Friday November 2, 2007 - 13:39:45 GMT
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Forex and Commodity Market Commentary and Analysis (2 November 2007)
The euro moved higher vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4525 level and was supported around the $1.4415 level. The common currency established a new lifetime high before coming off in the North American session. U.S. October non-farm payrolls growth was stronger-than-expected at 166,000, above the 85,000 estimated by economists, and the unemployment rate held steady at 4.7%. There was a cumulative downward revision to August‚Äôs and September‚Äôs non-farm payroll tallies of 10,000. Also, average hourly earnings came in lower-than-expected at 0.2% m/m and 3.8% y/y while September‚Äôs average hourly earnings printed was downwardly revised to 0.3%. The Fed will be pleased with the pullback in wage inflation and traders continue to scale back their expectations for another rate cut by the FOMC in December. The fed funds futures market is now discounting only a 60% chance the FOMC will take the rate lower 25bps by the end of January. In eurozone news, German manufacturing PMI fell to its weakest level in two years at 51.7 while EMU-13 October manufacturing PMI came in at 51.5. Euro bids are cited around the US$ 1.4385 level.
The yen depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•115.40 level and was supported around the ¬•114.35 level. BoJ Governor Fukui reported he is ‚Äúpainfully aware of the difficulty of choosing the right time" for raising interest rates, adding ‚ÄúBut if we waver too much it could cloud our policy judgment, and we cannot let that happen.‚ÄĚ Fukui added a raise in rates will be important to help prevent an excessive accumulation of short-yen carry trades. The swap futures market is now discounting about a 50% chance the BoJ will lift the overnight call rate by 25bps to 0.75% by the end of the current fiscal year in March 2008. The Nikkei 225 stock index lost 2.09% to close at ¬•16,517.48. Dollar bids are cited around the ¬•113.85/ ¬•112.55 levels. The euro moved higher vis-√†-vis the yen as the single currency tested offers around the ¬•166.85 level and was supported around the ¬•165.00 figure. The British pound and Swiss franc moved higher vis-√†-vis the yen as the crosses tested offers around the ¬•240.05 and ¬•99.85 levels, respectively. The Chinese yuan depreciated vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.4558 in the over-the-counter market, up from CNY 7.4543.
The British pound lost appreciated vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 2.0865 level and was supported around the $2.0765 level. The pair came within a few pips of establishing a new multi-decade high that was reached yesterday. IDS reported that U.K. wage gains fell to 3.2% in the three months through October, down from 3.4% - the smallest gain in more than one year. Cable bids are cited around the US$ 2.0600 figure. The euro moved higher vis-√†-vis the British pound as the single currency tested offers around the ‚ā§0.6965 level and was supported around the ‚ā§0.6930 level.
The Swiss franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the CHF 1.1490 level and was capped around the CHF 1.1585 level. The pair reached a new multi-year low dating to early 2005 following the release of Swiss economic data that saw October consumer price inflation up 0.9% m/m and 1.3% y/y. This growth was an acceleration and was more-than-expected and suggests the SNB will remain on the offensive regarding interest rates in December. Dollar offers are cited around the CHF 1.1665 level. The euro moved higher vis-√†-vis the Swiss franc as the single currency tested offers around the CHF 1.6740 level while the British pound moved lower vis-√†-vis the Swiss franc and tested bids around the CHF 2.3965 level.
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