Friday February 2, 2007 - 15:18:18 GMT
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Forex and Commodity Market Commentary and Analysis (2 February 2007)
The euro depreciated vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2975 level and was capped around the $1.3065 level. The common currency darted higher after the release of the all-important U.S. January non-farm payrolls data that saw 111,000 new jobs created last month, about 40,000 less than were expected. The unemployment rate ticked up to 4.6% from 4.5% and average hourly earnings were up +0.2%. Notably, however, there was a combined upward revision of 81,000 to November‚Äôs and December‚Äôs job tallies. Collectively, these data suggest there will not be appreciable pressure on the Federal Reserve to lift interest rates anytime soon. At the same time, however, these data will do little to push the Fed towards lowering rates anytime soon. Other data released in the U.S. today saw the final January University of Michigan consumer sentiment index print at 96.9, up from 91.7 in December while December factory orders grew 2.4% from 1.2% in November. In eurozone news, the EMU-12 December producer price index was flat m/m and up 4.1% y/y. Euro bids are cited around the US$ 1.2925 level.
The yen depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•121.10 level and was supported around the ¬•120.60 level. Technically, today‚Äôs intraday low was right around the 38.2% retracement of the move from ¬•118.00 to ¬•122.15. Japanese finance minister Omi verbally intervened overnight saying exchange rates ‚Äúshould reflect fundamentals‚ÄĚ but ‚Äúrefrained from discussing the current level.‚ÄĚ Speculation remains rampant that European authorities will include a statement about the yen‚Äôs recent weakness in the Group of Seven communiqu√© next weekend. Germany hosts the G7 meeting and the euro/ yen cross rate‚Äôs strength above the ¬•150.00 figure is making life difficult for European exporters. Notably, U.S. Treasury Paulson testified this week that he is watching the yen ‚Äúvery, very closely‚ÄĚ but yesterday he added he was doing so ‚Äúonly because of the publicity coming out of Europe.‚ÄĚ Bank of Japan Governor Fukui reported Japan is unlikely to return to deflation. Data released in Japan overnight saw the January monetary base decline for the eleventh consecutive month, off 21.1% y/y. The Nikkei 225 stock index climbed 0.16% to close at ¬•17,547.11. Dollar bids are cited around the ¬•120.10 level. The euro moved higher vis-√†-vis the yen as the single currency tested offers around the ¬•157.75 level and was supported around the ¬•157.05 level. The British pound and Swiss franc appreciated vis-√†-vis the yen as the crosses tested offers around the ¬•238.60 and ¬•97.55 levels, respectively. The Chinese yuan appreciated vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.7560 in the over-the-counter market, down from CNY 7.7585.
The British pound was little-changed vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 1.9745 level and was supported around the US$ 1.9635 level. Trading activity was quite volatile after the U.S. non-farm payroll data were released. Data released in the U.K. today saw January construction sector PMI improve to 57.9 from 57.5 in December. Also, Q4 individual insolvencies in England and Wales reached a record high in Q4. Pay specialists IDS reported U.K. pay deals picked up in the three months to January and are now at their highest level since 2001. Short sterling interest rate futures continue to discount two additional monetary tightenings by Bank of England‚Äôs Monetary Policy Committee. 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§0.6595 level and was capped around the ‚ā§0.6625 level.
The Swiss franc lost ground vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2480 level and was supported around the CHF 1.2375 level. Dollar offers are cited around the CHF 1.2555 level. The euro came off vis-√†-vis the Swiss franc as the single currency tested bids around the CHF 1.6165 level and was capped around the CHF 1.6200 figure while the British pound moved higher vis-√†-vis the Swiss franc and tested offers around the CHF 2.4540 level.
The Australian dollar weakened vis-√†-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.7715 level and was capped around the $0.7755 level. Technically, today‚Äôs intraday high was right around the 61.8% retracement of the move from $0.7615 to $0.7980. Data released in Australia overnight saw the December trade deficit expand to ‚ÄďA$ 1.336 billion from November‚Äôs revised level of ‚ÄďA$ 897 million. Australian dollar bids are cited around the US$ 0.7700 figure.
The Canadian dollar weakened vis-√†-vis the U.S. dollar today as the greenback tested offers around the C$ 1.1870 level and was supported around the C$ 1.1775 level. The pair last traded at these levels in November 2005. U.S. dollar bids are cited around the C$ 1.1765 level.
Gold came off sharply vis-√†-vis the U.S. dollar today as the yellow metal tested bids around the US$ 648.16 level and was capped around the $659.70 level. The pair established a fresh six-month high this week but gave back those gains today on account of the relatively robust U.S. economic data. Silver moved lower vis-√†-vis the U.S. dollar today as the pair tested bids around the US$ 13.23 level and was capped around the $13.71 level.
Crude oil gained ground vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for March delivery tested offers around the US$ 57.94 level and were supported around the $57.10 level. Forecasts for the oil-dependent northeastern U.S. continue to show the current cold snap will continue well into next week and these are keeping oil prices elevated. Additionally, Nigerian oil unions are considering a strike on account of increase violence in the Niger Delta. A report that Iran has ratcheted up its nuclear ambitions is also keeping the pair bid.
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