Monday July 16, 2007 - 16:39:17 GMT
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GCI Financial - www.gcitrading.com
Forex and Commodity Market Commentary and Analysis (16 July 2007)
The euro gained marginal ground vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3800 figure and was supported around the $1.3760 level. Technically, today‚Äôs intraday low was right around the 23.6% retracement of the move from $1.3260 to $1.3815. The common currency gave up marginal ground after the Federal Reserve Bank of New York‚Äôs July Empire State manufacturing index improved to 26.5 in July from 25.8 in June, the highest level since June 2006. The greenback was on the defensive last week on account of ongoing troubles in the U.S. subprime mortgage market and weaker-than-expected retail sales. Traders will pay close attention to two days of testimony from Federal Reserve Chairman Bernanke this week to see if he offers any clues that Fed policymakers are becoming more comfortable with receding inflationary pressures. Also, traders want to get a sense of whether or not a monetary easing and lower interest rates are on the Fed‚Äôs radar. June consumer price inflation data will be released on Wednesday, preceded by producer price inflation data tomorrow. In eurozone news, the German ZEW business confidence indicator will be released tomorrow. Data released in the eurozone today saw the June harmonized consumer price inflation index up 1.9% y/y, unchanged from provisional readings. Euro bids are cited around the US$ 1.3720 level.
The yen lost marginal ground vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•122.15 level and was supported around the ¬•121.55 level. Technically, today‚Äôs intraday low was right around the 76.4% retracement of the move from ¬•120.75 to ¬•124.15. Traders are closely watching developments in the Upper House election campaigns ahead of this month‚Äôs election. The Liberal Democratic Party is facing an uphill battle and if the LDP does not retain a majority in the Diet, Bank of Japan‚Äôs next interest rate hike could be delayed. Many BoJ-watchers believe the central bank could lift the overnight call rate by +25bps as early as next month. The Nikkei 225 stock index climbed 1.42% to close at ¬•18,238.95. Dollar bids are cited around the ¬•120.70 level. The euro moved higher vis-√†-vis the yen as the single currency tested offers around the ¬•168.35 level and was supported around the ¬•167.70 level. The British pound and Swiss franc gained ground vis-√†-vis the yen as the crosses tested offers around the ¬•248.60 and ¬•101.55 levels, respectively. In Chinese news, the yuan‚Äôs central parity rate vis-√†-vis the U.S. dollar was set at a record CNY 7.5681, down from CNY 7.5731. Bank of England released a working paper that reported ‚ÄúA revaluation of the yuan which reduces the growth of China's exports may also reduce the exports of its neighbors, such as Korea and Japan, depressing rather than boosting their own GDP (gross domestic product) growth rates and creating pressure for currency depreciation rather than appreciation. Thus, a generalized revaluation of Asian currencies seen by some observers as an important part of the solution to the current problem of global imbalances may not in fact follow from a slowing of Chinese growth due to a yuan revaluation.‚ÄĚ Citigroup and Goldman Sachs predicted Chinese Q2 GDP growth will print around 10.7% and 11.0%, respectively.
The British pound extended recent gains vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 2.0400 figure and was supported around the $2.0320 level. The pair reached a new, multi-decade high after absorbing recent resistance around the $2.0365 level. Data released in the U.K. today saw central London June retail sales growth expand 10.3% y/y while nationwide house prices were up 10.9% y/y in May, down from 11.3% y/y in April. June CPI data will be released in the U.K. tomorrow and if they are above May‚Äôs reading of 2.5%, they could lead to further upward pressure on sterling. Cable bids are cited around the US$ 2.0290 level. The euro came off vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6760 level and was capped around the ‚ā§0.6780 level.
The Swiss franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the CHF 1.1995 level and was capped around the CHF 1.2035 level. May retail sales data will be released tomorrow. Dollar offers are cited around the CHF 1.2080 level. The euro came off marginally vis-√†-vis the Swiss franc as the single currency tested bids around the CHF 1.6545 level while the British pound moved higher vis-√†-vis the Swiss franc and tested offers around the CHF 2.4515 level.
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