Daily Market Commentary

€
The euro appreciated sharply vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.5945 level and was supported around the $1.5765 level.  The common currency is within striking distance of testing its all-time high around the $1.6020 level, established on 22 April.  A rebound in prices for NYMEX crude oil futures for August delivery to the $147 handle pushed the dollar lower as did a further meltdown in U.S. equity prices.  Shares in mortgage giants Fannie Mae and Freddie Mac deteriorated further as investors waited to see if these government sponsored enterprises would be bailed out by the government or Federal Reserve.  Data released in the U.S. today saw June import prices up 2.6% m/m and 20.5% y/y.  It was also reported that the May trade balance was off 1.2% to –US$ 59.8 billion from April’s -$60.5 billion gap.  Additionally, the University of Michigan’s mid-July consumer sentiment index printed at 56.6, up from 56.4 in June.  Fed Chairman Bernanke testifies to the U.S. Senate on Tuesday and House of Representatives on Wednesday.  In eurozone news, German June wholesale prices were up 0.9% m/m and 8.9% y/y. One source is reporting German Q2 GDP may have fallen 0.75% to +1.5% q/q.  Euro bids are cited around the $1.5645/ $1.5230 levels.

¥/ CNY
The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥105.65 level and was capped around the ¥107.30 level.  Technically, today’s intraday low was right around the 76.4% retracement of the move from ¥108.60 to ¥95.70.  Bank of Japan’s Policy Board is not expected to change monetary policy when it convenes on Monday.  The central bank is expected to warn of a greater downside risk to the Japanese economy on account of elevated energy and input costs.  Data released in Japan overnight saw revised May industrial output up 2.8% m/m. Also, consumer confidence fell to a record low in June at 32.6.  The Nikkei reported the government will keep its economic assessment unchanged in July for the fifth consecutive month.  MoF’s Shinohara reported the U.S.’s FX policies remain unchanged since the Group of Seven meeting in April.    The Nikkei 225 stock index lost 0.21% to close at ¥13,039.69. Dollar bids are cited around the ¥104.95/ ¥103.65 levels.  The euro weakened vis-à-vis the yen as the single currency tested bids around the ¥168.10 level and was capped around the ¥169.35 level. The British pound and Swiss franc depreciated vis-à-vis the yen as the crosses tested bids around the ¥210.20 and ¥103.85 levels, respectively.  The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8340 level in the over-the-counter market, down from CNY 6.8428 – the pair’s lowest close since the yuan revaluation of July 2005.

₤
The British pound depreciated moved sharply higher vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.9960 level and was supported around the $1.9750 level.  Technically, today’s intraday low was right around the 38.2% retracement of the move from $2.0395 to $1.9360.  The U.K. media is reporting some large U.K. banks are lobbying Bank of England to extend its Special Liquidity Scheme to enhance liquidity to the money markets. Cable bids are cited around the US$ 1.9360/ 1.9100 levels.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.8000 figure and was supported around the ₤0.7975 level.

CHF
The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0135 level and was capped around the CHF 1.0300 figure.  Technically, today’s intraday low was right around the 50.0% retracement of the move from CHF 0.9645 to CHF 1.0625.  U.S. dollar offers are cited around the CHF 1.0395 level.  The euro and British pound came off vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.6160 and CHF 2.0215 levels, respectively.