Forex Market Commentary and Analysis (24 June 2010)
The euro appreciated vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2385
level and was supported around the $1.2260 level.The common currency extended yesterday‚Äôs
gains that began after the Federal Open Market Committee released a policy
statement that was more dovish than expected.Two-year U.S. Treasury note yields are at or near lifetime lows, reflecting
the expectation that U.S. official rates will be on hold for some time.The Fed yesterday reported it ‚Äúanticipates that
economic conditions, including low rates of resource utilization, subdued
inflation trends, and stable inflation expectations, are likely to warrant
exceptionally low levels of the federal funds rate for an extended period.‚ÄĚThere is a spirited ongoing debate as to
whether the U.S. economy is likely to experience deflation or will maintain a
low-inflation course for some time.Data
released in the U.S. today saw May durable goods orders decline 1.1% y/y, a
sharp reversal from the upwardly-revised April print of +3.0%, while the
ex-transportation component was up 0.9%, up from April‚Äôs result of -0.8%.Also, weekly initial jobless claims fell to
457,000 and continuing jobless claims fell to 4.548 million.Data to be released tomorrow include Q1 gross
domestic product, the GDP price index, core PCE, and final June University of
Michigan consumer sentiment.The Fed
will sell US$ 2 billion in term-deposits on 28 June to drain cash from the
banking system.Traders will pay close
attention to the Group of Twenty meetings that are beginning in Toronto.There is a perception that U.S. officials
favour higher deficit spending while Europe favours reduced deficit spending.In
eurozone news, there were renewed concerns today that Greece‚Äôs situation
could worsen.Credit default swaps in
Greek debt surged 145 bps to a record 1,077 today.Eurozone data released today saw April
industrial new orders up 0.9% m/m and 22.1% y/y.German May import price data will be released
tomorrow along with the Ifo June business climate survey.French data released today saw May consumer
spending up 0.7% m/m and 1.9% y/y while May total jobseekers were higher by
22,600.Euro offers are cited around the
US$ 1.2570 level.
The yen appreciated vis-√†-vis the U.S. dollar today as the
greenback tested bids around the ¬•89.20 level and was capped around
the ¬•89.95 level. The pair lost ground
even though Japanese economic data revealed the pace of economic growth may be
moderating.It was reported that the
total merchandise trade balance more than halved in May to ¬•324.2 billion.Export growth cooled for the third consecutive
month but shipments abroad were up 32.1% y/y.The 1.2% m/m decline is partially attributable to the ongoing strength
of the yen and its impact on muting foreign demand for Japanese goods.Other data released in Japan overnight saw
the May corporate service price index decline 0.8% y/y, an improvement from
April‚Äôs decline of 1.1% y/y.Data to be
released in Japan overnight include June Tokyo-area consumer price inflation
and May nationwide consumer price inflation.The core ex-food and energy components are likely to remain in negative,
deflationary territory. The Nikkei 225 stock index gained 0.04% to close at
moved lower vis-√†-vis the yen as the single currency tested bids around the
¬•109.55 level and was capped around the ¬•111.00 figure.The
British pound moved lower vis-√†-vis the yen as sterling tested bids around
the ¬•133.45 level while the Swiss franc moved
lower vis-√†-vis the yen and tested bids around the ¬•80.75 level. In Chinese news, the U.S. dollar depreciated
vis-√†-vis the Chinese yuan as the greenback closed at CNY 6.8001 in the
over-the-counter market, down from CNY 6.8140. Data to be released in China overnight include
the June MNI business expectations survey and May industrial profits.The yuan has retained some of the gains it
earned this week following People‚Äôs Bank of China‚Äôs decision to eventually end
its two-year peg to the U.S. dollar and internationalize the yuan.China‚Äôs move to liberalize the yuan should
help to counter inflationary pressures and cause China to rely less on foreign
trade and focus more on domestic final private demand.Group of Twenty officials will meet with
President Hu in Toronto this week.
British pound depreciated vis-√†-vis the U.S. dollar today as cable tested bids
around the US$ 1.4915 level and was capped around the US$ 1.5010 level.Cable gave back some of yesterday‚Äôs gains
that it scored when minutes from Bank of England‚Äôs June Monetary Policy Committee
meeting were released. They evidenced a 7-to-1 vote to keep the benchmark
interest rate unchanged at 0.5%.MPC
member Sentance favoured a 25bps tightening to 0.75%, noting that inflation has
proven to be ‚Äúresilient‚ÄĚ since the end of the recession.In contrast to Sentance‚Äôs position, ‚Äúother
members thought that changes to the balance of risks were insufficient to
warrant a change in the stance.‚ÄĚCable
bids are cited around the US$ 1.4620 level.The euro appreciated
vis-√†-vis the British pound as the single currency tested offers around the
¬£0.8270 level and was supported around the ¬£0.8180 level.
franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids
around the CHF 1.0985 level and was capped around the CHF 1.1065 level. The Swiss government today reduced its deficit
projections for 2011-2013 and now sees a 2011 shortfall of CHF 600 million,
considerably less than the deficit of CHF 4.1 billion that was predicted in
August 2009.Swiss National Bank will
publish its quarterly bulletin tomorrow.Data released in Switzerland this week saw the May trade balance decline
sharply to CHF 820 million from the upwardly-revised April total of CHF 2.06
billion.This decline reflects the
impact of the strong franc and the limited success Swiss National Bank has had
in blunting the impact of the stronger franc through euro-buying
intervention.SNB member Jordan this
week said deflation risks have largely gone away and said there is currently no
need for intervention.Swiss National
Bank this week reported that its foreign currency investments rose to CHF 239
billion in May from CHF 153.6 billion in April, indicative of the significant
amount of franc-selling intervention the central bank has been conducting to
protect the Swiss export sector.U.S.
dollar offers are cited around the CHF 1.1470 level.The
euro depreciated vis-√†-vis the Swiss franc as the single currency tested bids
around the CHF 1.3555 level while the
British pound moved lower vis-√†-vis the Swiss franc and tested bids around
the CHF 1.6435 level.
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