Thursday June 1, 2006 - 14:20:33 GMT
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Forex and Commodity Market Commentary and Analysis (1 June 2006)
The euro depreciated vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2720 level and was capped around the US$ 1.2820 level. Stops were hit below the $1.2760 level, representing the 23.6% retracement of the move from $1.2970 to $1.2690. Data released in the U.S. today saw Q1 non-farm productivity print at 3.7%, less-than-expected, while unit labour costs came in less-than-expected at -0.6% from 3.0% in Q4. Traders were interested in these labour costs data because they could represent less pressure on the Federal Open Market Committee to tighten interest rates this month. Also, weekly initial jobless claims were up 7,000 to 336,000. Other data released in the U.S. today saw the May ISM manufacturing index recede to 54.4 from 57.3 in April while April construction spending was off 0.1%. The dollar went bid yesterday afternoon after minutes from the FOMC‚Äôs most interest rate deliberations were released and evidenced a discussion about raising rates by +50bps. This was considerably more hawkish than many traders expected and the minutes read core inflation ‚Äúwas now around the upper end of what they viewed as an acceptable range.‚ÄĚ If the FOMC does not tighten policy this month as most traders expect it to, the question becomes whether or not the Fed will move on 8 August and then what happens for the remainder of 2006. In eurozone news, Q1 EMU-12 GDP was confirmed at 0.6% q/q and the European Union upped its GDP forecasts for Q2 and Q3. Also, EMU-12 April unemployment printed at 8.0%, unchanged from March‚Äôs print. Other data saw May EMU-12 PMI improve to 57.0, its strongest showing since August 2000. A full +25bps by the European Central Bank next week is now priced in and the question is whether or not the ECB will go +50bps. Other data released today saw German manufacturing PMI improve to 58.5 from 58.1 in April. Euro offers are cited around the US$ 1.2795/ 1.2830 levels.
The yen depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•113.35 level and was supported around the ¬•112.40 level. Technically, the intraday low was about fifteen pips above the 23.6% retracement of the move from ¬•147.65 to ¬•101.30. Bank of Japan Policy Board member Haru reported the central bank is ‚Äúcautious‚ÄĚ about ending its zero per cent interest rate policy. Capital flows data released overnight saw foreign investors as net sellers of Japanese equities for the second consecutive week in the week to 27 May and were net buyers of bonds and money market instruments. Japanese investors were net buyers of foreign equities and foreign bonds. The Nikkei 225 stock index climbed 0.24% to close at ¬•15,503.74. Dollar bids are cited around the ¬•112.25/ 111.60 levels. The euro weakened vis-√†-vis the yen as the single currency tested bids around the ¬•143.70 level and was capped around the ¬•144.35 level. The British pound and Swiss franc slumped vis-√†-vis the yen as the crosses tested bids around the ¬•209.90 and ¬•92.05 levels, respectively. The Chinese yuan weakened vis-√†-vis the U.S. dollar as the greenback closed at CNY 8.0204 in the over-the-counter market, up from CNY 8.0175, and at CNY 8.0200 in the exchange-traded market. Data released in China overnight saw May PMI print at 54.8, up from 58.1 in April, while the CLSA PMI came in at 52.8, up from 52.7.
The British pound fell sharply vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.8565 level and was capped around the $1.8725 level. Chartists are eyeing the $1.8535 level as the pair‚Äôs next downside target. Data released in the U.K. today saw May CIPS manufacturing PMI slip to 53.2 from a revised 54.0 in April, still a decent number. Most traders do not expect Bank of England‚Äôs Monetary Policy Committee to change interest rates next week. Cable offers are cited around the US$ 1.8645/ 1.8720 levels. The euro moved higher vis-√†-vis the British pound as the single currency tested offers around the ‚ā§0.6860 level and was supported around the ‚ā§0.6840 level.
The Swiss franc weakened vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2295 level and was supported around the CHF 1.2170 level. Technically, today‚Äôs intraday high was right around the 50% retracement of the move from CHF 1.1285 to CHF 1.3285. Data released in Switzerland today saw May PMI print at 63.5, down from 63.8 in April. Also, Swiss GDP climbed 0.9% q/q in Q1 and 3.5% y/y. Dollar bids are cited around the CHF 1.2050 level. The euro and Swiss franc appreciated vis-√†-vis the Swiss franc as the crosses tested offers around the CHF 1.5645 and CHF 2.2850 levels, respectively.
The Australia depreciated vis-√†-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.7440 level and was capped around the $0.7530 level. Data released in Australia today saw May PMI print at 48.9, down from 50.3 in April, while private new capital expenditures climbed 0.6% q/q and 28.9% y/y. Australian dollar offers are cited around the US$ 0.7520 level.
The Canadian dollar shed ground vis-√†-vis the U.S. dollar today as the greenback tested offers around the C$ 1.1100 figure and was capped around the C$ 1.1000 figure. Dollar offers are cited around the C$ 1.1160 level.
The New Zealand dollar depreciated vis-√†-vis the U.S. dollar today as the kiwi tested bids around the US$ 0.6290 level and was capped around the $0.6355 level. New Zealand dollar offers are cited around the US$ 0.6375 level.
Gold fell sharply vis-√†-vis the U.S. dollar today as the yellow metal tested bids around the US$ 621.50 level and was capped around the $ 646.00 figure. The U.S. dollar‚Äôs strength and the U.S.‚Äôs overtures towards Iran caused gold to spin lower. Silver came off vis-√†-vis the U.S. dollar as the pair tested bids around the $11.56 level and was capped around the $12.54 level.
Crude oil weakened vis-√†-vis the U.S. dollar today as light, sweet crude NYMEX crude futures for July delivery tested bids around the US$ 70.05 level and was capped around the $71.44 level. The pair came off after the U.S. indicated it would join European countries in talks with Iran if Iran agreed to suspend its nuclear ambitions. Also, OPEC members are meeting in Caracas today and are expected to keep output levels near maximum capacity.
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