6% retracement of the move from CHF 0.9645 to CHF 1.0625.  U.S. dollar offers are cited around the CHF 1.0760 level.  The euro and British pound moved higher vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.6225 and CHF 2.0570 levels, respectively.

Published on  Mon, May 12 2008, 23:28 GMT

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