Thursday May 17, 2007 - 16:09:26 GMT
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Forex and Commodity Market Commentary and Analysis (17 May 2007)
The euro lost ground vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3475 level and was capped around the $1.3545 level. Technically, today‚Äôs intraday high was right around the 38.2% retracement of the move from $1.3680 to $1.3460. The common currency extended recent losses after U.S. weekly initial jobless claims fell 5,000 to 293,000 in the week ending 12 May while continuing jobless claims were off 78,000 to 2.47 million. Notably, the four-week moving average remains at a thirteen-month low and this may results in a strong May non-farm payrolls number. Other data released today saw April leading economic indicators fall a worse-than-expected 0.5%. Federal Reserve Chairman Bernanke reported he does ‚Äúnot expect significant spillovers from the sub-prime (mortgage) market to the rest of the economy or the financial system.‚ÄĚ Traders await the mid-May University of Michigan consumer sentiment index tomorrow. In eurozone news, the European Central Bank‚Äôs monthly bulletin reported ‚ÄúThe further strengthening of the dynamics of M3 is largely explained by strong capital inflows into the euro area. In the context of current global financial market developments and the flatness of the yield curve in the euro area, this robust growth needs to be assessed with caution.‚ÄĚ ECB member Liebscher reported there are ‚Äúsome risks ahead‚ÄĚ for eurozone consumer price inflation and most dealers continue to expect the ECB will lift its refinancing rate by +25bps next month. Euro bids are cited around the US$ 1.3415 level.
The yen weakened vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•121.30 level and was supported around the ¬•120.65 level. The pair reached its strongest level since 23 February as traders sold yen following a weaker-than-expected Japanese GDP report that saw economic growth of 0.6% in the January through March quarter. Even though this print was around most estimates, the capital expenditures component fell 0.9% compared to expectations for a 2.3% improvement. As expected, Bank of Japan‚Äôs Policy Board kept interest rates unchanged overnight and Governor Fukui reiterated rates to increase gradually. Fukui also indicated the central bank won‚Äôt be inhibited by parliamentary elections in July but most traders do not see a move higher in rates until later this year. Other data released in Japan today saw Tokyo April condominium sales fall 9.3% y/y while sales were off 3.9% in Osaka. The Nikkei 225 stock index lost 0.17% to close at ¬•17,498.60. Dollar bids are cited around the ¬•120.40 level. The euro climbed vis-√†-vis the yen as the single currency tested offers around the ¬•163.80 level and was supported around the ¬•163.20 level. The British pound and Swiss franc moved higher vis-√†-vis the yen as the crosses tested offers around the ¬•239.50 and ¬•99.10 levels, respectively. The Chinese yuan appreciated sharply vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.6707 in the over-the-counter market, down from CNY 7.6820. People‚Äôs Bank of China Governor Zhou reported the central bank may consider additional monetary tightenings to counter inflation. Notably, China‚Äôs consumer price index was up 3.0% y/y in April. Chinese and U.S. officials will meet next week to discuss economic and trade issues.
The British pound came off vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.9730 level and was capped around the $1.9790 level. Technically, today‚Äôs intraday high was right around the 61.8% retracement of the move from $1.9590 to $2.0130. Data released in the U.K. today saw English Q1 housing starts off 9.0% y/y to 43,600. Many traders expect tomorrow‚Äôs April retail sales figures to move the market. Cable bids are cited around the US$ 1.9685 level. The euro came off marginally vis-√†-vis the British pound today as the single currency tested bids around the ‚ā§0.6825 level and was capped around the ‚ā§0.6850 level.
The Swiss franc moved lower vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2280 level and was supported around the CHF 1.2195 level. Technically, today‚Äôs intraday high was right around the 50% retracement of the move from CHF 1.2355 to CHF 1.1995. Swiss National Bank President Roth was quoted as saying ‚Äúmarket trends (in the Swiss franc) do not reflect our economy‚Äôs fundamentals. "It is not because the house hasn't burned for years that one should cancel one's fire insurance.‚ÄĚ Dollar offers are cited around the CHF 1.2325 level. The euro and British pound moved higher vis-√†-vis the Swiss franc as the crosses tested offers around the CHF 1.6560 and CHF 2.4235 levels, respectively.
The Australian dollar came off vis-√†-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.8200 figure and was capped around the $0.8270 level. Technically, today‚Äôs intraday high was right around the 50% retracement of the move from $0.8390 to $0.8170. Data released in Australia today saw average weekly earnings climb 1.1% in the three months to February and climb 3.5% y/y. Australian dollar bids are cited around the US$ 0.8120 level.
The Canadian dollar extended recent gains vis-√†-vis the U.S. dollar today as the greenback tested bids around the C$ 1.0970 level and was capped around the C$ 1.1055 level. The pair is about 40 pips shy of testing multi-decade lows established in May 2006. Data released in Canada today saw April consumer price inflation climb +2.2% y/y, down from 2.3% in March. Excluding energy prices, however, inflation grew 2.4%, its strongest showing in nearly four years. These data are well above Bank of Canada‚Äôs 2.0% target rate and suggest the central bank may be forced to raise interest rates again soon. U.S. dollar offers are cited around the C$ 1.1150 level.
Gold came off vis-√†-vis the U.S. dollar today as the yellow metal tested bids around the US$ 653.95 level and was capped around the $663.75 level. The U.S. dollar‚Äôs intraday gains contributed to gold‚Äôs intraday weakness. Silver weakened vis-√†-vis the U.S. dollar as the pair tested bids around the US$ 12.70 level and was capped around the $12.97 level.
Crude oil appreciated vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for June delivery tested offers around the US$ 63.73 level and was supported around the $62.53 level. The price was underpinned by continued refinery problems in the U.S. and concerns that U.S. gasoline stockpiles will not be enough to satisfy demand during the U.S. summer driving season. Also, tensions remain escalated in Nigeria, Africa‚Äôs largest oil producer, and these are also keeping prices higher.
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