Forex Market Commentary and Analysis (16 April 2010)
The euro depreciated vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3470
level and was capped around the $1.3585 level. The common currency failed to sustain early
gains this week and was pushed lower on Friday after U.S. equities
tumbled.The U.S. Securities and
Exchange Commission filed fraud charges against Goldman Sachs for its
involvement in the sub-prime mortgage crisis that rocked the financial
world.Shares in Goldman Sachs finished
the week down more than US$ 18 and today‚Äôs news is likely to accelerate the
Obama administration‚Äôs calls for greater regulatory reform, particularly over
derivatives.The U.S. financial sector
was doing decently following some initial first quarter earnings reports from
the likes of Bank of America and JPMorgan Chase.Kansas City Fed President Hoenig said the Fed
should exit monetary policy as ‚Äúdelibertely as possible‚ÄĚ and called on the Fed
to ‚Äúeventually‚ÄĚ reduce its balance sheet below US$ 1 trillion.San Francisco Fed President Yellen warned the
Fed has ‚Äústepped on the gas as much as it can.‚ÄĚData released in the U.S. today saw March housing starts gain 1.6% m/m
and building permits climbed 7.5% m/m.Also,
mid-April University of Michigan consumer sentiment fell back to 69.5 from the
prior reding of 73.6.In eurozone news, traders are closely
monitoring the situation involving the Icelandic volcano that erupted this week
for the first time in nearly two centuries.The volcano has prompted the cancellation of a significant number of
flights across Europe and is having a negative impact on cross-border business.
Eurozone finance ministers are said to have ordered Greece to prepare to tap
its credit facility with the European Union and the International Monetary
Fund. European Central Bank member Stark
said he is skeptical about IMF loans to Greece and stressed Greece must repay
any bilateral loans it obtains.Data
released in the eurozone today saw March consumer price inflation up 0.9% m/m
and 1.4% y/y with the core rate up 1.0% y/y.Additionally, the February trade balance came in at ‚ā¨ 2.6 billion.Euro bids are cited around the US$ 1.3175
The yen appreciated vis-√†-vis the U.S. dollar today as the
greenback tested bids around the ¬•91.90 level and was capped around
the ¬•93.15 level. A Democratic Party of
Japan legislator officially called for a 2% inflation target as a way to lift
Japan out of its long-standing deflationary spiral, a policy that has been advocated
by DPJ legislators for weeks.Yesterday,
Bank of Japan upgraded its economic assessment in seven of the country‚Äôs nine
areas. The central bank reported the local economies ‚Äúhad picked up, although
there remained differences in the pace and extent of the recovery.‚ÄĚThe upgrade increases the likelihood the
central bank will increase their estimates for economic growth and inflation
when its semi-annual outlook is released on 30 April.Data to be released in Japan next week
include consumer confidence and machine tool orders.The Nikkei 225 stock index lost 1.52% to
close at ¬•11,102.18. U.S. dollar offers
are cited around the ¬•96.85 level.The euro moved lower vis-√†-vis the yen
as the single currency tested bids around the ¬•123.85 level and was capped around
the ¬•126.40 level.The British pound moved lower vis-√†-vis the yen as sterling tested bids
around the ¬•141.30 level while the Swiss
franc moved lower vis-√†-vis the yen and tested bids around the ¬•86.45 level.
In Chinese news, the U.S. dollar depreciated
vis-√†-vis the Chinese yuan as the greenback closed at CNY 6.8255 in the
over-the-counter market, down from CNY 6.8260. People‚Äôs Bank of China adviser Li Daokui said
China has reached a ‚Äúconsensus‚ÄĚ on adjusting its exchange rate gradually and is
not bowing to U.S. pressure by allowing the yuan to appreciate.Many data were released in China this week.First, Q1 real GDP came in on the high end of
expectations, printing at an annualized growth rate of 11.9% y/y.Also, the March producer price index was up
5.9% y/y and March consumer prices were up 2.4% y/y. Additionally, March retail sales were up 18.0%
y/y and March industrial production was up 18.1% y/y.These data make it extremely likely the
Chinese government will revalue its yuan currency or widen its trading band by
an estimated 2-3%.Some traders believe
this move could take place as early as next week while most China-watchers
believe it will happen before the end of the second quarter.
British pound depreciated sharply vis-√†-vis the U.S. dollar today as cable
tested bids around the US$ 1.5365 level and was capped around the $1.5505
level. Prime Minister Brown and Tory leader Cameron
debated this week ahead of the 6 May general election.Many political pundits believe the contest
will result in a hung Parliament and some now say the general election is too
close to call with Cameron perhaps still holding a slight lead over Brown.Data released in the U.K. this week saw March
Nationwide consumer confidence print at 72, down from a revised +81.Cable bids are cited around the US$ 1.5140
level.The euro moved higher vis-√†-vis the British pound as the single
currency tested offers around the ¬£0.8800 figure and was supported around the ¬£0.8745
franc depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers
around the CHF 1.0630 level and was supported around the CHF 1.0560 level. Data released in Switzerland today saw March
producer and import prices climb 0.5% m/m and 0.0% y/y.Swiss National Bank Vice Chairman Jordan this
week said regulators cannot allow governments to be ‚Äúblackmailed‚ÄĚ into
protecting banks from collapse during future financial crises.There was talk yesterday that the Swiss
National Bank may have sold francs for euro this week in an intervention to try
and support the Swiss export sector.U.S.
dollar offers are cited around the CHF 1.0920 level.The
euro moved lower vis-√†-vis the Swiss franc as the single currency tested bids
around the CHF 1.4325 level while the
British pound moved lower vis-√†-vis the Swiss franc and tested bids around
the CHF 1.6290 level.
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