The euro weakened vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2015 level and was capped around the $1.2090 level. Technically, the pair briefly traded above the 50% retracement level of the move from $1.2325 to $1.1825 and later orbited the 38.2% retracement of the same range. European Central Bank President Trichet maintained a hawkish tone in remarks today saying “We considered that there was an increase in medium term inflation risks” in discussing last week’s decision to raise rated by +25bps. Trichet also reiterated monetary policy remains “accommodative” but added upcoming economic data will drive the central bank’s policy. Many traders believe the ECB will continue to tighten monetary policy on account of nagging inflation pressures. Data released in the eurozone today saw EMU-12 retail sales up 0.8% m/m and 0.9% y/y in January. In U.S. news, traders await the released of January factory orders data today amid forecasts of a 5.9% pullback following the 10.2% fall in durable goods in January. Minneapolis Fed President Stern on Friday predicted “respectable growth” for the U.S. economy over the next two years and suggested a possible downturn in the housing market may have been “overstated.” He added the economy “really isn’t fragile at all” and added it’s “fully appropriate” for the Fed to be “more data-driven.” The big question on traders’ minds is whether or not the Federal Open Market Committee will lift the federal funds target rate at the end of this month. Chicago Fed President Moskow speaks tomorrow and Q4 productivity and labour costs data will also be released tomorrow. Euro offers are cited around the US$ 1.2060/ 1.2110 levels.
¥/ CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥117.30 level and was supported around the ¥116.05 level. Stops were reached above the ¥117.10 level, representing the 38.2% retracement of the move from ¥113.40 to ¥119.40. The yen was dented after a government survey confirmed combined corporate capital spending rose 9.5% y/y in the October – December period, the eleventh straight quarterly improvement, but it was off 0.4% q/q. Traders reduced long yen exposure on the notion the government may be forced to downwardly revise GDP data for that period that was reported at an annualized +5.5% clip. Revised figures are expected on 13 March. Chief Cabinet Secretary Abe said the government will not interfere with Bank of Japan’s decision on when to unwind its long-standing quantitative easing policy but added the government believes deflation continues. Many traders believe the BoJ Policy Board will announce a shift in policy as early as Thursday’s monetary policy meeting while others see 28 April as a more suitable time. BoJ Governor Fukui today said “We are entering an important phase as the situation surrounding the economy and prices are heading toward a favorable direction. We want to support (the Japanese economy) by implementing monetary policies in an appropriate way at an appropriate time.” Prime Minister Koizumi, however, said “I don't think we can say we have departed from deflation.” The yen was also dented by news that Japan’s Softbank may acquire Vodafone’s Japanese business unit along with a media report that U.S. automotive giant General Motors Corp. may sell a 20% stake in Suzuki Motor Corp. Japanese February reserve assets will be released tonight followed by February bank lending data tomorrow. The Nikkei 225 stock index gained 1.52% to close at ¥15,901.16. Dollar bids are cited around the ¥116.80/ 30 levels. The euro climbed higher vis-à-vis the yen as the single currency tested offers around the ¥141.30 level and was supported around the ¥140.15 level. Stops were hit above the ¥141.10 level, representing the 61.8% retracement of the move from ¥143.60 to ¥137.10. The British pound and Swiss franc appreciated vis-à-vis the yen as the crosses tested offers around the ¥206.05 and ¥90.05 levels, respectively. The Chinese yuan appreciated vis-à-vis the U.S. dollar today as the greenback closed at CNY 8.0374 in the over-the-counter market, down from CNY 8.0382, and at CNY 8.0365 in the exchange-traded market. People’s Bank of China Governor Zhou spoke about the central bank’s FX reserves today saying “Some people worry that the central bank will reduce its overall US dollar (reserve) holdings, but that's not going to happen… We will continue to manage foreign exchange reserves on the principles of security, liquidity and valuation.” Zhou added “The next step is to relax the controls on the management and remittance of foreign currency.” An influential Chinese government advisor this weekend said the government should widen the yuan’s trading band vis-à-vis the U.S. dollar by 0.5% to 1.0%. Separately, the National Development and Reform Commission reported China will “optimize” the structure of its FX reserves and added it will keep the yuan stable. China officially had about US$ 818.9 billion in FX reserves at the end of 2005.
