Forex Market Commentary and Analysis (18 May 2010)
The euro appreciated vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2445
level and was supported around the $1.2315 level. The common currency gained
marginal ground after eurozone finance ministers reported the Greek debt crisis
will not engender excessive tightening policies.European Union Economic and Monetary Affairs
Commissioner Rehn reported the European Union will ‚Äútake a look‚ÄĚ at the deficit
reduction plans of all 27 European Union governments before June.Greece confirmed receipt of a ‚ā¨14.5 billion
loan tranche from the European Union.European Central Bank Weber warned against a return to ‚Äúbusiness as
normal‚ÄĚ in the economic recovery process.Three-month U.S. dollar Libor reached 0.46469% today, up from Monday‚Äôs
level of 0.46%, while the euro Libor rate fell to 0.63%.Data released in the eurozone today saw
EMU-16 April consumer price inflation up 0.5% m/m and 1.5% y/y at the headline
level and 0.8% y/y at the core level.The
May ZEW economic sentiment index fell to 37.6 from the prior reading of 46.0 while
the EMU-16 March trade balance printed at ‚ā¨4.5 billion.The German May ZEW economic sentiment index
fell to 45.8 while the current situation sub-index came in at -21.6.Also, French Q1 non-farm payrolls were off
0.1% q/q with wages up 0.7% q/q.In U.S. news, data released today saw
the April headline producer price index off 0.1% m/m and up 5.5% y/y with the
ex-food and energy rate up 0.2% m/m and 1.0% y/y.Also, April housing starts were up 5.8% m/m
to an annualized 672,000 units and April building permits were off 11.5% m/m to
an annualized 606,000 units.Traders are
trying to reconcile how the European debt crisis may decelerate the removal of
monetary accommodation by the Fed.Euro
bids are cited around the US$ 1.2140 level.
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 ¬•92.30 level. Bank of Japan
overnight resumed the provision of U.S. dollars to lenders as dollar borrowing
costs continue to escalate globally on account of European sovereign debt
woes.BoJ is offering unlimited U.S.
dollar loans for 84 days from 20 May to 12 August at a fixed interest rate of
1.24% against eligible collateral as part of this program.The central bank‚Äôs previous U.S. dollar
lending operations commenced in September 2008 following the collapse of U.S.
banking giant Lehman Brothers.Bids for
the loans totaled US$ 210 million, a relatively low number that represented
good news. BoJ‚Äôs Policy Board convenes on 20-21 May and some dealers expect it will
provide information regarding its lending program this week designed to
stimulate certain sectors of the economy including technology.Data released in Japan overnight saw the
March tertiary industry index decline 3.0% m/m, down from the revised prior
reading of -0.3%.Also, April consumer
confidence improved to 42.1 while April machine tool orders were up 200.9%
y/y.Additionally, April Nationwide department
sales were off 3.7% y/y and Tokyo-area department store sales were off 4.9%
y/y.The Nikkei 225 stock index gained 0.07%
to close at ¬•10,242.64.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 ¬•115.45 level and was supported
around the ¬•113.75 level.The British pound moved higher vis-√†-vis
the yen as sterling tested offers around the ¬•134.80 level while the Swiss franc moved higher vis-√†-vis
the yen and tested offers around the ¬•82.35 level. In Chinese news, the U.S. dollar depreciated vis-√†-vis the Chinese
yuan as the greenback closed at CNY 6.8274 in the over-the-counter market, down
from CNY 6.8277. People‚Äôs Bank of China
adviser Xia Bin reported ‚Äúdiversification is a long-term trend‚ÄĚ and added the
euro‚Äôs problems will not deter China from diversifying its sizable foreign
currency reserves.PBoC official Li De
reported the central bank ‚Äúwill be very prudent‚ÄĚ over interest rate
adjustments.Yuan forwards gained ground
following a report from eurozone finance ministers that Greece‚Äôs debt crisis
will not precipitate ‚Äúexcessive‚ÄĚ tightening policies.
British pound depreciated vis-√†-vis the U.S. dollar today as cable tested bids
around the US$ 1.4405 level and was capped around the $1.4520 level. Cable spun lower during the North American
session as traders continued to sell sterling on concerns the new coalition
government will be unable to materially reduce the U.K.‚Äôs bloated budget
deficit and national debt.Data released
in the U.K. today saw April headline consumer price inflation was up 0.6% m/m
and 3.7% y/y while the core CPI index was up 3.1% y/y.Both the headline and core year-over-year
rates remain at significantly elevated levels and Bank of England Governor
George cited elevated oil prices, a weaker pound, and restoration of the VAT
sales tax rate at 17.5% as ‚Äúfactors that are masking the downward pressure on
inflation from the substantial margin of spare capacity in the economy.‚ÄĚThe 3.7% print was the highest since November
2008.The BoE Monetary Policy Committee
expects CPI inflation will fall back to target within a year.New Chancellor of the Exchequer Osborne
reconfirmed the new government‚Äôs ‚Äúabsolute commitment to maintaining price
stability‚ÄĚ and to reducing spending by ¬£6 billion in 2010-2011.Cable
bids are cited around the US$ 1.4110 level.The euro appreciated vis-√†-vis
the British pound as the single currency tested offers around the ¬£0.8605 level
and was supported around the ¬£0.8540 level.
franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids
around the CHF 1.1265 level and was capped around the CHF 1.1380 level.Swiss National Bank President Hildebrand late
yesterday reported the central bank is ‚Äúready to act‚ÄĚ against the current
strengthening of the franc, noting it is jeopardizing the economic recovery and
Swiss price stability.Hildebrand warned
that Europe‚Äôs ‚Äúdramatic‚ÄĚ situation is ‚Äúvery difficult‚ÄĚ and might worsen,
pledging action in a ‚Äúdecisive manner.‚ÄĚU.S. dollar bids are cited around the US$ 1.1110 level.The
euro gained ground vis-√†-vis the Swiss franc as the single currency tested
offers around the CHF 1.4045 level while the
British pound lost ground vis-√†-vis the Swiss franc and tested bids around
the CHF 1.6295 level.
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