Thursday November 30, 2006 - 15:46:56 GMT
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Forex and Commodity Market Commentary and Analysis (30 November 2006)
The euro extended recent gains vis-Ă -vis the U.S. dollar today as the single currency tested offers around the US$ 1.3215 level and was supported around the $1.3140 level. The common currency came within a few pips of eclipsing yesterdayâ€™s new multi-month high. The Federal Reserveâ€™s Beige Book was released yesterday and reported â€ścontinued moderate growthâ€ť in the U.S. economy and noted an â€śoverall decline in single family home sales.â€ť Data released in the U.S. today saw October personal income climb +0.4% while personal spending was up +0.2% with the inflation-adjusted spending rate at its fastest pace since July. October personal consumption expenditures were off 0.2% m/m after declining 0.3% in September and the PCE price index is up 1.5% over the past year, its slowest annual gain since July 2002. Core inflation was up 0.2% in October and is up 2.4% over the past twelve months, unchanged from Septemberâ€™s tally and still significantly above the Fedâ€™s perceived comfort zone. Also, weekly initial jobless claims climbed +34,000 to 357,000. Other U.S. data released today saw the Chicago November purchasing managers index come in weaker-than-expected at 49.9, down from 53.5 in October. Most sub-indices of the report were also weaker and this could portend a weaker national ISM figure. In eurozone news, EMU-12 GDP expanded 0.5% q/q in Q3 and was up 2.7% y/y. These data confirm the eurozoneâ€™s economy is expanding nicely despite nagging inflation pressures. Other data released today saw German unemployment fall below four million workers for the first time in four years with the unemployment rate down to 10.2% from 10.4%. Also, the EMU-12 November economic sentiment indicator printed at 110.3 while provisional EMU-12 November harmonized inflation was up 1.8% from 1.6% in October. Additionally, the European Commission lowered its Q4 growth forecast for the eurozone but raised its Q1 2007 growth estimates. European Central Bank President Trichet verbally intervened today on the euro saying â€śexcess volatility and disorderly movementsâ€ť in the currency markets are unwelcome. Euro bids are cited around the US$ 1.3110/ 1.3080 levels.
The yen appreciated vis-Ă -vis the U.S. dollar today as the greenback tested bids around the ÂĄ115.95 level and was capped around the ÂĄ116.55 level. Bank of Japan Policy Board member Noda spoke about the inevitable interest rate hike saying â€śIf economic and price developments move along our (semi-annual) outlook report, I think we will adjust interest rates slowly by closely monitoring the developments. Our basic policy stance is described as being 'forward-looking' - to foresee future developments as far as possible given the lag monetary policy actions have in having impact on the real economy, and respond in as flexible and nimble fashion as much as possible.â€ť Data released in Japan today saw October housing starts climb 2.2% y/y, the third consecutive monthly gain. Also, October orders received by the 50 largest contractors were up 8.8% y/y. Many Japanese economic data will be released tonight including consumer inflation numbers. The Nikkei 225 stock index climbed 1.23% to close at ÂĄ16,274.33. Dollar bids are cited around the ÂĄ115.70/ 20 levels. The euro moved higher vis-Ă -vis the yen as the single currency tested offers around the ÂĄ153.45 level and was supported around the ÂĄ152.90 level. The British pound and Swiss franc climbed higher vis-Ă -vis the yen as the crosses tested offers around the ÂĄ227.50 and ÂĄ96.35 levels, respectively. The Chinese yuan depreciated vis-Ă -vis the U.S. dollar as the greenback closed at CNY 7.8334 in the over-the-counter market, up from CNY 7.8305. The government confirmed it will continue to strengthen macroeconomic controls in 2007.
The British pound galloped higher vis-Ă -vis the U.S. dollar today as cable tested offers around the US$ 1.9585 level and was supported around the $1.9445 level. The pair has not been this strong since the U.K. abandoned the European Exchange Rate Mechanism in September 1992. Bank of England Governor King verbally intervened against sterlingâ€™s strength saying it is now â€śmuch more difficultâ€ť for companies to export to the U.S. Data released in the U.K. today saw Nationwide November house prices climb 1.4% m/m and were up 9.6% y/y while the GfK November consumer confidence index fell to -7 from -5 in October. Moreover, the CBIâ€™s distributive trades survey saw a balance of -9 among retailers who saw November sales weaker than year ago, the worst showing since Marchâ€™s -16 balance. BoE Monetary Policy Committee member Blanchflower testified today that wage growth in the economy has likely been overestimated while MPCâ€™s Besley and Bean argued wages have not declined enough. Cable bids are cited around the US$ 1.9500/ 1.9430 levels. The euro moved lower vis-Ă -vis the British pound as the single currency tested bids around the â‚¤0.6740 level and was capped around the â‚¤0.6760 level.
The Swiss franc appreciated vis-Ă -vis the U.S. dollar today as the greenback tested bids around the CHF 1.1995 level and was capped around the CHF 1.2105 level. The pair had not traded with a CHF 1.19 handle prior to today since May 2005. Data released in Switzerland today saw the November consumer price index down 0.04% m/m while the index climbed 0.5% y/y. Dollar offers are cited around the CHF 1.2165 level. The euro and British pound came off vis-Ă -vis the Swiss franc as the crosses tested bids around the CHF 1.5870 and CHF 2.3525 levels, respectively.
The Australian dollar appreciated vis-Ă -vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7905 level and was supported around the $0.7820 level. Data released in Australia today saw October private sector credit up 1.1% m/m and 14.7% y/y while Q3 private new capital expenditures were off 6.0% q/q and was up 7.9% y/y. Also, October retail sales were up 0.8%. Australian dollar bids are cited around the US$ 0.7835/ 0.7795 levels.
The Canadian dollar depreciated vis-Ă -vis the U.S. dollar today as the greenback tested offers around the C$ 1.1435 level and was supported around the C$ 1.1365 level. U.S. dollar offers are cited around the C$ 1.1450/ 1.1570 levels.
The New Zealand dollar gained ground vis-Ă -vis the U.S. dollar today as the kiwi tested offers around the US$ 0.6845 level and was supported around the $0.6775 level. New Zealand dollar offers are cited around the US$ 0.6895 level.
Gold made major moves higher vis-Ă -vis the U.S. dollar today as the yellow metal tested offers around the US$ 647.45 level and was supported around the $636.50 level. Strong downward moves in the U.S. dollar fueled the pairâ€™s move higher, as did weaker-than-expected U.S. economic data released today. Silver gained ground vis-Ă -vis the U.S. dollar as the pair tested offers around the US$ 13.95 level and was supported around the $13.50 level.
Crude oil moved higher vis-Ă -vis the U.S. dollar today as light, sweet NYMEX crude oil futures for January delivery tested offers around the US$ 63.15 level and was supported around the $62.20 level. Data released yesterday saw weekly U.S. crude oil and refined products inventories fall unexpectedly and this pushed energy higher, as did forecasts for a cold snap of weather in the eastern U.S. OPEC will convene in Nigeria on 14 December to discuss possible further production cuts.
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