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U.S. Forex Market Commentary

Tue, May 5 2009, 22:02 GMT
by GCI Financial Team

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EURO

The euro moved weakened vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3280 level and was capped around the US$ 1.3440 level.  Federal Reserve Chairman Bernanke testified today and said the U.S. economy should start growing later this year, the most optimistic assessment he has made in several quarters.  Nonetheless, he said the economic recovery will coincide with “further sizable job losses” over the coming months.  Bernanke estimates the economy may climb “somewhere” in the 9% range, contrary to many private sector forecasts that see unemployment climbing to 10%.  Current private sector forecasts also see the economy contracting up to 3% in the current second quarter.  Bernanke said “the pace of contraction may be slowing” and said the housing market has evidenced some signs of bottoming while consumer spending improved in the first quarter.  Data released in the U.S. today saw April ISM services sector activity contract with the headline index printing at 43.7, up from 40.8 in March. Sub-indices saw the new orders index improve to 47.0 while the employment index improved to 32.3. Bernanke also indicated there have been some indications of improvements in easing credit strains in the economy.  The big news this week will be the results on banks’ stress tests on Thursday.  There is now chatter that up to ten banks will be requested to firm up their balance sheets with additional capital.  Bernanke said problems banks will have six months to implement “comprehensive capital plans for establishing the required buffers” to protect against future losses” or they will need to obtain assistance from the government.  In eurozone news, French President Sarkozy is seeking a stronger European Union role on bank regulation.  German Chancellor Merkel reported she is opposed to take hikes until the financial and economic crisis are over.  Data released in the eurozone today saw March industrial producer prices register their sharpest decline in 22 years, off 0.7% m/m and 3.1% y/y.  The European Central Bank is expected to reduce its main refinancing rate target to 1.0% from 1.25% on Thursday.  Euro bids are cited around the US$ 1.2765 level.

JPY / CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥99.20 level and was supported around the ¥98.60 level.  Prime Minister Aso reported “Japan and Germany are the biggest economic nations in Europe on the one side and Asia on the other side. And that's why we both must carry a big responsibility in the international community.”  He added “a lot of financial means will be used in the recovery of the economy.”  Japan’s Golden Week holidays conclude today and liquidity should return to normal overnight.  The Nikkei 225 yesterday stock index will next reopen at ¥8,977.37.  U.S. dollar offers are cited around the ¥104.15 level.  The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥131.50 level and was capped around the ¥132.80 level.  The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥149.85 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥87.00 figure. In Chinese news, the U.S. dollar closed at CNY 6.8190 in the over-the-counter market, down from CNY 6.8225.

STERLING

The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.5160 level and was supported around the $1.4980 level.  Sterling was the main moved in the markets today, outperforming most other currencies.  Data released in the U.K. saw April construction PMI improved to 38.1  CBI’s quarterly survey of small and medium-sized enterprises’ trends reported those firms experienced a decline in output and orders at the fast rate in two decades in the three months to April.   Cable bids are cited around the US$ 1.4735 level.  The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.8825 level and was capped around the ₤0.8930 level.

Published on  Tue, May 5 2009, 22:05 GMT

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