Forex Market Commentary and Analysis (11 May 2010)
The euro depreciated vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2665
level and was capped around the $1.2800 figure.The common currency extended yesterday‚Äôs
losses as traders expressed skepticism that the rescue packages announced by
eurozone officials early yesterday will suffice in addressing the bloc‚Äôs major
debt woes.In fact, the common currency
traded lower than Friday‚Äôs close following last week‚Äôs major sell-off.Ireland‚Äôs budget deficit-to-GDP ration
remains 14.3% and Greece‚Äôs remains 13.6%, underscoring the major debt problems
faced by many eurozone countries including these, Spain, Portugal, and Italy.There are renewed forecasts that the common
currency will eventually decline to parity with the U.S. dollar.European Central Bank member Nowotny reported
‚Äúthe intention is to get again control of the unorderly markets and I think
this is a goal that has been achieved remarkably in an effective way.‚ÄĚEMU-16 central banks yesterday began
purchasing eurozone government bonds in the secondary market as a quantitative
easing measure.ECB member Wellink went
one step further today, saying ‚ÄúIf there are excessive deficits at a certain
moment, fines should be considered more quickly. Deny countries who are erring
the access to European structural funds.‚ÄĚData released in Germany today saw the April consumer price index
decline 0.1% m/m and up 1.0% y/y while the EU-harmonized index was off 0.1% and
up 1.0% y/y.Also, the April wholesale
price index was up 1.7% m/m and 6.0% y/y.In U.S. news, Fed Chairman
Bernanke reported the eurozone‚Äôs approximate US$ 1 trillion aid package is ‚Äúbasically
not a panacea‚ÄĚ and called for ‚Äúfundamental underlying changes‚ÄĚ in countries‚Äô
economies.The Senate today approved an
amendment to a regulatory overhaul bill that will audit the Fed‚Äôs
emergency-lending programs during the financial crisis over the past couple of years.Richmond Fed President Lacker reported ‚ÄúWe
are already seeing evidence that employment is on the path to steady growth.‚ÄĚData released in the U.S. today saw March
wholesale inventories decline to +0.4% from the prior reading of +0.6%.Euro bids are cited around the US$ 1.2585
The yen appreciated vis-√†-vis the U.S. dollar today as the
greenback tested bids around the ¬•92.21 level and was capped around
the ¬•93.40 level. Traders again moved
back into yen as doubts resurfaced regarding the adequacy of the ‚ā¨500 billion
deal announced over the weekend to support debt-laden eurozone countries.Bank of Japan Deputy Governor Yamaguchi
yesterday said the central bank has ‚Äúno need to alter the outlook in our
semi-annual economic report‚ÄĚ following recent market volatility.Finance minister Kan reported equity and
currency markets will ‚Äústart to stabilize.‚ÄĚMinutes from last month‚Äôs BoJ Policy Board meeting were released yesterday
and policymakers observed ‚Äúbalance sheet adjustments in the banking sector and
the fiscal deficit problem in some European countries might further slow the
pace of economic recovery‚ÄĚ in the region.BoJ yesterday injected ¬•2 trillion into the financial system for a
second day, the first back-to-back same-day operations since October 2008.Also, BoJ reestablished a U.S. dollar
currency swap agreement with the Fed and other central banks this weekend to
help stabilize global financial markets. Data to be released in Japan overnight include
April official reserve assets.The
Nikkei 225 stock index lost 1.14% to close at ¬•10,411.10.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 ¬•116.90 level and was capped around the ¬•119.40 level.The
British pound moved higher vis-√†-vis the yen as sterling tested offers
around the ¬•139.65 level while the Swiss
franc moved lower vis-√†-vis the yen and tested bids around the ¬•82.95 level.
In Chinese news, the U.S. dollar depreciated
vis-√†-vis the Chinese yuan as the greenback closed at CNY 6.8293 in the
over-the-counter market, up from CNY 6.8266. People‚Äôs Bank of China adviser Xin Bin said
the central bank‚Äôs quarterly report released yesterday is a signal the central
bank will permit the yuan to appreciate vis-√†-vis the U.S. dollar.The central bank yesterday yielded some clues
regarding the possibility of ending its U.S. dollar peg, reporting it will
manage the yuan ‚Äúwith reference to a basket of currencies‚ÄĚ ‚Äď language that was
absent from the central bank‚Äôs previous quarterly summary. Many data were released in China overnight.
First, the April trade balance expanded to US$ 1.68 billion from the prior
reading of ‚ÄďUS$ 7.24 billion.Second,
April NDRC housing prices improved to 12.8 from the prior reading of 11.7.Third, April producer prices were up 6.8% y/y
and April consumer prices were up 2.8% y/y.Fourth, April retail sales growth decelerated to +18.5% y/y.Fifth, April industrial production was up
17.8% y/y.Sixth, April new yuan loans
expanded to CNY 774.0 billion from the prior reading of CNY 510.7 billion.
British pound appreciated sharply vis-√†-vis the U.S. dollar today as cable
tested offers around the US$ 1.5005 level and was supported around the $1.4720
level.Cable moved higher after Prime
Minister Brown resigned from office and tendered his resignation to Her Majesty
the Queen, who quickly accepted incoming Prime Minister Cameron‚Äôs plea to form
a new government.Sterling moved higher
on this news on the premise that a Tory-Liberal Democrat coalition may be more
successful in reducing the U.K.‚Äôs bloated debt and deficit problems than a
Labour-Liberal Democrat coalition.Today‚Äôs
political drama ends more than twelve years of uninterrupted Labour rule.Data released in the U.K. saw the April RICS
house price balance increase to 17% from the prior reading of 9%.Also, March industrial production was up 2.0%
m/m and 2.0% y/y with manufacturing production up 2.3% m/m and 3.3% y/y.The April NIESR GDP estimate will be released
tonight.Cable bids are cited around the
US$ 1.4335 level.The euro depreciated vis-√†-vis the British pound as the single
currency tested bids around the ¬£0.8475 level and was capped around the ¬£0.8615
franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids
around the CHF 1.1035 level and was capped around the CHF 1.1135 level. Data released in Switzerland today saw the
April SECO consumer confidence survey improve to +14 from the prior reading of
-7, exceeding expectations.April
producer and import prices will be released tomorrow.Swiss National Bank Chairman Hildebrand
reiterated the central bank‚Äôs policy is prepared to fight inflation and
deflation and reiterated the SNB will not permit an excessive appreciation of
the franc.U.S. dollar offers are cited
around the CHF 1.1270 level.The euro moved lower vis-√†-vis the
Swiss franc as the single currency tested bids around the CHF 1.4030 level
while the British pound appreciated
vis-√†-vis the Swiss franc and tested offers around the CHF 1.6620 level.
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