{"id":10408,"date":"2010-06-21T14:22:29","date_gmt":"2010-06-21T18:22:29","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=10408"},"modified":"2010-06-21T14:22:29","modified_gmt":"2010-06-21T18:22:29","slug":"forex-daily-market-commentary-79","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2010\/06\/21\/forex-daily-market-commentary-79\/","title":{"rendered":"Forex Daily Market Commentary"},"content":{"rendered":"

By GCI Forex Research<\/strong><\/p>\n

Fundamental Outlook at 1400 GMT (EDT + 0400)<\/strong><\/p>\n

\u20ac<\/strong><\/p>\n

The euro depreciated vis-\u00e0-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2350 level and was capped around the $1.2465 level.\u00a0 European Central Bank officials spoke today and offered their latest views regarding the ongoing European credit crisis.\u00a0 President Trichet defended the central bank\u2019s commitment to price stability, saying statements that price expectations have come unanchored are \u201cunfounded.\u201d\u00a0 Trichet also noted the economic recovery is likely to \u201cremain moderate and uneven.\u201d\u00a0 He also called for \u201cbetter instruments to prevent excessive deficits\u201d and wants sanctions against countries to become \u201cquasi-automatic.\u201d\u00a0 Trichet cited \u201cmore stringent reporting requirements or even a limitation of suspension of voting rights\u201d as possibilities.\u00a0 Additionally, he said the ECB\u2019s purchase of bonds are not engendering inflation risks.\u00a0 ECB member Gonzalez-Paramo warned about the proposed bank global bank tax, saying it could \u201champer the flow of credit to the real economy.\u201d\u00a0 ECB member Stark said the ECB \u201cwill not embark on a dimension in size of government bond purchases as it was done by other central banks\u201d and called the ECB\u2019s purchases \u201ctemporary in nature.\u201d\u00a0 The ECB has spent about \u20ac51 billion purchasing government and corporate debt in the secondary market to keep a lid on yields and improve liquidity.\u00a0 In contrast, the Fed has purchased US$ 1.42 trillion in housing debt and US$ 300 billion in U.S. Treasuries whereas Bank of England has invested about \u00a3200 billion.\u00a0 Gonzalez-Paramo also said stress tests on European banks will cover both liquidity and capital positions.\u00a0 Stark added \u201cno (eurozone) country will default\u201d on its debts.\u00a0 Bundesbank\u2019s monthly bulletin said the weak euro may offset fiscal tightening.\u00a0 ECB member Noyer called for \u201crigorous\u201d budgetary discipline and said some banks are facing \u201cincreasing\u201d funding problems.\u00a0 In U.S. news, data to be released tomorrow include May existing home sales, April house prices, and the June Richmond Fed manufacturing index.\u00a0 Group of Twenty officials will convene in Toronto this week and weekend to discuss global policy and could announce a global bank tax.\u00a0 The Federal Open Market Committee\u2019s interest rate decision will be released this week and many traders believe it will contain its \u201cextended period\u201d rhetoric to describe the ongoing accommodation of monetary policy.\u00a0 Euro offers are cited around the US$ 1.2570 level.<\/p>\n

