By GCI Fx Research
€
The euro lost sharp ground vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4230 level and was capped around the $1.4410 level. The common currency sold off sharply following the release of U.S. July non-farm payrolls data that saw 247,000 workers lose their jobs last month from a positively revised -443,000 in June. Also, the July unemployment rate improved to 9.4% from 9.5% in June, better-than-expected, while July average hourly earnings were up 0.2% m/m from 0.0% m/m. July average hourly earnings were also up 2.5% y/y, down from 2.7% y/y in June, while July average weekly hours printed at 33.1, up from 33.0. Even though today’s data evidenced an improvement in the U.S. labour market, many economists believe the unemployment rate will peak above 10.0% later this year or early next year. U.S. economic growth is still contracting and it must grow approximately 2.5% per year in order to accommodate new entrants into the job market. In eurozone news, German June industrial output was off 0.1% m/m and 18.1% y/y. French President Sarkozy will meet with the heads of a few banks next week and impress upon them the need to increase their lending activity. Data released in France today saw the June trade deficit widen to €4.01 billion while the German June trade surplus expanded to €12.2 billion from €9.6 billion. European Central Bank President Trichet reported “We’re leaving this period of free-fall, we’re still falling. We’re in a period which still requires a great deal of vigilance. We have all had to cope with exceptional situation. We all took decisions that were commensurate with the problems we faced. We did not do the same because the situation was not the same.” Euro bids are cited around the US$ 1.3900 figure.
¥/ CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥96.95 level and was supported around the ¥95.05 level. The yen was given across the board as risk appetite returned to the market following the stronger-than-expected U.S. July jobs report. Data released in Japan overnight saw the July trade surplus up 127.8% y/y at ¥251.21 billion during the first twenty days of July. Liquidity will be reduced next week in Japan next week with the beginning of the O-bon summer holiday. Bank of Japan’s Policy Board convenes next week and is not expected to change monetary policy at this time. The Nikkei 225 stock index climbed 0.23% to close at ¥10,412.09. 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 ¥138.55 level and was supported around the ¥136.50 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥162.45 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥90.60 level. In Chinese news, the U.S. dollar gained ground vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8288 in the over-the-counter market, up from CNY 6.8283. Traders continue to express concern that People’s Bank of China will begin to tighten monetary policy.
₤
The British pound lost additional ground vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.6675 level and was capped around the $1.6825 level. Bank of England’s Monetary Policy Committee yesterday surprised the markets by expanding its bond purchase program by ₤50 billion. Data released in the U.K. today saw July producer price inflation index up 0.3% m/m and were off 1.3% y/y. Core PPI was up 0.5% m/m and 0.2% y/y while input producer prices were off 1.4% m/m and 12.2% y/y. Cable bids are cited around the US$ 1.6485 level. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.8500 figure and was capped around the ₤0.8595 level.
Daily Market Commentary provided by GCI Financial Ltd.
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