By GCI Forex Research
Fundamental Outlook at 1400 GMT (EDT + 0400)
€
The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3280 level and was supported around the $1.3185 level. Traders continue to lift the common currency higher on the premise that much-needed financial aid will be released to Greece sooner rather than later. European Central Bank President Trichet today urged German legislators to approve Greece’s request for funds under a joint financial rescue package being offered by the European Union and International Monetary Fund. Trichet noted a “strong sense of direction” is required so that contagion can be avoided. A timetable for disbursement of funds to Greece could be released as early as next week. A European Union official said a final plan on the initial €45 billion bailout plan could be reached “in days” while German finance minister Schaeuble said it is not yet certain that an agreement would be reached and called on Greece to implement a budget consolidation. Traders are also monitoring the situation in Spain and Portugal, two eurozone countries that had their credit ratings downgraded and may require their own financial assistance packages. Data released in the eurozone today saw the EMU-16 March money supply off 0.1% y/y while the April business climate indicator improved to +0.23 from the revised prior print of -0.20. Additionally, EMU-16 industrial confidence, economic confidence, and services confidence all improved this month. The EMU-16 March unemployment rate and April consumer price inflation data will be released tomorrow. Additionally, Germany’s unemployment roll fell by 68,000 in April with the unemployment rate reaching 7.8% from the prior reading of 8.0%. In U.S. news, the Chicago Fed’s National Activity Index improved to -0.07 from the revised prior reading of -0.44. Also, weekly initial jobless claims fell to +448,000 from the revised prior reading of +459,000 and continuing jobless claims fell to 4.645 million. Q1 GDP data will be released tomorrow along with University of Michigan consumer sentiment data. President Obama nominated Janet Yellen to become the new Fed Vice Chairman and also nomated Peter Diamond and Sarah Bloom Raskin to become Fed Governors. The Fed yesterday voted to keep monetary policy unchanged. Euro bids are cited around the US$ 1.3175 level.
¥/ CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥94.15 level and was supported around the ¥93.85 level. Nikkei reported Bank of Japan will forecast consumer price inflation of +0.2% in fiscal year 2011, following three years of declines. BoJ’s Policy Board will release its interest rate decision overnight and is not expected to change monetary policy at this time, though it may upgrade its forecasts for economic and inflation growth. It was also announced that the balance of commercial paper held by the central bank is expected to reach zero for the first time in nearly nineteen months after having once reached ¥4 trillion. Japanese financial markets were closed overnight for the Golden Week holidays. Many data will be released overnight including April PMI manufacturing, March household spending, March jobless data, consumer price inflation, and March industrial production. The Nikkei 225 stock index lost 2.57% yesterday to close at ¥10,924.79. U.S. dollar offers are cited around the ¥96.85 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥124.85 level and was supported around the ¥123.75 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥143.80 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥87.00 figure. In Chinese news, the U.S. dollar appreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8260 in the over-the-counter market, up from CNY 6.8254. China reduced its quota for short-term overseas borrowing this year to US$ 32.4 billion, 1.5% less than last year’s pace on account of yuan appreciation. People’s Bank of China is expected to revalue its yuan currency at any time.
£
The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.5285 level and was supported around the $1.5140 level. Cable shook off market chatter that the ratings agencies may downgrade the U.K. on account of its worsening financial position. Data released in the U.K. overnight saw April Nationwide housing prices up 1% m/m and 10.5% y/y. The April GfK consumer confidence survey will be released tonight. Prime Minister Brown, the Tories’ Cameron, and the Liberal Democrat’s Clegg held their last debate today and it appears increasingly likely Labour will lose its grip on power. Cable bids are cited around the US$ 1.5030 level. The euro depreciated vis-à-vis the British pound as the single currency tested bids around the £0.8670 level and was capped around the £0.8730 level.
CHF
The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0805 level and was capped around the CHF 1.0870 level. The April KOF Swiss leading indicator for April will be released tomorrow. U.S. dollar offers are cited around the CHF 1.0930 level. The euro moved higher vis-à-vis the Swiss franc as the single currency tested offers around the CHF 1.4350 level while the British pound appreciated vis-à-vis the Swiss franc and tested offers around the CHF 1.6540 level.
Forex Daily Market Commentary provided by GCI Financial Ltd.
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