Friday August 31, 2007 - 14:59:06 GMT
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Forex and Commodity Market Commentary and Analysis (31 August 2007)
The euro moved higher vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3720 level and was supported around the $1.3625 level. Technically, today‚Äôs intraday high was just below the 76.4% retracement of the move from $1.3840 to $1.3360. Traders bid the common currency higher in Australasian and European dealing on expectations that Federal Reserve Chairman Bernanke may not make market-friendly comments about the U.S. housing sector at the annual Jackson Hole symposium in Jackson Hole today. Bernanke was quoted as saying the Fed ‚Äústands ready to take additional actions as needed‚ÄĚ to limit ‚Äúadverse affects‚ÄĚ on the broad economy from the recent liquidity meltdown. Moreover, he noted ‚Äúit is not the responsibility of the Federal Reserve ‚Äď nor would it be appropriate ‚Äď to protect lenders and investors from the consequences of thief financial decisions.‚ÄĚ Traders are also paying close attention to remarks expected from President Bush today in which he may announce a rescue package for the U.S. housing sector. Data released in the U.S. today saw July personal income up 0.5% m/m with personal spending up 0.4% m/m. Also, July factory orders were up 3.7%, the August Chicago PMI survey rose to 53.8 from 53.4 in July, and the August University of Michigan consumer sentiment index declined to 83.4 from 90.4. In eurozone news, traders continue to pare back their expectations that the European Central Bank will lift its main refinancing rate by +25bps next week. Data released in the eurozone today saw August EMU-13 economic sentiment move lower in August while provisional August HICP was up 1.8% y/y and was unchanged m/m. Moreover, EMU-13 July unemployment was unchanged at 6.9% and German July retail sales were up 0.3% m/m and off 1.5% y/y. Euro bids are cited around the US$ 1.3530 level.
The yen depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•116.60 level and was supported around the ¬•115.80 level. The pair briefly traded above the ¬•116.40 level, representing the 38.2% retracement of the move from ¬•124.15 to ¬•111.60. Many data were released in Japan overnight. First, nationwide core consumer prices fell for the sixth consecutive month in July, off 0.1% y/y, with headline CPI unchanged. In the Tokyo area, core CPI was unchanged y/y in August and headline CPI was off 0.2% m/m. These data will render it more difficult for Bank of Japan‚Äôs Policy Board to lift the overnight call rate by +25bps to +0.75% in September, especially in light of global credit conditions. Second, July all-household spending was off 0.1% y/y. Third, Japan‚Äôs unemployment rate contracted to its lowest level in more than nine years, falling to 3.6% from 3.7%. Fourth, July housing starts were weak at -23.4% y/y. Fifth, July orders by the 50 largest contractors were off 10.4% y/y. Sixth, July construction orders were off 10.4% y/y. Seventh, July industrial output was off 0.4% m/m, the fourth decline in five months. The Nikkei 225 stock index gained 2.57% to close at ¬•16,569.09. Dollar bids are cited around the ¬•114.55 level. The euro appreciated vis-√†-vis the yen as the single currency tested offers around the ¬•159.60 level and was supported around the ¬•157.80 level. The British pound and Swiss franc gained ground vis-√†-vis the yen as the crosses tested offers around the ¬•235.50 and ¬•97.05 levels, respectively. The Chinese yuan came off vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.5450 in the over-the-counter market, down from CNY 7.5410.
The British pound moved higher vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 2.0230 level and was supported around the $2.0110 level. The pair reached its strongest showing since 13 August. Data released in the U.K. today saw the August GfK consumer confidence index rise unexpectedly to -4 from -6 in July. Most traders expect Bank of England‚Äôs Monetary Policy Committee to lift its repo rate by +25bps to +6.00% in the coming months. Cable bids are cited around the US$ 2.0090 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§0.6785 level.
The Swiss franc lost ground vis-√†-vis the U.S. dollar today as the greenback tested bids around the CHF 1.1985 level and was capped around the CHF 1.2080 level. Data released in Switzerland today saw August CPI off 0.1% m/m and up 0.4% y/y. Many traders believe Swiss National Bank may delay its expected +25bps monetary tightening next month. Dollar offers are cited around the CHF 1.2140 level. The euro and British pound gained ground vis-√†-vis the Swiss franc as the crosses tested offers around the CHF 1.6480 and CHF 2.4365 levels, respectively.
The Australian dollar appreciated marginally vis-√†-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.8250 level and was supported around the $0.8140 level. Data released in Australia today saw the July trade balance print at ‚ÄďA$ 756 million from a revised ‚ÄďA$ 1.737 billion in June. Also, July private sector credit was up 0.9% m/m and up 15.4% y/y and July retail sales were up 0.9% m/m. Australian dollar bids are cited around the US$ 0.7955 level. The New Zealand dollar came off vis-√†-vis the U.S. dollar as the kiwi tested bids around the US$ 0.7000 figure and was capped around the US$ 0.7100 figure. New Zealand dollar bids are cited around the US$ 0.6985 level.
The Canadian dollar moved marginally higher vis-√†-vis the U.S. dollar today as the greenback tested bids around the C$ 1.0505 level and was capped around the C$ 1.0585 level. Data released in Canada today saw Q2 GDP up 0.8% q/q, down from Q1‚Äôs pace of +1.0%. On an annualized basis, GDP expanded 3.4% y/y in Q2. The pair was also pressured by news that U.S. technology giant Microsoft might make a play for Canada‚Äôs Research in Motion, maker of the Blackberry. U.S. dollar offers are cited around the C$ 1.0655 level.
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