Friday January 19, 2007 - 16:36:09 GMT
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Forex and Commodity Market Commentary and Analysis (19 January 2007)
The euro pulled back vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2920 level after running out of steam around the psychologically-important US$ 1.3000 figure. Technically, today‚Äôs intraday low was right around the 50% retracement of the move from $1.2480 to $1.3360. Data released in the U.S. today saw the mid-January University of Michigan consumer sentiment index print at 98.0, its highest level in some three years and much higher than expected. That result was up from December‚Äôs 91.7 level and both the current conditions index and expectations index notched improvements. Comments from Richmond Fed President Lacker caused the U.S. dollar to appreciate as Lacker noted ‚ÄúThe risk that core inflation surges again, or does not subside as desired, clearly remains the predominant macroeconomic policy risk.‚ÄĚ He added ‚ÄúWe can have healthy wage growth without inflation as long as we see commensurate growth in labor productivity.‚ÄĚ Lacker was the lone dissenter at several Federal Open Market Committee meetings last year and outgoing Boston Fed President Minehan replaces him as a voting member on the FOMC this year. Data released in the U.S. yesterday saw the Philadelphia Fed index of manufacturing improve to 8.3 from -2.3 in December. Sub-indices saw the new orders index rose to 1.3, the prices paid index recede to 11.9, and the employment index move higher to 7.9. In eurozone news, the Belgian National Bank‚Äôs January consumer confidence index improved to -1 from -8 in December. Euro bids are cited around the US$ 1.2885 level.
The yen weakened vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•121.40 level and was supported around the ¬•121.10 level. The pair this week reached its highest level since March 2003 as traders reacted to Bank of Japan‚Äôs decision to keep monetary policy unchanged. The central bank‚Äôs ultra-accommodative interest rate policy continues to encourage short yen carry trades. Data released in Japan today saw December corporate failures up 18.8% m/m. The Nikkei 225 stock index lost 0.35% to close at ¬•17,310.44. Dollar bids are cited around the ¬•120.70 level. The euro came off vis-√†-vis the yen as the single currency tested bids around the ¬•156.95 level and was capped around the ¬•157.65 level. The British pound moved higher vis-√†-vis the yen as sterling tested offers around the ¬•239.80 level while the Swiss franc moved lower vis-√†-vis the yen as the pair tested bids around the ¬•97.00 figure. The Chinese yuan depreciated vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.7739 in the over-the-counter market, up from CNY 7.7710. The Chinese government denied it will permit a 4% appreciation of the yuan this year. Data released in China today saw the urban registered unemployment rate print at 4.1% at the end of last year.
The British pound came off vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.9690 level and was capped around the $1.9770 level. Stops were reached below the $1.9710 level, representing the 76.4% retracement of the move from $1.9845 to $1.9260. Data released in the U.K. today saw December retail sales climb 1.1% m/m, the best performance for the month of December in three years, while the December provisional M4 money supply indicator was up 12.8% y/y. Notably, however, BBA reported that net mortgage lending growth decelerate to ‚ā§5.8 billion last month after position a record high in November. These data were consistent with results from BSA. Bank of England Monetary Policy Committee member Besley spoke hawkishly today and said ‚ÄúOne of the concerns of the MPC at all points is with second round effects going from inflation through to wage settlements.‚ÄĚ Many traders believe the central bank will lift interest rates another +25bps in Q1. Cable bids are cited around the US$ 1.9655 level. The euro came off vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6550 level and was capped around the ‚ā§0.6580 level.
The Swiss franc depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2530 level and was supported around the CHF 1.2450 level. Technically, today‚Äôs intraday high was just above the 38.2% retracement of the move from CHF 1.1285 to CHF 1.3285. Dollar offers are cited around the CHF 1.2580 level. The euro and British pound moved higher vis-√†-vis the Swiss franc as the crosses tested offers around the CHF 1.6190 and CHF 2.4685 levels, respectively.
The Australian dollar weakened vis-√†-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.7860 level and was capped around the US$ 0.7905 level. Australian dollar bids are cited around the $0.7850 level.
The Canadian dollar appreciated marginally vis-√†-vis the U.S. dollar today as the greenback tested bids around the C$ 1.1710 level and was capped around the C$ 1.1755 level. Technically, today‚Äôs intraday low was right around the 50% of the move from C$ 1.1625 to C$ 1.1800. Bank of Canada yesterday estimated that GDP will expand by 2.3% in 2007, down from an estimated growth level of 2.7% last year. BoC also reported the headline consumer price index ‚Äúshould average just above one per cent in the first half of 2007.‚ÄĚ Data released in Canada today saw November wholesale trade expand 0.1% m/m. U.S. dollar offers are cited around the C$ 1.1760 level.
Gold moved higher vis-√†-vis the U.S. dollar today as the yellow metal tested offers around the US$ 632.40 level and was supported around the $626.90 level. The pair moved to two-week highs yesterday. Silver moved higher vis-√†-vis the U.S. dollar as the pair tested offers around the $12.84 level and was supported around the $12.62 level.
Crude oil appreciated vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for March delivery tested offers around the US$ 52.58 level and was supported around the $51.49 level. OPEC reduced its 2007 oil demand growth forecast to up an annual 1.5% rate and now predicts 2006 oil demand expanded at an annual rate of 1%.
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