Forex Market Commentary and Analysis (22 April 2010)
The euro depreciated vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3255
level and was capped around the $1.3420 level. The common currency continues to weaken on
worsening conditions in Greece.The
European Union is now estimating that Greece‚Äôs 2009 deficit is worse than
previously reported and Moody‚Äôs Investors Service downgraded the government‚Äôs
debt ratings to A3 from A2.Many dealers
expected a greater credit downgrade. Credit default swaps on Greek five-year
debt surged 91 basis points to a record 577 and ten-year bond yields touched
9%, the highest level since 1998.All of
these factors render it increasingly likely Greece will be forced to accept a
bailout from eurozone partners and/ or the International Monetary Fund.Greece may be forced to reduce or postpone
payments to bond investors for now.Data
released in the eurozone today saw April PMI services print at 55.5, up from
the prior reading of 54.1, while EMU-16 consumer confidence improved to -15 in
April from -17.It was also reported
that the eurozone‚Äôs debt-to-GDP ration escalated to 78.7% at the end of 2009
from 69.4% at the end of 2008.In U.S. news, data released today saw the
March headline producer price index climb 0.7% m/m and 6.0% y/y while the core
rate was up 0.7% m/m and 0.9% y/y.Also,
weekly initial jobless claims fell to 456,000 from the revised prior reading of
480,000 while continuing jobless claims fell to 4.646 million from the prior
reading of 4.686 million.Moreover,
March existing home sales were up 6.8% m/m to an annualized 5.35 million units
and the February house price index was off 0.2% m/m.President Obama called for a financial
overhaul that would offer the ‚Äústrongest consumer protection ever.‚ÄĚObama‚Äôs plan calls for a ban on future bank
bailouts.Euro bids are cited
around the US$ 1.3175 level.
The yen depreciated vis-√†-vis the U.S. dollar today as the
greenback tested offers around the ¬•93.35 level and was supported around
the ¬•92.75 level. There is increasing
speculation the BoJ will raise its outlook for the economy and prices next week
amid positive improvements in certain economic measures including the export
sector, the unemployment rate, and consumer confidence.The Democratic Party of Japan reported it
will likely call for an inflation target for the central bank in this year‚Äôs
election platform.It is likely
legislators will try and prompt the central bank to seek inflation of up to two
per cent.The International Monetary Fund this week
called on Japan to enact a ‚Äúcredible‚ÄĚ medium-term fiscal plan.Bank of Japan Governor Shirakawa warned
complacency is the ‚Äúmost dangerous risk‚ÄĚ for central banks and said ‚Äúover-confidence‚ÄĚ
damaged Japan and the U.S.Finance
minister Kan said concerns over Japan‚Äôs terrible debt situation will ease when
a new fiscal plan is issued.Data
released overnight saw March supermarket sales off 6.6% y/y.The Nikkei 225 stock index lost 1.27% to
close at ¬•10,949.09.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 ¬•123.30 level and was capped around
the ¬•125.15 level.The British pound moved lower vis-√†-vis the yen as sterling tested bids
around the ¬•142.40 level while the Swiss
franc moved lower vis-√†-vis the yen and tested bids around the ¬•86.00 figure.
In Chinese news, the U.S. dollar appreciated
vis-√†-vis the Chinese yuan as the greenback closed at CNY 6.8264 in the
over-the-counter market, down from CNY 6.8275. People‚Äôs Bank of China sold
bills at lower yields for the first time in fifteen months, evidencing the
banking system‚Äôs large surplus of cash. Many China-watchers believe China may
allow the yuan to appreciate at any time between now and the end of the
British pound depreciated vis-√†-vis the U.S. dollar today as cable tested bids
around the US$ 1.5340 level and was capped around the $1.5470 level. Data released in the U.K. today saw March
retail sales climb 0.4% m/m and 2.2% y/y while the March public sector net cash
requirement grew to ¬£25.8 billion from February‚Äôs level of ¬£8.0 billion.Also, March public sector net borrowing
printed at ¬£23.5 billion, up from the prior reading of ¬£9.7 billion.Additionally, March mortgage approvals grew
marginally to 52,000 from the prior reading of 48,000 and the March M4 money
supply expanded 0.1% m/m and 3.5% y/y.Minutes
from Bank of England Monetary Policy Committee‚Äôs April meeting were released yesterday
and they revealed a unanimous vote to keep interest rates unchanged and the
central bank‚Äôs asset purchase plan unchanged at ¬£200 billion.Traders are talking about a surge in the
polls by the Liberal Democratic Party and the likely impact this will have on
the 6 May General Election.Many
political pundits believe the contest will result in a hung Parliament and some
now say the general election is too close to call with Cameron perhaps still
holding a slight lead over Brown.Cable
bids are cited around the US$ 1.5140 level.The euro moved lower
vis-√†-vis the British pound as the single currency tested bids around the ¬£0.8630
level and was capped around the ¬£0.8695 level.
franc depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers
around the CHF 1.0805 level and was supported around the CHF 1.0670 level. Swiss National Bank and Swiss regulators
announced new regulations today that mandate UBS and Credit Suisse to hold
larger amounts of reserves to defend against crisis scenarios. Data released in Switzerland today saw the
March trade balance expand to CHF 2.01 billion from the prior reading of CHF
1.29 billion while the April ZEW expectations survey fell back to 53.4 from
53.8.Dealers continue to cite talk that
Swiss National Bank may be intervening by bidding the euro/ franc cross
higher.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 1.4320 level
while the British pound moved higher
vis-√†-vis the Swiss franc and tested offers around the CHF 1.6580 level.
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