{"id":9890,"date":"2010-06-01T12:11:25","date_gmt":"2010-06-01T16:11:25","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=9890"},"modified":"2010-06-01T12:11:25","modified_gmt":"2010-06-01T16:11:25","slug":"forex-daily-market-commentary-73","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2010\/06\/01\/forex-daily-market-commentary-73\/","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 sharply vis-\u00e0-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2110 level and was capped around the $1.2310 level. Today\u2019s intraday low represented a new four-year low and the common currency moved lower as eurozone unemployment reached its highest level in April since June 1998, at 10.1%.\u00a0 These data are the latest indication the eurozone sovereign debt crisis is having a profound impact on the labour market.\u00a0 The continued depreciation of the euro means more traders are viewing the common currency as a funding currency for carry trades.\u00a0 Dealers also dumped the common currency on escalating concerns Europe\u2019s credit woes would lead to larger-than-expected losses at regional banks.\u00a0 Yesterday, the ECB warned\u00a0 that eurozone banks could face as much as \u20ac195 billion in additional loan losses over the next eighteen months on account of the financial crisis.\u00a0 The ECB also reported it increased its purchases of eurozone government bonds.\u00a0 ECB member Nowotny said the ECB\u2019s bond purchase program will continue until there is financial stability in the eurozone, adding there \u201cis no quantitative goal.\u201d Yesterday, ECB member Weber said monetary policy has been expanded to include new measures \u201cthat I continue to see in a critical way due to the stability risks.\u201d\u00a0 Weber also yesterday called for \u201cheightened alertness.\u201d\u00a0 There are also reported tensions between Germany and France with the former possibly complaining the latter is not doing enough to bail out their eurozone member partners.\u00a0 The ECB reported banks deposited \u20ac305 billion with it overnight.\u00a0 Other data released today saw EMU-16 May PMI manufacturing tick lower to 55.8 while German provisional May unemployment was lower by 45,000 and the unemployment rate came in at 7.7%.\u00a0 Also, May PMI manufacturing improved to 58.4 and German April retail sales were up 1.0% m\/m and off 3.1% y\/y.\u00a0 French data released today saw April producer prices up 1.0% m\/m and 4.0% y\/y with May PMI manufacturing lower at 55.8.\u00a0 In U.S. news, data released today saw May ISM manufacturing decrease to 59.7 while the ISM prices paid index fell to 77.5.\u00a0 Also, April construction spending improved 2.7% m\/m.\u00a0 Chicago Fed President Evans yesterday reported that targeted asset purchases are more effective at addressing financial crises than straight injections of cash.\u00a0 Some Fed-watchers are expressing concern that the Fed may be too dovish in calculating that the full rate of employment is now between 5% and 5.3%.\u00a0 If the Fed waits until the unemployment rate gets that low before making material adjustments to short-term interest rates, it could risk fueling inflation.\u00a0 Euro offers are cited around the US$ 1.2620 level.<\/p>\n

