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U.S. Forex Market Commentary

Thu, Jul 3 2008, 21:54 GMT
by GCI Financial Team

GCI

EURO

The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.5735 level and was capped around the $1.5910 level.  The common currency dove in the North American session after European Central Bank President Trichet’s news conference revealed he is not pre-committing to another rate hike. The ECB lifted its main refinancing rate by 25bps to 4.25% today as expected.   Trichet indicated policymakers have a “strong determination” to anchor inflation expectations and pledged to “closely monitor” developments. In contrast to last month’s media conference in which he strongly telegraphed today’s rate hike.  Consumer and producer price inflation data in the eurozone remain significantly elevated thus many traders anticipate another ECB monetary tightening before the end of the year.  Data released in the eurozone today saw EMU-15 May retail sales rise 1.2% m/m and 0.2% y/y.  German June final services PMI printed at 52.1, down from 53.8 in May, while the EMU-15 June services PMI measure fell to 49.1 from 50.6 in May.  In U.S. news, June non-farm payrolls declined by 62,000 while the unemployment rate was steady at 5.5% and average hourly earnings were up 3.4% y/y The jobs report was weak including a cumulative 52,000 downward revision to April’s and May’s non-farm payrolls numbers.  Notably, June was the first time since May 2002 that the economy has lost jobs for six consecutive months.  Other data released today saw weekly initial jobless claims climb 16,000 to 404,000 in the week ending 28 June.  President Bush verbally intervened to support the U.S. dollar yesterday but traders doubt there will be an actual concerted global intervention to buy the U.S. dollar.  Euro bids are cited around the $1.5645/ $1.5230 levels.

 
JPY / CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥106.90 level and was supported around the ¥105.75 level.  Traders lifted the pair to intraday highs during the North American session after the release of disappointing U.S. non-farm payrolls data and initial jobless claims data.  Group of Eight policymakers will convene in Hokkaido next week and a German government source indicated inflation will be the number one topic for discussion, especially with oil topping $146 today.  Capital flows data saw foreigners as net sellers of Japanese equities for the first time in seven weeks.  The Nikkei 225 stock index lost 0.16% to close at ¥13,265.40.  Dollar bids are cited around the ¥103.00/ 101.35 levels.  The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥169.10 level and was supported around the ¥168.00 figure.  The British pound and Swiss franc appreciated vis-à-vis the yen as the crosses tested offers around the ¥211.90 and ¥105.05 levels, respectively.  The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8510 in the over-the-counter market, down from CNY 6.8530 and the pair’s lowest close since the yuan revaluation of July 2005.

STERLING

The British pound weakened vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.9810 level and was capped around the $1.9935 level.  Cable extended yesterday’s sell-off and stops were reached below the $1.9865 level, representing the 23.6% retracement of the move from $1.9405 to $2.0005.  The pair moved lower after it was reported that the U.K. services sector PMI fell to 47.1 in June from 49.8 in May, below expectations and the weakest print in five years.  On a positive note on the inflation front, the prices charged sub-index rose modestly to 56.0.  Also, Bank of England released its quarterly Credit Conditions Survey today that reported the availability of credit to individuals and corporations has declined since March and will likely fall through the end of Q3.  IDS reported pay deals were stable in the quarter to May, up 3.5% in the three months to the end of May.  Bank of England Deputy Governor Bean reported the market’s dislocation will probably continue.  Cable bids are cited around the US$ 1.9360/ 1.9100 levels.  The euro weakened vis-à-vis the British pound as the single currency tested bids around the ₤0.7940 level and was capped around the ₤0.8000 figure.

SWISS

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0250 level and was supported around the CHF 1.0110 level.  Technically, today’s intraday high was right around the 38.2% retracement of the move from CHF 0.9645 to CHF 1.0625.  Data released in Switzerland today saw June consumer prices rise 0.2% m/m and 2.9% y/y, below economists’ forecasts for a 3.1% increase.  U.S. dollar bids are cited around the CHF 1.0020 level.  The euro and British pound gained ground vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.6135 and CHF 2.0320 levels, respectively.

 
AUD / NZD

The Australian dollar came off vis-à-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.9580 level and was capped around the $0.9630 level.  Technically, today’s intraday low was right around the 23.6% retracement of the move from $0.9325 to $0.9665.  Data released in Australia overnight saw the May trade balance print at –A$ 965 million. It was also reported that activity in Australia’s services sector fell in June.  Australian dollar bids are cited around the US$ 0.9495.  The New Zealand dollar weakened vis-à-vis the U.S. dollar as the kiwi tested bids around the US$ 0.7550 level and was capped around the $0.7605 level.  New Zealand dollar bids are cited around the $0.7530 level.

 
CAD

The Canadian dollar depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the C$ 1.0195 level and was supported around the C$ 1.0110 level.  Technically, today’s intraday low was right around the 38.2% retracement of the move from C$ 0.9055 to C$ 1.0380.  U.S. dollar offers are cited around the C$ 1.0440 level.

Published on  Thu, Jul 3 2008, 21:57 GMT