Tuesday May 30, 2006 - 14:46:50 GMT
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Forex and Commodity Market Commentary and Analysis (30 May 2006)
The euro spun higher vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2880 level and was supported around the $ 1.2740 level. The common currency moved to intraday highs after it was confirmed that U.S. Treasury Secretary Snow would be replaced by Goldman Sachs Chairman Hank Paulson. The latter is known as a markets man and traders believe this may represent the Bush administration‚Äôs attempt to pressure China more on liberalizing its yuan currency. The pair was bid earlier after it was reported EMU-12 M3 money supply expanded 8.8% y/y last month, up from a downwardly revised 8.5% in March. This came in hotter-than-expected and increases the likelihood the European Central Bank will raise interest rates next week. ECB‚Äôs Liebscher today said there is a broad spectrum of risks to price stability and reiterated ‚Äústrong vigilance‚ÄĚ is essential. Many dealers believe the ECB could lift its main refinancing rate by +50bps next week while others see only a +25bps move higher. Eurogroup President Juncker called on EMU-12 countries to make ‚Äúan additional effort‚ÄĚ to get their public finances in order. Data released in Germany today saw April wholesale sales climb 1.8% m/m and were off 1.6% y/y. In U.S. news, May consumer confidence fell to 103.2 from April‚Äôs 109.8 but was a little stronger-than-expected. Chicago Fed President Moskow was quite hawkish in his remarks today and said consumer prices need to move to the middle of the Fed‚Äôs perceived comfort zone with regard to inflation. The big numbers in the U.S. this week include Thursday‚Äôs ISM manufacturing index survey and Friday‚Äôs May non-farm payrolls data. Euro offers are cited around the US$ 1.2905 level.
The yen lost marginal ground vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•112.80 level and was supported around the ¬•111.60 level. Technically, today‚Äôs intraday low was about twenty pips above the 38.2% retracement of the move from ¬•109.00 to ¬•112.90. Bank of Japan Governor Fukui spoke overnight and said the Japanese economy has ‚Äújust dragged itself out of an intensive care unit‚ÄĚ and added the decision to lift interest rates from their current near zero per cent level ‚Äúhinges on economic conditions and prices at the time.‚ÄĚ Bank of Japan‚Äôs Policy Board convenes on 14-15 June but most traders do not expect a move higher in rates until July at the earliest. For the second consecutive day, the central bank injected funds into the money market to prevent the overnight call rate from escalating, about ¬•500 billion total. Data released in Japan today saw April industrial output climb 1.5% m/m while the April unemployment rate was steady at 4.1%. Also, April household spending was off 2.0% y/y. Economy minister Yosano said it is natural for the market to determine the yen‚Äôs exchange rate but added sharp movements in the exchange rate are not desirable. The Nikkei 225 stock index lost 0.35% to close at ¬•15,859.45. Dollar bids are cited around the ¬•110.95 level. The euro moved higher vis-√†-vis the yen as the single currency tested offers around the ¬•144.35 level and was supported around the ¬•143.30 level. The British pound and Swiss franc gained ground vis-√†-vis the yen as the crosses tested offers around the ¬•210.95 and ¬•92.55 levels, respectively. The Chinese yuan weakened vis-√†-vis the U.S. dollar today as the greenback closed at CNY 8.0320 in the over-the-counter market, up from CNY 8.0211, and at CNY 8.0266 in the exchange-traded market. Ratings agency Fitch warned China‚Äôs financial system could be facing some US$ 220 billion in losses due to bad loans.
The British pound scored sharp gains vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 1.8820 level and was supported around the $1.8575 level. Stops were hit above the $1.8720/ 75 levels and chartist are eyeing the 1.8835 level. Traders lifted sterling ahead of many economic data that will be released tomorrow including Bank of England household borrowing, GfK consumer confidence, and the CBI‚Äôs retail sales survey. Nationwide house prices will also be released tomorrow and are expected to evidence additional increases. Cable offers are cited around the US$ 1.8905 level. The euro weakened vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6835 level and was capped around the ‚ā§0.6865 level.
The Swiss franc gained strong ground vis-√†-vis the U.S. dollar today as the greenback tested bids around the CHF 1.2065 level and was capped around the CHF 1.2255 level. Technically, today‚Äôs intraday low was right around the 61.8% retracement of the move from CHF 1.1920 to CHF 1.2300. Dollar bids are cited around the CHF 1.2010 level. The euro and British pound moved lower vis-√†-vis the Swiss franc as the crosses tested bids around the CHF 1.5575 and CHF 2.2720 levels, respectively.
The Australian dollar appreciated vis-√†-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7645 level and was supported around the $0.7565 level. Data released in Australia today saw April retail sales climb 1.4% m/m. Australian dollar offers are cited around the US$ 0.7700 figure.
The Canadian dollar appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the C$ 1.0980 level and was capped around the C$ 1.1065 level. The pair is poised to test multi-decade lows that were established earlier this month. U.S. dollar offers are cited around the C$ 1.1090 level.
The New Zealand dollar appreciated vis-√†-vis the U.S. dollar today as the kiwi tested offers around the US$ 0.6405 level and was supported around the US$ 0.6330 level. New Zealand dollar offers are cited around the US$ 0.6495 level.
Gold made strong gains vis-√†-vis the U.S. dollar today as the yellow metal tested offers around the US$ 662.10 level and was supported around the $648.95 level. The pullback in the U.S. dollar was positive for gold. Silver moved higher vis-√†-vis the U.S. dollar as the pair tested offers around the US$ 13.35 level and was supported around the $12.67 level.
Crude oil gained ground vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude futures for July delivery tested offers around the US$ 72.64 level and was supported around the $71.21 level. OPEC announced it will continue to produce oil near maximum capacity and will meet on Thursday in Caracas. Iran yesterday indicated it will not shift all of its uranium enrichment activities to Russia. Global leaders convene in Europe this week to work out more details regarding proposed sanctions against Iran. The pair partially moved higher today on news that Chinese demand jumped 10.8% y/y last month.
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