By GCI Fx Research
€
The euro moved came off vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3555 level and was capped around the US$ 1.3670 level. Traders dumped higher-yielding currencies like the common currency and British pound after a Wall Street Journal report indicated U.S. banks received concessions from the Federal Reserve ahead of the government’s report on the results of the banks’ stress tests. The report indicated the results were watered down by the Fed, raising new questions about the actual health of U.S. financial institutions. Federal Reserve Chairman Bernanke is scheduled to speak on the results later today. In eurozone data, French March industrial production was off 1.4% m/m and 16.1% y/y and Italian industrial production was off 4.6% m/m and 23.8% y/y. Economists believe the eurozone economy will probably shrink more than previously thought with some forecasts calling for a 5% contraction this year, comapred with the previous 3.4% forecast. European Central Bank President Trichet today reported economic growth is “around the inflection point in the cycle” and added “there has been a substantial improvement in the markets since mid-September (2008). But we have to remain very alert. An exit strategy, or the path to a sustainable mode is absolutely of the essence. It’s an essential part of confidence today and has been a feature of this meeting (of global central bankers).” EMU-16 GDP data will be released on Friday. ECB member Ordonez was also cautiously optimistic, reporting “There are signs that the worst (of the economic slump)] was in the first quarter. I would be slightly surprised if this enormously V-shaped curve that now almost appears to be the consensus forecast…materializes.” Euro bids are cited around the US$ 1.2765 level.
¥/ CNY
The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥97.25 level and was capped around the ¥98.80 level. Risk aversion returned to the market as traders reacted to press reports that U.S. banks’ stress tests results may have been watered down by the Federal Reserve following lobbying from banks. The March leading index, coincident index, and April official reserves assets data will be released overnight. The Nikkei 225 yesterday stock index climbed 0.20% to close at ¥9,451.98. 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 offers around the ¥132.05 level and was capped around the ¥134.80 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥146.75 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥87.70 level. In Chinese news, the U.S. dollar depreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8235 in the over-the-counter market, down from CNY 6.8250.
Daily Market Commentary provided by GCI Financial Ltd.
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