By GCI Fx Research
€
The euro moved higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3325 level and was supported around the US$ 1.3220 level. Risk appetite returned to the market ahead of Monday’s release of banks’ stress tests results in the U.S. There is speculation that Citigroup and Bank of America will be strongly encouraged to raise additional capital by the U.S. Treasury and there are whispers that four other U.S. banks may be forced to seek additional capital. Data released in the U.S. today saw the April ISM manufacturing index print at 40.1, up from 36.3 in March and above expectations. The prices and employment sub-indices also improved. Additionally, March factory orders were off 0.9%, March building permits were upwardly revised to -8.5%, and final April University of Michigan consumer sentiment improved to 65.1 from 57.3 in March. In eurozone news, European markets were closed for the May Day holiday. The European Central Bank is largely expected to reduce its main refinancing rate target by 25bps next Thursday and may announce some quantitative easing measures. Euro bids are cited around the US$ 1.2765 level.
¥/ CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥99.55 level and was supported around the ¥98.50 level. Data released in Japan overnight evidenced a dramatically weakening economy. First, unemployment climbed to its highest level in four years, printing at 4.8%. Second, the March core consumer price index fell 0.1%, the first year-over-year decline since late 2007 and these data evidence a greater potential of a deflationary spiral. Collectively, these data suggest Bank of Japan may need to provide additional monetary stimuli and this will likely increase pressure on the government to provide more fiscal stimuli. The Nikkei 225 yesterday stock index climbed 1.69% to close at ¥8,977.37. 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 ¥132.35 level and was supported around the ¥130.30 level. The British pound moved higher vis-à-vis the yen as sterling bstested offers around the ¥148.30 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥87.60 level. In Chinese news, the U.S. dollar ended at CNY 6.8230 in the over-the-counter market.
₤
The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.4935 level and was supported around the $1.4750 level. U.K. markets were opened today during the May Day holiday but will be closed on Monday. Data released in the U.K. today saw the April CIPS manufacturing survey rally to 42.9 from 39.5 in March, an indication the manufacturing sector’s weakness may be abating. Other data saw March total consumer lending growth reach a new all-time low as the increase in mortgage lending nearly halved from February’s level. In contrast, however, mortgage approvals increased for the fourth consecutive month. Total consumer lending expanded by ₤885 million in March and mortgage lending expanded by ₤757 million. Also, March M4 money supply growth printed at 0.2% m/m and 17.8% y/y. Cable bids are cited around the US$ 1.4735 level. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.8885 level and was capped around the ₤0.8985 level.
Daily Market Commentary provided by GCI Financial Ltd.
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