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

The yen appreciated vis-\u00e0-vis the U.S. dollar today as the greenback tested bids around the \u00a590.55 level and was capped around the \u00a591.25 level.\u00a0 Risk aversion returned to the market after the long holiday weekend in some trading centers as traders deliberated a slowdown in Chinese economy activity and a worsening fiscal situation in Europe.\u00a0 Bank of Tokyo is now forecasting the euro may weaken to US$ 1.16 by the fourth quarter and some policymakers are concerned that additional euro weakness could lead to too much appreciation of the yen.\u00a0 Prime Minister Hatoyama\u2019s popularity has reached a new low, less than two months before parliamentary elections.\u00a0 The Social Democratic Party left Hatoyama\u2019s coalition government this weekend in opposition to Japanese approval to relocate a U.S. base within Okinawa.\u00a0 Bank of Japan Governor Shirakawa yesterday reported \u201c\u2026the greatest challenge Japan\u2019s economy is facing now is the decline in the potential growth rate as well as the shrinking of the population and sluggish productivity growth underlying this.\u201d\u00a0 Speaking about the global increase in fiscal spending, Shirakawa added \u201cFiscal policies are not a cornucopia.\u00a0 Policymakers should work to appropriately conduct policies so as to maintain sufficient market confidence.\u00a0 In this regard, current events seem to have served as a \u2018wakeup call\u2019 to many countries.\u201d\u00a0 Regarding inflation, Shirakawa added \u201cConcerning inflation-targeting, there are expectations that expanding the central bank\u2019s balance sheets would help Japan escape deflation and cause inflation rates to rise.\u00a0 But the central banks of Japan, the U.S., and Europe have expanded balance sheets only to see drops in inflation rates.\u00a0 Expanding central bank balance sheets does not immediately cause prices to rise.\u201d\u00a0 Regarding economic growth, Shirakawa noted \u201cJapan\u2019s economy is making firm progress toward sustainable growth.\u00a0 We need to be mindful of upside and downside risks.\u201d\u00a0 Data to be released in Japan overnight include the May monetary base.\u00a0 The Nikkei 225 stock index lost 0.58% today to close at \u00a59,711.83.\u00a0 U.S. dollar offers are cited around the \u00a596.85 level.\u00a0 The euro moved lower vis-\u00e0-vis the yen as the single currency tested bids around the \u00a5109.75 level and was capped around the \u00a5112.30 level.\u00a0 The British pound moved higher vis-\u00e0-vis the yen as sterling tested offers around the \u00a5133.10 level while the Swiss franc moved lower vis-\u00e0-vis the yen and tested bids around the \u00a577.45 level. In Chinese news, the U.S. dollar appreciated vis-\u00e0-vis the Chinese yuan as the greenback closed at CNY 6.8306 in the over-the-counter market, up from CNY 6.8278.\u00a0\u00a0 Dealers expressed concern about a sharper-than-expected decline in May PMI manufacturing that saw the May level decline to 53.9 while the HSBC manufacturing PMI measure weakened to 52.7 from the revised prior reading of 52.7.\u00a0 Honda Motors reported its automobile production in China will remain halted until at least 3 June on account of a strike.\u00a0 People\u2019s Bank of China lifted yields on one-year bills for the first time in four months as inflation is picking up and the central bank is attempting to absorb excess cash from the money market.\u00a0 A PBoC adviser warned China\u2019s property problems are more severe than the U.S.\u2019s real estate problems.\u00a0 Spreads on Chinese property company bonds are widening away from U.S. Treasuries.<\/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$ 1.4615 level and was supported around the $1.4435 level.\u00a0 Sterling partially moved higher on account of its current retention of its AAA credit rating.\u00a0 In contrast, Spain\u2019s credit rating was downgraded last week and the U.K. media today reported France could lose its vaulted rating as well.\u00a0 Data released in the U.K. today saw May PMI manufacturing remain unchanged at 58.0, beating expectations.\u00a0 Cable bids are cited around the US$ 1.4220 level.\u00a0 The euro depreciated vis-\u00e0-vis the British pound as the single currency tested bids around the \u00a30.8320 level and was capped around the \u00a30.8475 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 1.1730 level and was supported around the CHF 1.1525 level.\u00a0 Data released in Switzerland today saw Q1 gross domestic product climb 0.4% q\/q and 2.2% y\/y while May PMI defied expectations and rallied to 66.4, up from the prior reading of 65.9.\u00a0 April retail sales data will be released tomorrow.\u00a0 Swiss National Bank member Leuthard on Friday said Switzerland is interested in a \u201cstable euro,\u201d adding the central bank\u2019s euro reserves have risen to 52%.\u00a0 SNB has undertaken significant franc-selling intervention this year to address the depreciation of the common currency.\u00a0 U.S. dollar bids are cited around the US$ 1.1420 level.\u00a0 The euro lost ground vis-\u00e0-vis the Swiss franc as the single currency tested bids around the CHF 1.4155 level while the British pound gained ground vis-\u00e0-vis the Swiss franc and tested offers around the CHF 1.7050 level.<\/p>\n

Forex Daily Market Commentary<\/strong><\/em> provided by<\/em><\/strong> GCI Financial Ltd<\/strong><\/a>.<\/strong><\/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":"

Today\u2019s intraday low represented a new four-year low and the common currency moved lower as eurozone unemployment reached its highest level in April since June 1998, at 10.1%. These data are the latest indication…<\/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-9890","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/9890","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=9890"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/9890\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=9890"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=9890"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=9890"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}