Forex Market Commentary and Analysis (10 June 2010)
The euro appreciated vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2140
level and was supported around the $1.1955 level.As expected, the European Central Bank kept
its main refinancing rate unchanged at 1.0% today and ECB President Trichet
noted the central bank would continue to offer three-month emergency loans to
financial institutions until September.Traders
also moved into euro after bond auctions in Spain and Italy were well-received
by investors, suggesting the threat of sovereign contagion may be
diminishing.Trichet said it will be ‚Äúappropriate‚ÄĚ
for the ECB to continue purchasing sovereign and corporate bonds, noting ‚Äúwe
have a money market that is not functioning perfectly.‚ÄĚ As a result, there is a
likelihood that official European interest remains will remain muted for quite
some time.The ECB also lifted its
eurozone growth forecast to 1.0% today from the previous estimate of 0.8% and
now expects the economy to expand about 1.2% in 2011, down from the previous
estimate of 1.5%.Data released in
Germany today saw May headline consumer price inflation up 0.1% m/m and 1.2%
y/y while the harmonized rate was up 0.1% m/m and 1.2% y/y.Other data saw April manufacturing production
up 0.4% m/m and 8.5% y/y while April industrial production was off 0.3% m/m and
7.9% y/y.Also, French Q1 non-farm
payrolls were up 0.2% q/q.In U.S. news, the April trade balance
deficit widened to ‚ÄďUS$ 40.3 billion from the revised previous tally of ‚ÄďUS$
40.0 billikon.Weekly initial jobless
claims fell to 456,000 while continuing hibless claims fell sizable to 4.462
million from an upwardly-revised 4.717 million.Data to be released tomorrow include May advance retail sales, mid-June
University of Michigan consumer sentiment, and April business inventories.The Fed reported its assets fell to US$ 2.33
trillion as some liquidity swaps with foreign central banks declined.Fed Chairman Bernanke yesterday characterized
the Fed‚Äôs debt as ‚Äúunsustainable.‚ÄĚEuro
offers are cited around the US$ 1.2330 level.
The yen depreciated vis-√†-vis the U.S. dollar today as the
greenback tested offers around the ¬•91.45 level and was supported around
the ¬•90.85 level. Global risk appetite
was stronger today compared with recent trading sessions and the yen was given
as a result.The yen remains technically
overbought and could snap back quickly as traders assume risk in
higher-yielding currencies.Bank of
Japan will soon release details about its latest plan to stimulate credit for
the private sector, an initiative likely to total several trillion yen.Data released in Japan overnight confirmed
Japan‚Äôs economy expanded at an annualized 5% rate in the three months that
ended 31 March, up from the previous estimate of +4.9% and the largest increase
since Q2 2009.The economy was up an
unchanged 1.2% q/q and the GDP deflator was off 2.8% y/y, up from the earliest
estimate of -3.0%.Other data released overnight
saw the May domestic corporate goods price index up 0.1% m/m and 0.4% y/y while
May consumer confidence improved to 42.7.New finance minister Noda this week reported ‚ÄúThe Bank of Japan has
taken steps based on its understanding of price stability as (inflation of
above) zero to 2 per cent ‚Äď with a median at 1 per cent ‚Äď which I think is
reasonable.Prime Minister Kan‚Äôs view is
that we should achieve above 1 per cent (inflation).I share his view but that is not to advocate
inflation targeting.‚ÄĚThe Nikkei 225 stock
index gained 1.09% to close at ¬•9,542.65.The euro moved higher vis-√†-vis
the yen as the single currency tested offers around the ¬•110.85 level and was supported
around the ¬•108.95 level.The British pound moved higher vis-√†-vis
the yen as sterling tested offers around the ¬•134.35 level while the Swiss franc moved higher vis-√†-vis
the yen and tested offers around the ¬•80.10 level. In Chinese news, the U.S. dollar appreciated vis-√†-vis the Chinese
yuan as the greenback closed at CNY 6.8307 in the over-the-counter market, up
from CNY 6.8280. People‚Äôs Bank of China this week warned Chinese economic
growth will continue to be impacted by global problems and said final domestic
private demand is still not ‚Äúsolid.‚ÄĚ PBoC noted an ‚Äúappropriately loose‚ÄĚ
monetary policy and a proactive fiscal policy will continue. Data released in China overnight saw May NDRC
housing prices move higher while the May trade balance grew more-than-expected
to US$ 19.53 billion on a 48.5% surge in exports. Many data will be released
tonight including May PPI, CPI, retail sales, and industrial production.People‚Äôs Bank of China has injected CNY 166
billion to the money market this week to ease pressure from the tightening
money supply.The State Administration
of Foreign Exchange reported China will see a ‚Äúlarge‚ÄĚ international payments
surplus in 2010.
British pound appreciated vis-√†-vis the U.S. dollar today as cable tested offers
around the US$ 1.4715 level and was supported around the $1.4510 level. As
expected, Bank of England‚Äôs Monetary Policy Committee voted to keep its main
Bank Rate unchanged at 0.50% today.The
BoE also kept its asset purchase target unchanged at ¬£200 billion.Inflation remains elevated in the U.K. but
the central bank is also trying to stimulate economic growth and will likely
not raise interest rates anytime soon.Prime Minister Cameron will unveil an emergency budget on 22 June.Cable bids are cited around the US$ 1.4220
level.The euro depreciated vis-√†-vis the British pound as the single
currency tested bids around the ¬£0.8220 level and was capped around the ¬£0.8280
franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids
around the CHF 1.1395 level and was capped around the CHF 1.1505 level. Traders continue to test the resolve of the
Swiss National Bank to support the euro/ franc cross through continued
intervention.Swiss foreign reserves
have recently increased significantly and many dealers believe the central bank
cannot afford to keep intervening en masse.Data released in Switzerland this week saw the May unemployment rate
remain unchanged at 4.0% while May consumer price inflation was off 0.1% m/m
and up 1.1% y/y.U.S. dollar bids are
cited around the US$ 1.1310 level.The euro gained ground vis-√†-vis the
Swiss franc as the single currency tested offers around the CHF 1.3870 level
while the British pound gained ground
vis-√†-vis the Swiss franc and tested offers around the CHF 1.6840 level.
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