By GCI Fx Research
€
The euro lost ground vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3910 level and was capped around the $1.4015 level. The pair came off partially on news that U.S. investment banking giant Goldman Sachs earned a sizable US$ 2.7 billion in the second quarter, beating expectations. Data released in the U.S. today saw the June headline producer price index print a stronger-than-expected 1.8% m/m, up from the prior reading of 0.2%, while the ex-food and energy component was up 0.5%, more-than-expected and above the -0.1% previous print. Also, headline PPI increased to -4.6% from the previous -5.0% reading while the ex-food and energy PPI reading printed at 3.3%, up from the prior reading of 3.0%. Even though these data were higher-than-expected, they will not necessarily translate into higher-than-expected consumer price inflation if businesses are unable to pass along higher input and output costs to consumers. Other data released today saw June overall retail sales climb +0.6% while the ex-autos component was up +0.3%. While these data appear to be strong, much of the second consecutive monthly gain reflected purchases of gasoline and automobiles. In eurozone news, European Central Bank member Mersch reported there are “negative effects stemming from excessively low interest rates.” In contrast, ECB member Hurley noted “The pace of global recovery is expected to be gradual and downside risks to the global outlook remain. Policy rates should only be increased once there are clear signs that a sustainable recovery has begun.” Data released in the eurozone today saw the EMU-16 July ZEW economic expectations index fall to 39.5 from 44.8 in June. Also, EMU-16 industrial production was up 0.5% m/m and was off 17% y/y. 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 ¥93.35 level and was supported around the ¥92.70 level. Finance minister Yosano reported Bank of Japan should extend its purchases of commercial paper and commercial bonds past the current September deadline. Yosano said “The BoJ may not use the window for its emergency measures of buying commercial paper and corporate bonds, but it would be better off keeping the window open.” BoJ’s Policy Board convenes again tonight and an announcement to this effect is expected by many BoJ-watchers. The yen gave back gains after Goldman Sachs reported stronger-than-expected second quarter earnings data. New vice finance minister Tango echoed Yosano’s comments. The Nikkei 225 stock index climbed 2.34% to close at ¥9,261.81. 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 ¥130.75 level and was supported around the ¥129.35 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥152.45 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥85.15 level. In Chinese news, the U.S. dollar strengthened vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8319 in the over-the-counter market, up from CNY 6.8318.
Daily Market Commentary provided by GCI Financial Ltd.
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