By GCI Fx Research
€
The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4245 level and was supported around the US$ 1.4100 figure. The common currency added on to recent gains and reached its highest level since 29 December 2008. Data released in the U.S. today saw April personal spending decrease 0.1% m/m while April personal income was up 0.5% m/m, an indication that consumption is not keeping up with income. It was also reported that April core U.S. personal consumption expenditures were up 0.3% m/m and 1.9% y/y. Other data saw the U.S. ISM May manufacturing index print at 42.8, up from 40.1 in April. U.S. equity markets were up sharply with the Dow posting more than a 200-point surge through mid-day U.S. trading. In eurozone news, the EMU-16 May manufacturing PMI index improved to 40.7 from 36.8 in April, the largest rise since at least June 1997 but still below the “boom-or-bust” 50.0 level, evidencing an ongoing contraction in the sector. Germany’s PMI manufacturing level printed at a stronger-than-expected 39.6 in May, up from April’s print of 35.4. The EMU-16 print represented a seven-month high. Other data released today saw April construction spending climb 0.8% m/m. The EMU-16 April unemployment rate will be released tomorrow. 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 ¥96.75 level and was supported around the ¥94.45 level. The yen was firmly given across the board as risk appetite strengthened and traders moved into currencies with higher-yielding assets. There has not been much verbal intervention from Japanese monetary officials and there is little expectation that actual intervention will materialize now. Bank of Japan is expected to keep monetary policy unchanged for foreseeable future, especially after the central bank and government upgraded their respective assessments of the economy one week ago. The Nikkei 225 yesterday stock index rallied 1.63% to close at ¥9,677.75. 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 ¥137.25 level and was supported around the ¥133.90 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥159.15 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥90.45 level. In Chinese news, the U.S. dollar weakened vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8257 in the over-the-counter market, down from CNY 6.8273. U.S. Treasury Secretary Geithner is meeting Chinese officials in China and said China’s U.S. dollar assets are “very safe,” reiterating the U.S. believes in a strong U.S. dollar. Geithner also said the rise in U.S. yields reflect “an improvement in confidence” whereas many traders believe the run-up in yields reflects a worsening of the U.S. fiscal outlook.
₤
The British pound appreciated sharply vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.6495 level and was supported around the $1.6160 level. Cable reached its highest level since 30 October 2008 as traders continued their pursuit of higher-yielding assets. Data released in the U.K. today saw May manufacturing PMI improve to 45.4 from 43.1 in April, exceeding forecasts but the fourteenth consecutive month of contraction. Also, Hometrack May house prices were steady, the first time in twenty months they have not declined. Prime Minister Brown indicated he will not step down regardless of the results of next week’s European and local elections. Brown also supported Chancellor of the Exchequer Darling who may have inadvertently gotten involved in the pay scandal impacting many members of Parliament. Cable bids are cited around the US$ 1.5535 level. The euro depreciated vis-à-vis the British pound as the single currency tested bids around the ₤0.8615 level and was capped around the ₤0.8740 level.
Daily Market Commentary provided by GCI Financial Ltd.
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