Tuesday March 6, 2007 - 15:40:50 GMT
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Forex and Commodity Market Commentary and Analysis (6 March 2007)
The euro gained marginal ground vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3130 level and was supported around the $1.3080 level. Technically, today‚Äôs intraday high was right around the 38.2% retracement of the move from $1.2910 to $1.3215. Data released in the U.S. today saw Q4 non-farm labour productivity downwardly revised to +1.6% from +3.0% while unit labour costs were upwardly revised to 6.6%, significantly above expectations. For all of 2006, productivity expanded at a 1.6% pace, its slowest level since 1995. The dramatic rise in unit labour costs will not sit well with Federal Reserve policymakers who seek evidence that price pressures are waning in the U.S. economy. Other data released in the U.S. today saw January pending home sales fall 4.1% m/m and 8.9% y/y while January factory orders were off 5.6%. St. Louis Fed President Poole was relatively hawkish in remarks made yesterday in which he said the Fed ‚Äúdoesn‚Äôt see a recession on the horizon.‚ÄĚ Notably, Poole also made some comments that supported the notion of an inflation target when he said ‚Äúthat I would like monetary policy to aim at 1.5 % core inflation and not just accept inflation barely inside one end or the other of a 1 to 2% range.‚ÄĚ Fed Governor Warsh yesterday noted that ‚Äúwhile premiums on riskier assets rose some last week, markets are functioning well amid higher volatility, market discipline appears effective as investors are reviewing their positions, and overall liquidity does not appear to be in short supply.‚ÄĚ Fed Chairman Bernanke is scheduled to speak later in the North American session. Former Fed Chairman Greenspan was quoted as saying there is a one-in-three chance the U.S. economy will enter a recession this year. In eurozone news, EMU-12 GDP was up an unchanged 0.9% q/q and 3.3% y/y in Q4. The European Commission lifted its growth forecast for Q2 2006 to a range between 0.5% and 0.9%. The EMU-12 economy expanded at a quarterly rate of 0.9% in Q4 2006. Other data released today saw EMU-13 retail sales decrease 0.1% m/m and were off 0.1% y/y. Euro bids are cited around the US$ 1.3045/ 25 levels.
The yen depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•116.65 level and was supported around the ¬•115.20 level. Technically, today‚Äôs intraday high was right around the 61.8% retracement of the move from ¬•121.40 to ¬•109.00. U.S. Treasury Secretary Paulson spoke in Tokyo overnight and said ‚ÄúThe (yen‚Äôs exchange) rate is determined in a competitive market and it trades in an open market as it should.‚ÄĚ Japanese finance minister Omi reported Japan is ‚Äúnot going to comment on specific (exchange rate) levels and share prices.‚ÄĚ Some of the recent strength in the yen has been attributable to repatriation of foreign assets by Japanese companies ahead of Japan‚Äôs fiscal year-end on 31 March. The Nikkei 225 stock index gained 1.22% to close at ¬•16,844.50. Dollar bids are cited around the ¬•115.20 level. The euro moved higher vis-√†-vis the yen as the single currency tested offers around the ¬•153.00 figure and was supported around the ¬•150.75 level. The British pound and Swiss franc gained ground vis-√†-vis the yen as the crosses tested offers around the ¬•224.90 and ¬•95.45 levels, respectively. The Chinese yuan appreciated vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.7415 in the over-the-counter market, down from CNY 7.7500. Treasury Secretary Paulson will travel to Beijing tomorrow where he will deliver a ‚Äúfirm‚ÄĚ message to China that it is ‚Äúextremely important for China to speed up its reforms.‚ÄĚ
The British pound moved higher vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 1.9305 level and was supported around the $1.9185 level. British Retail Consortium today reported that Bank of England‚Äôs rate hikes from November and January have not yet impacted consumer spending. BRC data released today saw like-for-like retail sales climb 3.3% y/y. Most traders do not expect Bank of England‚Äôs Monetary Policy Committee to tighten monetary policy on Thursday. Cable bids are cited around the US$ 1.9180 level. The euro weakened vis-√†-vis the British pound as the single currency tested bids around the US$ 0.6790 level and was capped around the ‚ā§0.6820 level.
The Swiss franc came off vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2250 level and was supported around the CHF 1.2190 level. Data released in Switzerland today saw Q4 GDP expanded 0.5% q/q and 2.2% y/y. For 2006 as a whole, the Swiss economy grew 2.7%, its fastest pace in some six years. Dollar offers are cited around the CHF 1.2275/ 1.2310 levels. The euro and British pound gained ground vis-√†-vis the Swiss franc as the crosses tested offers around the CHF 1.6045 and CHF 2.3605 levels, respectively.
The Australian dollar appreciated vis-√†-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7755 level and was supported around the $0.7680 level. Technically, today‚Äôs intraday high was right around the 76.4% retracement of the move from $0.7985 to $0.7015. Data released in Australia today saw the January trade deficit print at a lower-than-expected ‚ÄďA$ 876 million from December‚Äôs revised level of ‚ÄďA$ 1.379 billion. Also, January building approvals were off 0.9% m/m and 1.0% y/y. Australian dollar bids are cited around the US$ 0.7615 level.
The Canadian dollar appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the C$ 1.1740 level and was capped around the C$ 1.1830 level. As expected, Bank of Canada kept its main interest rate unchanged at 4.25% today and noted ‚ÄúTotal CPI inflation should average just above one per cent in the first half of 2007, returning to the two per cent target in 2008. Core inflation should remain near two per cent throughout this period.‚ÄĚ BoC‚Äôs next rate decision will come on 24 April and its next monetary policy report will be issued on 26 April. Data released in Canada today saw January building permits print at C$ 6.3 billion, up 11.3% m/m. U.S. dollar bids are cited around the C$ 1.1655 level.
Gold appreciated vis-√†-vis the U.S. dollar today as the yellow metal tested offers around the US$ 645.85 level and was supported around the $632.80 level. Some weakness in the U.S. dollar contributed to the pair‚Äôs gain today as traders lifted gold from six-week lows. Silver moved higher vis-√†-vis the U.S. dollar as the pair tested offers around the US$ 12.97 level and was supported around the $12.61 level.
Crude oil gained ground vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for April delivery tested offers around the US$ 60.77 level and was supported around the $59.67 level. A cold weather snap in the U.S. Northeast that is expected to last through the weekend and speculation that Iran may be hit with additional United Nations sanctions contributed to the pair‚Äôs gains. Traders await weekly U.S. inventories data tomorrow.
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