Daily Market Commentary - Fundamental Outlook
€
The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3725 level and was supported around the $1.3685 level. Technically, the pair continues to orbit the 23.6% retracement of the move from $1.3260 to $1.3850. Many data were released in the U.S. today. First, the Q2 employment cost index rose 0.9% while benefit costs were up 1.3% - the largest increase since Q1 2005. Second, June personal spending was up +0.1% and June personal incomes were up +0.4%. Third, the core PCE price index was up +0.1% m/m and +1.9% y/y, within the Federal Reserve's perceived 1% to 2% comfort zone. Fourth, July consumer confidence improved to 112.6 from 105.3 in June, a six-year high. Fifth, June construction spending was down 0.3%, defying expectations of a +0.2% increase. Sixth, the July Chicago PMI survey fell to 53.4 from 60.2 in June. The new orders component of the survey was down sharply while manufacturing input prices were up with the prices paid component up to 73.1 from 68.1 in June. Traders await tomorrow's ISM report followed by Friday's all-important July non-farm payrolls report. In eurozone news, preliminary July harmonized consumer price inflation moderated to +1.8% from +1.9% in June. Also, the EMU-13 July economic sentiment indicator fell back to 111.0 from 111.7 in June. Eurozone unemployment moderated to 6.9% in June, unchanged from a downwardly revised figure in May. These data confirm that employment is increasing in the eurozone and European Central Bank policymakers will pay close attention to any wage-driven inflation that results. Other data released today saw Germany's July jobless rate at 3.715 million, up 28,000 from June, while June retail sales were up 0.7% m/m and off 0.8% y/y. Euro bids are cited around the US$ 1.3625 level.
¥/ CNY
The yen came off vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥119.50 level and was supported around the ¥118.75 level. Technically, today's intraday low was just below the 50% retracement of the move from ¥115.15 to ¥124.15. Many data were released in Japan overnight. First, the unemployment rate fell to a nine-year low of 3.7% in June from 3.8% in May. Second, household spending was up 0.1% y/y, below forecasts. Third, overall household income was up 7.6% y/y. Fourth, average monthly cash earnings were off 1.1% y/y. Fifth, June construction orders were up 26.4% y/y. Sixth, June housing starts were up 6.0% y/y, the first rise in three months. Seventh, June orders by the 50 largest contractors were up 26.4% y/y. Bank of Japan announced it will begin to sell shares over a ten-year period that it began purchasing from banks in September 2002 to support the market. BoJ purchases about ¥2 trillion as part of the plan and will gradually reduce its holdings. The Nikkei 225 stock index lost 0.23% to close at ¥17,248.89. Dollar bids are cited around the ¥117.25 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥163.80 level and was supported around the ¥162.65 level. The British pound and Swiss franc gained ground vis-à-vis the yen as the crosses tested offers around the ¥242.90 and ¥99.15 levels, respectively. In Chinese news, the yuan's central parity rate vis-à-vis the U.S. dollar was set at CNY 7.5737, down from CNY 7.5824. U.S. Treasury Secretary Paulson continues his visit to China in which he is calling on China's leadership to allow the yuan to strengthen further. Data released in China today saw June consumer confidence print at 97.5, up from 96.7 in May.
₤
The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 2.0340 level and was supported around the US$ 2.0235 level. Traders await the outcome of this week's Bank of England Monetary Policy Committee meeting with most expecting the central bank to keep the repo rate unchanged at 5.75%. Many dealers believe the MPC will lift the repo rate by +25bps to 6.00% by the end of the year with some hawks expecting a repo rate as high as +6.25% by the end of the year. Data released in the U.K. today saw the July GfK/ NOP headline consumer confidence index retreat to -6 from -3 in June. Also, the CBI retail sales survey saw a balance of +18% y/y of retailers saw higher sales in July, up from +17% in June. Cable bids are cited around the US$ 2.0135 level. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.6735 level and was capped around the ₤0.6765 level.
CHF
The Swiss franc came off marginally vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2065 level and was supported around the CHF 1.2010 level. Technically, today's intraday high was right around the 50% retracement of the move from CHF 1.1960 to CHF 1.2165. Data released in Switzerland today saw the June UBS private consumption indicator rise to +2.31 from +2.10 in May. Dollar offers are cited around the CHF 1.2080/ 1.2155 levels. The euro and British pound gained ground vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.6525 and CHF 2.4515 levels, respectively.
DISCLAIMER : GCI's 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 used as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.
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