₤
The British pound came off vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.7525 level after testing offers around the $1.7625 level, the 38.2% retracement of the move from $1.7130 to $1.7935. The big item on traders’ screens this week is Wednesday’s and Thursday’s Bank of England Monetary Policy Committee meeting. Most traders do not expect the central bank to reduce interest rates at this time. The housing market has stabilized to a large degree but there are recent reports the manufacturing sector is beginning to deteriorate. Additionally, retail sales appear to have slumped at the beginning of the year and if this trend continues, a monetary easing may be in the cards before the end of H1 2006, particularly if inflation pressures and inflation expectations lessen. Traders await the release of British Retail Consortium’s retail sales survey tonight. Cable offers are cited around the US$ 1.7600 figure. The euro came off vis-à-vis the British pound as the single currency tested bids around the £0.6850 level and was capped around the £0.6875 level.
CHF
The Swiss franc lost marginal ground vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.2895 level and was capped around the CHF 1.2995 level. Technically, today’s intraday low was just above the 38.2% retracement of the move from CHF 1.2240 to CHF 1.3285. Heightened geopolitical risks including situations in Iran, Iraq, and Nigeria continue to preoccupy traders and increases in tensions could result in safe-haven buying of the franc. The February unemployment rate will be released tomorrow. Dollar bids are cited around the CHF 1.2875 level. The euro and British pound came off vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.5590 and CHF 2.2690 levels, respectively.
Sunday, 5 March 2006 all times GMT (last release in parentheses)
2300 Australia February securities inflation (0.7% m/m) 2300 Australia February securities inflation (3.1% y/y) 2350 Japan Q4 capital spending (10.6%)
Monday, 6 March 2006 all times GMT (last release in parentheses)
0030 Australia February ANZ job advertisements (-0.9%) 0730 France European Central Bank President Trichet speaks 0900 Germany February retail PMI (50.4) 0900 France February retail PMI (46.2) 0900 Italy February retail PMI (53.2) 0900 Eurozone February retail PMI (49.7) 1000 Eurozone January retail sales (0.1% m/m) 1000 Eurozone January retail sales (0.8% y/y) 1330 Canada January building permits (27.4% m/m) 1500 US January factory orders (1.1%) 1500 US January factory inventories (0.5%) 1500 Canada February Ivey PMI (54.1) 2350 Japan February official reserve assets (US$ 851.7 billion)
Tuesday, 7 March 2006 all times GMT (last release in parentheses)
0000 Australia Q1 Westpac-ACCI industrial trends survey 0001 UK February BRC retail sales monitor, all (3.4% y/y) 0001 UK February BRC retail sales monitor, same story (0.2% y/y) 0600 Japan February machine tool orders (5.4% y/y) 0645 CH February unemployment rate (3.9%) 1100 Germany January factory orders (-1.6% m/m) 1100 Germany January factory orders (3.9% y/y) 1330 US Q4 non-farm productivity (-0.6%) 1330 US Q4 unit labour costs (3.5%) 1400 Canada Bank of Canada interest rate decision 2000 US January consumer credit 2230 Australia Reserve Bank of Australia interest rate decision 2345 US Chicago Fed President Moskow speaks 2350 Japan February trade balance 2350 Japan February M2+CD money supply (1.9% y/y) 2350 Japan February broad liquidity (2.3% y/y) 2350 Japan February bank lending (0.0% y/y)
Wednesday, 8 March 2006 all times GMT (last release in parentheses)
