By GCI Fx Research
€
The euro moved sharply higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4120 level and was supported around the $1.3960 level. Strong gains in U.S. equity markets added to the common currency’s ascent today. Data released in the U.S. today saw the June headline consumer price index print at +0.7% m/m, up from, +0.1% m/m in May, while the ex-food and energy component was up +0.2% m/m, up from +0.1% m/m in May. Also, headling CPI was off 1.4% y/y with the ex-food and energy component up 1.7% y/y, down from +1.8% y/y in May. Also, the New York Federal Reserve’s Empire State manufacturing index improved to -0.55 in July from -9.41 in June. Also, June industrial production improved to -0.4% from a revised prior reading of -1.2% while June capacity utilization printed at 68.0%, above estimates but below the revised May reading of 68.2%. Minutes from the Federal Reserve’s 24 June Federal Open Market Committee meeting will be released later today and traders will pay close attention to any indication that policymakers are contemplating an exit strategy to the massive amount of monetary stimuli in the markets. There is also speculation the Fed could make a further announcement about its Treasury buying operations. In eurozone news, EMU-16 June consumer price inflation fell 0.1%, down from a flat reading in May. European Central Bank President Trichet reported the central bank remains an “anchor of stability and confidence in challenging times.” Euro bids are cited around the US$ 1.3435 level.
¥/ CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥94.05 level and was supported around the ¥93.25 level. As expected, Bank of Japan kept its monetary policy unchanged overnight with the overnight call rate target unchanged at 0.10%, a unanimous vote. Notably, the central bank extended its foreign exchange swap line with the Federal Reserve until 1 February 2010. BoJ Governor Shirakawa signaled a possible end to the central bank’s emergency credit programs, reporting “We decided to extend the measures by three months this time, rather than six months, because financial conditions are improving and we expect this improvement to continue. If this situation develops further, we will end (the programs).” The BoJ decided to extend its policy of purchasing bonds from financial institutions and providing them with unlimited loans to 31 December from 30 September. BoJ’s median forecast for real gross domestic product growth for next fiscal year was changed to -3.4%, worse than the previous -3.1% decline. The core consumer price index forecast was upgraded to -1.3% from -1.5%. Shirakawa also indicated banks remain reluctant to lend to small companies and added financial conditions are improving but remain severe. The Nikkei 225 stock index climbed 0.08% to close at ¥9,269.25. 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 ¥132.75 level and was supported around the ¥130.45 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥154.80 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥87.55 level. In Chinese news, the U.S. dollar weakened vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8308 in the over-the-counter market, down from CNY 6.8310. China reported its foreign reserves expanded US$ 42 billion in June.
₤
The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.6465 level and was supported around the US$ 1.6300 figure. Data released in the U.K. today saw the June claimant count rise 23,800, down from May’s downwardly revised 30,800. ILO’s measure of unemployment rose 281,000 to 2.38 million in the three months to May, the highest quarterly reading since at least 1971. Bank of England Deputy Governor Bean denied reports the BoE has paused its quantitative easing program following last week’s decision to not increase the ₤125 billion asset purchase program. Former MPC member Blanchflower reported the BoE should have expanded the program last week. Cable bids are cited around the US$ 1.6185 level. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.8595 level and was supported around the ₤0.8545 level.
Daily Market Commentary provided by GCI Financial Ltd.
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