Forex Market Commentary and Analysis (17 June 2010)
The euro appreciated vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2410
level and was supported around the $1.2240 level. The common currency continued its ascent and
reached its highest level since 28 May as dealers reacted positively to a
successful ‚ā¨3 billion Spanish bond auction and news that Bank of Spain will
publish the details of the stress tests on its banks and banking system. European Union officials will convene in
Brussels to discuss economic issues and the Stability and Growth Pact.There is an initiative among some European
leaders to publish the stress tests on all European banks.The European Central Bank released its June
monthly bulletin today and it was nearly identical to remarks made by ECB
President Trichet last week after the ECB kept its main refinancing rate
unchanged at 1.0%.The EU and the
International Monetary Fund reported Greece is making good progress to reduce
its deficit pursuant to its ‚ā¨110 billion rescue package.The EU will also seek a global transaction
tax. Germany‚Äôs Kiel Institute today
predicted the ECB will hike rates in Q4 2011.Data released in the eurozone today saw April construction output
decline 0.3% m/m and fall 6.1% y/y.In U.S. news, data released today saw
May headline consumer price inflation off 0.2% m/m and up 2.0% y/y while the
ex-food and energy component was up 0.1% m/m and 0.9% y/y.These data reflect the fact that core
inflation remains very tame.Other data
saw weekly initial jobless claims climb to 472,000 from 460,000 while
continuing jobless claims increased to 4.571 million.Other data saw the June Philadelphia Fed
index decline to 8.0 from 21.4 and May leading indicators improved to 0.4% from
0.0%.Finally, the Q1 current account
balance worsened to ‚ÄďUS$ 109.0 billion from the revised previous level of ‚ÄďUS$
100.9 billion.U.S. legislators are
seeking to force the Fed to make greater disclosures.Euro offers are cited around the US$
The yen appreciated vis-√†-vis the U.S. dollar today as the
greenback tested bids around the ¬•90.95 level and was capped around
the ¬•91.45 level. A Reuters survey is
noting Japanese manufacturers are the most optimistic they have been in a
couple of years and this could preface an improvement in next month‚Äôs Bank of
Japan Tankan survey.Japanese household
assets are now at their highest level in nearly two years and Japanese companies
are sitting on a record amount of cash totaling about ¬•202.7 trillion.Households‚Äô financial assets surged 3.1% y/y
to ¬•1.453 trillion and these data evidence the degree to which companies and
consumer are hoarding cash.Moreover,
the household data reflect the significant deflation problem in Japan where
final private demand remains anemic.Yesterday, Bank of Japan kept its economic assessment unchanged after
improving its assessment in May following better capital spending and foreign
trade. Other data released overnight saw the April leading index remain steady
at 101.7 while the April coincident index fell to 101.3.Minutes from the BoJ May Policy Board meeting
will be released tonight. The Nikkei 225 stock index lost 0.67% to close at ¬•9,999.40.The
euro moved higher vis-√†-vis the yen as the single currency tested offers around
the ¬•113.15 level and was supported around the ¬•111.65 level.The
British pound moved higher vis-√†-vis the yen as sterling tested offers
around the ¬•135.45 level while the Swiss
franc moved higher vis-√†-vis the yen and tested offers around the ¬•82.05 level.
In Chinese news, the U.S. dollar depreciated
vis-√†-vis the Chinese yuan as the greenback closed at CNY 6.8291 in the
over-the-counter market, down from CNY 6.8334. People‚Äôs Bank of China sold one-year bills at
an unchanged yield overnight for the first time in nearly three weeks and this
is a signal from the central bank they are not contemplating raising rates
now.A PBoC survey released overnight
indicated a record number of Chinese households have called home prices ‚Äúunacceptable‚ÄĚ
on account of dissatisfaction with the level of inflation.PBoC promoted Du Jinfu to be a Vice
British pound appreciated vis-√†-vis the U.S. dollar today as cable tested offers
around the US$ 1.4835 level and was supported around the US$ 1.4645 level. Data
released in the U.K. today saw May headline retail sales climb 0.6% m/m and 2.2%
y/y while the ex-auto fuel component was up 0.5% m/m and 3.4% y/y.Also, June CBI trends total orders worsened
to -23 from the previous -18 reading.Chancellor
of the Exchequer Osborne spoke last night and said the U.K. government plans to
abolish the Financial Services Authority and provide most of its power to the
Bank of England.Osborne plans to
replace the regulator with three entities over the next two years.Critics have suggested Brussels will still
call the shorts and this amounts to little more than re-branding of regulatory
duties.Hector Sants is becoming a new
Deputy Governor at Bank of England.BoE
Governor King indicated he welcomes the central bank‚Äôs new responsibilities and
indicated policy will be tightened at an appropriate time, noting rates may be
lifted before bonds are sold.The April
ILO unemployment rate ticked lower to 7.9%.The euro appreciated
vis-√†-vis the British pound as the single currency tested offers around the
¬£0.8380 level and was supported around the ¬£0.8335 level.
franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested
bids around the CHF 1.1110 level and was capped around the CHF 1.1330 level. As expected, Swiss National Bank kept its
three-month Swiss franc Libor target rate unchanged at 0.25%. Swiss National
Bank Chairman Hildebrand effectively eased its stance on the Swiss franc today,
saying the risks of deflation have ‚Äúlargely disappeared.‚ÄĚSNB also warned it cannot keep interest rates
at a record low in the medium term without engendering inflation.Traders interpreted these comments as an
indication SNB will be less likely to intervene by buying euro for francs.SNB also raised its 2010 economic growth
forecast to 2.0% from about 1.5% in March.SNB also sees CPI around 2.2% in 2012 and accelerating to 3.1% in early
2013.Data released in Switzerland today
saw Q1 industrial production off 7.8% q/q and up 5.3% y/y.U.S. dollar offers are cited around the CHF
1.1470 level.The euro came off vis-√†-vis the Swiss franc as the single currency
tested bids around the CHF 1.3755 level while the British pound moved lower vis-√†-vis the Swiss franc and tested
bids around the CHF 1.6430 level.
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