Thursday April 27, 2006 - 15:18:40 GMT
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GCI Financial - www.gcitrading.com
Forex and Commodity Market Commentary and Analysis (27 April 2006)
The euro appreciated sharply vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2495 level and was supported around the $1.2405 level. The common currency moved to intraday and multi-month highs after testimony from Fed Chairman Bernanke began. Bernanke said ‚Äú‚Ä¶data arriving since the meeting have not materially changed that assessment (as reported in March the Federal Open Market Committee statement).‚ÄĚ He cited the current account as a significant problem that needs to be addressed and continues to see oil prices as a problem for the economy. Traders believe the FOMC will lift the federal funds target rate by +25bps to 5.00% on 10 May and a smaller camp believes the Fed will move again at the end of June. Any inkling that the Fed may not move in June or perhaps in May will dent the U.S. dollar even further as it would imply the end of the Fed‚Äôs current tightening cycle. Data released in the U.S. today saw weekly initial jobless claims rise +11,000 to 315,000 and continuing jobless claims were up at 2.449 million. Claims have been hovering around the 300,000 figure for several weeks and next week‚Äôs April non-farm payrolls number will be of extreme interest to traders. The Fed‚Äôs Beige Book released yesterday confirmed the housing market is moderating. In eurozone news, European Central Bank Vice President Garganas warned interest rates are below their normal level and added no one can predict how high rates will go. Garganas also noted the ECB can tighten monetary policy whenever needed and this calls into question next Thursday‚Äôs ECB Governing Council meeting. ECB President Trichet last month suggested a rate hike is not necessarily on the cards but recent EMU-12 economic data have been strong and ECB policymakers have been hawkish in their public statements. Data released in the eurozone today saw the German April jobless tally off 40,000 m/m. Euro offers are cited around the US$ 1.2560/ 1.2775 levels.
The yen moved lower vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•115.10 level and was supported around the ¬•114.20 level. Earlier, however, the pair established a new weekly low at levels not seen since late January after People‚Äôs Bank of China tightened monetary policy for the first time since October 2004. Traders await many economic data tonight out of Japan including CPI, employment numbers, household spending, retail trade, and industrial production. MoF‚Äôs Watanabe verbally intervened today saying FX traders misinterpreted the G7‚Äôs statement, adding it did not call for an adjustment in the dollar. Bank of Japan will release its semi-annual report on the economy and prices tonight and BoJ Governor Fukui will follow with comments. Trades will closely monitor his words for any clues about when the central bank could lift interest rates from their current near-zero per cent level. The Nikkei 225 stock index climbed 0.34% to close at ¬•17,114.54. Dollar bids are cited around the ¬•114.45 level. The euro came off marginally vis-√†-vis the yen as the single currency tested bids around the ¬•142.05 level and was capped around the ¬•143.05 level. The British pound and Swiss franc moved higher vis-√†-vis the yen as the crosses tested offers around the ¬•205.30 and ¬•90.40 levels, respectively. The Chinese yuan appreciated vis-√†-vis the U.S. dollar today as the greenback closed at CNY 8.0161 in the over-the-counter market, down from CNY 8.0183, and at CNY 8.0161 in the exchange-traded market. The big news in China today was that People‚Äôs Bank of China lifted its benchmark one-year lending by 27bps to 5.85%, the first increase since October 2004. This policy move follows recent economic data that China‚Äôs economy grew 10.2% in Q1. Data released in China today saw end-March urban unemployment of 4.2%. A PBOC policymaker today warned that too much of China‚Äôs foreign exchange reserves are being invested in U.S. Treasuries and reiterate the yuan will be permitted to appreciate ‚Äúin a gradual manner.‚ÄĚ
The British pound moved sharply higher vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 1.8010 level and was supported around the $1.7815 level. The pair has not been this strong since September 2005 and stops were hit above the $1.8000/05 level, representing the 38.2% retracement level of the move from $1.9550 to $1.7045. Data released in the U.K. today saw Nationwide house price growth decelerate appreciably to 0.1% m/m, down from March‚Äôs 1.1% gain. The April GfK consumer confidence survey will be released tomorrow. Cable offers are cited around the US$ 1.8165 level. The euro weakened vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6950 level and was capped around the ‚ā§0.6980 level.
The Swiss franc made sizable gains vis-√†-vis the U.S. dollar today as the greenback tested bids around the CHF 1.2575 level and was capped around the CHF 1.2745 level. The pair has not been this weak since January and traders appear to be gunning for the CHF 1.2530 level. Swiss National Bank President Roth speaks tomorrow. Dollar bids are cited around the CHF 1.2430 level. The euro moved lower vis-√†-vis the Swiss franc as the single currency tested bids around the CHF 1.5780 level while the British pound moved higher vis-√†-vis the Swiss franc and tested offers around the CHF 2.2740 level.
The Australian dollar moved higher vis-√†-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7575 level and was supported around the $0.7490 level. Australian dollar offers are cited around the $0.7615 level.
The Canadian dollar appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the C$ 1.1220 level and was capped around the C$ 1.1315 level. U.S. dollar offers are cited around the C$ 1.1875 level.
The New Zealand dollar moved marginally higher vis-√†-vis the U.S. dollar today as the kiwi tested offers around the US$ 0.6350 level and was supported around the $0.6270 level. Reserve Bank of New Zealand kept its official cash rate steady at 7.25% and reiterated its intention to keep rates unchanged for the rest of the year. RBNZ has tightened monetary policy nine time by a cumulative 225bps since January 2004. New Zealand dollar offers are cited around the US$ 0.6380 level.
Gold appreciated vis-√†-vis the U.S. dollar today as the yellow metal tested offers around the US$ 643.15 level and was supported around the $626.70 level. Silver moved higher vis-√†-vis the U.S. dollar as the pair tested offers around the US$ 13.17 level and was supported around the $12.26 level.
Crude oil came off vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude futures for June delivery tested bids around the US$ 71.02 level and was capped around the $72.04 level. Traders dumped crude yesterday and today after EIA reported U.S. crude runs increased 343,000 barrels per day last week. Concern that that the U.S. may have insufficient gasoline stocks to meet peak summer demand appear to be receding. Tomorrow‚Äôs IAEA report to the United Nations Security Council on Iran‚Äôs nuclear ambitions will be critical.
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