Wednesday July 18, 2007 - 16:21:33 GMT
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GCI Financial - www.gcitrading.com
Forex and Commodity Market Commentary and Analysis (18 July 2007)
The euro appreciated vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3830 level and was supported around the $1.3750 level. The common currency established a new lifetime high today after absorbing the psychologically-important US$ 1.3800 figure. Federal Reserve Chairman Bernanke testified today and confirmed the Fed has reduced its forecast for U.S. economic growth in 2007. The Fed now expects the economy to expand between 2.25% and 2.5% in 2007, down from February‚Äôs predictions of 2.5% to 3.0%. The Fed still sees inflation rising between 2.0% and 2.25% this year as measured by core personal consumption expenditures. Regarding economic risks, Bernanke reported subprime mortgage problems are likely to worsen before they improve and he added the ‚Äúhousing correction may take longer than expected.‚ÄĚ Data release in the U.S. today saw June headline consumer price inflation rise 0.2% m/m, above estimates but the smallest monthly increase since January. Also, June new home sales were up 2.3% y/y to a 1.467 million annualized rate, above expectations, while building permits fell 7.5% to a 1.406 annualized rate, the lowest since June 1997. In eurozone news, the EMU-13 May trade surplus printed at ‚ā¨1.7 billion, down from ‚ā¨2.3 billion in April. Euro bids are cited around the US$ 1.3695 level.
The yen appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the ¬•121.60 level and was capped around the ¬•122.35 level. Technically, today‚Äôs intraday low was right around the 76.4% retracement of the move from ¬•120.75 to ¬•124.15. Minutes from Bank of Japan Policy Board‚Äôs June interest rate deliberations were released overnight and reiterated policymakers should raise rates ‚Äúgradually.‚ÄĚ Most traders believe the BoJ could lift the overnight call rate by +25bps to +0.75% next month after this month‚Äôs Upper House elections. Data released in Japan today saw May revised average pay off 0.2% y/y while the may revised leading index improved to 40.9 from 30.0. The Nikkei 225 stock index lost 1.11% to close at ¬•18,015.58. Dollar bids are cited around the ¬•120.70 level. The euro came off vis-√†-vis the yen as the single currency tested bids around the ¬•168.00 figure and was capped around the ¬•168.60 level. The British pound and Swiss franc weakened vis-√†-vis the yen as the crosses tested bids around the ¬•249.60 and ¬•101.40 levels, respectively. In Chinese news, the Chinese yuan‚Äôs central parity rate vis-√†-vis the U.S. dollar was set at CNY 7.5661, up from CNY 7.5651. Fed Chairman Bernanke today said it is in China‚Äôs best interest to let the yuan appreciate.
The British pound extended recent gains vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 2.0545 level and was supported around the $2.0460 level. The pair reached a new multi-decade high despite the release of minutes from Bank of England Monetary Policy Committee‚Äôs July meeting. The minutes evidenced a 6-to-3 vote in favour of lifting interest rates, narrower than expected. Some traders believe the close vote could reduce the chances that the MPC will tighten monetary policy further next month. Data released in the U.K. today saw average earnings growth including bonuses fall to 3.5% in the three months to May, down from 4.1% in the three months to April. Also, the June claimant count fell by 13,800 while the ILO unemployment rate eased to 5.4% from 5.5% in April. Cable bids are cited around the US$ 2.0430 level. The euro came off vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6715 level and was capped around the ‚ā§0.6745 level.
The Swiss franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the CHF 1.1960 level and was capped around the CHF 1.2050 level. The pair reached its lowest level since 8 December 2006. Dollar offers are cited around the CHF 1.2065 level. The euro came off vis-√†-vis the Swiss franc as the single currency tested bids around the CHF 1.6530 level while the British pound appreciated vis-√†-vis the Swiss franc and tested offers around the CHF 2.4665 level.
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