Thursday February 1, 2007 - 17:21:38 GMT
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Forex and Commodity Market Commentary and Analysis (1 February 2007)
The euro came off vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3005 level and was capped around the $ 1.3050 level. Technically, today‚Äôs intraday high was right around the 76.4% retracement of the move from $1.3480 to $1.1640. The common currency moved sharply higher yesterday after the Federal Open Market Committee kept interest rates unchanged, as expected. The Fed reported ‚ÄúRecent indicators have suggested somewhat firmer economic growth, and some tentative signs of stabilization have appeared in the housing market. Overall, the economy seems likely to expand at a moderate pace over coming quarters. Readings on core inflation have improved modestly in recent months, and inflation pressures seem likely to moderate over time. However, the high level of resource utilization has the potential to sustain inflation pressures. The Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.‚ÄĚ Albeit the Fed was more optimistic about economic growth, traders largely viewed this as a mildly dovish statement. Data released in the U.S. today saw December consumer spending rise 0.7% after climbing 0.5% in November while personal incomes rose 0.5% after rising 0.3% in November. Notably, the U.S. savings rate was negative for the second consecutive year. Over the past year, the PCE price index has climbed 2.3% and core inflation excluding food and energy was up 0.1% m/m and 2.2% y/y. Other data released in the U.S. today saw the January ISM manufacturing index print weaker-than-expected at 49.3, down from 51.4, and this evidences the same type of deceleration in the manufacturing sector that yesterday‚Äôs Chicago PMI survey reported. The ISM‚Äôs new orders sub-index was down and the prices paid component rose sharply to 53.0 from 47.5 in December. Additionally, weekly initial jobless claims were off 20,000 to 307,000 in the week ending 27 January. In eurozone news, the EMU-13 January manufacturing PMI survey printed at 55.5, its lowest level in eleven months, while German December orders for machinery and new plant were up 8% y/y. Euro bids are cited around the US$ 1.2885 level.
The yen appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the ¬•120.10 level and was capped around the ¬•120.90 level. Technically, today‚Äôs intraday low was right around the 50% retracement of the move from ¬•118.00 to ¬•122.15. Traders bought yen as some short yen carry trades were closed in anticipation of Group of Seven officials mentioning the yen‚Äôs weakness in their communiqu√© after their meeting in Germany on 9-10 February. MoF‚Äôs Watanabe said he doesn‚Äôt think the G7 ‚Äúwill pick up the yen weakness specifically as an agenda item‚ÄĚ and added the MoF ‚Äúneeds to calmly monitor‚ÄĚ the market‚Äôs movements. Japanese officials are clearly trying to avert a volatile appreciation of the yen when Japanese interest rates are finally lifted. U.S. Treasury Secretary Paulson yesterday said he is watching the yen ‚Äúvery, very closely.‚ÄĚ Capital flows data released overnight saw foreigners purchase a net ¬•483.1 billion in Japanese equities in the last week. The Nikkei published forecasts estimating real GDP expanded 0.9% q/q and 3.7% y/y in Q4. The Nikkei 225 stock index climbed 0.78% to close at ¬•17,519.50. Dollar bids are cited around the ¬•119.60 level. The euro weakened vis-√†-vis the yen as the single currency tested bids around the ¬•156.60 level and was capped around the ¬•157.50 level. The British pound and Swiss franc came off vis-√†-vis the yen as the crosses tested bids around the ¬•236.55 and ¬•96.70 levels, respectively. The Chinese yuan appreciated vis-√†-vis the U.S. dollar today as the greenback closed at CNY 7.7585 in the over-the-counter market, down from CNY 7.7739 and a new all-time post-yuan revaluation low. Data released in China today saw the CLSA January PMI manufacturing survey print at 52.0, down from 52.4 in December, while the CFLP January manufacturing PMI survey improved to 55.1 from 54.8. The Chinese media is reporting the government will establish a state foreign exchange investment company this year to help manage China‚Äôs massive foreign exchange reserves.
The British pound appreciated sharply vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 1.9735 level and was supported around the $1.9620 level. Technically, today‚Äôs intraday high was just below the 61.8% retracement of the move from $1.9785 to $1.9480. Data released in the U.K. today saw the January manufacturing PMI survey print at 52.8 from a revised 52.0 in December. Some traders believe Bank of England remains concerned with the increase in output prices. Cable bids are cited around the US$ 1.9585 level. The euro came off vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6605 level and was capped around the ‚ā§0.6635 level.
The Swiss franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the CHF 1.2390 level and was capped around the CHF 1.2460 level. Technically, today‚Äôs intraday low was right around the 38.2% retracement of the move from CHF 1.3235 to CHF 1.1875. Data released in Switzerland today saw the December trade surplus narrow to CHF 430 million from CHF 1.3 billion in November. Traders are speculating that Swiss National Bank President Roth will verbally intervene against the franc‚Äôs recent weakness. Dollar offers are cited around the CHF 1.2520 level. The euro came off vis-√†-vis the Swiss franc as the pair tested bids around the CHF 1.6165 level while the British pound moved higher vis-√†-vis the Swiss franc and tested offers around the CHF 2.4495 level.
The Australian dollar weakened vis-√†-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.7735 level and was capped around the $0.7765 level. Data released in Australia today saw the AIG manufacturing performance index of 1.1 index points to 51.3. Australian dollar bids are cited around the US$ 0.7700 figure.
The Canadian dollar appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the C$ 1.1795 level and was capped around the C$ 1.1795 level. U.S. dollar bids are cited around the C$ 1.1690 level.
Gold moved higher vis-√†-vis the U.S. dollar today as the yellow metal tested offers around the US$ 661.35 level and was supported around the $651.95 level. The pair established a fresh six-month high yesterday after the U.S. dollar moved lower on account of the FOMC‚Äôs mildly dovish policy statement. Silver moved higher vis-√†-vis the U.S. dollar as the pair tested offers around the US$ 13.81 level and was supported around the $13.55 level.
Crude oil moved higher vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for March delivery tested offers around the US$ 58.39 level and was supported around the $ 57.14 level. OPEC implements its second round of production cuts today, reducing daily output by 500,000 barrels per day.
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