By GCI Fx Research
€
The euro appreciated sharply vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3925 level and was supported around the US$ 1.3730 level. The common currency reached its highest level since 5 January and some dealers believe traders may use the reduced liquidity over the long U.S., U.K., and European holidays to make a run at the psychologically-important US$ 1.4000 figure, a level it’s not traded above since the end of last year. Data released in the U.S. today saw April leading indicators rise 1.0% from a revised 0.2% decline in March, the first improvement in seven months. These data suggest the U.S. economy is inching closer to an economic recovery. Weekly initial jobless claims were off 12,000 to 631,000 in the week ended 16 May while continuing jobless claims were up 75,000 to 6.662 million. Other data saw the May Philadelphia Fed manufacturing survey improve to -22.6. In eurozone news, the EMU-16 May composite Purchasing Managers Index improved to an eight-month high of 43.9 from 41.1 in April with improvements in both the manufacturing and services PMI indices. Similarly, German flash May PMI data suggest that country’s economy may be past the worst. It was also reported that France’s economic contraction moderated in May as its flash PMI rose to 46.1 from 43.8 in April. Euro bids are cited around the US$ 1.3435 level.
¥/ CNY
The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥94.00 figure and was capped around the ¥95.25 level. The pair extended its recent sell-off and reached its lowest level since 19 March as risk aversion returned to the market ahead of the long holiday weekend in Europe and the U.S. Data released in Japan overnight saw the March tertiary index print at 100.8, off 4.0% m/m and worse than February’s 1.3% decline. The tertiary index was also off 3.2% q/q in the January – March quarter, worse than the 1.7% pullback in the October – December period. The March leading index and coincident index will be released in Japan overnight. The Nikkei 225 yesterday stock index lost 0.86% to close at ¥9,264.15. 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 ¥131.50 level and was supported around the ¥129.85 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥146.85 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥85.50 level. In Chinese news, the U.S. dollar appreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8250 in the over-the-counter market, up from CNY 6.8215.
₤
The British pound moved higher vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.5890 level and was supported around the $1.5515 level. Cable weakened earlier in the day after Standard & Poors changed its outlook on the U.K. government’s debt to negative from stable, the first time it’s been negative since 1978. S&P is projecting that public sector debt will near 100% of gross domestic product over the medium-term. Even though the government’s sovereign AAA credit rating remains intact, today’s news is a blow for beleaguered U.K. Prime Minister Brown who has about one year before he must call an election. Sterling absorbed this news and rocketed to its highest level since 6 November. April retail sales were up 0.9% m/m after an upwardly revised 1.1% increase in March. Also, CML April gross mortgage lending printed around ₤10.4 billion and April public sector net borrowing reached ₤8.5 billion. Additionally, the M4 money supply was up 0.1% m/m and 17.4% y/y and Q1 business investment was off 5.5% q/q. Cable bids are cited around the US$ 1.5315 level. The euro gained ground vis-à-vis the British pound as the single currency tested offers around the ₤0.8870 level and was supported around the ₤0.8720 level.
Daily Market Commentary provided by GCI Financial Ltd.
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