Thursday March 15, 2007 - 15:20:58 GMT
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Forex and Commodity Market Commentary and Analysis (15 March 2007)
The euro appreciated marginally vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3240 level and was supported around the $1.3190 level. A mixed bag of U.S. economic data today contributed to sideways price activity for the common currency. First, U.S. February wholesale inflation expanded at its fastest pace since November 2006 with headline producer price inflation up 1.3% and core inflation up 0.4%. On an annualized basis, headline and core PPI were up 2.5% y/y and 1.8% y/y. Traders will evaluate these data more closely after tomorrow‚Äôs February consumer price inflation data are released but Federal Reserve policymakers who convene next Tuesday and Wednesday are unlikely to be satisfied with the acceleration in wholesale inflation. The spike in inflation comes at a particularly difficult time for policymakers who on one hand must be vigilant against inflation and on the other hand, may be forced to lower interest rates if the U.S. sub-prime mortgage industry fallout worsens. Second, weekly initial jobless claims were off 12,000 to 318,000 last week while continuing jobless claims were up 48,000 to 2.58 million. Third, the Federal Reserve Bank of New York‚Äôs Empire State manufacturing index tumbled in March to 1.85 from 24.35 in February. Fourth, Treasury International Capital flows data evidenced a major gain in January with foreign capital flows totaling US$ 74.6 billion into the U.S. two months ago, after December‚Äôs revised outflow of US$ 14.7 billion ‚Äď the first outflow since June 2005. Net purchases of U.S. long-term securities rose to US$ 115.0 billion in January from US$ 62.8 billion in December. In eurozone news, the European Central Bank‚Äôs March monthly economic bulletin confirmed the ECB believes ‚Äúsome moderation in GDP growth compared with Q4 2006‚ÄĚ will materialize. Other data released today saw eurozone Q4 labour costs rise at an annualized rate of 2.4%, down from 2.5% in Q3 while EMU-13 February inflation was unchanged at 1.8% y/y. Euro bids are cited around the US$ 1.3115 level.
The yen was little-changed vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•117.55 level and was supported around the ¬•117.00 figure. Bank of Japan Governor Fukui indicated there is ‚Äúno direct link between the (BoJ‚Äôs recent) rate hike and the recent global stock market weakness.‚ÄĚ Clearly, however, some traders reduced exposure to short yen carry trades when Japanese rates were lifted to +0.50%. The Japanese government left its assessment of the economy unchanged this month, noting it is ‚Äúrecovering despite some weakness in consumption.‚ÄĚ The government also noted that ‚Äúconsumer confidence has also been flat.‚ÄĚ Data released in Japan overnight saw foreigners sell a net ¬•429.9 billion of Japanese equities last week, meaning non-Japanese accounts were net sellers for the second consecutive week. The Nikkei 225 stock index climbed 1.10% to close at ¬•16,860.39. Dollar bids are cited around the ¬•116.25 level. The euro moved higher vis-√†-vis the yen as the single currency tested offers around the ¬•155.50 level and was supported around the ¬•154.70 level. The British pound and Swiss franc appreciated vis-√†-vis the yen as the crosses tested offers around the ¬•227.50 and ¬•96.60 levels, respectively. The Chinese yuan depreciated vis-√†-vis the U.S. dollar today as the greenback closed at CNY 7.7440 in the over-the-counter market, up from CNY 7.7380. Data released in China today saw industrial value-added output climb 18.5% in the January-to-February period.
The British pound weakened vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.9305 level and was capped around the $1.9390 level. Technically, today‚Äôs intraday low was just above the 23.6% retracement of the move from $1.9670 to $1.9180. CBI lifted its 2007 GDP forecast for the U.K. economy to 2.9% from 2.7%. It was announced that Bank of England Chief Economist and Monetary Policy Committee member Charles Bean was reappointed to the MPC for another three-year term from 1 June. In other BoE news, a survey released by the central bank today saw U.K. inflation expectations for the coming year remain elevated at 2.7%. Cable bids are cited around the US$ 1.9215 level. The euro moved higher vis-√†-vis the British pound as the single currency tested offers around the ‚ā§0.6840 level and was supported around the ‚ā§0.6820 level.
The Swiss franc appreciated marginally vis-√†-vis the U.S. dollar today as the greenback tested bids around the CHF 1.2140 level and was capped around the CHF 1.2215 level. Technically, today‚Äôs intraday high was right around the 23.6% retracement of the move from CHF 1.2550 to CHF 1.2105. As expected, Swiss National Bank lifted interest rates by +25bps today and its three-month Libor target rate is now 1.75% to 2.75% with the target at 2.25%. Today‚Äôs move by SNB represented the sixth consecutive rise since December 2005. Notably, the central bank kept its 2007 GDP growth forecast unchanged at 2% and raised its inflation forecast to 0.5% from 0.4%. Dollar offers are cited around the CHF 1.2230/ 75 levels. The euro gained marginal ground vis-√†-vis the Swiss franc as the single currency tested offers around the CHF 1.6125 level while the British pound moved lower vis-√†-vis the Swiss franc and tested bids around the CHF 2.3505 level.
The Australian dollar appreciated vis-√†-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7890 level and was supported around the $0.7845 level. Technically, today‚Äôs intraday high was right around the 23.6% retracement of the move from US$ 0.7695 to $0.7945. Data released in Australia today saw the February jobless rate rise to 4.6% from 4.5% in January. Australian dollar bids are cited around the US$ 0.7820 level.
The Canadian dollar appreciated marginally vis-√†-vis the U.S. dollar today as the greenback tested bids around the C$ 1.1730 level and was capped around the C$ 1.1770 level. Technically, today‚Äôs intraday low was just above the 38.2% retracement of the move from C$ 1.1560 to C$ 1.1825. U.S. dollar bids are cited around the C$ 1.1695/ 55 levels.
Gold gained ground vis-√†-vis the U.S. dollar today as the yellow metal tested offers around the US$ 647.75 level and was supported around the $643.50 level. The pair tracked oil‚Äôs move higher. Silver moved higher vis-√†-vis the U.S. dollar as the pair tested offers around the $13.05 level and was supported around the $12.85 level.
Crude oil gained marginal ground vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for April delivery tested offers around the US$ 58.60 level and was supported around the $58.02 level. As expected, OPEC officials convened in Vienna today and kept its official production quota unchanged at 25.8 million barrels of oil per day. A tenuous recovery in global equities has underpinned oil prices.
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