Daily Market Commentary - GCI Financial

EURO

The euro fell sharply vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.5710 level and was capped around the $1.5955 level. Traders continued to book profits ahead of the weekend following the common currency’s move to within fifteen pips of the psychologically-important US$ 1.6000 figure yesterday. Data released in the eurozone today saw the April consumer confidence index recede to -7 from -3 in March while German March PPI was up 0.7% m/m and 4.2% y/y. Overall eurozone consumer prices remain elevated as the EMU-15 CPI rate is around 3.6%, significantly above the ECB’s 2.0% ceiling target. An interview published today with European Central Bank arch-hawk Weber quoted him as saying inflation will likely remain at or above 3% for the remainder of the current year and called this “a very alarming environment for a stability-oriented central bank.” Weber added “Should further price risks or second round effects occur, we need to act with determination.” In U.S. news, Boston Fed President Rosengren said “For those financial institutions that do have access to the Discount Window, there is indeed a need for the Fed to have broader access to information than marketplace counterparty creditors, if we are to effectively manage our responsibilities as lender of last resort and custodian of financial stability.” Traders await earnings reports from U.S. banking giant Citigroup following news that Merrill Lynch posted its third consecutive quarterly loss and could slash as many at 4,000 jobs. Philadelphia Fed President Plosser cautioned against “expecting more from the Fed than it has the ability to deliver.” It was reported that the Philadelphia Fed’s manufacturing index reached a seven-year low. Euro bids are cited around the US$ 1.5345 level.

JPN/CNY

The yen depreciated sharply vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥104.45 level and was supported around the ¥102.25 level. The pair reached its highest level since 29 February as an appetite for risk returned to the market with both the yen and the Swiss franc on the defensive. The Japanese government’s April economic assessment was unchanged overall but downgraded its view on Japanese business conditions and the U.S. economy and noted Japan’s economic recovery “appears to be pausing recently.” Bank of Japan Governor Shirakawa indicated elevated energy and materials prices are reducing corporate profits. The BoJ is expected to keep the overnight call rate unchanged at 0.50% for the foreseeable future. Data released in Japan overnight saw March department store sales off 1.2% y/y while the March consumer confidence index rose to 36.7 from 36.1 in February. The Nikkei 225 stock index climbed 0.58% to close at ¥13,476.45. Dollar offers are cited around the ¥105.55 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥164.40 level and was supported around the ¥162.65 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥208.30 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥101.25 level. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.9935 in the over-the-counter market, down from CNY 6.9938. Data released in China today saw March property prices in 70 major cities up 10.7% y/y.

STERLING

The British pound moved higher vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.9995 level and was supported around the $1.9880 level. Technically, today’s intraday high and low were right around the 38.2% and 50.0% retracements of the move from $1.9360 to $2.0395. CML reported U.K. gross mortgage lending fell 8% y/y in Q1 and will likely weaken further. Sterling gained some ground on news that Royal Bank of Scotland Group Plc is preparing a rights issue to replenish up to ₤12 billion in capital reserves. Sterling also continues to benefit from reports that Bank of England may swap gilts for mortgage-backed securities and from this week’s report that sterling Libor may have been fixed at artificially low levels. BoE Chief Economist Bean reported that the decline in sterling’s effective exchange rate since August is equivalent to about a 3% decline in the repo rate. Cable bids are cited around the US$ 1.9605/ 1.9505 levels. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.7885 level and was capped around the ₤0.7990 level.

SWISS

The Swiss franc moved lower vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0285 level and was supported around the CHF 1.0035 level. The franc reached its weakest level since 12 March. Swiss National Bank reported it will offer up to US$ 6 billion in U.S. dollar liquidity in the form of repo auctions. U.S. dollar offers are cited around the CHF 1.0375 level. The euro and British pound moved higher vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.6160 and CHF 2.0465 levels, respectively.

Posted in Categories: Contributor, Eurozone, External Research, Forex, Japan, Switzerland, UK, USA.

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Comment by Forex Beginner Blog

2008-04-20 05:09:56

From technical point of view i believe that the GBP-USD is making a continuation of the big trend that has been halted for quite sometimes now. The potential long-term target for this pair may go up as high as 2.0416 weekly upper bollinger band. That’s my analysis on this one ;)

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