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Daily Market Commentary

Discussion in 'Forex Daily News & Outlook' started by gcitrading, Jun 17, 2009.

  1. gcitrading

    gcitrading Contributing Member

    Dec 16, 2008
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    The euro gained significant ground-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3985 level and was supported around the $1.3805 level. Several factors contributed to the dollar’s demise today. First, May headline consumer price inflation was up 0.1% m/m and off 1.3% y/y with the ex-food and energy component up +0.1% m/m and +0.8% y/y. The headline year-over-year decline was the sharpest in some 60 years. Second, it was reported the Federal Reserve may try to manage interest rate expectations with a more direct message when Federal Open Market Committee policymakers convene next week. Fed officials are undoubtedly uncomfortable with the recent rise in interest rates across the Treasury curve and may try to craft the message that expectations of a rate hike to withdraw some monetary stimuli are premature. Some economists believe the Fed may even adopt a similar tactic that Bank of Canada recently employed in suggested rates are unlikely to move higher before late 2010. Third, other data released in the U.S. today saw the current account deficit decline to –US$ 101.5 billion in the January – March quarter, down from –US$ 154.9 billion in Q4 2008, but still above economists’ expectations. In eurozone news, European Union finance officials will convene tomorrow and Friday to discuss stronger supervision of European financial markets. Data released in the eurozone today saw the April EMU-16 global trade balance print at €2.7 billion, up from March’s surplus of €1.8 billion. Euro bids are cited around the US$ 1.3435 level.

    The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥95.50 level and was capped around the ¥96.75 level. The Japanese government upgraded its overall economic assessment of the economy for the second consecutive month in June, reporting that exports and industrial production are improving. Notably, the government did not report the economy is “worsening” for the first time since December. Bank of Japan also raised its assessment of the economy, reporting the economy has “begun to stop worsening.” Finance minister Yosano said the BoJ and government “share the exact same view on economic conditions” and added the “January – March period was clearly the bottom” for the current economic cycle. The government, however, noted capital expenditures and housing starts are “decreasing at a fast pace” and said the employment situation is “severe and worsening rapidly.” Data released in Japan overnight saw revised May machine tool orders off 79.2%. The Nikkei 225 stock index climbed 0.90% to close at ¥9,840.85. U.S. dollar offers are cited around the ¥104.15 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥134.60 level and was supported around the ¥132.35 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥155.60 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥89.25 level. In Chinese news, the U.S. dollar strengthened vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8360 in the over-the-counter market, up from CNY 6.8330.

    The British pound lost ground vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.6220 level and was capped around the $1.6480 level. North American dealers lifted cable from intraday lows. Data released in the U.K. today saw May jobless claims rise 39,300 while the claimant count rate of unemployment printed at 7.2%. Sterling was dented during European dealing after a report from Bank of England suggested further sterling strength would “reduce the boost to net trade arising from (sterling’s) depreciation since summer 2007.” On the other hand, BoE added sterling’s recent appreciation “may reflect the unwinding of some excess pessimism” about the U.K. Traders await comments from Chancellor of the Exchequer Darling at his annual Mansion House speech later in the session. BoE Governor King was quoted today as saying the U.K. banking system is too large, as are some U.K. banks. He also reported “There are certainly grounds for believing that the rapid falls in activity are coming to an end. But there are some equally solid reasons for believing that the path to full recovery could be protracted.” Cable bids are cited around the US$ 1.6110 level. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.8535 level and was supported around the ₤0.8425 level.

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