By GCI Fx Research
€
The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3665 level and was supported around the US$ 1.3530 level. The common currency moved to intraday highs late in the North American session and was supported right around the 23.6% retracement of the move from $1.2880 to $1.3720. U.S. equity markets were bid higher for modest gains during most of the trading day despite the release of a U.S. April housing starts data that saw activity decline to a 458,000 annualized rate from a 530,000 annualized rate in March. Similarly, building permits declined to an annualized 495,000 rate in April from an annualized 516,000 level in March. Overall housing starts were off 54.2% y/y. Traders are closely monitoring a report that Goldman Sachs, Morgan Stanley, and JPMorgan Chase have made an application to the U.S. Treasury to return US$ 45 billion in TARP funds that were borrowed from the U.S. Treasury last year. An announcement from the Federal Reserve is expected on 8 June. In eurozone news, the German economics ministry warned German companies will face a tough time this summer with credit and liquidity. Data released in Germany today saw the ZEW May economic expectation index improve for a seventh consecutive month, rising to 31.1 from 13.0 in April. These data suggest the worst could be over in the German economy while other economsits believe more difficult times are ahead for the German economy. European Central Bank member Tumpel-Gugerell reported the ECB is prepared to administer banking supervision duties in tandem with national central banks, the European Commission, and supervisory bodies. Euro bids are cited around the US$ 1.3435 level.
¥/ CNY
The yen appreciated marginally vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥95.90 level and was capped around the ¥96.70 level. Moody’s Investors Service downgraded Japan’s foreign currency debt rating and the finance ministry has ratcheted up the verbal intervention against the yen’s recent strength. Data released in Japan overnight saw revised March industrial production climb 1.6% m/m while April revised tool orders were up 20.3% m/m and off 80.4% y/y. The Nikkei 225 yesterday stock index climbed 2.78% to close at ¥9,290.29. 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 ¥131.85 level and was supported around the ¥130.15 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥149.60 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥87.05 level. In Chinese news, the U.S. dollar depreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8250 in the over-the-counter market, down from CNY 6.8270.
₤
The British pound extended recent gains vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.5525 level and was supported around the $1.5295 level. Cable reached its highest level since 18 December and has been well-bid from the $1.44 handle on 22 April. Data released in the U.K. today saw April consumer price inflation moderate sharply as retail prices decline at their fastest pace since at least 1958. March CPI fell to +2.3% y/y from +2.9% y/y in March, the lowest rate since January 2008. Core CPI fell to an annual rate of +1.5% in April from 1.7%. One school of thought suggests cable has been well bid for the past several days on account of the political problems being faced by Brown’s Labour government which has quickly found itself embroiled in an expenses scandal. There is growing speculation the Tory party could use the scandal to vault to power and the Tories are known to favour keeping the pound and not adopting the euro. Cable bids are cited around the US$ 1.5255 level. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.8765 level and was capped around the ₤0.8850 level.
Daily Market Commentary provided by GCI Financial Ltd.
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