Thursday June 21, 2007 - 10:11:57 GMT
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GCI Financial - www.gcitrading.com
Forex and Commodity Market Commentary and Analysis (21 June 2007)
The euro weakened marginally vis-Ã -vis the U.S. dollar today as the single currency tested bids around the US$ 1.3370 level and was capped around the $1.3405 level. Technically, todayâ€™s intraday high was right around the 50% retracement of the move from $1.3550 to $1.3260. The common currency failed to advance on news that the provisional June services PMI index rose to 58.3 from 57.3 in May, above expectations, while the manufacturing PMI index rose to 55.4 in June from 55.0 in May. Traders await tomorrowâ€™s release of Germanyâ€™s Ifo business confidence survey and it is expected to moderate from near record-levels. Germanyâ€™s HWWI institute lifted its GDP growth forecast to 2.8% from its previous 2.3% level. In U.S. news, Treasury Secretary Paulson indicated the U.S. housing sector slump is likely nearing its end. Data to be released in the U.S. today include the weekly initial jobless claims, leading economic indicators, and the Philadelphia Fedâ€™s business confidence survey. Euro bids are cited around the US$ 1.3330 level.
The yen depreciated marginally vis-Ã -vis the U.S. dollar today as the greenback tested offers around the Â¥123.75 level and was supported around the Â¥123.40 level. The pair established a fresh multi-year high dating back to December 2002. Traders continued to sell yen in short carry trades and invest the proceeds in higher-yielding currencies. Data released in Japan overnight saw the May trade surplus up 9.3% y/y while capital flows data revealed that foreign investors were net buyers of Japanese equities for the seventh consecutive week. The main market speculation involving the yen now is when Bank of Japan will next raise interest rates. Many traders believe the central bank will lift borrowing costs as early as August, after next monthâ€™s parliamentary elections. The markets are pricing in two +25bps hikes by the BoJ through the end of the year. Remarks from BoJ Governor Fukui will continue to be closely scrutinized. The Nikkei 225 stock index climbed 0.16% to close at Â¥18,240.30. Dollar bids are cited around the Â¥122.60 level. The euro came off vis-Ã -vis the yen as the single currency tested bids around the Â¥165.35 level and was capped around the Â¥165.75 level. The British pound and Swiss franc weakened vis-Ã -vis the yen as the crosses tested bids around the Â¥245.85 and Â¥99.50 levels, respectively. In Chinese news, the yuanâ€™s central parity rate was set at CNY 7.6208 vis-Ã -vis the U.S. dollar, up from CNY 7.6180. Peopleâ€™s Bank of China Vice Governor Wu warned that the yuan must not appreciate too rapidly on account of its importance to international trade.
The British pound depreciated vis-Ã -vis the U.S. dollar today as cable tested bids around the US$ 1.9890 level and was capped around the $1.9935 level. Cable yesterday traded at its highest level since 6 June and stops were hit below the $1.9910 level today, representing the 23.6% retracement of the move from $1.9180 to $2.0130. Bank of England Governor King gave his Mansion House speech last night and reported U.K. businesses have not added enough workers to prevent stronger demand from creating inflation. In BoE Monetary Policy Committee meeting minutes released yesterday, King was in the minority of policymakers who opted for a +25bps monetary tightening this month. Most trades expect the MPC to lift rates by +25bps in August followed by as much as another +50bps in tightening by the end of the year. Notably, the BoE has lifted rates four times over the past eleven months. Cable bids are cited around the US$ 1.9770 level. The euro came off vis-Ã -vis the British pound as the single currency tested bids around the â‚¤0.6710 level and was capped around the â‚¤0.6725 level.
The Swiss franc depreciated vis-Ã -vis the U.S. dollar today as the greenback tested offers around the CHF 1.2420 level and was supported around the CHF 1.2370 level. Technically, todayâ€™s intraday high was right around the 50% retracement of the move from CHF 1.2475 to CHF 1.2355. Data released in Switzerland saw the May trade surplus expand to CHF 1.3 billion, up 16% y/y, while the June ZEW economic indicator fell to -0.1 from 0. Dollar offers are cited around the CHF 1.2445 level. The euro and British pound appreciated vis-Ã -vis the Swiss franc and tested offers around the CHF 1.6615 and CHF 2.4740 levels, respectively.
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