By GCI Forex Research
Fundamental Outlook at 1500 GMT (EDT + 0500)
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The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3585 level and was supported around the $1.3460 level. The common currency extended recent gains and reached its highest level since 19 March as traders continued to cover shorts that were put on following heightened sovereign credit woes in the eurozone in the first quarter. Data released in the eurozone today saw German March PMI improve to 60.2 while EMU-16 PMI improved to 56.6. Today’s data are consistent with other recent economic data that confirm Germany – the eurozone’s largest economy – continues to drive economic growth in the bloc. On a negative note, German retail sales fell 0.4% m/m and were off 0.9% y/y. Liquidity is expected to remain quite thin tomorrow and Monday in the eurozone and the United Kingdom for the Easter and Passover holidays. Traders remain fixated on Greece’s debt woes with a new wave of skepticism regarding the country’s ability to successfully reduce its fiscal deficits and refinance its maturing debt in the second quarter. European Central Bank member Kranjec reported the European Union “won’t do anything special” to support Greece. In U.S. news, March Challenger jobs cuts were off 55.0% y/y and weekly initial jobless claims fell to 439,000 from the revised print of 445,000. Continuing jobless claims were narrowly lower at 4.662 million. Other data released today saw the March ISM manufacturing index improve more-than-expected to 59.6 from the prior reading of 56.5. Also, the March prices paid index was up significantly at 75.0 from the prior reading of 67.0. Tomorrow’s March non-farm payrolls data will cap an abbreviated trading week. Many economists are calling for job growth around the +185,000 area and upward revisions to recent months’ data but some are questioning how many job gains could be due to temporary factors such as the U.S. census. U.S. Treasury Secretary Geithner warned it will be some time before large sustainable increases in jobs growth will be seen. New York Fed President Dudley reported “near term” inflation will remain low and said muted U.S. economic growth will warrant low rates. Euro bids are cited around the US$ 1.3335 level.
¥/ CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥94.05 level and was supported around the ¥93.25 level. As expected, Bank of Japan’s Q1 Tankan survey of corporate sentiment improved q/q with the large manufacturers’ index up to -14 from -24 in Q4 and the non-manufacturer’s index higher at -14 from -22. Also, the large manufacturers’ outlook improve to -8 from -21 in Q4 and Q1 all-industry capital expenditures improved to -0.4% from -10.8%. Today’s improvement represented the Tankan’s highest levels in eighteen months but they do not necessarily mean Japan’s economy will evidence a marked improvement, especially as final private demand remains tepid and deflation remains a significant problem. There is market chatter that Bank of Japan will lift its assessment of the economy at the BoJ Policy Board meeting on 6-7 April, possibly on account of greater export activity. BoJ’s 30 April Policy Board meeting will include its semi-annual economic projections and could be the meeting when Policy Board members adjust policy further following last month’s additional easing steps. There will be an Upper House election in July and politicians will likely pressure the central bank to make policy easier far in advance of that election. The Nikkei 225 stock index gained 1.39% to close at ¥11,244.40. U.S. dollar offers are cited around the ¥94.75 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥127.50 level and was supported around the ¥125.95 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥143.60 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥90.00 figure. In Chinese news, the U.S. dollar appreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8264 in the over-the-counter market, up from CNY 6.8259. Data released in China overnight saw March manufacturing PMI improve to 55.1 from 52.0 in February. People’s Bank of China reported yesterday it will continue its moderately loose monetary policy.
₤
The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.5295 level and was supported around the $1.5170 level. Bank of England issued its first quarter credit conditions survey today in which it reported U.K. mortgage demand may rise in the second quarter. Data released in the U.K. today saw March PMI manufacturing print at 57.2, up from the revised prior reading of 56.5. Cable bids are cited around the US$ 1.4455 level. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the £0.8840 level and was capped around the £0.8900 figure.
CHF
The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0435 level and was capped around the CHF 1.0610 level. Swiss National Bank is said to have intervened in the market today by selling Swiss francs in what is estimated to have been a massive operation. Swiss monetary, financial, and government officials have been warning that they will not tolerate a further increase in the franc in recent weeks but many traders speculated the central bank would not intervene to weaken the franc. Data released in Switzerland today saw the March PMI manufacturing survey improve to 65.5 from the prior reading of 57.4. U.S. dollar offers are cited around the CHF 1.1180 level. The euro moved higher vis-à-vis the Swiss franc as the single currency tested offers around the CHF 1.4410 level while the British pound moved higher vis-à-vis the Swiss franc and tested offers around the CHF 1.6215 level.
Forex Daily Market Commentary provided by GCI Financial Ltd.
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