EURO

The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.5360 level and was capped around the $1.5495 level. The common currency extended its recent losses and reached its lowest level since 24 March. Traders continue to speculate that the U.S. economy may have turned the corner and is on the road to improvement following several months of economic hardship caused by credit market dislocations. The Federal Reserve announced it is expanding the size of its Term Auction Facility to US$ 75 billon from US$ 50 billion to counter “persistent liquidity pressures in some term funding markets.” The Fed also announces it is increasing the size of its currency swap agreements with the European Central Bank and Swiss National Bank. The Fed also announced it is expanding the collateral acceptable under the Term Securities Lending Facility. Data released in the U.S. today saw the April non-farm payrolls tally decline 20,000, much-better-than-expected, while the April unemployment rate ticked lower to 5.0% from 5.1%. Also, average hourly earnings were up +0.1% m/m and 3.4% y/y. These data suggest wage inflation pressures are abating and other data saw March factory orders improve +1.4%. In eurozone news, EMU-15 April final PMI manufacturing printed at 50.7, its lowest level since August 2005, while German final April manufacturing PMI printed at 53.6. Moreover, German March retail sales were off 0.1% m/m and 6.3% y/y. Euro bids are cited around the US$ 1.5345 level.

JPN/CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥105.70 level and was supported around the ¥104.30 level. The pair reached its highest level since 28 February as traders continued to speculate Bank of Japan’s Policy Board will not increase interest rates for at least several months. Japanese financial markets will be closed on Monday and Tuesday for national holidays thus liquidity will be reduced and there is a chance that the yen’s depreciation could become overextended. Data released in Japan overnight saw the April monetary base fall 2.8% y/y. The Nikkei 225 stock index climbed 2.05% to close at ¥14,049.26. Dollar bids are cited around the ¥103.65/ ¥101.35 levels. The euro moved higher vis-à-vis the yen as the crosses tested offers around the ¥162.55 level and was supported around the ¥161.40 level. The British pound and Swiss franc appreciated vis-à-vis the yen as the crosses tested offers around the ¥209.00 and ¥100.10 levels, respectively. In Chinese news, yuan trading will reopen next week.

STERLING

The British pound came off vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.9715 level and was capped around the $1.9895 level. Technically, today’s intraday high was right around the 38.2% retracement of the move from US$ 2.0395 to $1.9600. Data released in the U.K. today saw the Halifax April annual house price inflation measure turn negative, off 1.3% m/m. Bank of England yesterday reported that credit-related assets are undervalued. Cable bids are cited around the US$ 1.9505 level. The euro came off vis-à-vis the British pound as the single currency tested bids around the ₤0.7765 level and was capped around the ₤0.7835 level.

SWISS

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0605 level and was supported around the CHF 1.0465 level. The pair reached its highest level since 28 February. Data released in Switzerland today saw April PMI rise to 56.6 from 55.3 in March. U.S. dollar offers are cited around the CHF 1.0760 level. The euro and British pound appreciated vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.6320 and CHF 2.0960 levels, respectively.

Posted in Categories: Contributor, External Research, Forex.

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