Wednesday June 20, 2007 - 15:07:32 GMT
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Forex and Commodity Market Commentary and Analysis (20 June 2007)
The euro gained marginal ground vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3435 level and was supported around the $1.3415 level. Today‚Äôs range was extraordinarily tight as traders awaited comments from Federal Reserve policymakers later in the North American session and tomorrow‚Äôs jobless claims report, and PMI surveys in the eurozone. U.S. Treasury Secretary Paulson lauded global economic growth levels today and added ‚Äúcurrency reform is not going to eliminate the U.S.‚Äôs trade deficit.‚ÄĚ In eurozone news, it was announced the European Parliament has approved Malta‚Äôs and Cyprus‚Äôs accession of Economic and Monetary Union, meaning those two countries may join the eurozone on 1 January 2008. Euro bids are cited around the US$ 1.3355 level.
The yen weakened vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•123.60 level and was supported around the ¬•123.10 level. Technically, today‚Äôs intraday low was just above the 23.6% retracement of the move from ¬•120.75 to ¬•123.75. The yen weakened after minutes from Bank of Japan‚Äôs May Policy Board meeting reaffirmed the central bank will lift interest rates gradually. BoJ Deputy Governor Muto hawkishly said Japan‚Äôs projected GDP growth rate of 2% could lift inflation expectations in the coming quarters. Data released in Japan overnight saw large firms‚Äô Q2 business sentiment index print at -0.9 compared with +6.2 in Q1, the third consecutive quarterly decline. Also, the April all-industry activity index was up 1.2% m/m. Traders are talking about the forthcoming release of the BoJ‚Äôs quarterly tankan survey of manufacturing sentiment on 2 July. Economists are predicting an unchanged reading. The Nikkei 225 stock index gained 0.26% to close at ¬•18,211.68. Dollar bids are cited around the ¬•122.60 level. The euro moved higher vis-√†-vis the yen as the single currency tested offers around the ¬•166.00 figure and was supported around the ¬•165.20 level. The British pound and Swiss franc gained ground vis-√†-vis the yen as the crosses tested offers around the ¬•246.35 and ¬•99.95 levels, respectively. The Chinese yuan depreciated marginally vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.6180 in the over-the-counter market, up from CNY 7.6175. Traders cited market rumours that China may be ready to tighten monetary policy further. A government think-tank confirmed 2007 CPI growth is seen around 3.3% on rising food prices. Data released in China today saw the entrepreneur confidence index fall to 83.4% in the second quarter. The Chinese media reported China‚Äôs soon-to-be-established foreign exchange reserves management company may open as early as September and is likely to be named China National Investment Corp.
The British pound moved higher vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 1.9935 level and was supported around the $1.9870 level. Technically, today‚Äôs intraday low was just above the 50% retracement of the move from $1.9590 to $2.0130. Minutes from the June meeting of Bank of England‚Äôs Monetary Policy Committee were released today and evidenced a tight 5-to-4 vote to keep interest rates unchanged at 5.50%. BoE Governor King was in the minority voting for a hike and the vote was much closer than expected. Most traders now believe the MPC will lift interest rates by +25bps in August. Notably, the short sterling futures contracts are now pricing in at least two additional +25bps rate hikes by the end of the year. Some traders are even speculating the repo rate will move as high as 6.25% by the end of the year, or 75bps above current official rates. Data released in the U.K. today saw the May M4 money supply up an annualized 13.8%, the highest since October 2006‚Äôs 13.9% level. Also, CML reported that May mortgage lending was the highest on record for that month while BSA reported May mortgage approvals fell to ‚ā§4.74 billion from ‚ā§5.45 billion one year ago. Cable bids are cited around the US$ 1.9840 level. The euro came off vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6730 level and was capped around the ‚ā§0.6760 level.
The Swiss franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the CHF 1.2355 level and was capped around the CHF 1.2410 level. Technically, today‚Äôs intraday low was right around the 61.8% retracement of the move from CHF 1.2570 to CHF 1.1995. Data released in Switzerland today saw the May producer price index up 0.9% m/m and 2.8% y/y. UBS today hiked its Swiss 2007 GDP forecast to 2.6% from 1.8% and sees additional monetary tightenings. Dollar offers are cited around the CHF 1.2395 level. The euro and British pound came off vis-√†-vis the Swiss franc as the crosses tested bids around the CHF 1.6590 level and CHF 2.4600 figure, respectively.
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