Tuesday May 6, 2008 - 16:08:57 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (6 May 2008)
The euro appreciated
vis-Ã -vis the U.S. dollar today as the single currency tested offers around
the US$ 1.5565 level and was supported around the $1.5450 level. The common currency rocketed higher during
the North American session after NYMEX crude oil futures for June 2008 delivery
spiked higher to US$ 122.00 on supply concerns involving Nigeria and Iran. The strong correlation between the euro and
oil continues and traders will also pay close attention to the ongoing hawkish
rhetoric from the European Central Bank.
Most traders believe the ECB will keep interest rates unchanged on
Thursday and remarks from ECB President Trichet will be closely monitored for
their degree of hawkishness and any sign the central bank may be contemplating
a rate cut later this year or earlier next year. Data released in the eurozone today saw the
EMU-15 April PMI service sector improve to 52.0 from 51.8. German services PMI rose to 54.9 while
French, Italian, and Spanish readings all fell.
Other EMU-15 data released today saw EMU-15 producer price inflation up
0.7% m/m and 5.7% y/y in March, the highest reading since August 2006. The PPI inflation data render it unlikely the
ECB can afford to publicly be more complacent about escalating costs. In U.S. news, Federal Reserve Chairman Bernanke
spoke last night and suggested the U.S. housing sector will continue
to worsen. Bernanke also provided
support for governmental plans to limit foreclosures. A Federal Reserve survey
released yesterday saw senior loan officers confirm there has been further
credit tightening in the capital markets.
Euro bids are cited around the US$ 1.5345 level.
The yen appreciated
vis-Ã -vis the U.S. dollar today as the greenback tested bids around the Â¥104.15
level and was capped around the Â¥105.10 level.
Stops were reached below the Â¥104.40 level, representing the 23.6%
retracement of the move from Â¥100.00 to Â¥105.75. Japanese financial markets remained closed
for the Golden Week holiday and liquidity will remain reduced. Most traders believe Bank of Japanâ€™s Policy
Board will keep its overnight call rate unchanged at 0.50% for the foreseeable
future, especially after recently moving from a rate-tightening bias to a
neutral bias. The Nikkei 225 stock index last closed at Â¥14,049.26. Dollar bids are cited around the Â¥103.65/
Â¥101.35 levels. The euro weakened vis-Ã -vis the yen as the single currency tested
bids around the Â¥162.00 figure and was capped around the Â¥162.75 level. The
British pound and Swiss franc moved lower as the crosses tested bids around
the Â¥205.55 and Â¥99.45 levels, respectively.
The Chinese yuan appreciated
vis-Ã -vis the U.S. dollar as the greenback closed at CNY 6.9873 in the
over-the-counter market, down from CNY 6.9879.
A government think-tank reported Q2 GDP growth will be around 10.8% y/y
with CPI up 7.5%.
The British pound appreciated
vis-Ã -vis the U.S. dollar today as cable tested offers around the US$
1.9770 level and was supported around the $1.9635 level. Sterling
was lifted higher from intraday lows after crude oil prices spiked higher. Data released in the U.K. saw April
services PMI fall to a five-year low of 50.4, significantly below Marchâ€™s 52.1
level and below forecasts. Most traders
believe Bank of Englandâ€™s Monetary Policy Committee will keep its headline repo
rate unchanged at 5.0% on Thursday while others believe the MPC may reduce
borrowing costs by another 25bps to 4.75%.
Cable bids are cited around the US$ 1.9505 level. The
euro moved higher vis-Ã -vis the British pound as the single currency tested
offers around the â‚¤0.7890 level and was supported around the â‚¤0.7845 level.
The Swiss franc
appreciated vis-Ã -vis the U.S. dollar today as the greenback tested bids
around the CHF 1.0425 level and was capped around the CHF 1.0550 level. Data released in Switzerland today saw April
consumer price inflation up 0.8% m/m and 2.3% y/y. Swiss National Bank set a
minimum bid rate of 2.0% for up to US$ 6 billion of 28-day liquidity is was
auctioning off today. U.S. dollar offers
are cited around the CHF 1.0760 level. The euro and British pound weakened
vis-Ã -vis the Swiss franc as the crosses tested bids around the CHF 1.6255 and
CHF 2.0600 levels, respectively.
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