Thursday July 19, 2007 - 16:23:54 GMT
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Forex and Commodity Market Commentary and Analysis (19 July 2007)
The euro gained ground vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3830 level and was supported around the $1.3785 level. The common currency‚Äôs intraday high was right around the lifetime high it established yesterday. Federal Reserve Chairman Bernanke continued his second day of congressional testimony today and reported ‚ÄúOverall, the U.S. economy appears likely to expand at a moderate pace over the second half of 2007, with growth then strengthening a bit in 2008 to a rate close to the economy's underlying trend.‚ÄĚ Bernanke also reiterated that the recent improvement in underlying inflation may prove temporary. Data released in the U.S. today saw June leading indicators decline 0.3% m/m from a revised 0.2% increase in May. Also, weekly initial jobless claims were off 8,000 to 301,000 while continuing jobless claims were up 20,000 to 2.57 million. Traders await the release of the Philadelphia Fed‚Äôs manufacturing index today along with the minutes from the Federal Open Market Committee meeting that was held on 28 June. In eurozone news, French policymakers are still making noise regarding the European Central Bank‚Äôs independence and need to coordinate policy or held more dialogue with eurozone finance ministers. Data released in the eurozone today saw the Belgian National Bank July consumer confidence indicator fall to -1 from +1 in June. Euro bids are cited around the US$ 1.3695 level.
The yen came off marginally vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•122.15 level and was supported around the ¬•121.75 level. Today‚Äôs intraday range was relatively thin as the pair tries to recoup some of yesterday‚Äôs losses. Data released in Japan today saw the May all-industries index fall 0.3% m/m, the first decline in two months. Also, June department store sales were up 5.5% y/y, the largest rise in nine years. Traders are closely monitoring the election campaign in the Upper House where some believe the Liberal Democratic Party may lose ground in this month‚Äôs contest. A mixed electoral result could delay Bank of Japan‚Äôs next interest rate increase while an outright LDP victory or loss might make it easier for the BoJ to push through a hike in the overnight call rate by +25bps to +0.75%. The Nikkei 225 stock index climbed 0.56% to close at ¬•18,116.57. Dollar bids are cited around the ¬•121.55/ 120.70 levels. The euro moved higher vis-√†-vis the yen as the single currency tested offers around the ¬•168.80 level and was supported around the ¬•168.05 level. The British pound came off vis-√†-vis the yen as sterling tested bids around the ¬•249.70 level while the Swiss franc appreciated vis-√†-vis the yen and tested offers around the ¬•101.75 level. The Chinese yuan appreciated marginally vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.5632 in the over-the-counter market, down from CNY 7.5640. Data released in China today saw Q2 GDP up 11.9% y/y and H1 GDP growth was up 11.5% y/y. Also, June CPI was up 4.4% y/y and H1 industrial output was up 18.5% y/y with H1 fixed-asset investment up 25.9% y/y. Additionally, June nominal retail sales were up 16% y/y.
The British pound came off vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 2.0470 level and was capped around the $2.0540 level. Sterling shied away from the new multi-decade high that it established yesterday. Bank of England Governor King was quoted as saying ‚ÄúWe have to look through the short-term volatility caused by gas and electricity prices. In our view, inflation will come down during the rest of the year. It is likely to drop further but we will have to wait and see.‚ÄĚ Data released in the U.K. today saw public sector net borrowing print at ‚ā§7.4 billion, the worst print for the month of June since 1993. Various housing market data released today suggest that BoE‚Äôs recent monetary tightenings may be having a negative impact on the housing sector. BSA reported that mortgage approvals continued to ease in June while BBA reported that mortgage lending continued to decelerate. In contrast, CML reported that gross mortgage lending reached a new record high in June. Additionally, BoE M4 money supply growth was up a monthly +0.8% in June and up 13.0% y/y and June retail sales rose 0.2% m/m, down from +0.4% in May. Cable bids are cited around the US$ 2.0430/ 2.0360 levels. The euro moved higher vis-√†-vis the British pound as the single currency tested offers around the ‚ā§0.6750 level and was supported around the ‚ā§0.6720 level.
The Swiss franc came off vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2035 level and was supported around the CHF 1.1985 level. Data released in Switzerland today saw the ZEW economic expectations indicator fall to -2.1 in July from -0.1 in June. Also, the June trade surplus printed at CHF 1.7 billion, up from CHF 935.5 million one year ago. Dollar offers are cited around the CHF 1.2065/ 95 levels. The euro gained ground vis-√†-vis the Swiss franc as the single currency tested offers around the CHF 1.6610 level while the British pound weakened vis-√†-vis the Swiss franc and tested bids around the CHF 2.4570 level.
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