12 June 2006
Monday

Fundamental Outlook at 1400 GMT (EST + 0400)

€

The euro came off vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2565 level and was capped around the $1.2650 level.  Technically, today’s intraday low was just above the 50% retracement of the move from $1.3475 to $1.1640.  Traders continue to price in another +25 interest rate hike from the Federal Reserve at the end of the month and continue to reduce long euro exposure following European Central Bank President Trichet’s comments last week following the ECB’s decision to lift rates by a modest +25bps.  Fed speakers – including Chairman Bernanke – have been hawkish lately and today’s Fed speakers include Bies, Olson, Pianalto, and Fisher.  U.S. Treasury Secretary Snow this weekend said U.S. inflation “remains contained” despite high oil prices.  Data to be released in the U.S. this week could help cement a monetary tightening by the Federal Open Market Committee this week with producer price inflation out tomorrow followed by consumer price inflation on Wednesday.  In eurozone news, German May wholesale prices were up 0.7% m/m and 5.0% y/y and French finance minister Breton reiterated the ECB should only tighten policy gradually.  Trichet speaks on Wednesday and the ECB’s monthly report will be released on Thursday. Euro offers are cited around the US$ 1.2775 level.

¥/ CNY

The yen lost marginal ground vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥114.55 level and was supported around the ¥113.95 level.  Technically, today’s intraday low was right around the 50% retracement of the move from ¥118.85 to ¥109.00.  Data released in Japan overnight saw gross domestic product for the January – March period upwardly revised to +0.8% q/q from +0.5% with the annualized rate printing about +3.1%.  Notably, the domestic demand deflation notched a +0.1% y/y rise, above estimates of 0%, and this may give Bank of Japan more latitude to lift interest rates from their current near zero per cent that much sooner.  Strong capital spending and consumption led to the upward revision in GDP. Other data released today saw the May consumer confidence index recede to 49.8 from 50.0 in April while the April current account surplus receded 20.2% y/y to ¥1.28 trillion.  Additionally, the May corporate goods price index improved 0.7% m/m and capital flows data saw foreign investors as net sellers of Japanese stocks in May for the first time since January 2005. Finance minister Tanigaki talked with outgoing U.S. Treasury Secretary Snow this weekend about exchange rates at the G8 meeting in St. Petersburg.  The G8 did not make mention on exchange rates in their communiqué.  The Nikkei 225 stock index climbed 0.56% to close at ¥14,833.01.  Dollar bids are cited around the ¥113.35 level.  The euro came off vis-à-vis the yen as the single currency tested bids around the ¥143.75 level and was capped around the ¥144.25 level. The British pound and Swiss franc moved higher vis-à-vis the yen as the crosses tested offers around the ¥210.90 and ¥92.80 levels, respectively.  The Chinese yuan came off vis-à-vis the U.S. dollar today as the greenback closed at CNY 8.0188 in over-the-counter trade, up from CNY 8.0112, and at CNY 8.0150 in the exchange-traded market.  Data released in China today saw the May trade surplus print at US$ 13.0 billion and the May consumer price index was up 1.4% y/y.

₤

The British pound moved higher vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.8465 level and was supported around the $1.8380 level.  Technically, today’s intraday high was just below the 23.6% retracement of the move from $1.8880 to $1.8365.  Data released in the U.K. today saw the government’s measure of April house prices up 5.1% y/y while May output prices were up 2.5% m/m and 3.0% y/y with the core rate up 2.4% y/y, a one-year high.  This led to the pound’s gains at is suggests more inflation will become evident in the U.K. economy.  In contrast, May input prices eased marginally. Cable offers are cited around the US$ 1.8555 level.  The euro weakened vis-à-vis the British pound as the single currency tested bids around the ₤0.6820 level and was capped around the ₤0.6865 level. 

CHF

The Swiss franc lost marginal ground vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2365 level and was supported around the CHF 1.2290 level.  Technically, today’s intraday low was right around the 50% retracement of the move from CHF 1.1285 to CHF 1.3285.  Swiss National Bank’s interest rate decision will be released on Thursday and its mid-year policy assessment will be released this week.  Dollar bids are cited around the CHF 1.2230 level.  The euro came off vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.5525 level while the British pound escalated vis-à-vis the Swiss franc as the pair tested offers around the CHF 2.2765 level.

AUD

The Australian dollar was little changed vis-à-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7495 level and was supported around the $0.7455 level.  Australian dollar offers are cited around the US$ 0.7545 level.

CAD

The Canadian dollar extended recent gains vis-à-vis the U.S. dollar today as the greenback tested bids around the C$ 1.1000 figure and was capped around the $1.1075 level.  U.S. dollar offers are cited around the C$ 1.1100 figure.

NZD

The New Zealand dollar moved lower vis-à-vis the U.S. dollar today as the kiwi tested bids around the US$ 0.6305 level and was capped around the $0.6335 level.  New Zealand dollar offers are cited around the US$ 0.6450 level. 

Gold/ Silver

Gold moved higher vis-à-vis the U.S. dollar today as the yellow metal tested offers around the US$ 611.60 level and was supported around the $603.20 level.  The U.S. dollar’s recent strength has eaten into gold’s run-up in 2006 but this is now being overshadowed by global inflation jitters.  Silver moved higher vis-à-vis the U.S. dollar as the pair tested offers around the US$ 11.31 level and was supported around the $11.01 level.

Crude Oil

Crude oil gained ground vis-à-vis the U.S. dollar today as light, sweet NYMEX crude futures for July delivery tested offers around the US$ 72.28 level and was supported around the $71.38 level.  Traders are paying close attention to the beginning of the U.S. hurricanes season and Iran today indicated it will not negotiate over its nuclear ambition activities.