Forex Market Commentary and Analysis (20 April 2010)
The euro depreciated vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3415
level and was capped around the $1.3495 level. The common currency came off as traders
digested many different economic data that were released today.First, the February eurozone current account
printed at -‚ā¨3.9 billion, wider than the revised prior reading of -‚ā¨1.7
billion, while the EMU-16 April ZEW economic sentiment survey printed at 46.0,
up from the prior reading of 37.9.Also,
German March producer prices climbed to 0.7% m/m and -1.5% y/y while the April
ZEW economic sentiment survey came in at 53.0 with the current situation survey
improving to -39.2.These data signify
that sentiment conditions are improving in the eurozone‚Äôs largest economy but
also evidence the dichotomy between improving eurozone economies and
significantly overextended countries like Greece, Spain, and Portugal.In U.S.
news, data to be released tomorrow include MBA mortgage applications and
data to be released on Thursday include March producer price data, weekly
initial jobless claims, and March existing home sales.Fed Chairman Bernanke defended the Federal
Reserve‚Äôs role in the Lehman Brothers debacle, noting the Fed did not have
supervisory powers over Lehman.President Obama is expected to make a major speech this week in New York
calling for regulatory reform.Chicago
Fed President Evans reported the U.S. recession is ‚Äúdefinitely over‚ÄĚ and added
U.S. unemployment will need more time to decline. Evans also said low interest
rates are ‚Äúappropriate‚ÄĚ for now.Fed
Governor Duke reported ‚Äúthe outlook for commercial real estate is not very
favourable.‚ÄĚDealers are also evaluating
Goldman Sachs‚Äôs stronger-than-expected first quarter earnings report today
against the report from last Friday that the U.S. government is targeting them
in a major fraud case related to the sub-prime mortgage crisis.Euro bids are cited around the US$ 1.3175
The yen depreciated vis-√†-vis the U.S. dollar today as the
greenback tested offers around the ¬•92.95 level and was supported around
the ¬•92.40 level. Finance minister Kan
noted ‚ÄúI think inflation targeting is an attractive policy. We could have a
goal of 1 per cent or something a little higher, like 2 per cent, and work with
the BoJ until that goal is met.‚ÄĚMost
dealers believe the government is likely to keep pressuring Bank of Japan to
ease policy further.One reason the yen
was pushed lower is because the London three-month interbank offered rate (Libor)
for yen loans declined to 0.23688 yesterday, its lowest level since May 2006.
At the same time, the spread between yen rates and dollar rates climbed to its
highest level in eight months, rendering the U.S. dollar more attractive
investment.Further yen weakness could
in fact be prompted by a renewal of the carry trade.BoJ Governor Shirakawa said the central bank
is not excluding any policy options at this time and reiterated weak demand is
causing price declines.Data released in
Japan overnight saw March machine tool orders climb 262.2% y/y while March
convenience store sales were off 4.9% y/y.Trade balance data will be released tomorrow.The Nikkei 225 stock index lost 0.07% to close
at ¬•10,900.68. U.S. dollar offers are
cited around the ¬•96.85 level.The euro moved higher vis-√†-vis the yen
as the single currency tested offers around the ¬•125.60 level and was supported
around the ¬•124.45 level.The British pound moved higher vis-√†-vis
the yen as sterling tested offers around the ¬•143.25 level while the Swiss franc moved higher vis-√†-vis
the yen and tested offers around the ¬•87.60 level. In Chinese news, the U.S. dollar depreciated vis-√†-vis the Chinese yuan
as the greenback closed at CNY 6.8254 in the over-the-counter market, down from
CNY 6.8275. China‚Äôs currency regulator
today noted that China‚Äôs capital account surplus expanded to US$ 144.8 billion
in 2009, up from US$ 19 billion in 2008.The perception of higher interest rates in China is likely to fuel more
China-bound investment capital.Many
traders believe China will revalue its yuan‚Äôs trading band imminently, possibly
by widening its trading band by up to 3%.
British pound appreciated vis-√†-vis the U.S. dollar today as cable tested offers
around the US$ 1.5430 level and was supported around the $1.5290 level. Data released in the U.K. today saw March
consumer price inflation climb to 0.6% m/m and 3.4% y/y while the core CPI rate
was up 3.0% y/y.Another inflation
measure (RPIX) was up 0.7% m/m and 4.4% y/y.Bank of England Governor King will likely need to address a letter to
Chancellor Darling explaining why inflation is above the BoE‚Äôs target and the
central bank‚Äôs outlook for inflation.Data to be released in the U.K. tomorrow include the claimant count,
weekly earnings, and ILO unemployment data.BoE MPC meeting minutes will also be released tomorrow.Traders are talking about a surge in the
polls by the Liberal Democratic Party and the likely impact this will have on
the 6 May General Election..Many
political pundits believe the contest will result in a hung Parliament and some
now say the general election is too close to call with Cameron perhaps still
holding a slight lead over Brown.Cable
bids are cited around the US$ 1.5140 level.The euro moved lower
vis-√†-vis the British pound as the single currency tested bids around the ¬£0.8740
level and was capped around the ¬£0.8805 level.
franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids
around the CHF 1.0600 figure and was capped around the CHF 1.0660 level. March
money supply data will be released tomorrow followed by the March trade balance
and April Credit Suisse ZEW survey on Thursday.Swiss National Bank Vice Chairman Jordan last 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 1.4330 level
while the British pound moved higher
vis-√†-vis the Swiss franc and tested offers around the CHF 1.6400 figure.
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Mon 18 Dec
10:00 EZ- final HICP Tue 19 Dec
09:00 DE- IFO Survey
13:30 US- Housing Starts/Permits
13:30 US- Current Account Wed 20 Dec
15:00 US- Existing Homes Sales
15:30 US- EIA Crude Thu 21 Dec
03:00 JP- BOJ Decision
13:30 CA- CPI & Retail Sales
13:30 US Weely Jobless
13:30 US- GDP Fri 22 Dec
09:30 US- GB- GDP
13:30 US- core PCE Deflator & Presonal Income
15:00 US- New Homes Sales
15:00 US- final University of Michigan
17:00 US- early Closes Mon 25 Dec
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Potential Trading Opportunities
POTENTIAL PRICE RISK: Medium Mon--10:00 GMT-- EZ- final November HICP. flash data are rarely changed.
POTENTIAL PRICE RISK: HIGH- Medium Tue --09:00 GMT-- DE- IFO Survey. Key report but usually not a market-mover
POTENTIAL PRICE RISK: HIGH- Medium- Tue --13:30 GMT-- US- Housing Starts and Permits. Leading indicators of activity
POTENTIAL PRICE RISK: HIGH-Medium- Wed --15:00-- US- Existing Homes Sales. Top Housing statistic
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