By GCI Fx Research
€
The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3340 level and was supported around the US$ 1.3175 level. Data released in the eurozone overnight saw flash March eurozone consumer price inflation recede to its lowest level ever, declining to 0.6% from 1.2% in February – much lower than expected. EMU-16 inflation remains in a downward trend and this will likely provide the European Central Bank with more scope to reduce interest rates in the near term. It is possible the ECB will reduce its main refinancing rate by 50bps on Thursday from the current 1.50%. Notable, the ECB has already reduced rates by 275bps since October and there is widespread speculation the ECB may adopt a quantitative easing framework that could involve the purchase of sovereign debt in the secondary market. Eurogroup chairman Juncker said the European Union’s €200 million fiscal stimulus plan will not have a “tangible immediate” impact on the economy and sees a greater impact in 2010. Other eurozone data saw German unemployment rise in March, up 69,000 to around 3.586 million. In U.S. news, St. Louis Federal Reserve President Bullard expressed concen with the rapid growth in the U.S. monetary base. Data released in the U.S. today saw the 20-city January S&P Case-Shiller home price index off 19.0% while the average price of U.S. homes dipped to 2003 levels. Data to be released today include March consumer confidence and March Chicago PMI. Euro bids are cited around the US$ 1.3245 level.
¥/ CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥98.65 level and was supported around the ¥97.20 level. There is talk that Japan may have decided to move forward with its third fiscal stimulus plan. Today is the last day of Japan’s fiscal year and many data were released overnight. First, February all household spending was off 3.5% y/y. Second, February construction orders were off 24.9% y/y to ¥916.8 billion. Third, February housing starts were off 24.9% y/y to 62,303 units. Fourth, the February jobless rate rose to 4.4%. The Nikkei 225 stock index lost 1.54% to close at ¥8,109.53. 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 ¥131.55 level and was supported around the ¥128.20 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥141.35 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥86.65 level. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8330 in the over-the-counter market, down from CNY 6.8331.
₤
The British pound strengthened vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.4345 level and was supported around the $1.4240 level. Bank of England Deputy Governor Tucker indicated implement countercyclical regulations is “incredibly ambitious.” London will host the Group of Twenty meeting over the next couple of days and traders are paying attention to some key themes. First, dealers want to see if the eurozone is cajoled into increasing the size of its fiscal stimulus by U.S. officials. Second, dealers want to see if there is any movement afoot to create an international reserve currency much as China and Russia have suggested. Third, dealers are waiting to see if the global financial community tried to implement an international regulatory framework, a plan that is being sharply resisted by Germany and some other nations. Data released in the U.K. today saw the January index of services worsen to -1.3% from -0.8%. Also, the GfK NOP consumer confidence figure improved to -30 from -35 in February. Cable bids are cited around the US$ 1.4085 level. The euro rallied vis-à-vis the British pound as the single currency tested offers round the ₤0.9315 level and was supported around the ₤0.9240 level.
CHF
The Swiss franc appreciated sharply vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.1355 level and was capped around the CHF 1.1515 level. Swiss National Bank is expected to continue pursing quantitative easing measures by conducting franc-selling intervention in the foreign exchange markets. Data released in Switzerland today saw the February UBS consumption indicator decline to 0.89. U.S. dollar bids are cited around the CHF 1.1165 level. The euro came off vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.5140 level while the British pound lost ground vis-à-vis the Swiss franc and tested bids around the CHF 1.6260 level.
Daily Market Commentary provided by GCI Financial Ltd.
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