By GCI Forex Research
Fundamental Outlook at 1400 GMT (EDT + 0400)
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The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3690 level and was supported around the $1.3565 level. The common currency extended gains from late last week after it was reported that eurozone officials reached an agreement to provide financial assistance to Greece if that country cannot meet its refinancing needs in the market. Greece has billions of euro in bonds maturing over the next couple of months and the recent increase in Greek yields may render it too expensive – or even impossible – for Greece to refinance its maturing debt. The package offered by Greek officials is said to total some US$ 61 billion. The spread between Greek ten-year bonds and German bunds narrowed today to around 350bps. Dealers will again focus on the significant fiscal problems of Spain and Portugal and eurozone officials may be forced to assist them as well. European Central Bank President Trichet reported the Greek plan as a “positive” step and called on the Greek government to meet its fiscal obligations. German Chancellor Merkel is said to be facing major criticisms in her country for agreeing to the new financial assistance to Greece at below-market rates. Data to be released in Germany tomorrow include March consumer price inflation followed by French February current account data and March consumer price inflation data on Wednesday. In U.S. news, the March monthly budget statement printed at –US$ 65.4 billion. Data to be released in the U.S. tomorrow include the March NFIB small business optimism index, February trade balance, and March import price index. Fed Governors Duke and Tarullo spoke today about non-monetary issues. Euro bids are cited around the US$ 1.3175 level.
¥/ CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥93.60 level and was supported around the ¥92.90 level. Minutes from the Bank of Japan Policy Board meeting on 16-17 March were released overnight in which some rate-setters concluded “there was no solid justification for enhancing monetary conditions. The market may also increasingly come to consider that the bank would take whatever policy action the market has anticipated.” BoJ policymakers doubled a lending program for commercial banks to ¥20 trillion. Many members said the program’s expansion “reaffirmed the bank’s stance on continuing to consistently make a contribution” to improve economic growth and overcome deflation. One common criticism is that the program will accomplish little as far as actually improving liquidity measures in the real economy and stimulating final private demand. Data released in Japan overnight saw March bank lending decline 1.8% y/y, worse than the prior reading of -1.5%. Data to be released in the Australasian session will include the March domestic corporate goods price index and March Tokyo-area condominium sales. The Nikkei 225 stock index climbed 0.42% to close at 11,251.90. U.S. dollar offers are cited around the ¥96.85 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥127.45 level and was supported around the ¥126.60 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥144.50 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥88.30 level. In Chinese news, the U.S. dollar appreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8257 in the over-the-counter market, up from CNY 6.8236. U.S. and Chinese officials will convene in Washington, D.C. this week to discuss China’s exchange rate policy and other financial aspects of the bilateral relationship. China today reported its foreign exchange reserves totaled US$ 2.447 trillion at the end of March. Also, China’s trade surplus in the first quarter was off 77% to US$ 14.49 billion. China is said to have posted a rare US$ 7.24 billion trade deficit in March.
₤
The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.5485 level and was supported around the $1.5365 level. Traders are closely monitoring the lead-up to the U.K. general election on 6 May amid talk that Prime Minister Brown may have narrowed the gap against Tory challenger Cameron, the presumed favourite. Dealers are still speculating the most likely scenario will be a hung Parliament and sterling has generally been weaker as a result of this premise. Data to be released in the Australasian session include the BRC March retail sales monitor and the March RICS house price balance. Cable bids are cited around the US$ 1.5140 level. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the £0.8845 level and was supported around the £0.8805 level.
CHF
The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0530 level and was capped around the CHF 1.0615 level. Data to be released in Switzerland tomorrow include the March producer and import price index. On Friday, Swiss National Bank Governing Board member Danthine said “avoiding inflation” is a “medium-term” challenge. Data released in Switzerland last week saw the March unemployment rate decline to 4.2% from 4.4% in February. U.S. dollar offers are cited around the CHF 1.0920 level. The euro moved lower vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.4380 level while the British pound moved lower vis-à-vis the Swiss franc and tested bids around the CHF 1.6270 level.
Forex Daily Market Commentary provided by GCI Financial Ltd.
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