Monday July 9, 2007 - 15:11:26 GMT
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GCI Financial - www.gcitrading.com
Forex and Commodity Market Commentary and Analysis (9 July 2007)
The euro came off marginally vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3610 level and was capped around the $1.3635 level. The dollar failed to sustain short-lived gains it scored on Friday following the release of relatively strong June non-farm payrolls data and this could render the greenback on the defensive in the short-term. Data released in the eurozone today saw German May industrial production up 1.9% m/m while the German May trade surplus expanded to ‚ā¨17.5 billion from ‚ā¨15.0 billion in April. All eyes are on today‚Äôs eurozone finance ministers meeting and the fireworks that are expected to ensue. French finance minister Sarkozy is expected to tell his EMU-13 counterparts why France should delay its deficit reduction goal. European Central Bank President Trichet countered some of Sarkozy‚Äôs ongoing criticism of the common currency and its strength by saying ‚Äúdenying that economic and monetary stability is at the heart of (the euro‚Äôs success) would be an enormous error.‚ÄĚ Remarks from ECB member Stark will be closely scrutinized today. In U.S. news, the May trade balance will be released on Thursday and June retail sales will be released on Friday along with University of Michigan consumer sentiment. Euro bids are cited around the US$ 1.3565/ 20 levels.
The yen weakened marginally vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•123.65 level and was supported around the ¬•123.25 level. Technically, today‚Äôs intraday high was right around the 76.4% retracement of the move from ¬•124.15 to ¬•122.10. Economic data released today reinforce the view that Bank of Japan‚Äôs Policy Board will keep interest rates unchanged this week and likely lift them by +25bps to +0.75% next month. The June economy watchers‚Äô index fell last month for its third consecutive decline, printing at 46.0 from 46.8 in May. Also, May core private sector machinery orders surged 5.9% m/m, the fastest pace of growth in eleven months. Additionally, June money supply was up 1.8% y/y and June bank lending rose 0.7% y/y, weaker-than-expected and down from May‚Äôs 0.9% pace. The government upgraded its view of the economy for the first time in nearly a year. The Nikkei 225 stock index gained 0.67% to close at ¬•18,261.98. Dollar bids are cited around the ¬•122.85/ 45 levels. The euro was little-changed vis-√†-vis the yen as the single currency tested offers around the ¬•168.50 level and was supported around the ¬•167.95 level. The British pound and Swiss franc moved higher vis-√†-vis the yen as the crosses tested offers around the ¬•238.75 and ¬•101.55 levels, respectively. In Chinese news, the yuan‚Äôs central parity rate vis-√†-vis the U.S. dollar was set at CNY 7.6085, down from CNY 7.6135. Data released in China today saw consumer confidence improve in Q2. Goldman Sachs reported Q3 GDP growth is expected around 12% and Citigroup reported the yuan‚Äôs appreciation will accelerate in Q3.
The British pound climbed higher vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 2.0160 level and was supported around the $2.0095 level. Technically, today‚Äôs intraday low was right around the 23.6% retracement of the move from $2.0200 to $2.0055. Data released in the U.K. today saw June producer output prices up 0.2% and producer input prices up 0.6% m/m and 2.1% y/y. These data were slightly less-than-expected but it was also reported that consumers believe the yearly rate in input price inflation will rise to 2.1% from 1.3% in May. Most traders believe Bank of England‚Äôs Monetary Policy Committee will tighten monetary policy by at least another +25bps in 2007 and possibly take the repo rate higher to 6.25%. Cable bids are cited around the US$ 2.0060 level. The euro weakened vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6760 level and was capped around the ‚ā§0.6775 level.
The Swiss franc appreciated marginally vis-√†-vis the U.S. dollar today as the greenback tested bids around the CHF 1.2150 level and was capped around the CHF 1.2190 level. Technically, today‚Äôs intraday high was right around the 23.6% retracement of the move from CHF 1.2475 to CHF 1.2090. This will be a quiet week for Swiss economic data and traders will pay close attention to any remarks from Swiss National Bank officials. Dollar offers are cited around the CHF 1.2235 level. The euro came off vis-√†-vis the Swiss franc as the single currency tested bids around the CHF 1.6570 level while the British pound appreciated vis-√†-vis the Swiss franc and tested offers around the CHF 2.4525 level.
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