Thursday April 6, 2006 - 15:49:27 GMT
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Forex and Commodity Market Commentary and Analysis (6 April 2006)
The euro depreciated vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2210 level and was capped around the $1.2330 level. Stops were hit below the $1.2225 level, representing the 61.8% retracement of the move from $1.2590 to $1.1640. The common currency came off after European Central Bank President Trichet spoke and was relatively dovish in his remarks. Trichet said the market‚Äôs expectations of a May interest rate hike ‚Äúdo not correspond to the ECB‚Äôs thinking‚ÄĚ and added policymakers will monitor inflation risks ‚Äúvery closely,‚ÄĚ notably omitting the words ‚Äúexercise vigilance.‚ÄĚ Many dealers expected an ECB hike next month after Germany‚Äôs Ifo survey and eurozone PMI survey printed at multi-year highs. Both the ECB and the Federal Reserve have publicly stated their short-term monetary policymaking decisions will be guided by economic data. Trichet‚Äôs remarks open the doors for some appreciable late-week U.S. dollar gains, particularly if March non-farm payrolls are significantly above expectations of about 190,000 when data are released tomorrow. Data released in the U.S. today saw weekly initial jobless claims off 5,000 to 299,000. In other eurozone news, the German government announced the planned increase in value-added tax could cause annual inflation to increase 1.4% in that country. Euro offers are cited around the US$ 1.2340 level.
The yen weakened vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•117.80 level and was supported around the ¬•117.25 level. Technically, today‚Äôs intraday low was right around the 50% retracement of the move from ¬•119.00 to ¬•115.45. Data released in Japan overnight saw the February leading index decline to 80.0 from 81.8 in January. Also, it was reported that foreign investors were net purchasers of Japanese equities in the week to 1 April and were net sellers of Japanese bonds while Japanese investors were net buyers of foreign equities and net sellers of overseas bonds. Additionally, machine tool orders were up 4.5% y/y last month. The Nikkei 225 stock index climbed 1.42% to close at ¬•17,489.33, its highest close since July 2000 while the broader TOPIX index closed as its highest level since November 1991. Dollar bids are cited around the ¬•117.10 level. The euro weakened vis-√†-vis the yen as the single currency tested bids around the ¬•143.75 level and was capped around the ¬•144.85 level. The British pound appreciated vis-√†-vis the yen as sterling tested offers around the ¬•206.85 level while the Swiss franc weakened vis-√†-vis the yen and tested bids around the ¬•91.15 level. The Chinese yuan appreciated vis-√†-vis the U.S. dollar as the greenback closed at CNY 8.0080 in the over-the-counter market, down from CNY 8.0087. The government reiterated 2006 and 2007 GDP is estimated to be 9.5% and 8.8%, respectively. U.S. Treasury Secretary Snow reported China is ‚Äútoo cautious‚ÄĚ about making the yuan more flexible and added he expects the yuan to ‚Äúmove more‚ÄĚ over the next couple of years. The Chinese media reported China‚Äôs foreign exchange reserves will likely increase another US$ 100 billion in 2006.
The British pound lost marginal ground vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.7495 level and was capped around the US$ 1.7595 level. Data released in the U.K. today saw Q1 GDP climb 0.6% from the previous three months. Also, Halifax reported March house prices were up 0.9% m/m and 6.2% y/y and new construction orders gained 1% in the three months to February. Additionally, Nationwide house prices were up in Q1, the latest evidenced of a stabilization in the U.K. housing sector. Bank of England‚Äôs Monetary Policy Committee voted to keep interest rate unchanged again today for the eighth consecutive month, as expected. Cable offers are cited around the US$ 1.7600 figure. The euro moved lower vis-√†-vis the British pound as the single currency tested bids around the ¬£0.6965 level and was capped around the ¬£0.7015 level.
The Swiss franc depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2925 level and was supported around the CHF 1.2805 level. KOF lifted its GDP growth forecast for Switzerland to 2.1% for 2006, up from the previous level of 1.5%. KOF added it expects GDP to reach 1.9% in 2007, up from the previous reading of 1.8%. KOF also said it expects unemployment to decline and CPI to rise by 0.9% in 2006. Dollar bids are cited around the CHF 1.2760 level. The euro came off marginally vis-√†-vis the Swiss franc as the single currency tested bids around the CHF 1.5760 level while the British pound moved higher vis-√†-vis the Swiss franc and tested offers around the CHF 2.2640 level.
The Australian dollar appreciated vis-√†-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7330 and was supported around the $ 0.7260 level. Data released in Australia today saw the March unemployment rate fall to 5.0% from 5.2% in February. Australian dollar offers are cited around the US$ 0.7350 level.
The Canadian dollar made strong gains vis-√†-vis the U.S. dollar today as the greenback tested bids around the C$ 1.1520 level and was capped around the $1.1625 level. The March PMI Ivey survey will be released today. U.S. dollar offers are cited around the C$ 1.1815 level.
The New Zealand dollar was little-changed vis-√†-vis the U.S. dollar today as the greenback tested bids around the US$ 0.6120 level and was capped around the US$ 0.6185 level. New Zealand dollar offers are cited around the US$ 0.6230 level.
Gold moved higher vis-√†-vis the U.S. dollar today as the yellow metal tested offers around the US$ 601.60 level and was supported around the $587.00 figure. Traders finally took out the psychologically-important US$ 600.00 figure. Silver moved higher vis-√†-vis the U.S. dollar and tested offers around the $12.06 level and was supported around the $11.57 level.
Crude oil appreciated vis-√†-vis the U.S. dollar today as light, sweet crude for May delivery tested offers around the US$ 67.87 level and was supported around the $67.10 level. The U.S. government yesterday reported a significant 4.4 million barrel decline in weekly gasoline supplies for the fifth consecutive week. Also, crude inventories gained 2.1 million barrels last week. In geopolitical events, Iran announced it has test-fired a ‚Äútop secret‚ÄĚ missile while Shell expressed concerns that the Nigerian government will be able to rein in militants in that country.
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