Daily Market Commentary

Fundamental Outlook at 1400 GMT (EST + 0400)
 

€

The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4765 level and was supported around the $1.4665 level.  The common currency consolidated some of last week’s losses.  The pair sputtered higher as crude oil and commodities prices recovered, partially on account of a pending storm in the U.S. gulf region.  Traders are still trying to reconcile elevated rates of inflation in the eurozone with last week’s news that EMU-15 GDP growth contracted in Q2.  Germany’s ZEW business confidence index will be released tomorrow.  Germany’s DIW sees German Q3 GDP growth around 0.1%. Germany’s Deutschebank reported inflation expectations are increasing in the eurozone and cannot “be reconciled with price stability over the long run.”  Data released in the eurozone today saw the June foreign trade balance record a balance of -€100 million, down from June’s €7.5 billion surplus.  German economic minister Glos reported the government will maintain its 1.7% GDP growth forecast for 2008 for now.  In U.S. news, the August NAHB housing market index will be released later in the North American session.  Euro bids are cited around the US$ 1.4315 level.

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the US$ 109.95 level and was capped around the ¥110.55 level.  Technically, today’s intraday low was right around the 50% retracement of the move from ¥124.15 to ¥95.70.  Bank of Japan convened a two-day Policy Board meeting overnight and is expected to keep the overnight call rate unchanged at 0.50% for the foreseeable future.  Nikkei again reported that BoJ is likely to downgrade its economic assessment following the recent news that GDP contracted 2.4% in the April – June quarter.  Data released in Japan overnight saw July department store sales off 2.5%, the fifth consecutive monthly decline, while the June leading index was upwardly revised to 91.3. The Nikkei 225 stock index climbed 1.12% to close at ¥13,165.45.  Dollar bids are cited around the ¥106.40 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥161.80 level and was capped around the ¥162.65 level.  The British pound and Swiss franc depreciated vis-à-vis the yen as the crosses tested bids around the ¥205.20 and ¥100.15 levels, respectively.  The Chinese yuan depreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8760 in the over-the-counter market, up from CNY 6.8700.  Data released in China overnight saw the July property climate index fall from June’s result.

£

The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.8720 level and was supported around the $1.8625 level.  Technically, today’s intraday low was right around the 61.8% retracement of the move from $1.7045 to $2.1160.  Bank of England gave a bleak assessment of the economy last week and there are mounting expectations the central bank will orchestrate a rate cut, pushing the headline repo rate lower from its current 5.0% level.  Cable bids are cited around the $1.8015 level.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the £0.7905 level and was supported around the £0.7870 level.

CHF

The Swiss franc gained marginal ground vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0910 level and was capped around the CHF 1.1005 level.  Data released in Switzerland today saw June retail sales up 0.7% y/y.  Many traders believe Swiss National Bank will move interest rates lower in December.  U.S. dollar offers are cited around the CHF 1.1135 level.  The euro and British pound moved higher vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.6175 and CHF 2.0530 levels, respectively.