By GCI Fx Research
€
The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4110 level and was capped around the US$ 1.4335 level. Profit-taking ensued following several days of U.S. dollar selling pressure that stemmed from growing concern the U.S.’s fiscal deficits are expanding too rapidly. Federal Reserve Chairman Bernanke testified and said “Maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance…Unless we demonstrate a strong commitment to fiscal sustainability in the longer run, we will have neither financial stability nor healthy economic growth… Certainly, our economy and financial markets face extraordinary near-term challenges, and strong and timely actions to respond to those challenges are necessary and appropriate.” Kansas City Fed President Hoenig was on the tape late in the day saying “If we fail to bring policy into balance, we will have significant inflationary pressure.” U.S. Treasury yields have backed up significantly in recent weeks, possibly signifying the market’s pessimism over the perilous state of U.S. finances. Data released in the U.S. today saw May ADP private-sector employment off 532,000, worse than April’s 491,000 decline. Also, the May U.S. ISM non-manufacturing index was up nominally to 44.0 from 43.7 in April. Additionally, April new factory orders were up 0.7% m/m and off 22.8% y/y with the ex-transportation component up 0.1% m/m and off 22.1% y/y. In eurozone news, the European Commission is working on a proposal to allocate €19 billion to create new jobs. EMU-16 producer prices declined for their ninth consecutive month in April, off 1.0% m/m and 4.6% y/y. Moreover, EMU-16 GDP was unrevised at -2.5% q/q in Q1. Euro bids are cited around the US$ 1.3435 level.
¥/ CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥96.40 level and was supported around the ¥95.35 level. Bank of Japan Policy Board member Kamezaki indicated there’s a greater chance the Japanese economy will perform worse-than-expected instead of better-than-expected. Still, Kamekazi reported the loose monetary conditions could result in the economy overheating. BoJ officials will likely keep monetary policy unchanged for the foreseeable future. Finance minister Yosano yesterday reported the economy likely hit bottom in Q1 and Kamekazi today warned Japan’s consumer price index could decline even more sharply in the summer, possibly as much as 2%. The Nikkei 225 stock index climbed 0.38% to close at ¥9,741.66. 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 ¥135.30 level and was capped around the ¥138.00 figure. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥155.70 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥89.15 level. In Chinese news, the U.S. dollar strengthened vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8299 in the over-the-counter market, up from CNY 6.8298.
Daily Market Commentary provided by GCI Financial Ltd.
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