Friday February 16, 2007 - 16:05:21 GMT
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Forex and Commodity Market Commentary and Analysis (16 February 2007)
The euro weakened vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3095 level and was capped around the $ 1.3145 level. Technically, the common currency continues to orbit the 50% retracement of the move from $1.3365 to $1.2865. Many data were released in the U.S. today. First, the January headline producer price index was off 0.6% m/m and up +0.2% y/y while the ex-food and energy core component was up +0.2% m/m and +1.8% y/y. Federal Reserve policymakers will likely be pleased to see the core year-over-year measure below 2.0%. Second, January housing starts were off 14.3% while January building permits were off 2.8%, further evidence of the slowdown in the U.S. housing market. The Fed has recently indicated that it is not overly concerned with the slowdown in the U.S. housing market as consumer spending has held up. Third, the mid-February University of Michigan consumer sentiment index came in at 93.3, below expectations and the 96.9 print from the end of January. Traders await comments from Chicago Fed President Moskow later in the North American session. In eurozone news, European Central Bank member Gonzalez-Paramo was hawkish in his remarks today saying ‚ÄúPrice stability is a mid-term objective, so we can't refer just to data for March or even for the whole of 2007 in order to be comfortable that our objective is being met.‚ÄĚ Most traders believe the ECB will lift its main refinancing rate by 25bps in March to 3.75% from its current 3.5% level. The European Commission lifted its 2007 EMU-13 GDP forecast to 2.4% from 2.1%. The German January consumer price index was off 0.2% and up 1.6% y/y and the EMU-12 December trade surplus printed at ‚ā¨2.5 billion from a revised November surplus of ‚ā¨5.1 billion. Liquidity will be reduced on Monday on account of a U.S. market holiday. Euro bids are cited around the US$
The yen weakened vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•119.55 level and was supported around the ¬•118.95 level. Technically, today‚Äôs intraday low was right around the 76.4% retracement of the move from ¬•118.00 to ¬•121.45. Some traders continue to speculate that Bank of Japan will lift interest rates next week, possibly leading to an unwinding of short yen carry trades. Data released in Japan overnight saw the December leading index upwardly revised to 31.8 from the initial estimate of 25.0 while the December tertiary index was off 0.4% m/m, the second consecutive monthly decline. Also, revised December employee average pay was off 0.1% y/y. The Nikkei 225 stock index lost 0.12% to close at ¬•17,875.65. Dollar bids are cited around the ¬•118.40 level. The euro moved lower vis-√†-vis the yen as the single currency tested bids around the ¬•156.25 level and was capped around the ¬•157.05 level. The British pound and Swiss franc weakened vis-√†-vis the yen as the crosses tested bids around the ¬•232.15 and ¬•96.30 levels, respectively. The Chinese yuan appreciated vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.7426 in the over-the-counter market, down from CNY 7.7555. People‚Äôs Bank of China lifted banks‚Äô reserve requirements by 50bps to 10% to slow the growth of the money supply.
The British pound came off vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.9465 level and was capped around the $1.9540 level. Technically, today‚Äôs intraday high was right around the 23.6% retracement of the move from $1.8515 to $1.9845. Data released in the U.K. today saw IRS pay awards escalate to 3.5% in the three months to January from 3.0% in December, representing the highest pay increase since November 1998. This may be bad news for Bank of England Monetary Policy Committee policymakers who are concerned with inflationary pressures and are expected to lift borrowing costs further in Q2. Cable bids are cited around the US$ 1.9415 level. The euro weakened vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6720 level and was capped around the ‚ā§0.6740 level.
The Swiss franc came off vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2380 level and was supported around the CHF 1.2330 level. Technically, today‚Äôs intraday low was just above the 50% retracement of the move from CHF 1.2770 to CHF 1.1875 level. Data released in Switzerland today saw December retail sales rise 0.8% y/y and were up 1.9% y/y for all of 2006. Dollar offers are cited around the CHF 1.2435 level. The euro came off vis-√†-vis the Swiss franc as the single currency tested bids around the CHF 1.6200 figure while the British pound moved higher vis-√†-vis the Swiss franc and tested offers around the CHF 2.4130 level.
The Australian dollar came off marginally vis-√†-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.7835 level and was capped around the $0.7860 level. Data released in Australia today saw merchandise imports fall 1.0% m/. Australian dollar bids are cited around the US$ 0.7815 level.
The Canadian dollar weakened marginally vis-√†-vis the U.S. dollar today as the greenback tested offers around the C$ 1.1655 level and was supported around the C$ 1.1615 level. Technically, today‚Äôs intraday high was right around the 50% retracement of the move from C$ 1.1430 to C$ 1.1875. U.S. dollar bids are cited around the C$ 1.1580 level.
Gold weakened vis-√†-vis the U.S. dollar today as the yellow metal tested bids around the US$ 663.05 level and was capped around the $669.60 level. The U.S. dollar‚Äôs intraday gains contributed to gold‚Äôs pullback today. Some physical demand was cited around gold‚Äôs intraday low. Silver weakened vis-√†-vis the U.S. dollar as the pair tested bids around the $13.82 level and was capped around the $14.02 level.
Crude oil moved higher vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for March delivery tested offers around the US$ 59.26 level and were supported around the $58.12 level. Temperatures in the northeastern part of the U.S. remain cold but are expected to warm up over the next few days. OPEC officials will convene in the middle of March and are not expected to change output levels.
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