Tuesday June 1, 2004 - 17:04:56 GMT
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GCI Financial - www.gcitrading.com
Daily Market Commentary and Analysis (1 June 2004)
The euro gained ground vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2265 level after finding good demand around the $1.2155 level. The move to intraday lows was driven by technicals as the common currency tested the 61.8% retracement level of the move from $1.2079 to $1.2300 before moving higher. Geopolitical concerns also conspired against the dollar today as dealers expressed concern with new attacks against Saudi oil workers. Also, near-month crude oil futures spiked higher above the $41.00 figure and some traders are now openly talking about a price of US$ 42.50 to $45.00 per barrel. G8 leaders will convene in Sea Island, Georgia this weekend and have pledged to include a statement about the escalating price of oil in their communiqué. Data released in the U.S. today saw a 1.6% increase in May Challenger layoffs, leading to increased speculation that this week’s May non-farm payrolls data on Friday will not be robust. Also, the May ISM index came in at 62.8, exceeding expectations and higher than April’s 62.4 level. Data released in the eurozone today saw EMU-12 Q1 GDP unrevised at +0.6% q/q and +1.3% y/y and the European Commission kept its Q2 EMU-12 GDP forecast unrevised in a range of +0.3% to +0.7%. Additionally, the EMU-12 May manufacturing PMI index came in at 54.7 compared with April’s 54.0 level with Germany, France, and Italy all registering improvements last month. It remains to be seen, however, if this translates into higher economic growth rates in the eurozone. Also, German April real wholesale sales were off 0.5% m/m and up +0.9% y/y. The EU today confirmed that four EMU aspirants, namely Cyprus, Estonia, Lithuania, and Slovenia, have applied to join the Exchange Rate Mechanism known as ERM2. Euro stops are cited below the $1.2140 level.
The yen retraced some of its recent gains vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥110.40 level during North American dealing. The move higher saw the pair test the 100-hour moving average and bids supported the pair around the ¥109.25 level overnight. The markets returned to normal today following the reduced liquidity seen during yesterday’s holiday in the U.S. and Europe. A rumour circulated in the markets that the MoF has been checking the exchange rate with agent banks following the announcement that the government did not intervene in the market between 28 April and 27 May. Bank of Japan Deputy Governor Muto reconfirmed the central bank will maintains its quantitative easing policy for a “considerable time” and added it is unclear when deflation will end. He also added the reform of Japan’s financial system has not been very successful thus far. The yen gained a little traction during Australasian dealing after a successful 10-year JGB auction that saw record demand. Data released in the U.S. today saw April overtime pay up 4.7% y/y, the 21st consecutive month of increases. The Nikkei 225 stock index gained 0.54% to close at ¥11,296.76. Dollar stops are cited below the ¥109.20 level. The euro scored a major move higher vis-à-vis the yen today as the single currency tested offers around the ¥135.15 level after finding bids around the ¥133.30 level. In Chinese news, People’s Bank of China Vice Governor Su Ning was on the wires saying any “premature change to the yuan peg could harm the global economy,” dampening expectations of a shift in China’s FX regime anytime soon.
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