Monday July 23, 2007 - 15:18:18 GMT
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Forex and Commodity Market Commentary and Analysis (23 July 2007)
The euro came off marginally vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3795 level and was capped around the $1.3845 level. The common currency established a new lifetime high today as traders continued to worry about subprime mortgage worries in the U.S. credit markets. The 10-year U.S. Treasury note is now trading below 5.00% as traders have started to price in a chance the Federal Reserve may be forced to expand monetary policy by reducing interest rates this year. Data released in the U.S. today saw the Chicago Fed‚Äôs National Activity index reach its highest level this year, printing at +0.11 from May‚Äôs reading of -0.32. In eurozone news, Germany‚Äôs Bundesbank reported German economic growth likely decelerated in Q2 from Q1‚Äôs pace. European Central Bank member Bini-Smaghi brushed aside concern about the euro‚Äôs recent strength saying ‚Äúthe weakness of the dollar reflects the weakness of the American economy.‚ÄĚ Traders await the release of the German Ifo survey on Thursday. Euro bids are cited around the US$ 1.3735 level.
The yen appreciated marginally vis-√†-vis the U.S. dollar today as the greenback tested bids around the ¬•120.80 level and was capped around the ¬•121.70 level. Technically, today‚Äôs intraday low was just above the 38.2% retracement of the move from ¬•115.15 to ¬•124.15. Traders are closely watching next weekend‚Äôs Upper House elections in which the Liberal Democratic Party may lose its stronghold on the legislature. An LDP loss could precipitate the prime minister‚Äôs resignation and any sense of political instability could impact the yen. Data released in Japan overnight saw June supermarket sales off 1.5% y/y, the eighteenth consecutive monthly decline. The Nikkei 225 stock index shed 1.07% to close at ¬•17,963.64. Dollar bids are cited around the ¬•120.75 level. The euro weakened vis-√†-vis the yen as the single currency tested bids around the ¬•167.10 level and was capped around the ¬•168.35 level. The British pound appreciated vis-√†-vis the yen as sterling tested offers around the ¬•250.10 level while the Swiss franc came off vis-√†-vis the yen and tested bids around the ¬•100.60 level. In Chinese news, the yuan‚Äôs central parity rate vis-√†-vis the U.S. dollar was set at CNY 7.5642 vis-√†-vis the U.S. dollar, down from CNY 7.5712. Data released in China today saw June crude output up 2.5% y/y while June property prices in 70 major cities were up 7.1% y/y.
The British pound appreciated vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 2.0600 figure and was supported around the $2.0545 level. Sterling established another multi-decade high as traders absorbed the psychologically-important US$ 2.60 figure. Data released in the U.K. today saw Rightmove house prices rise 0.3% m/m in mid-July, down from June‚Äôs +0.8% pace. Traders await any details as to when Bank of England‚Äôs Monetary Policy Committee will next lift interest rates. Cable bids are cited around the US$ 2.0475 level. The euro came off vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6705 level and was capped around the ‚ā§0.6735 level.
The Swiss franc weakened vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2055 level and was supported around the CHF 1.1985 level. Technically, today‚Äôs intraday low was just below the 38.2% retracement of the move from CHF 1.2230 to CHF 1.1960. The July KOF leading indicator will be released on Friday. Dollar offers are cited around the CHF 1.2130 level. The euro and British pound gained ground vis-√†-vis the Swiss franc as the crosses tested offers around the CHF 1.6655 and CHF 2.4815 levels, respectively.
The Australian dollar marched higher vis-√†-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.8840 level and was supported around the $0.8785 level. Today‚Äôs intraday high represented a new multi-decade high. Data released in Australia today saw Q2 final producer price inflation up 1.0% q/q and 2.3% y/y. Traders await consumer price inflation data and believe it may be tame enough to allow Reserve Bank of Australia to keep interest rates unchanged for the time being. Australian dollar bids are cited around the US$ 0.8720 level. The New Zealand dollar extended recent gains vis-√†-vis the U.S. dollar today as the kiwi tested offers around the US$ 0.8025 level and was supported around the US$ 0.7955 level. Today‚Äôs intraday high represented a new 25-year high for the pair. Many traders believe Reserve Bank of New Zealand may lift its official cash rate by another 25bps to +8.25% on Thursday. New Zealand dollar bids are cited around the US$ 0.7950 level.
The Canadian dollar appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the C$ 1.0425 level and was capped around the $1.0485 level. May retail sales data will be released tomorrow. U.S. dollar offers are cited around the C$ 1.0580 level.
Gold came off vis-√†-vis the U.S. dollar today as the yellow metal tested bids around the US$ 681.95 level and was capped around the $685.20 level. Most traders believe gold will continue to shine as the U.S. dollar‚Äôs weakness is likely to persist. Silver moved lower vis-√†-vis the U.S. dollar today as the pair tested bids around the US$ 13.24 level and were capped around the $13.39 level.
Crude oil slumped vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for September delivery tested bids around the US$ 74.51 level and were capped around the US$ 75.69 level. Traders await details from tomorrow‚Äôs meeting between the U.S. and Iran. OPEC President Al Hamli was quoted this weekend as saying policymakers are ‚Äúconcerned‚ÄĚ about steep prices that remain near all-time highs. OPEC, however, appears to not want to increase production ahead of its next scheduled meeting in September.
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