Fundamental Outlook at 1400 GMT (EST + 0400)
€
The euro lost ground vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.5540 level and was capped around the $1.5660 level. The common currency fell to its weakest level since 3 April as traders continued to price in the likelihood of a pause in the Federal Reserve’s interest rate cuts after tomorrow’s likely 25bps monetary easing to 2.00% in the federal funds target rate. Dealers will pay very close attention to what the Federal Open Market Committee states in its policy statement. Traders are also awaiting this Friday’s April non-farm payrolls report. New jobs creation in the U.S. economy has been quite weak lately and there have been multiple downward revisions to monthly estimates, possibly concurrent with the beginning of an economic recession. Data released in the U.S. today saw April consumer confidence fall to 62.3 from 65.9 in March. In eurozone news, the German government reported that negotiated salaries and wages in Germany expanded at their fastest pace in twelve years since the beginning of 2008, up 3.3% y/y in January. Also, German March new machinery, plant orders were off 5.0% y/y. Euro bids are cited around the US$ 1.5345 level.
¥/ CNY
The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥103.75 level and was capped around the ¥104.35 level. Technically, today’s intraday low was right around the 61.8% retracement of the move from ¥108.60 to ¥95.70. Most traders do not expect Bank of Japan’s Policy Board will change the overnight call rate from 0.50% during its two-day policy deliberations today and tomorrow. Manufacturing, employment, household spending, and industrial production data will be released overnight. Japanese financial markets were closed today for a national holiday. Dollar bids are cited around the ¥101.35 level. The euro weakened vis-à-vis the yen as the single currency tested bids around the ¥161.55 level and was capped around the ¥163.20 level. The British pound and Swiss franc came off vis-à-vis the yen as the crosses tested bids around the ¥204.80 and ¥99.95 levels, respectively. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.9850 in the over-the-counter market, down from CNY 7.0014.
£
The British pound depreciated sharply vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.9710 level and was capped around the $1.9915 level. Sterling has traded in a $1.9675 to $2.0025 range over the past several days. Many data were released today that contributed to sterling’s pullback. First, the U.K. today saw the CBI April high street sales balance fall sharply to -26% from +1% in March, the lowest level since November 2005 and much worse than estimated. Second, March total net consumer lending expanded £8.2 billion from a downwardly revised £9.6 billion in February. Third, BSA reported March gross lending fell to £3.6 billion from £5.4 billion one year ago. Fourth, M4 money supply growth eased in March to its slowest rate in nearly two years. Fifth, it was reported that March mortgage approvals fell significantly to their lowest level since records began. Parliament’s Treasury Select Committee has endorsed the appointment of Bank of England Governor King for a second term. King spoke about the central bank’s current policymaking dilemma saying “We must balance the risk of a sharp slowing in activity this year, which would pull inflation below target next year, against the risk that without some slowing in the pace of activity, above-target inflation in the short term might have some tendency to persist.” King also warned that inflation could surpass 3.0% like it did in 2007 and cautioned that consumer spending will likely slow further. Cable bids are cited around the US$ 1.9505 level. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the £0.7895 level and was supported around the £0.7830 level.
CHF
The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0400 figure and was supported around the CHF 1.0330 level. The pair continue to orbit the CHF 1.0385 level, representing the 50% retracement of the move from CHF 1.1105 to CHF 0.9650. Data released in Switzerland today saw the March UBS consumption indicator fall to 2.29 from 2.32 in February. U.S. dollar offers are cited around the CHF 1.0550 level. The euro and British pound came off vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.6135 and CHF 2.0450 levels, respectively.