Tuesday May 5, 2009 - 20:32:04 GMT
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Forex Market Commentary and Analysis (5 May 2009)
The euro moved weakened vis-Ă -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 coincde with â€śfurther
sizable job lossesâ€ť over the coming months.
Bernanke estimates the economy may climb â€śsomewhereâ€ť 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 â€śthe pace of contraction may be
slowingâ€ť 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 banksâ€™ 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
â€ścomprehensive capital plans for establishing the required buffersâ€ť to protect
against future lossesâ€ť 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.
The yen depreciated vis-Ă -vis the U.S. dollar today as the
greenback tested offers around the ÂĄ99.20 level and was supported around the ÂĄ98.60
level. Prime Minister Aso reported â€śJapan 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.â€ť He added â€śa lot of financial means will be
used in the recovery of the economy.â€ť Japanâ€™s Golden
Week holidays conclude today and liquidity should return to normal
overnight. The Nikkei 225
yesterday stock index will next reopen at ÂĄ8,977.37. U.S. dollar offers are cited around the
ÂĄ104.15 level. The euro moved lower vis-Ă -vis the yen as the single currency
tested bids around the ÂĄ131.50 level and was capped around the ÂĄ132.80 level. The
British pound moved higher vis-Ă -vis the yen as sterling tested offers around
the ÂĄ149.85 level while the Swiss franc
moved lower vis-Ă -vis the yen and tested bids around the ÂĄ87.00 figure. In Chinese news, the U.S. dollar closed
at CNY 6.8190 in the over-the-counter market, down from CNY 6.8225.
British pound appreciated vis-Ă -vis the U.S. dollar today as cable tested
offers around the US$ 1.5160 level and was supported around the $1.4980 level. Sterling
was the main moved in the markets today, outperforming most other
currencies. Data released in the U.K.
saw April construction PMI improved to 38.1
CBIâ€™s quarterly survey of small and medium-sized enterprisesâ€™ trends
reported those firms experienced a decline in output and orders at the fast
rate in two decades in the three months to April. Cable bids are cited around the US$ 1.4735
level. The euro moved lower vis-Ă -vis the British pound as the single
currency tested bids around the â‚¤0.8825 level and was capped around the â‚¤0.8930
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