Forex Market Commentary and Analysis (2 July 2010)
The euro appreciated vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2610
level and was supported around the $1.2480 level. Traders boosted the common currency to its
highest level since 21 May as the U.S. dollar was unable to gain traction from
a decrease in the June unemployment rate to 9.5%.In reality, the decline in the U.S.
unemployment rate was likely on account of negative factors.It was reported that June non-farm payrolls
fell 125,000, down from an upwardly-revised 433,000 in May, while June private
payrolls expanded to a lesser-than-expected 83,000.On a negative note, June average hourly
earningswere off 0.1% m/m and 1.7% y/y
and weekly hours worked ticked lower to 34.1These data are consistent with recent U.S. economic data that evidence a
moderating U.S. economy and a sluggish labour market that cannot seem to gain
any traction.Economists are concerned
that U.S. states are experiencing budget woes and may need to cut back on the
hiring and retention of government workers.Other data released today saw May factory orders decline 1.4%, reversing
course from April‚Äôs +1.0% gain.In eurozone news, dealers are still
reacting positively to the successful capital raisings by France and Spain this
week.This week, the European Central
Bank announced it is lending ‚ā¨111.2 billion in six-day funding to help banks
manage yesterday‚Äôs repayment of ‚ā¨442 billion in twelve-month funds ‚Äď the
largest facility ever awarded by the bank and in response to the financial
crisis.Data released in the eurozone
today saw EMU-16 May producer price inflation climb 0.3% m/m and 3.1% y/y while
the EMU-16 May unemployment rate was unchanged at 10.0%.Euro offers are cited around the US$
The yen depreciated vis-√†-vis the U.S. dollar today as the
greenback tested offers around the ¬•88.20 level and was supported around
the ¬•87.30 level. Traders reduced long exposure to the yen as the common
currency continued its ascent and reached its highest level since 21 May.The Japanese media continues to report Bank
of Japan may lift its 2010 economic growth forecast to around 2.5% from the
current forecast of 1.8%.New BoJ Policy
Board member Morimoto this week reported the economy ‚Äúis gradually recovering,
with the improvement of overseas economies as the starting point.‚ÄĚ There is speculation that Japan‚Äôs benchmark
ten-year Japanese government bond yield may decline below 1.0%.Data released in Japan overnight saw June
monetary base growth tick lower to 3.6% from 3.7% the previous month.The big news in Japan this week was an
improvement in the BoJ‚Äôs quarterly Tankan index of large manufacturers‚Äô
sentiment to +1 from the prior reading of -14.The large manufacturing outlook also improved to +3 and the
non-manufacturing sentiment index and outlook index also improved.Additionally, large all industries capex
moved higher to +4.4% from the prior reading of -0.4%.The Nikkei 225 stock index climbed 0.13% to
close at ¬•9,203.71.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 ¬•110.70 level and was supported around the ¬•109.45 level.The
British pound moved higher vis-√†-vis the yen as sterling tested offers
around the ¬•133.85 level while the Swiss
franc moved lower vis-√†-vis the yen and tested bids around the ¬•81.95 level.
In Chinese news, the U.S. dollar appreciated
vis-√†-vis the Chinese yuan as the greenback closed at CNY 6.7716 in the
over-the-counter market, down from CNY 6.7809. The
State Administration of Foreign Exchange reported the central bank will not
target massive foreign reserves or a long-term payment surplus.As expected, Chinese PMI data this week came
in weaker-than-expected with the June headline PMI manufacturing index
lower-than-expected at 52.1 and June HSBC PMI manufacturing lower at 50.4.
British pound appreciated vis-√†-vis the U.S. dollar today as cable tested offers
around the US$ 1.5230 level and was supported around the US$ 1.5150 level.Data released in the U.K. today saw June PMI
construction tick lower to 58.4.It was reported
yesterday that June PMI manufacturing declined as expected to 57.5 from the
prior reading of 58.0.Bank of England
released its quarterly credit conditions survey yesterday and it noted that
access to household credit expanded marginally in Q2 but conditions are
expected to tighten in Q3.BoE Monetary
Policy Committee member Miles reported the European bank funding situation is
‚Äúworrisome‚ÄĚ and said monetary tightening in the U.K. is not yet the proper
policy action.MPC member Posen this
week warned of a heightened risk of recession in the U.K.The central bank is expected to keep monetary
policy unchanged next week.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 ¬£0.8300 figure and
was supported around the ¬£0.8215 level.
franc depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers
around the CHF 1.0695 level and was supported around the CHF 1.0585 level. Many traders believe Swiss National Bank
intervened by selling francs yesterday, noting the recent appreciation of the
franc has been much too fast.On 17
June, SNB reported the threat of deflation has ‚Äúlargely disappeared,‚ÄĚ leading
to speculation it would curtail the massive interventions it undertook earlier
in the year.Data released in
Switzerland this week saw June PMI manufacturing decline to +65.7 from
+66.4.U.S. dollar offers are cited
around the CHF 1.0980 level.The euro appreciated vis-√†-vis the
Swiss franc as the single currency tested offers around the CHF 1.3430 level
while the British pound moved higher
vis-√†-vis the Swiss franc and tested offers around the CHF 1.6250 level.
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