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U.S. Forex Market Commentary

Sun, Aug 17 2008, 21:23 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$ 1.4695 level and was capped around the $1.4825 level.  The common currency reached its lowest level since 20 February as long commodities trades continued to unwind, favouring the U.S. dollar.  In eurozone news, German research institute Ifo reported it will lower its 2008 German economic growth forecast to about 2% from 2.4%.  German economic minister Glos said the government’s current forecast for 1.2% growth in 2009 will be reviewed in the middle of October.  European Central Bank member Stark said politicians should not “overplay” the recent EMU-15 economic contraction and noted slower growth may not reduce inflation much.  ECB’s Weber said Germany’s and the eurozone’s economies remain in “robust” shape and does not foresee a recession.  In U.S. news, Minneapolis Fed President Stern said the current economic conditions resembles those of the early 1990s and said they imply “a continuation of only modest expansion in the economy, the likelihood of further increases in unemployment for a time, and a diminution of inflation, absent a resurgence in energy and other commodity prices.” Data released in the U.S. today saw the New York Fed’s August manufacturing survey climb to 2.77.  Other U.S. data saw July industrial production was up +0.2% while capacity utilization rose to 79.9%.  June net TIC purchases of U.S. securities grew to US$ 51.1 billion, up from US$ 12.3 billion in May. Additionally, the mid-August University of Michigan consumer sentiment indicator improved to 61.7 from 61.2 at the end of July.  Euro bids are cited around the US$ 1.4315 level.

JPY / CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥110.65 level and was supported around the ¥109.60 level.  The pair established a new multi-month high dating to 2 January.  Japan’s financial services ministry reported Japanese banks’ losses related to bad loans spiked nearly two-thirds in the April-June quarter.  This is one of the first reports that Japanese banks may be encountering credit-related problems.  Most traders expect Bank of Japan to reduce its assessment of the economy in the coming days and to keep the overnight call rate unchanged at 0.50% for the foreseeable future.  The Nikkei 225 stock index climbed 0.48% to close at ¥13,019.41.  Dollar bids are cited around the ¥106.40 level.  The euro gained ground vis-à-vis the yen as the single currency tested offers around the ¥163.10 level and was supported around the ¥162.00 figure.  The British pound and Swiss franc moved higher vis-à-vis the yen as the crosses tested offers around the ¥206.10 and ¥100.75 levels, respectively. The Chinese yuan depreciated vis-à-vis the U.S. dollar as the greenback closed around the CNY 6.8700 figure, up from CNY 6.8600.  People’s Bank of China’s Q2 monetary policy report indicated the central bank will “guide reasonable credit growth” and maintain stable monetary policies. Data released in China overnight saw January – July urban fixed-asset investment up 27.3%.

STERLING

The British pound extended recent losses vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.8510 level and was capped around the $1.8700 figure.  Today’s intraday low coincided with the pair’s low during the pullback in October 2006.  Data released in the U.K. today saw the number of English and Welsh corporate failures and personal bankruptcies move higher in Q2.  Sterling continued to feel the pain from this week’s weaker-than-expected Bank of England quarterly inflation report and a growing sense the U.K. economy is headed into a recession.  Cable bids are cited around the $1.8015 level.  The euro came off vis-à-vis the British pound as the single currency tested bids around the ₤0.7890 level and was capped around the ₤0.7945 level.

SWISS

The Swiss franc weakened vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.1010 level and was supported around the CHF 1.0925 level.  The pair reached its highest level since 21 February as traders continued to reduce their exposure to commodities and buy back the U.S. dollar.  U.S. dollar offers are cited around the CHF 1.1135 level.  The euro came off vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.6150 level while the British pound moved higher vis-à-vis the Swiss franc as sterling tested offers around the CHF 2.0480 level.

Published on  Sun, Aug 17 2008, 21:24 GMT