Tuesday June 3, 2008 - 18:34:13 GMT
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Forex Market Commentary and Analysis (3 June 2008)
The euro depreciated
vis-√†-vis the U.S. dollar today as the single currency tested bids around
the US$1.5410 level and was capped around the $1.5625 level. Technically, today‚Äôs intraday low was right
around the 38.2% retracement of the move from $1.4430 to $1.6020. The markets are talking about verbal
intervention from Federal Reserve Chairman Bernanke today in which he reported
‚ÄúWe are attentive to the implications of changes in the value of the dollar for
inflation and inflation expectations and will continue to formulate policy to
guard against risks to both parts of our dual mandate, including the risk of an
erosion in longer-term inflation expectations.‚ÄĚ This is as strong a statement a
Federal Reserve Chairman has issued about the U.S. dollar in a very long time
and this suggests there may be growing cooperation between U.S. and
European counterparts about the need to promote a strong U.S. dollar. Most traders do not believe the Federal
Reserve is any closer to actually buying U.S. dollars in the market through
actual intervention yet today‚Äôs statement represents a marked change in
tactic. Similarly, U.S. Treasury
Secretary Paulson reported the government wants to ‚Äúensure that the dollar
remains a strong and stable currency.‚ÄĚ
Bernanke also indicated monetary policy is ‚Äúwell-positioned,‚ÄĚ suggesting
the Federal Open Market Committee may have ended its rate-easing cycle. The FOMC next meets on 24-25 June. Data
released in the U.S.
today saw April factory orders up 1.1% with the ex-transportation component up
2.6%. Atlanta Fed President Lockhart
warned the economy is ‚Äúgrowing slowly, poised for gradual recovery, but with
real risks that could subvert the story.‚ÄĚ
In eurozone news, most
traders expect the European Central Bank will keep its main refinancing rate
unchanged at 4.00% on Thursday when policymakers convene. ECB President Trichet is expected to remain
hawkish in his post-meeting press conference. Trichet today said ‚ÄúChallenging
as the present global economy may be, the rules for monetary policymaking are
not altered.‚ÄĚ EMU-15 data saw Q1 GDP growth upwardly revised to 0.8% q/q from
0.7% q/q and 2.2% y/y. Also, the EMU-15
April producer price index was up 0.8% m/m and 6.1% y/y. Euro bids are cited around the $1.5230 level.
The yen depreciated
vis-√†-vis the U.S. dollar today as the greenback tested offers around the
¬•105.55 level and was supported around the ¬•103.85 level. Bank of Japan Policy Board nominee Ikeo
testified ‚ÄúIt's appropriate that the BoJ aims to take policy steps flexibly
after examining both upside and downside risk.‚ÄĚ It is believed that Ikeo may
have been nominated to a deputy governorship. There are currently two vacancies
on the central bank‚Äôs Policy Board. Economic
and Fiscal Policy minister Ota spoke negatively about the economy today saying
‚ÄúWith the tepid growth in wages, the impact from rising gasoline prices and
food prices is by no means small on households.
As the economic watchers' survey shows, consumer sentiment is worsening.
We continue to watch carefully its impact on consumption.‚ÄĚ Data released in Japan today saw the May monetary
base decline 0.9% y/y. The Nikkei 225 stock index lost 1.60% to close at
¬•14,209.17. Dollar bids are cited around
the ¬•103.00/ 101.35 levels. Dollar bids
are cited around the ¬•103.00/ 101.35 levels. The
euro moved higher vis-√†-vis the yen as the single currency tested offers
around the ¬•163.20 level and was supported around the ¬•161.85 level. The British pound and Swiss franc gained
ground vis-√†-vis the yen as the crosses tested offers around the ¬•207.10
and ¬•101.30 levels, respectively. The
Chinese yuan appreciated vis-√†-vis the U.S. dollar as the greenback closed
at CNY 6.9250 in the over-the-counter market, down from CNY 6.9330 ‚Äď the pair‚Äôs
lowest close since the yuan revaluation of July 2005. People‚Äôs Bank of China reiterated it will
maintain a tight monetary policy to prevent overly rapid credit growth
following the recent earthquake.
The British pound weakened
vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.9605
level and was capped around the $1.9740 level.
Technically, today‚Äôs intraday low was right around the 23.6% retracement
of the move from $2.0395 to $1.9360. Data
released in the U.K.
today saw CIPS construction PMI fall to 43.9 in May, its lowest level since
April 1997. Traders are talking about a
rift between Bank of England
Governor King and Chancellor of the Exchequer Darling. The former is said to favour Charlie Bean as
the next Deputy Governor while the latter is said to favour Paul Tucker. Both Bean and Tucker are members of the BoE‚Äôs
Monetary Policy Committee. Cable bids
are cited around the US$ 1.9360/ 1.9100 levels.
The euro came off vis-√†-vis
the British pound as the single currency tested bids around the ‚ā§0.7855 level
and was capped around the ‚ā§0.7940 level.
The Swiss franc
depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers
around the CHF 1.0490 level and was supported around the CHF 1.0275 level. Data released in Switzerland today saw the May consumer
price index up 0.9% m/m and 2.9% y/y. U.S.
dollar offers are cited around the CHF 1.0760 level. The
euro came off vis-√†-vis the Swiss franc as the single currency tested bids
around the CHF 1.6055 level while the
British pound moved higher vis-√†-vis the Swiss franc as sterling tested
offers around the CHF 2.0570 level.
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