By GCI Fx Research
€
The euro came off vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3380 level and was capped around the US$ 1.3580 level. U.S. equity markets weakened on news that IBM was pulling out of a deal to acquire Sun Microsystems. Many traders are also hestiant to enter new long positions ahead of the upcoming release of corporate first quarter earnings. The common currency was also pressured lower on news that the International Monetary Fund has proposed that Central and Eastern European European Union members should be permitted to join the eurozone as quasi-members. The European Central Bank is strongly objected and countered by saying “The position of the European Central Bank is very well known: we consider the implementation of the treaty criteria to be indispensable. All the treaty, nothing but the treaty.” ECB member Bini Smaghi called for “verbal discipline” from policymakers when discussing exchange rates. Data released in the eurozone today saw the EMU-16 producer price index decline 0.5% m/m and 1.8% y/y – its largest annual decline in ten years. Many traders believe these weak data will encourage the ECB to reduce interest rates further. Other data saw February retails ales off 0.6% and the Sentix investor confidence index improved to -35.3 from -42.7. In U.S. news, the March employment trends index fell 2.3% to 90.1. Dealers are talking about the Obama administration’s statement that it may replace senior managers at U.S. financial institutions if they do not do an adequate job in turning their companies around. 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 ¥101.45 level and was supported around the ¥100.15 level. Bank of Japan reported it will provide the Federal Reserve with up to ¥10 trillion in a liquidity swap agreement to assist U.S. banks access foreign currency. Data released in Japan overnight saw February leading indicators improved to 20.0 from 9.1 in January. The Nikkei 225 stock index climbed 1.24% to close at ¥8,857.93. U.S. dollar offers are cited around the ¥104.15 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥134.70 level and was capped around the ¥137.40 level. The British pound moved lower vis-à-vis the yen as sterling tested offers around the ¥148.45 level while the Swiss franc moved lower vis-à-vis the yen and tested offers around the ¥88.40 level. The Chinese yuan was unchanged vis-à-vis the U.S. dollar today as the greenback closed at CNY 6.8343 in the over-the-counter market.
₤
The British pound came off vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.4725 level and was capped around the $1.4955 level. Chancellor of the Exchequer Darling reported the U.K.’s recession is “worse than we thought” and said any economic growth “may be in the back end of the year.” Bank of England reported it will establish a temporary currency swap agreement with the Federal Reserve if required to ensure an adequate supply of sterling liquidity to the U.S. if required. CBI reported U.K. businesses had better access to credit in the three months to March than the previous three month period. Cable bids are cited around the US$ 1.4515 level. The euro came off vis-à-vis the British pound as the single currency tested bids around the ₤0.9035 level and was capped around the ₤0.9110 level.
CHF
The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.1405 level and was supported around the CHF 1.1240 level. Swiss National Bank reported it has expanded its Swiss franc swap facility with the Federal Reserve. U.S. dollar bids are cited around the CHF 1.1165 level. The euro moved lower vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.5220 level while the British pound gained ground vis-à-vis the Swiss franc and tested offers around the CHF 1.6885 level.
Daily Market Commentary provided by GCI Financial Ltd.
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