\u00a5\/ CNY<\/strong><\/p>\n

The yen depreciated vis-\u00e0-vis the U.S. dollar today as the greenback tested offers around the \u00a591.45 level and was supported around the \u00a590.25 level.\u00a0 The pair moved higher after China gave some indication it was moving to liberalize its yuan currency.\u00a0 Bank of Japan Governor Shirakawa met Prime Minister Kan overnight ahead of the G20 summit.\u00a0 There is some speculation the government plans to nearly double its growth projection for the current fiscal year to 2.6% following January\u2019s estimate of 1.4%.\u00a0 Notably, Japan\u2019s economy contracted 2.0% during its last fiscal year and 3.7% the preceding fiscal year.\u00a0 The government is expected to release new growth estimates as early as tomorrow.\u00a0 BoJ will soon release its June quarterly survey of consumer sentiment and it is expected to evidence a fifth consecutive quarter of improved confidence.\u00a0 Also, big firms are expected to expand capital spending by 4.9% this fiscal year.\u00a0 Data released in Japan overnight saw the April all-industry activity index climb 1.8% m\/m, up from the previous print of -0.7%.\u00a0 Also, May Nationwide department store sales were off 2.1% y\/y and May Tokyo-area department store sales were off 1.8% y\/y with May convenience store sales off 3.2% y\/y.\u00a0 These weak sales data evidence the lack of final private demand in Japan and the economy\u2019s ongoing bout with deflation.\u00a0 The Nikkei 225 stock index climbed 2.43% to close at \u00a510,238.01.\u00a0 The euro moved higher vis-\u00e0-vis the yen as the single currency tested offers around the \u00a5113.40 level and was supported around the \u00a5112.05 level.\u00a0 The British pound moved higher vis-\u00e0-vis the yen as sterling tested offers around the \u00a5136.00 figure while the Swiss franc moved higher vis-\u00e0-vis the yen and tested offers around the \u00a582.50 level. In Chinese news, the U.S. dollar depreciated vis-\u00e0-vis the Chinese yuan as the greenback closed at CNY 6.7969 in the over-the-counter market, down from CNY 6.8261.\u00a0 The sharp move lower followed China\u2019s decision to end a two-year U.S. dollar peg ahead of this week\u2019s Group of Twenty summit in Toronto.\u00a0 Today\u2019s CNY gains were the largest since July 2005 when China revalued the yuan.\u00a0 Notably, the twelve-month non-deliverable yuan forward rose 1.1% to 6.6425 and this implies traders are speculating on a 2.3% yuan appreciation.\u00a0 People\u2019s Bank of China reported a stronger yuan will help curb inflation and focus investment on service industries from export manufacturing industries.\u00a0 Most dealers expect the appreciation will be relatively gradual with some forecasts calling for about a 4-5% appreciation this year and around a similar amount next year.\u00a0 During the past two years, Chinese monetary authorities bought dollars to prevent the yuan from strengthening too much.\u00a0 The CNY appreciation some 21% during the three years after China introduced its managed float against a basket of currencies in July 2005.\u00a0 The yuan has jumped some 16% vis-\u00e0-vis the euro this year and that may temper the yuan\u2019s upside.\u00a0 PBoC is estimated to have accumulated some US$ 2.4 trillion in foreign reserves while intervening in the currency markets.\u00a0 If the central bank is going to intervene less, it may have less U.S. dollars to recycle into U.S. Treasuries and related investments.\u00a0 PBoC suggested China\u2019s balance of payments means there is no need for \u201clarge changes\u201d in the yuan\u2019s value because it is \u201cnot too far from equilibrium levels.\u201d\u00a0 China\u2019s current account surplus was around US$ 297 billion in 2009.\u00a0 A stronger yuan will likely reduce China\u2019s rate of inflation that measured 3.1% last month.\u00a0 Today\u2019s announcement by the central bank will have bought China time ahead of this weekend\u2019s Group of Twenty summit in Toronto.<\/p>\n

\u00a3<\/strong><\/p>\n

The British pound appreciated vis-\u00e0-vis the U.S. dollar today as cable tested offers around the US$ 1.4935 level and was supported around the US$ 1.4805 level.\u00a0 Traders await the release of the U.K. Budget Report tomorrow, especially considering Prime Minister Cameron\u2019s recent fiscal cuts.\u00a0 Inflation remains above Bank of England\u2019s 2% target rate and is expected to moderate in the medium-term.\u00a0 Cable bids are cited around the US$ 1.4620 level.\u00a0 The euro depreciated vis-\u00e0-vis the British pound as the single currency tested bids around the \u00a30.8330 level and was capped around the \u00a30.8380 level.<\/p>\n

CHF<\/strong><\/p>\n

The Swiss franc depreciated vis-\u00e0-vis the U.S. dollar today as the greenback tested offers around the CHF 1.1110 level and was supported around the CHF 1.0995 level.\u00a0\u00a0 Data released in Switzerland today saw the May M3 money supply up 7.1% y\/y and data to be released tomorrow include the May trade balance.\u00a0 Swiss National Bank today reported that its foreign currency investments rose to CHF 239 billion in May from CHF 153.6 billion in April, indicative of the significant amount of franc-selling intervention the central bank has been conducting to protect the Swiss export sector.\u00a0 Last week, Swiss National Bank kept its three-month Swiss franc Libor target rate unchanged at 0.25% this week. Swiss National Bank Chairman Hildebrand effectively eased its stance on the Swiss franc, saying the risks of deflation have \u201clargely disappeared.\u201d\u00a0 SNB also warned it cannot keep interest rates at a record low in the medium term without engendering inflation.\u00a0 U.S. dollar offers are cited around the CHF 1.1470 level.\u00a0 The euro appreciated vis-\u00e0-vis the Swiss franc as the single currency tested offers around the CHF 1.3765 level while the British pound moved higher vis-\u00e0-vis the Swiss franc and tested offers around the CHF 1.6510 level.<\/p>\n

Forex Daily Market Commentary<\/strong><\/em> provided by<\/em><\/strong> GCI Financial Ltd<\/strong><\/a>.<\/strong><\/span><\/p>\n

GCI Financial Ltd (\u201dGCI\u201d) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (\u201dForex\u201d) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (\u201dCFDs\u201d) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.<\/p>\n

DISCLAIMER: GCI\u2019s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.<\/p>\n","protected":false},"excerpt":{"rendered":"

Data released in Switzerland today saw the May M3 money supply up 7.1% y\/y and data to be released tomorrow include the May trade balance. Swiss National Bank today…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-10408","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/10408","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=10408"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/10408\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=10408"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=10408"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=10408"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}