Wednesday November 29, 2006 - 16:08:11 GMT
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Forex and Commodity Market Commentary and Analysis (29 November 2006)
The euro weakened vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3130 level and was capped around the $1.3215 level. After establishing a fresh multi-month high yesterday, the common currency backed away after Federal Reserve Chairman squashed the notion that the Federal Open Market Committee is already contemplating a monetary expansion next year. Bernanke reported ‚ÄúA failure of inflation to moderate as expected would be especially troublesome‚ÄĚ and characterized core inflation rates as ‚Äúuncomfortably high‚ÄĚ while mentioning labour costs as a key factor to watch. Philadelphia Fed President Plosser hawkishly said ‚ÄúWe need to remain vigilant and recognize that maintaining the current stance of policy, or even firming further, may be in the best interests of the economy‚Äôs long-run performance.‚ÄĚ Data released in the U.S. today saw Q3 GDP expand at an annualized 2.2% rate, above the previous estimate of 1.6% and above expectations, while the GDP deflator printed at 1.7%. These data suggest the U.S. economy may have been more healthy than originally anticipated for the quarter ending in September. The personal consumption expenditures measure of inflation expanded 2.8% y/y with the core rate up 2.4% y/y, still above the Fed‚Äôs perceived comfort zone on inflation. Other data released in the U.S. today saw October new home sales off 3.2% to 1.004 million annualized units with September‚Äôs tally was also downwardly revised. These data followed yesterday‚Äôs surprising increase in existing home sales data. Traders await the release of the Fed Beige Book later in the day. In eurozone news, German wholesale figures were off 0.1% m/m in October and up 5.3% y/y. French finance minister Breton verbally intervened against the euro‚Äôs recent upsurge and again called for ‚Äúcollective vigilance.‚ÄĚ European Central Bank President Trichet is scheduled to speak later in the North American session. Euro bids are cited around the US$ 1.3045 level.
The yen appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the ¬•115.55 level and was capped around the ¬•116.45 level. The pair continues to orbit the ¬•115.70 level, representing the 38.2% retracement of the move from ¬•109.00 to ¬•119.85. Bank of Japan Governor Fukui indicated the central bank will do its part to not surprise the markets when it raises interest rates. Fukui reported ‚ÄúIn order to increase the efficacy of monetary policy it is very important to explain the policy thinking fully to market participants. It's of utmost importance to secure transparency. In the past it was said that in order for monetary policy to be effective, surprises were needed. But recently the thinking is the opposite: for the improvement of monetary policy effects, it's very important for the policies be smoothly reflected in the expectation formulation of the private sector.‚ÄĚ Most traders believe the BoJ will not lift rates until Q1 2007. Data released in Japan today saw October industrial output climb 1.6% m/m, more-than-expected. The Nikkei 225 stock index climbed 1.39% to close at ¬•16,076.20. Dollar bids are cited around the ¬•115.20 level. The euro weakened vis-√†-vis the yen as the single currency tested bids around the ¬•152.55 level and was capped around the ¬•153.40 level. The British pound and Swiss franc depreciated vis-√†-vis the yen as the crosses tested bids around the ¬•225.70 and ¬•96.05 levels, respectively. In Chinese news, the yuan‚Äôs central parity was set at a record CNY 7.8394 vis-√†-vis the U.S. dollar, its lowest after the yuan was revalued on 21 July 2005. A Morgan Stanley economic report issued today predicts China‚Äôs economy will expand between 8% and 9% in 2007.
The British pound weakened vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.9470 level and was capped around the $1.9545 level. The pair was about five pips away from its highest print in December 2004 and prior to that, sterling has not been this high since the famed move in September 1992 when the U.K. left the European Exchange Rate Mechanism. Data released in the U.K. today saw Bank of England‚Äôs measure of mortgage lending and mortgage approvals reach their highest levels in three years last month with lending up ‚ā§9.8 billion, the largest gain since September 2003. Also, the October final M4 money supply expanded 0.9% m/m and 14.1% y/y. Bank of England Deputy Governor Lomax said the Monetary Policy Committee‚Äôs twelve rate-setting meetings per year are ‚Äúover the top.‚ÄĚ Cable bids are cited around the US$ 1.9370 level. The euro moved lower vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6735 level and was capped around the ‚ā§0.6765 level.
The Swiss franc came off vis-√†-vis the U.S. dollar today as the greenback tested offers around CHF 1.2095 level and was supported around the CHF 1.2010 level. Technically, the pair continues to orbit around the CHF 1.2050 level representing the 61.8% retracement of the move from CHF 1.1285 to CHF 1.3285. Data released in Switzerland today saw the KOF economic barometer fall to 1.73 points in November from a revised 1.95 in October and 2.16 in September. Dollar offers are cited around the CHF 1.2135/ 1.2210 levels. The euro and British pound moved higher vis-√†-vis the Swiss franc as the crosses tested offers around the CHF 1.5905 and CHF 2.3585 levels, respectively.
The Australian dollar gained marginal ground vis-√†-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7855 level and was supported around the $0.7820 level. Data released in Australia today saw the October trade balance for goods and services print at ‚ÄďA$ 1.263 billion, worse then September‚Äôs ‚ÄďA$ 728 million. Australian dollar bids are cited around the $0.7755 level.
The Canadian dollar weakened vis-√†-vis the U.S. dollar today as the greenback tested offers around the C$ 1.1390 level and was supported around the C$ 1.1295 level. Data released in Canada today saw the overall current account surplus rise by C$ 400 million in Q3 to C$ 5.1 billion. Also, Canadian factory prices were off 0.1% m/m while raw materials prices fell 2.8% after declining 5.2% in September. U.S. dollar offers are cited around the C$ 1.1450 level.
The New Zealand dollar weakened vis-√†-vis the U.S. dollar today as the kiwi tested bids around the US$ 0.6775 level and was capped around the $0.6810 level. New Zealand dollar offers are cited around the US$ 0.6870 level.
Gold came off vis-√†-vis the U.S. dollar today as the yellow metal tested bids around the US$ 634.98 level and was capped around the $640.50 level. Silver weakened vis-√†-vis the U.S. dollar as the pair tested bids around the $13.49 level and was capped around the $13.77 level.
Crude oil moved higher vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for January delivery tested offers around the US$ 62.02 level and was supported around the $60.98 level.
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