Tuesday April 3, 2007 - 15:07:55 GMT
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GCI Financial - www.gcitrading.com
Forex and Commodity Market Commentary and Analysis (3 April 2007)
The euro was little-changed vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3350 level and was capped around the $1.3380 level. Today‚Äôs intraday range was relatively narrow and technically, today‚Äôs intraday low was right around the 61.8% retracement of the move from $1.3410 to $1.3255. Data released in the U.S. today saw the February pending home sales index improve to 109.3 from 108.5 but was off 8.5% y/y. Traders are already talking about Friday‚Äôs March non-farms payroll report to assess the health of the U.S. labour market. Other data released today saw Redbook chain store sales climb 0.4% m/m in the first four weeks of March. St. Louis Fed President Poole last night hawkishly said ‚ÄúIf the central bank is perceived as unwilling to underwrite higher inflation and prepared to pursue policies consistent with lower inflation, then expectations and actual inflation will fall.‚ÄĚ Poole also reiterated his support for an inflation target and prefers a core inflation rate around 1.5%. In eurozone news, EMU-13 February producer price inflation was up 0.3% m/m and 2.9% y/y. Most traders believe the European Central Bank will not change interest rates when policymakers convene this month. Euro bids are cited around the US$ 1.3285 level.
The yen depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•118.80 level and was supported around the ¬•117.70 level. Technically, today‚Äôs intraday low was right around the 23.6% retracement of the move from ¬•115.15 to ¬•118.50. The short yen carry trade remains alive and well, especially after last week‚Äôs soft Japanese consumer price inflation data and rate hike jitters involving Reserve Bank of Australia and Bank of England. Most traders expect Bank of Japan‚Äôs Policy Board will reiterate its low interest rate regime on 10 April. Data released in Japan today saw the March monetary base decline 19.1% y/y, the thirteenth consecutive monthly decline. The Nikkei 225 stock index gained 1.27% to close at ¬•17,244.05. Dollar bids are cited around the ¬•117.70 level. The euro moved higher vis-√†-vis the yen as the single currency tested offers around the ¬•158.81 level and was supported around the ¬•157.35 level. The British pound and Swiss franc gained ground vis-√†-vis the yen as the crosses tested offers around the ¬•234.80 and ¬•97.50 levels, respectively. The Chinese yuan appreciated vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.7315 in the over-the-counter market, down from CNY 7.7340.
The British pound lost marginal ground vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.9740 level and was capped around the $1.9820 level. Technically, today‚Äôs intraday low was right around the 76.4% retracement of the move from $1.9915 to $1.9180. Sterling reached its highest level since 24 January. Many traders continue to speculate Bank of England‚Äôs Monetary Policy Committee will lift interest rates by +25bps to 5.50% on Thursday. The futures market is pricing about a 50% chance the MPC will tighten rates on Thursday. Data released in the U.K. today saw the March construction sector PMI survey rise to 58.9, the highest level since December 2003. Tomorrow‚Äôs service sector PMI survey will be closely scrutinized. Cable bids are cited around the US$ 1.9660 level. The euro was little changed vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6750 level and was capped around the ‚ā§0.6765 level.
The Swiss franc weakened vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2190 level and was supported around the CHF 1.2145 level. Technically, today‚Äôs intraday low was just below the 23.6% retracement of the move from CHF 1.2570 to CHF 1.2025 level. Data released in Switzerland today saw March CPI up 0.1% m/m and 0.2% y/y. Also, KOF lifted its 2007 GDP forecast to 2.4% from 2.1% and to 3.5% for 2008 from 1.5%. Dollar offers are cited around the CHF 1.2235 level. The euro and British pound appreciated vis-√†-vis the Swiss franc as the crosses tested offers around the CHF 1.6290 and CHF 2.4100 figures, respectively.
The Australian dollar weakened vis-√†-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.8120 level and was capped around the $0.8170 level. The pair continues to trade near decade-high levels on expectations that Reserve Bank of Australia will lift its key cash rate by +25bps to 6.50% today. Data released in Australia today saw the February trade deficit expand to ‚ÄďA$ 838 million from ‚ÄďA$ 832 million. Australian dollar bids are cited around the US$ 0.8060 level.
The Canadian dollar weakened marginally vis-√†-vis the U.S. dollar today as the greenback tested offers around the C$ 1.1585 level and was supported around the C$ 1.1550 level. Traders await the release of Canadian employment data on Thursday preceded by February building permits data tomorrow. U.S. dollar bids are cited around the C$ 1.1510 level.
Gold appreciated vis-√†-vis the U.S. dollar today as the yellow metal tested offers around the US$ 666.45 level and was supported around the $661.90 level. Physical demand was cited in India ahead of that country‚Äôs traditional wedding season. Silver moved higher vis-√†-vis the U.S. dollar as the pair tested offers around the US$ 13.41 level and was supported around the $13.21 level.
Crude oil weakened vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for May delivery tested bids around the US$ 63.98 level and were capped around the $65.89 level. Traders sense that the ongoing dispute between Iran and the United Kingdom regarding the former‚Äôs detention of fifteen sailors it kidnapped in Iraqi waters may soon be resolved. Traders await weekly U.S. energy inventories data tomorrow.
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