Wednesday February 7, 2007 - 15:44:22 GMT
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Forex and Commodity Market Commentary and Analysis (7 February 2007)
The euro gained marginal ground vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3005 level and was supported around the $ 1.2970 level. Traders await the outcome of Thursday‚Äôs European Central Bank interest rate deliberations in which policymakers are expected to keep borrowing costs unchanged. Remarks from ECB President Trichet regarding the probability of another rate hike in March or April will be closely scrutinized as will any indication that the ECB will thereafter be on hold. Data released in the eurozone today saw German industrial production rise a smaller-than-expected 1.2% m/m in December and up 5.2% y/y. U.S. Treasury Secretary Paulson testified about exchange rates a little bit yesterday and he may make similar comments in his second day of testimony today. Data released in the U.S. today saw Q4 non-farm productivity expand 3.0% while unit labour costs were up 1.7%, down sharply from Q3‚Äôs gain of 3.2%. The deceleration in unit labour costs may result in less pressure on the Federal Reserve to tighten monetary policy further. Euro bids are cited around the US$ 1.2925 level.
The yen came off vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•120.70 level and was supported around the ¬•120.00 figure. Technically, today‚Äôs intraday low was right around the 50% retracement of the move from ¬•118.00 to ¬•122.15. Traders are speculating whether or not the yen‚Äôs recent weakness will be a major issue at this weekend‚Äôs Group of Seven meeting. An anonymous Japanese official today said the yen ‚Äúwon‚Äôt be a main agenda‚ÄĚ while German Deputy Finance Minister Milow said exchange rates will be discussed and added the yen ‚Äúis an important currency.‚ÄĚ U.S. Treasury Secretary Paulson yesterday said the yen is not a major concern as long as its value is being determined in open, competitive markets. Data released overnight confirmed Japan‚Äôs FX reserves totaled US$ 895.38 billion at the end of January. The Nikkei 225 stock index lost 0.66% to close at ¬•17,292.32. Dollar bids are cited around the ¬•119.60 level. The euro appreciated vis-√†-vis the yen as the single currency tested offers around the ¬•156.90 level and was supported around the ¬•155.80 level. The British pound and Swiss franc gained ground vis-√†-vis the yen as the crosses tested offers around the ¬•238.05 and ¬•97.40 levels, respectively. The Chinese yuan appreciated vis-√†-vis the U.S. dollar today as the greenback closed at CNY 7.4480 in the over-the-counter market, down from CNY 7.7555. Notably, the central parity rate for the pair was set below the USD/ HKD trading band. People‚Äôs Bank of China Vice Governor Xiang Junbo was quoted as saying inflation pressure is increasing on account of escalating consumer prices. San Francisco Fed President Yellen was critical of China‚Äôs foreign exchange regime last night saying ‚ÄúThe (Chinese) central bank has resisted pressures for more rapid appreciation of the renminbi by intervening in the foreign exchange market and building up its holdings of foreign reserves. Limiting appreciation of the currency in this manner complicates the use of monetary policy to produce an orderly slowdown in China's currently booming economy.‚ÄĚ
The British pound came off marginally vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.9670 level and was capped around the $1.9730 level. Technically, today‚Äôs intraday low was just above the 38.2% retracement of the move from $1.9260 to $1.9915. Most traders expect Bank of England‚Äôs Monetary Policy Committee to keep interest rates unchanged when their policy decision is announced tomorrow. Data released in the U.K. today saw Nationwide January consumer confidence improve slightly while December industrial production was off 0.1% m/m. Also, REC reported that January wage growth inflation remained near a 71-month high while BRC reported its January monthly shop price index was up 1.8% y/y. Cable bids are cited around the US$ 1.9645/ 1.9585 levels. The euro moved higher vis-√†-vis the British pound as the single currency tested offers around the ‚ā§0.6605 level and was supported around the ‚ā§0.6585 level.
The Swiss franc climbed marginally vis-√†-vis the U.S. dollar today as the greenback tested bids around the CHF 1.2380 level and was capped around the CHF 1.2420 level. Technically, today‚Äôs intraday high was right around the 23.6% retracement of the move from CHF 1.2570 to CHF 1.2375. Data released in Switzerland today saw the January unemployment rate remain unchanged at 3.3%. Swiss National Bank board member Hildebrand spoke today and said ‚Äúthere is indeed an increased risk for a rising trend in inflation‚ÄĚ and added normalization in interest rates will need to continue if economic conditions remain robust. Most traders believe SNB will hike rates again by +25bps this spring while a minority of traders believe the SNB has another +50bps of tightening remaining. Dollar offers are cited around the CHF 1.2450 level. The euro moved higher vis-√†-vis the Swiss franc as the single currency tested offers around the CHF 1.6120 level while the British pound moved lower vis-√†-vis the Swiss franc and tested bids around the CHF 2.4390 level.
The Australian dollar gained marginal ground vis-√†-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7785 level and was supported around the US$ 0.7760 level. As expected, Reserve Bank of Australia kept its official cash rate unchanged at 6.25%. Australian dollar bids are cited around the US$ 0.7695 level.
The Canadian dollar depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers around the C$ 1.1850 level and was supported around the C$ 1.1815 level. U.S. dollar bids are cited around the C$ 1.1765 level.
Gold appreciated vis-√†-vis the U.S. dollar today as the yellow metal tested offers around the US$ 656.20 level and was supported around the $652.80 level. Silver gained ground vis-√†-vis the U.S. dollar as the pair tested offers around the US$ 13.73 level and was supported around the $13.58 level.
Crude oil appreciated vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for March delivery tested offers around the US$ 59.84 level and were supported around the $58.96 level. Continued sub-zero temperatures in parts of the eastern U.S. and forecasts for greater home heating oil demand have kept energy bid. The U.S. Energy Information Administration reported that recent OPEC output cuts could see total commercial oil stocks decline an average of 900,000 barrels per day in industrialized countries. Traders await the release of weekly energy inventories data today and tomorrow.
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