N/A Japan Bank of Japan Policy Board meeting 0001 UK February Nationwide consumer confidence (98) 0500 Japan January leading economic index (81.8) 0500 Japan January coincident index (100.0) 0700 Japan February economy watchers survey, current (52.1) 0700 Japan February economy watchers survey, outlook (56.4) 1030 UK February BRC shop price index (-0.57% m/m) 1030 UK February BRC shop price index (-1.20% y/y) 1200 US MBA mortgage applications 1315 Canada February housing starts (248,100) 1430 US St. Louis Fed President Poole speaks 1700 Luxembourg European Central Bank member Mersch speaks 1700 US Federal Reserve Chairman Bernanke speaks 2000 NZ Reserve Bank of New Zealand interest rate decision 2145 NZ Q4 terms of trade index (-0.60% q/q)
Thursday, 9 March 2006 all times GMT (last release in parentheses)
N/A Japan Bank of Japan monetary policy announcement 0030 Australia February employment change (1,800) 0030 Australia February unemployment rate (5.3%) 0030 Australia February participation rate (64.4%) 0100 Japan Bank of Japan monthly report 0645 Switzerland February consumer price inflation (-0.2% m/m) 0645 Switzerland February consumer price inflation (1.3% y/y) 0800 UK February HBOS house prices (-0.4% m/m) 0800 UK February HBOS house prices (5.1% y/y) 0900 Eurozone European Central Bank monthly report 0930 UK January industrial production (0.2% m/m) 0930 UK January industrial production (-2.6% y/y) 0930 UK January manufacturing production (0.3% m/m) 0930 UK January manufacturing production (-2.2% y/y) 0930 UK January visible trade balance 1100 Germany January industrial production (-0.5% m/m) 1100 Germany January industrial production (3.5% y/y) 1200 UK Bank of England interest rate decision 1300 Canada January new housing price index (0.6% m/m) 1330 US January trade balance (-US$ 65.7 billion) 1330 US Weekly initial jobless claims (294,000) 1330 US Continuing jobless claims (2.486 million) 1330 Canada January international trade 1400 US Chicago Fed President speaks 1420 US Fed Governor Kohn speaks 1800 US New York Fed President Geithner speaks 2350 Japan February domestic consumer goods price index (0.2% m/m) 2350 Japan February domestic consumer goods price index (2.7% y/y) 2350 Japan February export price index (-2.1% m/m) 2350 Japan February export price index (5.3% y/y) 2350 Japan February import price index (-1.0% m/m) 2350 Japan February import price index (23.0% y/y)
Friday, 10 March 2006 all times GMT (last release in parentheses)
0001 UK February NIESR GDP estimate (0.8%) 0030 Australia January home loans (0.9%) 0030 Australia January investment lending (6.8%) 0500 Japan January household spending (-0.7% m/m) 0500 Japan January household spending (0.8% y/y) 0500 Japan January machine orders (6.8% m/m) 0500 Japan January machine orders (15.5% y/y) 0700 Germany February consumer price index (-0.5% m/m) 0700 Germany February consumer price index (2.1% y/y) 0700 Germany February harmonized CPI (-0.6% m/m) 0700 Germany February harmonized CPI (2.1% y/y) 0700 Germany January trade balance (€9.2 billion) 0700 Germany January current account (€6.3 billion) 0700 Germany January imports (5.8% m/m) 0700 Germany January exports (0.9% m/m) 0700 Germany February wholesale price index (0.6% m/m) 0700 Germany February wholesale price index (2.9% y/y) 0745 France January industrial production (-0.3% m/m) 0745 France January industrial production (-0.4% y/y) 0745 France January manufacturing production (-0.7% m/m) 0745 France January manufacturing production (-1.0% y/y) 0745 France January trade balance (-€3.1 billion) 0900 Italy Q4 GDP (0.3% q/q) 0900 Italy Q4 GDP (0.1% y/y) 1000 Eurozone Q4 current account (-€3.8 billion) 1000 Eurozone Q4 construction output (0.2% q/q) 1000 Eurozone Q4 construction output (0.3% y/y) 1000 UK February Financial Times house prices (1.8% y/y) 1200 Canada February unemployment rate (6.6%) 1200 Canada February net change in unemployment (26,300) 1330 US February change in non-farm payrolls (193,000) 1330 US February unemployment rate (4.7%) 1330 US February average hourly earnings (0.4% m/m) 1330 US February average hourly earnings (3.3% y/y) 1330 US February weekly hours (33.8) 1500 US January wholesale inventories (1.0%)
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.
