Forex Market Commentary and Analysis (30 June 2010)
The euro appreciated vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2305
level and was supported around the $1.2165 level. The common currency moved higher after it was
reported the European Central Bank would lend banks less than some dealers
estimated, suggesting funding strains in the eurozone may not be as severe as
expected.The ECB reported it will lend ‚ā¨131.9
billion to eurozone banks in a three-month tender whereas some expected the ECB
would lend as much as ‚ā¨300 billion.Banks
are due tomorrow to repay ‚ā¨442 billion under the ECB‚Äôs Long-Term Refinancing
Operation, one of its major facilities to counter the financial crisis. Traders pushed the euro lower, however, after
Moody‚Äôs Investors Service reported it is placing Spain‚Äôs Aaa local and foreign
currency government bond ratings on review for a possible downgrade. Data
released in the eurozone today saw the EMU-16 June consumer price inflation
estimate print at 1.4%, down from the prior reading of +1.6% and below
estimates.Data to be released tomorrow
include EMU-16 PMI manufacturing.Data
released in Germany today saw June unemployment decline 21,000 with the
unemployment rate remaining steady at 7.7%.May retail sales data will be released tomorrow.ECB President Trichet reported the ECB‚Äôs
covered bond-buying program has ended and said there‚Äôs less demand for ECB
liquidity than expected.German banks
have agreed to stress tests as soon as they can be examined. ECB member Mersch said he expects the eurozone‚Äôs
economic recovery to be ‚Äúuneven.‚ÄĚIn U.S. news, data released today saw
MBA mortgage applications reverse course and climb 8.8% while the June Chicago PMI
survey slumped to 59.1 from the previous reading of 59.7.The big news today was the June ADP
employment number.It fell to +13,000
from an upwardly-revised reading of +57,000 in May and these indicate lower-than-expected
private jobs creation.These data are
being closely scrutinized ahead of Friday‚Äôs release of June non-farm payrolls
data.Total payrolls are expected to
have decreased 125,000 while private payrolls are expected to have climbed
110,000.Traders will closely scrutinize
any revisions to previous month‚Äôs data.Chicago
Fed President Evana said the European crisis is a ‚Äúheadwind‚ÄĚ for the U.S.
economt and Atlanta Fed President Lockhart warned the U.S. economic recovery is
‚Äúnot yet sustainable.‚ÄĚFed Governor Duke
reported a return to pre-crisis lending levels may require years.Euro offers are cited around the US$
The yen depreciated vis-√†-vis the U.S. dollar today as the
greenback tested offers around the ¬•88.75 level and was supported around
the ¬•88.40 level. National Strategy
Minister Arai reported ‚ÄúStamping out deflation is our top policy priority‚ÄĚ and
added the yen‚Äôs strength ‚Äúmay be temporary.‚ÄĚEarlier this month, Prime Minister Kan called on Bank of Japan to
exercise its ‚Äúutmost efforts‚ÄĚ to beat deflation.Data released in Japan overnight saw June
small business confidence improve to 47.4 from the prior reading of 46.7.Also, June manufacturing PMI moved lower to
53.9 from the prior reading of 54.7 while May labour cash earnings were off
0.2% y/y, down from the upwardly revised print of +1.6% y/y.Additionally, May housing starts were off
4.6% y/y to 737,000 units and May construction orders were off 9.2% y/y.The big story in Japan tonight will be the
release of the Bank of Japan‚Äôs Q1 Tankan survey of corporate sentiment.Sentiment among large manufacturers is
expected to have improved to -4 from the prior reading of -14 while capex is
expected to have climbed 5.0%.Other
data to be released tonight include the June monetary base.The Nikkei 225 stock index lost 1.96% to
close at ¬•9,382.64.U.S. dollar bids are
cited around the ¬•86.29 level.The euro
moved higher vis-√†-vis the yen as the single currency tested offers around
the ¬•109.10 level and was supported around the ¬•107.65 level.The
British pound moved higher vis-√†-vis the yen as sterling tested offers
around the ¬•132.60 level while the Swiss
franc moved higher vis-√†-vis the yen and tested offers around the ¬•82.15 level.
In Chinese news, the U.S. dollar depreciated
vis-√†-vis the Chinese yuan as the greenback closed at CNY 6.7818 in the
over-the-counter market, down from CNY 6.7977. There is market chatter that June PMI data to
be released tonight will be on the weak side.People‚Äôs Bank of China reported it will it will strengthen banks‚Äô
capital requirements and said China needs to hasten economic
restructuring.Yuan forwards came off
the most in three weeks yesterday as dealers reacted to news that the U.S.
Conference Board revised its April survey number.
British pound depreciated vis-√†-vis the U.S. dollar today as cable tested bids
around the US$ 1.4980 level and was capped around the US$ 1.5075 level.Cable extended yesterday‚Äôs losses as traders
reduced exposure to sterling ahead of the quarter-end.Bank of England Monetary Policy Committee
member Posen said the MPC will work to keep inflation in check but conceded he
is a little more ‚Äúhumble‚ÄĚ about the BoE‚Äôs bond-buying capabilities than other
policymakers.Posen added he believes
the central bank‚Äôs easing programs can keep the economy out of a
recession.Data released in the U.K.
today saw June Nationwide house prices climbed 0.1% m/m and 8.7% y/y while Q1 total
business investment was up 7.8% q/q and off 7.7% y/y.June PMI manufacturing data will be released
tomorrow.Cable 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 ¬£0.8185 level and
was supported around the ¬£0.8085 level.
franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids
around the CHF 1.0790 level and was capped around the CHF 1.0855 level. Data released in Switzerland today saw the
June KOF Swiss leading indicator improve to 2.25 from the prior reading of
2.16.June PMI manufacturing data will
be released tomorrow.Swiss National
Bank member Danthine this week reported deflationary pressures have
added ‚ÄúIf the need (to raise interest rates) was felt, the SNB would be able to
react very quickly. But currently, we can work without having to hurry.‚ÄĚSwiss National Bank is expected to intervene
considerably less in the coming months after amassing a very large portfolio of
euro reserves to prevent the franc from appreciating too much.U.S. dollar offers are cited around the CHF
1.1470 level.The euro appreciated vis-√†-vis the Swiss franc as the single
currency tested offers around the CHF 1.3285 level while the British pound moved lower vis-√†-vis the Swiss franc and tested bids
around the CHF 1.6195 level.
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