Thursday February 8, 2007 - 15:55:39 GMT
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Forex and Commodity Market Commentary and Analysis (8 February 2007)
The euro appreciated vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3030 level and was supported around the $1.2975 level. Technically, today‚Äôs intraday high was right around the 38.2% retracement of the move from $1.2480 to $1.3360. The common currency moved higher after European Central Bank President Trichet characterized money and credit growth conditions in the eurozone as ‚Äúremaining vigorous‚ÄĚ and added ‚Äúthe liquidity situation in the euro area is ample by all plausible measures.‚ÄĚ Trichet also reiterated the ECB‚Äôs monetary policy remains ‚Äúaccommodative‚ÄĚ and said interest rates are ‚Äústill at low levels.‚ÄĚ Most traders believe the ECB will lift interest rates by +25bps next month after leaving rates unchanged today on account of Trichet‚Äôs use of the words ‚Äústrong vigilance.‚ÄĚ Data released in Germany today saw the December trade surplus recede to ‚ā¨10.8 billion from ‚ā¨13.8 billion in November. In U.S. news, weekly initial jobless claims climbed 3,000 to 311,000 in the week ending on 3 February while continuing jobless claims were off 54,000 to 2.49 million. Additionally, anecdotal retail sales data released in the U.S. today evidence mixed results in January among the nation‚Äôs largest retailers. Euro bids are cited around the US$ 1.2925 level.
The yen depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•121.40 level and was supported around the ¬•120.55 level. Technically, today‚Äôs intraday low was right around the 38.2% retracement of the move from ¬•118.00 to ¬•122.15. A couple of factors contributed to the yen‚Äôs weakness today. First, traders by and large now do not expect the Group of Seven to include the yen‚Äôs weakness in its communiqu√© after policymakers convene in Germany this weekend. Second, Bank of Japan Policy Board member Haru indicated inflation remains benign and added policy should be adjusted gradually. His comment suggests the BoJ will not be in any hurry to raise interest rates and this will likely not precipitate an unwinding of short yen carry trades. Data released in Japan today saw the January economy watchers‚Äô survey diffusion index recede to 47.2 from 48.9 in December while January bank lending was up 1.8% y/y, unchanged from December. Also, the January money supply was up 1.0% y/y and December industrial machinery orders were off 19.2% y/y. It was also reported that foreign investors purchased a net ¬•502.7 billion on Japanese equities last week. The Nikkei 225 stock index climbed 0.16% to close at ¬•17,292.48. Dollar bids are cited around the ¬•120.50 level. The euro moved higher vis-√†-vis the yen as the single currency tested offers around the ¬•157.95 level and was supported around the ¬•156.95 level. The British pound weakened vis-√†-vis the yen as sterling tested bids around the ¬•237.35 level while the Swiss franc moved higher vis-√†-vis the yen and tested offers around the ¬•97.40 level. The Chinese yuan depreciated marginally vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.7484 in the over-the-counter market, up from CNY 7.7480.
The British pound fell sharply vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.9565 level and was capped around the US$ 1.9725 level. Cable plummeted after Bank of England‚Äôs Monetary Policy Committee voted to keep interest rates unchanged following last month‚Äôs surprise +25bps monetary tightening. Most traders, however, expect the MPC to lift rates by another +25bps in Q2 on account of above-trend economic growth, elevated inflation expectations, higher pay settlements, inflated energy prices, and firm money supply growth. BoE‚Äôs quarterly inflation report will be released next week and will be closely parsed by traders. Data released in the U.K. today saw Land Registry house prices in England and Wales decline in Q4 2006 while Halifax January house prices were up 1.3% m/m and an annualized 9.9%. Also, Q4 2006 construction orders were off 3% q/q and unchanged y/y. Cable bids are cited around the US$ 1.9535 level. The euro moved higher vis-√†-vis the British pound as the single currency tested offers around the ‚ā§0.6650 level and were supported around the ‚ā§0.6595 level.
The Swiss franc weakened vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2510 level and was supported around the 1.2400 figure. 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 January consumer price index fall 0.7% m/m and rise 0.1% y/y. Domestic Swiss inflation is not expected to be elevated this year and many traders believe the Swiss franc may be given until Bank of Japan begins to raise interest rates. Many traders continue to sell the Swiss franc in carry trades to invest proceeds in higher-yielding currencies. Dollar offers are cited around the CHF 1.2560 level. The euro moved higher vis-√†-vis the Swiss franc as the single currency tested offers around the CHF 1.6250 level while the British pound weakened vis-√†-vis the Swiss franc and tested bids around the CHF 2.4340 level.
The Australian dollar moved higher vis-√†-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7815 level and was supported around the $0.7760 level. Technically, today‚Äôs intraday high was right around the 50% retracement of the move from $0.7935 to $0.7695. Data released in Australia today saw the January jobless rate decline to 4.5%, a 30-year low. Australian dollar bids are cited around the US$ 0.7765 level.
The Canadian dollar weakened vis-√†-vis the U.S. dollar today as the greenback tested offers around the C$ 1.1875 level and was supported around the C$ 1.1840 level. The pair has not traded at these levels since November 2005. U.S. dollar bids are cited around the C$ 1.1765 level.
Gold gained ground vis-√†-vis the U.S. dollar today as the yellow metal tested offers around the US$ 657.10 level and was supported around the $648.05 level. News that India‚Äôs first gold exchange-traded fund will commence operations on 15 February has the interest of traders as does speculation that the Tokyo Stock Exchange will list a precious metals exchange-traded fund. Silver moved higher vis-√†-vis the U.S. dollar as the pair tested offers around the US$ 13.74 level and was supported around the $13.47 level.
Crude oil climbed marginally vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for March delivery tested offers around the US$ 58.29 level and were supported around the $57.35 level. The cold weather snap in the eastern U.S. continues and is keeping energy costs bid. It was reported that U.S. distillate fuel stocks were reduced by 3.7 million barrels last week.
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