Tuesday June 12, 2007 - 16:58:10 GMT
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Forex and Commodity Market Commentary and Analysis (12 June 2007)
The euro weakened vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3310 level and was capped around the $ 1.3365 level. Today‚Äôs intraday low was the pair‚Äôs weakest showing since 30 March. Traders await the release of the U.S. Treasury Department‚Äôs semi-annual report on global exchange rate policies tomorrow and the repercussions the report may have in the U.S. Senate. If the report does not name Asian countries ‚Äď particularly China ‚Äď as currency manipulators, the U.S. dollar may still depreciate on account of the likelihood the U.S. Senate will pursue legal action against China, perhaps through protectionist trade measures. Data released in the U.S. today saw ICSC-UBS chain store sales rise 1.0% in the 9 June week. Friday‚Äôs May consumer price inflation data and Treasury International Capital flows data will be closely scrutinized. In eurozone news, European Central Bank President Trichet yesterday called for wage moderation in current pay negotiations. Data released in the eurozone today saw April EMU-13 industrial production fall 0.8% m/m and was up 2.8% y/y while German wholesale prices rose 0.3% and 2.4% y/y in May. Euro bids are cited around the US$ 1.3215 level.
The yen depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•121.85 level and was supported around the ¬•121.55 level. Finance minister Omi verbally intervened saying ‚ÄúIt's not appropriate to comment on daily foreign exchange moves...They should reflect economic fundamentals.‚ÄĚ Regarding diversification of its US$ 911 billion in foreign reserves away from the U.S. dollar, Omi added ‚ÄúWe must be very cautious in assessing risks in the operations of foreign exchange reserves. We put priority on safety and liquidity in such operations and only within this framework, we will pursue returns on investments.‚ÄĚ Traders are beginning to price in a chance that Bank of Japan‚Äôs Policy Board may lift interest rates again by August, after parliamentary elections. This week‚Äôs Policy Board meeting may not result in a unanimous vote to keep rates unchanged and could see speculation increase that rates may move higher next month. Data released in Japan today saw the May consumer confidence index recede to 47.3 from 47.4 in April. Also, the May wholesale goods price index rose 2.2% y/y while May corporate failures were up 24.4% m/m. The Nikkei 225 stock index lost 0.41% to close at ¬•17,760.91. Dollar bids are cited around the ¬•120.80 level. The euro came off vis-√†-vis the yen as the single currency tested bids around the ¬•162.05 level and was capped around the ¬•162.70 level. The British pound moved higher vis-√†-vis the yen as sterling tested offers around the ¬•240.50 level while the Swiss franc moved lower vis-√†-vis the yen and tested bids around the ¬•97.90 level. The Chinese yuan appreciated sharply vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.6436 in the over-the-counter market, down from CNY 7.6632. Data released in China saw the May consumer price index rise 3.4% y/y while May wholesale prices were up 5.1% y/y. Also, the M2 money supply was up 16.74% y/y as of the end of May. All eyes are on tomorrow‚Äôs U.S. governmental report that is likely to not name China as a currency manipulator. U.S. legislators have threatened a bill that would punish China for keeping its currency artificially devalued and China today threatened a ‚Äúcounter response.‚ÄĚ
The British pound gained ground vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 1.9755 level and was supported around the $1.9685 level. Technically, today‚Äôs intraday low was right around the 76.4% retracement of the move from $1.9545 to $2.0130. Data released in the U.K. today saw the trade in goods and services deficit fall to ‚ā§3.6 billion, the lowest since July 2005 and below March‚Äôs ‚ā§4.5 billion shortfall. Also, it was reported that U.K. inflation receded more-than-expected in May to 2.5% from 2.8% in April. Bank of England Governor King yesterday indicated the central bank may be forced to tighten monetary policy further if economic data such as output pricing remain high. Cable bids are cited around the US$ 1.9655/ 1.9545 levels. The euro came off vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6740 level and was capped around the ‚ā§0.6785 level.
The Swiss franc depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2430 level and was supported around the CHF 1.2370 level. Technically, today‚Äôs intraday high was right around the 61.8% retracement of the move from CHF 1.2770 to 1.1875. Dollar offers are cited around the CHF 1.2560 level. The euro and British pound gained ground vis-√†-vis the Swiss franc as the crosses tested offers around the CHF 1.6565 and CHF 2.4545 levels, respectively.
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