Friday May 4, 2007 - 15:51:15 GMT
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Forex and Commodity Market Commentary and Analysis (4 May 2007)
The euro rallied vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3590 level and was supported around the $1.3535 level. Technically, today‚Äôs intraday high was just above the 23.6% retracement of the move from $1.3255 to $1.3680. The pair moved to intraday highs after the release of weaker-than-expected U.S. April non-farm payrolls data that saw new jobs creation of 88,000, below many estimates. Additionally, there was a cumulative -26,000 downward revision to February‚Äôs and March‚Äôs non-farm payroll tallies and the unemployment rate printed at 4.5%. Also, average hourly earnings were up +0.2% m/m and +3.7% y/y, down from +4.3% y/y in December and the lowest gain since November 2004. In the January ‚Äď March quarter, average monthly payrolls gains were +129,000, down from +189,000 in the same period last year. Today‚Äôs U.S. data were on the soft side and partially evidence the impact from the slowdown in the U.S. housing market. The data also will render it easier for the Federal Open Market Committee to move its monetary policy bias closer to neutral and eventually lower interest rates when inflation and inflation expectations recede sufficiently in the U.S. The New York Fed confirmed the U.S. dollar depreciated 1.1% on a trade-weighted basis in Q1 and that the Fed did not intervene in the foreign exchange markets in Q1. The FOMC convenes next week to deliberate monetary policy. In eurozone news, the EMU-13 April PMI services index fell back to 57.0 from 57.4 with Germany‚Äôs index improving to 57.8 from 57.5. Notably, however, the prices component of the EMU-13 PMI survey remained strong and traders believe this will help to justify the anticipated +25bps monetary tightening by European Central Bank in June. It was also reported that EMU-13 March retail sales climbed 0.5% m/m and 2.6% y/y. ECB‚Äôs Quaden reported ‚ÄúThe data concerning economic activity have been very encouraging, and it seems economic growth in the eurozone is still robust.‚ÄĚ Euro bids are cited around the US$ 1.3515 level.
The yen appreciated marginally vis-√†-vis the U.S. dollar today as the greenback tested bids around the ¬•120.00 figure and was capped around the ¬•120.45 level. Technically, today‚Äôs intraday high was just above the 23.6% retracement of the move from ¬•117.60 to ¬•120.45. Liquidity was thin in the Australasian session on account of the ongoing Golden Week holidays in Japan and China and will return to normal next week. Finance minister Omi confirmed Asian countries ‚Äúhave been setting up many bilateral contracts to supply funds‚ÄĚ through bilateral swap lines and called this a ‚Äúmajor stop forward.‚ÄĚ This means some Asian countries would have a larger pool of funds with which to intervene in the foreign exchange markets as and when warranted and is an accord they will utilize to avoid another Asian currency crisis such as the one from one decade ago. A pullback or unwinding of short yen carry trades remains the yen‚Äôs largest upside risk followed by the possibility that Bank of Japan will raise the call rate from +0.50% sooner rather than later. The Nikkei 225 stock index closed the week at ¬•17,394.92. Dollar bids are cited around the ¬•119.20 level. The euro lost marginal ground vis-√†-vis the yen as the single currency tested bids around the ¬•162.85 level and was capped around the ¬•163.30 level. The British pound and Swiss franc moved lower vis-√†-vis the yen as the crosses tested bids around the ¬•238.75 and ¬•98.90 levels, respectively. Chinese financial markets will reopen next week.
The British pound appreciated vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 1.9925 level and was supported around the $1.9840 level. Technically, today‚Äôs intraday low was right around the 50% retracement of the move from $1.9545 to $2.0130. Most traders expect Bank of England‚Äôs Monetary Policy Committee will lift its repo rate by +25bps next week. Data released in the U.K. today saw personal insolvencies and mortgage repossessions climb 23.9% y/y in England and Wales, an indication that higher borrowing costs in the U.K. are impacting borrowers. Cable bids are cited around the US$ 1.9860 level. The euro gained marginal ground vis-√†-vis the British pound as the single currency tested offers around the ‚ā§0.6830 level and was supported around the ‚ā§0.6815 level.
The Swiss franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the CHF 1.2100 figure and was capped around the CHF 1.2165 level. Technically, today‚Äôs intraday high and low were right around the 38.2% and 23.6% retracement levels of the move from CHF 1.2445 to CHF 1.1995. Dollar offers are cited around the CHF 1.2200 figure. The euro and British pound weakened vis-√†-vis the Swiss franc as the crosses tested bids around the CHF 1.6440 and CHF 2.4095 levels, respectively.
The Australian dollar slumped vis-√†-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.8170 level and was capped around the $0.8240 level. Technically, today‚Äôs intraday low was right around the 61.8% retracement of the move from US$ 0.8030 to $0.8390. Reserve Bank of Australia released its quarterly monetary policy statement today in which it reported ‚ÄúThe Australian economy has performed strongly in the recent period, with favourable outcomes being recorded on several fronts. Output growth has picked up and this has been accompanied by continued strength in incomes and falling unemployment. At the same time, despite high levels of capacity utilization and tight labor market conditions, there has been some moderation in underlying inflation. These developments have taken place against a background of continued strength in the global economy. Most expectations are that growth of the world economy this year will again be above average, though a little below last year's pace.‚ÄĚ RBA sees underlying inflation to average 2.5% over the next few quarters, down from its previous forecast of 2.75%. Data released in Australia today saw the March trade balance print at a revised ‚ÄďA$ 1.622 billion. Also, the April SEEK employment index fell 0.5% m/m, the first decline in twelve months. Australian dollar bids are cited around the US$ 0.8115 level.
The Canadian dollar gained marginal ground vis-√†-vis the U.S. dollar today as the greenback tested bids around the C$ 1.1030 level and was capped around the C$ 1.1080 level. The pair has not been this weak since September 2006. Bank of Canada Governor Dodge today said there is no specific target for the Canadian dollar and added flexibility in exchange rates is ‚Äúcrucial.‚ÄĚ Data released in Canada today saw the April Ivey PMI index print at a weaker-than-expected 60.9, down from 67.3 in March. The loonie remains supported by mergers and acquisition flows and news including a Swedish concern‚Äôs planned purchase of Ipsco and an increased bid from Russia‚Äôs Norilsk Nickel for LionOre Mining. U.S. dollar offers are cited around the C$ 1.1150 level.
Gold moved higher vis-√†-vis the U.S. dollar today as the yellow metal tested offers around the US$ 690.35 level and was supported around the $680.40 level. The weaker-than-expected U.S. April non-farm payrolls data added to the pair‚Äôs gains. Silver appreciated vis-√†-vis the U.S. dollar as the pair tested offers around the US$ 13.57 level and was supported around the $13.34 level.
Crude oil lost marginal ground vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for June delivery tested offers around the US$ 63.41 level and was supported around the $62.91 level. Continued violence in Nigeria, Venezuela‚Äôs nationalization of its oil industry, and a hasty, unproductive meeting between the U.S. and Iran are underpinning energy prices.
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