Daily Market Commentary

 

€

The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4850 level and was capped around the $1.4935 level.  The common currency continues to consolidate some of the losses it has realized over the past couple of weeks.  Data released in the eurozone revealed the EMU-15 economy shrank in size in the three months from April to June, down 0.2% q/q and up 1.5% y/y, for the first quarterly contraction since early 1995.  These data render it less possible that European Central Bank policymakers will consider raising interest rates again right now and may move to cut rates soon.  Revised July consumer price inflation data released today saw annualized inflation at 4.0% in the eurozone, down from the provisional 4.1% reading.  Germany’s economy contracted 0.5% in Q2 with France’s economy off 0.3%.  Other data saw German final July CPI up 0.6% m/m and 3.3% y/y.  In U.S. news, traders await the release of July consumer price inflation data along with weekly initial jobless claims and continuing claims numbers.  Euro bids are cited around the US$ 1.5175 levels.

¥/ CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥109.80 level and was supported around the ¥109.00 figure.  Technically, today’s intraday high was right around the 50% retracement of the move from ¥124.15 to ¥95.70.  The Nikkei reported Bank of Japan will likely reduce its economic assessment next week when the BoJ Policy Board convenes.  Traders are now pricing in a very small chance the central bank will lift interest rates in the next year.  Data released in Japan overnight saw the June tertiary index fall 0.8% m/m, the second consecutive monthly decline.  The Nikkei 225 stock index lost 0.51% to close at ¥12,956.80.  Dollar bids are cited around the ¥106.40 level.  The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥163.65 level and was supported around the ¥162.50 level.  The British pound and Swiss franc appreciated vis-à-vis the yen as the crosses tested offers around the ¥205.60 and ¥100.95 levels, respectively.  The Chinese yuan weakened vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8600 in the over-the-counter market, up from CNY 6.8570.  Data released in China overnight saw industrial value-added output up 16.1% in the January to July period. People’s Bank of China formed an exchange rate department to better manage the yuan.  A report suggests Chinese CPI will continue to fall in H2 2008 and 2009.

£

The British pound gained ground vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.8735 level and was supported around the $1.8615 level.  Technically, today’s intraday low was right around the 61.8% retracement of the move from $1.7045 to $2.1160.  Sterling has fallen more than fourteen big figures over the past five weeks.  Bank of England’s quarterly inflation report was released yesterday and was more dovish than most traders expected.  Cable bids are cited around the $1.8515 level. The euro came off vis-à-vis the British pound as the single currency tested bids around the £0.7955 level and was capped around the £0.7990 level.


CHF

The Swiss franc weakened vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0890 level and was supported around the CHF 1.0840 level.  The pair continues to consolidate the gains made during the past couple of weeks. Data released in Switzerland today saw the SECO Q3 consumer sentiment index fall to -17 from +2 in Q2, its lowest level in 4.5 years and well below expectations.  These data support growing expectations that Swiss National Bank may need to reduce interest rates to stimulate economic growth.  U.S. dollar offers are cited around the CHF 1.1135 level.  The euro and British pound gained ground vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.6215 and CHF 2.0375 levels, respectively.