By GCI Fx Research
€
The euro moved sharply lower vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3990 level and was capped around the US$ 1.4265 level. The common currency moved lower after the release of better-than-expected U.S. May non-farm payrolls data that saw payrolls growth of -345,000, considerably better than the -600,000+ number that economists were expecting. In contrast, however, the unemployment rate jumped to 9.4% from 8.9% in April, its highest level since August 2003. Additionally, there was a cumulative +83,000 upward jobs revision to March’s and April’s tally, suggesting the labour market was not as weak at the beginning of the second quarter as originally expected. Still, most economists believe the ongoing U.S. economic recovery will largely be a jobless recovery as most companies are slow to rehire new workers and major U.S. industries like the automotive sector lay-off massive amounts of people. U.S. Treasury yields continue to sell-off and the 10-year Note is now yielding 3.81%, its highest level since early November. This curve steepening either reflects more optimism about the U.S. economy, increased pessimism over the U.S.’s fiscal state, or both. In eurozone news, European Commission member Alumnia said “the next quarters should show positive developments and growth should turn positive in the first part of 2010.” European Central Bank member Weber cautiously reported “We are currently witnessing the fact that these extensive interventions are having some stabilizing effects on financial markets and have, judging by the initial signs, probably led to a slowdown in the rapid pace of the downswing in the real economy. Nevertheless, the future outlook remains uncertain.” Speaking on interest rate policy, ECB’s Hurley noted “We haven’t taken any decision that this is necessarily the lowest rate. We never pre-commit. We have to assess the data that emerges and make our decision on the basis of that data, so there’s no commitment but we are closely monitoring the situation going forward.” 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 ¥98.20 level and was supported around the ¥96.50 level. The yen was offered across the board as traders moved into higher-yielding assets following better-than-expected U.S. May non-farm payrolls data. Dealers continue to cite outgoing yen investment that is being directed to foreign corporate bond purchases and this continues to have a negative impact on the yen. Most Bank of Japan-watchers expect the central bank will keep monetary policy unchanged for the foreseeable future. The Nikkei 225 stock index climbed 1.02% to close at ¥9,768.01. 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 ¥139.20 level and was supported around the ¥136.85 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥158.50 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥91.40 level. In Chinese news, the U.S. dollar strengthened vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8315 in the over-the-counter market, up from CNY 6.8298.
₤
The British pound weakened vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.5955 level and was capped around the $1.6240 level. Sterling continues to sell-off on escalating political uncertainty. A few of Prime Minister Brown’s Cabinet members have resigned this week and there have been growing calls for Prime Minister Brown to step down as well. It appears Chancellor of the Exchequer Darling – himself ensnarled in the expenses scandal – will retain his portfolio. Brown has reshuffled his Cabinet and sterling is weaker on the premise that Brown will be forced out of office and the Tories will win the next election. Bank of England reported it has purchased ₤79.9 billion of securities through its asset purchase facility so far. Data released in the U.K. today saw May factory gate prices decline 0.3% y/y, the first yearly decline since 2002, while input prices were off at the fastest rate since 2001 at -42.2% y/y. Cable bids are cited around the US$ 1.5790 level. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.8730 level and was capped around the ₤0.8865 level.
CHF
The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0860 level and was supported around the CHF 1.0660 level. Data released in Switzerland today saw May consumer price inflation rise 0.2% m/m and decline 1.0% y/y. U.S. dollar offers are cited around the CHF 1.1165 level. The euro and British pound moved higher vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.5235 and CHF 1.7400 levels, respectively.
Daily Market Commentary provided by GCI Financial Ltd.
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