Forex Market Commentary and Analysis (11 June 2011)
The euro depreciated vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2045
level and was capped around the $1.2150 level.The common currency was unable to sustain intraday gains after it was
reported U.S. May retail sales tumbled 1.2% from an upwardly revised +0.6% in
April.The ex-autos component was off
1.1%, down sharply from the upwardly-revised +0.6% April reading.Other data released today saw April business
inventories print at +0.4% while June University of Michigan consumer sentiment
improved more-than-expected to 75.5 from the prior reading of 73.6.The decline in retail sales kept U.S.
equities under pressure but the common currency was unable to notch its fourth
consecutive daily gain.European Central
Bank member Stark reported the European Union will seek to get an ‚ÄúAAA‚ÄĚ rating
on the debt instruments it may use as a backstop to provide funding for the
eurozone in the event of additional sovereign credit problems. Stark added ‚Äúinflation
is still very well-anchored in the eurozone‚ÄĚ and said the ongoing crisis in the
eurozone is ‚Äúnot a crisis of the euro.‚ÄĚ ECB member Bini Smaghi reported the
eurozone will likely expand and said abandoning the euro would be ‚Äúhighly
detrimental.‚ÄĚIn U.S. news, Philadelphia Fed President Plosser reported ‚ÄúThe
economic recovery is on a sustainable path, and I expect further progress even
as we unwind the accommodative monetary and fiscal stimulus put in place during
the crisis.Although the recovery so far
has been quite mild given the recession‚Äôs severity, I believe that it is
becoming more broad-based.‚ÄĚ Vice Chairman Kohn will remain at the Fed beyond
his retirement date as his successor, San Francisco Fed President Yellen, has
not yet had her Senate confirmation hearing.Euro offers are cited around the US$ 1.2330 level.
The yen depreciated vis-√†-vis the U.S. dollar today as the
greenback tested offers around the ¬•91.75 level and was supported around
the ¬•91.25 level. 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.New Prime Minister Kan will likely continue
to pressure the central bank to expand its monetary policy further.BoJ‚Äôs Policy Board will next week convene and
is unlikely to alter monetary policy, aside from releasing details about its
new loan scheme.Data released in Japan this
week 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 this week 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 1.70% to close at ¬•9,705.25.The euro
moved lower vis-√†-vis the yen as the single currency tested bids around the
¬•110.25 level and was capped around the ¬•111.35 level.The
British pound moved lower vis-√†-vis the yen as sterling tested bids around
the ¬•132.65 level while the Swiss franc moved
lower vis-√†-vis the yen and tested bids around the ¬•79.30 level. In Chinese news, the U.S. dollar appreciated
vis-√†-vis the Chinese yuan as the greenback closed at CNY 6.8330 in the
over-the-counter market, up from CNY 6.8307. Data released in China today saw the May
producer price index up 7.1% y/y while May CPI was up a stronger-than-expected
3.1% y/y.Also, May retail sales were up
18.7% y/y, May industrial production was up 16.5% y/y, and May money supply
decreased year-over-year.It was also
reported that May new yuan loans fell to CNY 639.4 billion from the previous
reading of CNY 774.0 billion.Some of
these data were leaked earlier in the week and they led to higher global equity
prices.The Chinese government today experienced
its third failed treasury bill auction this year as banks demanded higher
yields to counter inflation.
British pound depreciated sharply vis-√†-vis the U.S. dollar today as cable
tested bids around the US$ 1.4500 figure and was capped around the $1.4755
level. Many data were released in the U.K. today. First, May producer price
inflation input was off 0.6% m/m and up 11.2% y/y with output up 0.3% m/m and
5.7% y/y.Core output was up 0.1% m/m
and 4.4% y/y.Also, April industrial
production was off 0.4% m/m and up 2.1% y/y while April manufacturing
production was off 0.4% m/m and up 3.4% y/y.Finally, the May NIESR GDP estimate printed at +0.6%.BoE reported U.K. residents‚Äô expectations for
inflation over the last twelve months reached 3.3% last month, its highest
level since August 2008.Cable bids are
cited around the US$ 1.4220 level.The euro appreciated vis-√†-vis the
British pound as the single currency tested offers around the ¬£0.8320 level and
was supported around the ¬£0.8210 level.
franc depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers
around the CHF 1.1545 level and was supported around the CHF 1.1405 level. Swiss National Bank President Hildebrand
reported Swiss banks should be allowed to go bankrupt.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 1.3945 level
while the British pound lost ground
vis-√†-vis the Swiss franc and tested bids around the CHF 1.6685 level.
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