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5 June 2006
Monday Fundamental Outlook at 1400 GMT (EST + 0400) €
The euro moved higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2980 level and was supported around the $1.2920 level. Today’s intraday high represented the pair’s strongest print since 5 May 2005 and sets the stage for a run at the psychologically-important US$ 1.3000 figure. Friday’s disappointing U.S. May non-farm payrolls numbers continue to be priced in the market with many traders scaling back their expectations for additional Federal Open Market Committee monetary tightening. The FOMC convenes at the end of June and again on 8 August to deliberate interest rates. Fed Chairman Bernanke and European Central Bank President Trichet speak at a monetary policy conference later today along with Bank of Japan Deputy Governor Muto. Data released in the U.S. today saw the May non-manufacturing ISM survey fell to 60.1 from 63.0, consistent with expectations. The CFTC’s IMM currency speculation report released on Friday saw long euro positions rise to a record 79,884 contracts in the week to 30 May. In eurozone news, many trading centers were closed for a public holiday and will reopen tomorrow. In comparison to U.S. monetary expectations, the European Central Bank is expected to hike interest rates by at least +25bps on Thursday with some market participants anticipating a +50bps move. In other eurozone news, Germany’s economic “Wise Men” revised their 2006 GDP expectations to a growth rate of 1.5%. Group of Eight central banks and finance officials will meet in St. Petersburg at the end of this week. Euro offers are cited around the US$ 1.3045 level. ¥/ CNY The yen weakened vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥111.85 level and was supported around the ¥111.40 level. Technically, today’s intraday low was just below the 50% retracement of the move from ¥101.65 to ¥121.40. Data released in Japan overnight saw January – March non-financial firms’ capital investment climb 13.9% y/y. Traders are speculating today that the Japanese government may upwardly revise its January – March GDP estimate after a quarterly government survey showed spending on building factories and upgrading production facilities expanded at its fastest pace in nearly 1 ½ years in the three months to March. April machine orders data will be released on Friday. The Nikkei 225 stock index lost 0.77% to close at ¥15,558.31. Dollar bids are cited around the ¥111.00 figure. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥144.95 level and was supported around the ¥144.20 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥209.85 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥92.90 level. The Chinese yuan appreciated sharply vis-à-vis the U.S. dollar as the greenback closed at CNY 8.0077, down from CNY 8.0230, and at CNY 8.0886 in the exchange-traded market. ₤
The British pound slumped vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.8775 level and was capped around the $1.8880 level. Data released in the U.K. today saw the May CIPS services PMI survey recede to 59.2 from 59.7 in April, below expectations. EEF reported the U.K. manufacturing sector is likely to show good performance in Q2. Bank of England’s Monetary Policy Committee convenes on Thursday and is expected to keep its headline repo rate unchanged at 4.50% for the tenth consecutive month. Cable offers are cited around the US$ 1.8905/ 60 levels. The euro gained ground vis-à-vis the British pound as the single currency tested offers around the ₤0.6885 level and was supported around the ₤0.6855 level. CHF The Swiss franc moved higher vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.2020 level and was capped around the CHF 1.2075 level. Chartists are eyeing the CHF 1.1990 level as the pair’s next downside target. Dollar bids are cited around the CHF 1.2010/ 1.1995 level. The euro and British pound came off vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.5575 and CHF 2.2595 levels, respectively. AUD The Australian dollar weakened vis-à-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.7470 level and was capped around the $0.7545 level. Data released in Australia today saw the May performance of services index recede 7.0 points to 49.3 from April’s 56.3 level. Also, Q1 Australian gross company profits were up 0.1% from Q4’s 1.7% increase and May ANZ job ads were off 1.5% m/m and up 18.5% y/y. Australian dollar offers are cited around the US$ 0.7615 level.
CAD The Canadian dollar was little-changed vis-à-vis the U.S. dollar today as the greenback tested bids around the C$ 1.0975 level and was capped around the $1.1035 level. The May Ivey PMI survey will be released tomorrow. U.S. dollar offers are cited around the C$ 1.1060/ 1.1100 levels. NZD
The New Zealand dollar appreciated vis-à-vis the U.S. dollar today as the kiwi tested offers around the US$ 0.6340 level and was supported around the $0.6305 level. New Zealand dollar offers are cited around the US$ 0.6375 level. Gold/ Silver Gold moved higher vis-à-vis the U.S. dollar today as the yellow metal tested offers around the US$ 645.80 level and was supported around the $637.50 level. The dollar’s pullback and an increase in anti-West rhetoric from Iran contributed to the pair’s gains. Silver moved higher vis-à-vis the U.S. dollar as the pair tested offers around the US$ 12.37 level and was supported around the $12.08 level. Crude Oil Crude oil rallied vis-à-vis the U.S. dollar today as light, sweet NYMEX crude for July delivery tested offers around the US$ 73.78 level and was supported around the $72.32 level. The pair moved to multi-week lows after Iran’s Ayatollah Ali Khamenei warned it will withhold oil exports if the U.S. makes a “wrong move.” Iran has so far said it will not suspend uranium enrichments. European Union’s Solana will visit Tehran tomorrow to deliver options to Iran.
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