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$ 1.5675 level and was capped around the $1.5895 level. Technically, today’s intraday low was right around the 50% retracement of the move from $1.5335 to $1.6020. The common currency gave back ground for the second consecutive day on account of a couple of factors. First, the German April Ifo business confidence survey fell to 102.4 from 104.8 in March, its weakest print in more than two years and below forecasts. Further pullbacks in eurozone business and consumer confidence will likely continue to have a negative impact on the common currency despite continued hawkishness from European Central Bank officials. Second, the greenback gained strength on a Wall Street Journal report that the Federal Reserve may pause its current rate-easing cycle after likely lowering interest rates on 30 April. In U.S. news, weekly initial jobless claims fell 33,000 to 342,000, better-than-expected, while continuing claims were down 65,000. In contrast, it was reported that March total durable goods orders fell 0.3% with the ex-transportation component up 1.5% and the non-defense and ex-aircraft number unchanged after falling 0.2% in February. Other data released today saw March building permits upwardly revised to -5.7% from -5.8% while March new home sales were off 8.5% to 526,000 annualized units. Other EMU-15 data saw the February current account surplus revised to €4.3 billion. Euro bids are cited around the US$ 1.5595/ 1.5345 levels.

JPN/CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥104.20 level and was supported around the ¥103.30 level. The pair continues to gain ground on improving sentiment for the U.S. dollar and a growing perception Bank of Japan will move towards a more neutral policy stance on 30 April when it is expected to hike its inflation forecast and reduce its GDP growth forecasts. Many traders believe the central bank will lower rates in early 2008 and most traders believe the BoJ will take some time before it decides again to publicly confirm it is on a path to normalize interest rates. BoJ is expected to keep the overnight call rate unchanged at 0.50% on 30 April. Data released in Japan overnight saw the February all-industries index fall 1.4% while the March corporate services price index was up 0.4% m/m and 0.4% y/y. Traders await the release of tonight’s core consumer price inflation data with many forecasts focusing on a rise around 1.3%. The Nikkei 225 stock index lost 0.28% to close at ¥13,540.87. Dollar bids are cited around the ¥102.15 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥162.90 level and was capped around the ¥164.50 level. The British pound gained ground vis-à-vis the yen as sterling tested offers around the ¥205.50 level and was supported around the ¥204.15 level. The Swiss franc came off vis-à-vis the yen as the pair tested bids around the ¥100.80 level. The Chinese yuan weakened vis-à-vis the U.S. dollar as the greenback closed at CNY 6.9970 in the over-the-counter market, up from CNY 6.9827.

STERLING

The British pound weakened vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.9685 level and was capped around the $1.9815 level. Technically, today’s intraday low was right around the 76.4% retracement of the move from $1.9595 to $2.0025. Data released in the U.K. today saw March retail sales fall 0.4% m/m, the sharpest decline since January 2007. On a positive note, January’s and February’s sales growth were upwardly revised significantly. Other data released today saw CBI manufacturers’ total order books balance fall sharply to -13% from +7% in March, the largest swing in more than thirty years. Bank of England Monetary Policy Committee member Sentance talked about sterling’s recent moves saying “The recent decline in the pound creates additional upside risks for inflation which need to be taken into account in the overall policy judgment. Even though inflation is being pushed up in the short term by global inflationary forces and by a declining pound, the MPC’s job is to bring it back to target again.” Cable bids are cited around the US$ 1.9605/ 1.9505 levels. The euro slumped vis-à-vis the British pound as the single currency tested bids around the ₤0.7955 level and was capped around the ₤0.8025 level.

SWISS

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0330 level and was supported around the CHF 1.0140 level. The pair reached its highest level since 12 March. Credit Suisse announced a larger-than-expected write-down of losses today. Swiss National Bank reduced its repo rate for one-week funds to 1.90% from 2.00% where it has been since 30 March. U.S. dollar offers are cited around the CHF 1.0375/ 1.0550 levels. The euro and British pound moved higher vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.6215 and CHF 2.0375 levels, respectively.

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

Subscribe by RSS Subscribe by Email