Forex Market Commentary and Analysis (13 May 2010)
The euro depreciated vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2560
level and was capped around the $1.2685 level.The common currency is close to testing multi-month lows that could see the
pair test March 2009 lows.Deepening
eurozone credit concerns are impacting the common currency negatively, as are
output concerns that suggest U.S. economic growth will continue to outpace
EMU-16 economic growth.European Central
Bank President Trichet today defended the ECB‚Äôs decision this week to buy
eurozone debt in the secondary market and said the ECB will sterilize its
purchases through time deposits.ECB
member Quaden called on banks today to maintain more and stronger capital.Many traders believe the ECB will keep its
main interest rate target unchanged until late next year.In
U.S. news, data released today saw the April import price index climb 0.9%
m/m and 11.1% y/y.Also, weekly initial
jobless claims fell to 444,000 from 448,000 and continuing jobless claims rose
to 4.627 million.Fed Vice Chairman Kohn
and Minneapolis Fed President Kocherlakota defended the Fed‚Äôs pledge to keep
interest rates low for an ‚Äúextended period.‚ÄĚRegional Fed Presidents including Dallas‚Äôs Fisher, St. Louis‚Äôs Bullard,
and Philadelphia‚Äôs Plosser have recently suggested the pledge may inhibit the
Fed‚Äôs ability to manage medium-term inflation expectations.Fed Chairman Bernanke said a Senate proposal
to divest swaps trading desks from commercial banks would result in less financial
stability.Euro bids are cited
around the US$ 1.2585 level.
The yen appreciated vis-√†-vis the U.S. dollar today as the
greenback tested bids around the ¬•92.60 level and was capped around
the ¬•93.65 level. Traders jumped back
into yen today on renewed sovereign credit concerns.Many data were released in Japan overnight.
First, the March current account total printed at ¬•2.534 trillion.Second, the March trade balance printed at ¬•1.074
trillion.Third, April bank lending was
off 1.8% y/y.April bankruptcies data
will be released overnight along with April machine tool orders data and the
economy watchers‚Äô survey.Bank of Japan Deputy Governor Yamaguchi this
week 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 this week 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.The Nikkei 225 stock index climbed
2.18% to close at ¬•10,620.55.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 ¬•116.60 level and was capped around the ¬•118.70 level.The
British pound moved lower vis-√†-vis the yen as sterling tested bids around
the ¬•136.75 level while the Swiss franc moved
lower vis-√†-vis the yen and tested bids around the ¬•83.15 level. In Chinese news, the U.S. dollar appreciated
vis-√†-vis the Chinese yuan as the greenback closed at CNY 6.8280 in the
over-the-counter market, up from CNY 6.8272. People‚Äôs Bank of China member Li Daokui
reported ‚Äúconditions for China‚Äôs interest rate adjustment are basically mature
now.‚ÄĚYuan forwards rose today on the
premise that bilateral U.S.-Chinese talks could lead to yuan appreciation.People‚Äôs Bank of China adviser Xin Bin this
week said the central bank‚Äôs quarterly report released on Monday is a signal
the central bank will permit the yuan to appreciate vis-√†-vis the U.S.
dollar.The central bank 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.
British pound depreciated vis-√†-vis the U.S. dollar today as cable tested bids
around the US$ 1.4735 level and was capped around the $1.4915 level.Traders expressed fresh doubts that the new
coalition government would be able to adequately reduce the U.K.‚Äôs mammoth
fiscal deficit.The new government has
suddenly found an ally in Bank of England Governor King who has publicly supported
their decision to reduce spending by as much as ¬£6 billion.The central bank is likely to gain additional
oversight powers and the inclusion of the Liberal Democrats in the new
government may have saved the Financial Services Authority.Data released in the U.K. todays aw the total
trade balance worsen sharply, printing at -¬£3.683 billion.Cable bids are cited around the US$ 1.4335
level.The euro appreciated vis-√†-vis the British pound as the single
currency tested offers around the ¬£0.8540 level and was supported around the
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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
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POTENTIAL PRICE RISK: HIGH- Medium- Tue --13:30 GMT-- US- Housing Starts and Permits. Leading indicators of activity
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