Forex Market Commentary and Analysis (13 July 2010)
The euro appreciated sharply vis-√†-vis the U.S. dollar
today as the single currency tested offers
around the US$ 1.2735 level and was supported around the $1.2520 level. The common currency reached its highest level
since 12 May as dealers positioned themselves ahead of the U.S. corporate earnings
season that many dealers believe will evidence strong results for the second
quarter.Alcoa, the U.S. aluminum
production giant, reported better-than-expected earnings results.Dealers also moved into the euro after Greece
sold ‚ā¨1.625 billion in 26-week Treasury bills at a yield of 4.65% - below the
5% rate the European Union lent funds at in its bailout package to Greece.The euro easily absorbed news that Portugal‚Äôs
credit rating was reduced two notches to A1 by Moody‚Äôs on account of that
country‚Äôs expanding debt position and weaker economic growth.Eurozone finance ministers convened yesterday
and Dutch finance minister de Jager reported eurozone banks ‚Äúwill get a certain
period to refinance themselves in the market, but the countries will
immediately announce that there is a certain backstop.‚ÄĚEuropean regulators are conducting stress
tests on 91 different banks to evaluate their ability to withstand losses on
sovereign bond holdings.Data released
in the eurozone today saw the EMU-16 July ZEW economic sentiment survey come in
weaker-than-expected at 10.7, down from the prior reading of 18.8, while
Germany‚Äôs ZEW economic sentiment survey fell to 21.2 and the current situation
sub-index improved to 14.6.Other German
data saw the June wholesale price index decline 0.2% m/m and climb 5.1%
y/y.Other data released today saw
French June consumer price inflation up 0.0% m/m and 1.5% y/y while the
harmonized components were up 0.0% m/m and 1.7% y/y.In
U.S. news, traders are waiting to see if the U.S. Senate achieves a final
passage of the financial overhaul legislation on 15 July.The Federal Reserves sold US$ 2.12 billion of
term deposits in its third test auction today, a new tool the Fed may use to
absord excess liquidity from the banking system.Data released in the U.S. today saw June NFIB
small business optimism recede while the May trade balance deficit worsened to ‚ÄďUS$
42.3 billion.Many data including retail
sales will be released tomorrow along with minutes from the most recent Federal
Open Market Committee meeting.Euro
offers are cited around the US$ 1.2830 level.
The yen appreciated vis-√†-vis the U.S. dollar today as the
greenback tested bids around the ¬•88.00 figure and was capped around
the ¬•88.85 level. Bank of Japan‚Äôs Policy
Board is expected to keep its overnight call rate target unchanged at 0.10%
when its interest rate announcement is made tonight.BoJ Governor Shirakawa last week noted Japan‚Äôs
economy is ‚Äúlikely to stay on a recovery trend‚ÄĚ with improving domestic
demand.The central bank will likely
retain some policy tools ready to deploy in case the situation in Europe
deteriorates further or deflation worsens in Japan.BoJ is likely to be pressured by the
government following this weekend‚Äôs election loss, the yen‚Äôs ongoing strength,
and unstable equity markets.Last month,
BoJ unveiled details about its new ¬•3 trillion lending program to stimulate
lending to companies.Data released in
Japan overnight saw May industrial production up 0.1% m/m and 20.4% y/y with
May capacity utilization up 0.8% m/m.Also, June consumer confidence improved to 43.6 from the prior print of
42.7.The Nikkei 225 stock index lost
0.11% to close at ¬•9,537.23. U.S. dollar bids are cited around the ¬•86.29
moved higher vis-√†-vis the yen as the single currency tested offers around
the ¬•112.35 level and was supported around the ¬•110.65 level.The
British pound moved higher vis-√†-vis the yen as sterling tested offers around
the ¬•134.05 level while the Swiss franc moved
higher vis-√†-vis the yen and tested offers around the ¬•84.00 figure. In Chinese news, the U.S. dollar appreciated
vis-√†-vis the Chinese yuan as the greenback closed at CNY 6.7725 in the
over-the-counter market, up from CNY 6.7711. Data to be released in China tomorrow night
include Q2 GDP growth, June producer prices, June consumer prices, June retail
sales, and June industrial production.The economy is expected to have expanded an annualized 10.5% in the second
British pound appreciated sharply vis-√†-vis the U.S. dollar today as cable
tested offers around the US$ 1.5190 level and was supported around the US$ 1.4965
level.Data released in the U.K. today
saw June consumer price inflation up 0.1% n/n and 3.2% y/y while the core index
came in much stronger-than-expected at 3.1%, up from the prior result of
2.9%.DCLG May house prices were up
11.0% y/y and June Nationwide consumer confidence will be released tonight
followed by jobless data tomorrow.Sterling
climbed higher after the release of the CPI data on the premise that additional
Bank of England Monetary Policy Committee members will vote for higher interest
rates.BoE‚Äôs Main Bank Rate target currently
stands at 0.50%.MPC member Sentance
reported the MPC‚Äôs rate decision should support the private sector and said
rate-setting is becoming more difficult.MPC member Bailey said U.K. banks that are experiencing difficulties
should restructure their debts.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
¬£0.8390 level and was supported around the ¬£0.8315 level.
franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids
around the CHF 1.0515 level and was capped around the CHF 1.0645 level. Data released in Switzerland today saw June
producer and import prices decline 0.4% m/m and climb 0.9% y/y.Swiss National Bank President Hildebrand last
week said he is ‚Äúclosely monitoring‚ÄĚ the franc, adding its fluctuation has
‚Äúclearly increased.‚ÄĚ Most dealers
believe SNB has been forced to intervene less on account of all of the
euro-denominated assets on its balance sheet but some note the SNB will likely
continue to intervene at opportune levels.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 1.3400 figure while the
British pound moved higher vis-√†-vis the Swiss franc and tested offers
around the CHF 1.6055 level.
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