Daily Market Commentary

Eur
The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.5640 level and was capped around the $1.5740 level.  The common currency retreated after NYMEX crude oil futures of August delivery extended recent gains and tested the $135 handle on reduced concerns over supply constraints.  The Group of Eight summit in Hokkaido was largely a non-event for the exchange rates market.  President Bush reaffirmed the U.S.’s long-standing strong dollar policy and the G8 expressed “strong concern” about oil and food prices, noting they “pose a serious challenge to stable growth worldwide, have serious implications for the most vulnerable and increase global inflationary pressure.”  Federal Reserve Chairman Bernanke suggested the Fed may extend its credit facilities for primary dealers “beyond year-end.”  Data released in the U.S. today saw May pending home sales fall 4.7% m/m and 14% y/y, the latest indication of the sector’s struggles. Also, May wholesale inventories were off 0.8%. In eurozone news, European Central Bank member Papademos reiterated the ECB will take steps to ensure price stability.  Euro bids are cited around the $1.5645/ $1.5230 levels.

 ¥/ CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥107.45 level and was supported around the ¥106.25 level.  Technically, today’s intraday low was just below the 38.2% retracement of the move from ¥102.65 to ¥108.55.  Data released in Japan overnight saw the economy watchers; index decline for the third straight month in June as the current conditions index weakened to 29.5 from 32.1 in May, the lowest reading since October 2001.  Also, June bank lending was up 2.0%, the fastest rise in two years, while the M2 money supply rose 2.3% in June and.  Additionally, June corporate failures were up 7.1% and the trade deficit was ¥230 billion in the first 20 days of June.  The Nikkei 225 stock index lost 2.45% to close at ¥13,033.10.  Dollar bids are cited around the ¥103.00/ 101.35 levels.  The euro weakened vis-à-vis the yen as the single currency tested bids around the ¥167.20 level and was capped around the ¥168.55 level. The British pound and Swiss franc moved lower vis-à-vis the yen as the crosses tested bids around the ¥210.25 and ¥103.90 levels, respectively.

₤
The British pound weakened vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.9675 level and was capped around the $1.9795 level.  Traders await Thursday’s interest rate decision by Bank of England’s Monetary Policy Committee.  Most dealers believe the MPC will keep rates unchanged but there may be some votes for a decline in rates despite significantly elevated rates of inflation because there is mounting evidence the U.K. economy is facing a broad slowdown.  BCC reported there is a “serious risk” the U.K. economy could be in a recession by the end of the summer in its quarterly survey.  Government housing data reported annual house prices slowed to their weakest level in more than two years while CML reported house loans increased slightly in May. Cable bids are cited around the US$ 1.9360/ 1.9100 levels.  The euro came off vis-à-vis the British pound as the single currency tested bids around the ₤0.7940 level and was capped around the ₤0.7965 level.

CHF
The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0340 level and was supported around the CHF 1.0220 level.  U.S. dollar bids are cited around the CHF 1.0020 level.  The euro and British pound moved higher vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.6165 and CHF 2.0345 levels, respectively.