By GCI Fx Research
€
The euro moved higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4180 level and was supported around the $1.4085 level. Weakness in global equity markets capped the common currency’s upside potential today but North American dealers chipped away at the $1.42 handle. Data released in the U.S. today saw MBA mortgage applications improve +5.6% in their latest week, consistent with the recent uptick in the U.S. housing market. Data to be released in the U.S. tomorrow include weekly initial jobless claims and continuing jobless claims. In eurozone news, European Central Bank member Weber reported the central bank will exit its quantitative easing measures “once the economic recovery becomes sustainable and the situation on financial markets gets sufficiently stable.” Weber also expressed concern regarding the strength of banks and there is a growing concern of credit bottlenecks in the banking sector over the next few months. Furthermore, he noted the improvement in German Q2 GDP was on account of fiscal stimulus and a looser monetary policy. Data released in the eurozone today saw June construction output off 1.1% m/m and 8.8% y/y while German July annual producer price inflation registered its steepest decline since 1949, evidence that factory gate prices may not be contributing to consumer price inflation in Europe’s largest economy. Euro bids are cited around the US$ 1.3900 figure.
¥/ CNY
The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥93.75 level and was capped around the ¥94.95 level. The pair moved lower in concert with widespread yen strength after Chinese equity markets tumbled again, precipitating another global sell-off in Asian and European markets. The yen also strengthened ahead of the Japanese general election on 30 August. The Democratic Party of Japan looks poised to defeat the Aso government and long-incumbent Liberal Democratic Party. Market chatter suggests a DPJ government may be more tolerant of a stronger yen, and yesterday’s news suggested a DPJ government may call on Bank of Japan to purchase more Japanese government bonds. BoJ Governor Shirakawa will attend the Kansas City Fed’s Jackson Hole Symposium from 20-24 August. The Nikkei 225 stock index lost 0.79% to close at ¥10,204.00. 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 ¥132.15 level and was supported around the ¥134.50 level. The British pound moved lower vis-à-vis the yen as sterling tested offers around the ¥153.60 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥87.15 level. In Chinese news, the U.S. dollar lost ground vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8320 in the over-the-counter market, up from CNY 6.8309.
₤
The British pound came off vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.6375 level and was capped around the US$ 1.6590 level. Sterling was sharply lower earlier in the European session after minutes from Bank of England Monetary Policy Committee’s August deliberations were released. The minutes revealed that Governor King and two other members of the MPC voted in the minority for a ₤75 billion increase in the BoE’s quantitative easing program, an amount that would have expanded the entire facility to ₤225 billion. The MPC voted 6-to-3 to enact a ₤50 billion expansion, itself larger than many traders expected. Today’s minutes suggest the BoE may be further away from unwinding its monetary stimuli than previously believed. Data released in the U.K. today saw the August CBI industrial trends survey improve to -54 from -59, rendering industrial output at its best level since June 2008. Cable bids are cited around the US$ 1.6215 level. The euro gained ground vis-à-vis the British pound as the single currency tested offers around the ₤0.8625 level and was supported around the ₤0.8530 level.
Daily Market Commentary provided by GCI Financial Ltd.
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