Tuesday: Daily Forex Market Commentary

EURO

The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4815 level and was capped around the $1.4965 level.  The common currency reached its lowest level since 26 February.  There are many factors driving trading now. First, Russia is said to have halted its military actions against Georgia.  Second, there are reports that Iran has stepped up its military maneuvers, leading to volatility in the crude oil market. Third, there is a growing perception that the U.S.’s next rate move will be higher while the eurozone’s next rate move will be lower. Data released in the U.S. today saw the June trade deficit narrow unexpectedly by 4.1% to US$ 56.8 billion.

In eurozone news, European Central Bank member Weber warned the German economy may be going through a “dry spell” but said this won’t amount to a recession.  Weber sees German GDP growth around 2.0% this year and “around 1.0%” next year.  ECB’s Bini Smaghi sees eurozone growth slowing faster than expected.  EMU-15 GDP data are scheduled for release on Thursday.  Euro bids are cited around the US$ 1.5175 levels.

JPN/CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥109.60 level and was capped around the ¥110.35 level.  The pair continues to orbit the 50% retracement of the move from ¥124.15 to ¥95.70.  Data released in Japan overnight saw July corporate goods price inflation climb to 7.1%, a 27-year high and above expectations.  Also, July consumer confidence fell to 31.4, its lowest level since June 1982.  Traders await the release of April-June gross domestic product data that are scheduled for release on Wednesday with many economists eyeing a 0.6% contraction.  Other data released overnight saw June industrial output decline 2.2%.  The Nikkei 225 stock index lost 0.95% to close at ¥13,303.60.  Dollar bids are cited around the ¥106.40 level.

The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥163.25 level and was capped around the ¥164.40 level.

The British pound and Swiss franc weakened vis-à-vis the yen as the crosses tested bids around the ¥208.25 and ¥100.75 levels, respectively.

The Chinese yuan came off vis-à-vis the U.S. dollar today as the greenback closed at CNY 6.8632 in the over-the-counter market, up from CNY 6.8577.  Data released in China overnight saw July consumer price inflation up 6.3% y/y while foreign direct investment was up 44.54% y/y between January and July.

STERLING

The British pound weakened vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.9105 level and was capped around the $1.9255 level.  Cable reached its lowest level since November 2006.  Data released in the U.K. today saw July CPI inflation spike to 4.4% from 3.8% in June, more than double Bank of England’s inflation target of 2.0%.  This decreases the likelihood that BoE’s next rate move will be lower.  Bank of England Monetary Policy Committee’s quarterly inflation report will be released tomorrow.  Also, CML reported June gross mortgage lending was off 4% to ₤23.6 billion while government data saw June house price growth of 0.6% y/y.  Additionally, BRC high street sales fell 0.9% y/y in July. Cable bids are cited around the $1.8615 level.

The euro gained ground vis-à-vis the British pound as the single currency tested bids around the ₤0.7795 level and was capped around the ₤0.7850 level.

SWISS

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0925 level and was supported around the CHF 1.0830 level.  The pair reached its highest level since 25 February.  U.S. dollar offers are cited around the CHF 1.1135 level.

The euro moved higher vis-à-vis the Swiss franc as the single currency tested offers around the CHF 1.6240 level while the British pound weakened vis-à-vis the Swiss franc and tested bids around the CHF 2.0640 level.

Posted in Categories: Contributor, External Research, Forex.

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