DAILY MARKET COMMENTARY
19 May 2008

Monday 

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GCI Foreign Exchange Research:        www.gcitrading.com/fxnews/
FX Research Desk:                                fxnews@gcitrading.com
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Fundamental Outlook at 1400 GMT (EDT + 0400)

€

The euro came off vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.5555 level and was capped around the $1.5630 level.  Technically, today’s intraday high and low were right around the 50% and 38.2% retracement of the move from $1.6020 to $1.5280.  European Central Bank President Trichet reinforced expectations the central bank is unlikely to ease monetary policy anytime soon.  Trichet reported policymakers must prevent higher inflation from igniting higher pay deals that could in turn lead to an inflationary spiral.  Germany’s Bundesbank released its monthly bulletin today in which it reported the ECB’s “central monetary policy challenge remains the firm anchoring of longer-term inflation expectations.”  Germany’s ZEW research institute will release its economic expectations tomorrow for May.  The German Economy Ministry today reported the economy will slow in the next few months.  Data released in the eurozone today saw March construction output fall 2.2% m/m and 1.4% y/y.  In U.S. news, traders await the release of the minutes from the Federal Open Market Committee meeting from 30 April on Wednesday.  Policymakers voted to reduce the federal funds target rate by 25bps at that meeting and dealers await any clue that the Fed may be close to ending its long-term rate-easing cycle.  Data released in the U.S. today saw the April leading index up 0.1%.  Euro bids are cited around the US$ 1.5230 level.

¥/ CNY

The yen appreciated marginally vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥103.65 level and was capped around the ¥104.30 level.  Technically, today’s intraday low was right around the 61.8% retracement of the move from ¥108.60 to ¥95.70.  Data released in Japan overnight saw April department store sales off 3.4% y/y, the latest evidence that final private demand is lagging.  The government announced an initiative today to expand foreign investment in Japan.    The coincident index and tertiary index will be released tonight.  The Nikkei 225 stock index gained 0.35% to close at ¥14,269.61.    Dollar bids are cited around the ¥103.00/ 101.35 levels.  The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥161.80 level and was capped around the ¥162.50 level.  The British pound and Swiss franc weakened vis-à-vis the yen as the crosses tested bids around the ¥203.05 and ¥99.20 levels, respectively.  The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.9753 in the over-the-counter market, down from CNY 6.9890 and the pair’s lowest close since the yuan revaluation of July 2005. 

₤

The British pound depreciated vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.9490 level and was capped around the $1.9625 level.  Technically, today’s intraday high was right around the 38.2% retracement of the move from US$ 2.0025 to $1.9360.  Data released in the U.K. overnight saw Rightmove May house prices up 1.2%, reaching its highest level in nearly six years.  RICS reported U.K. house sales may decline more than 40% in 2008 and Lloyds TSB business optimism survey reached new lows in April.  It was also reported that Bank of England Deputy Governor Lomax is resigning from the central bank effective next month.  Candidates to succeed her include MPC’s Bean and Tucker.  Cable bids are cited around the US$ 1.9360/ 1.9100 levels.  The euro gained ground vis-à-vis the British pound as the single currency tested offers around the ₤0.7980 level and was supported around the ₤0.7950 level.

CHF

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0530 level and was supported around the CHF 1.0415 level.  Swiss April producer and import prices data will be released tomorrow.  U.S. dollar offers are cited around the CHF 1.0760 level.  The euro and British pound gained ground vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.6350 and CHF 2.0525 levels, respectively.

Technical Outlook at 1230 GMT (EDT + 0400)

             (Bid Price)       (Today’s Intraday Range)                               

EUR/ USD         1.5587                 1.5632, 1.5560
USD/ JPY         103.95                 104.28, 103.63
GBP/ USD        1.9536                 1.9623, 1.9524
USD/ CHF         1.0461                 1.0484, 1.0414
AUD/ USD         0.9536                 0.9569, 0.9526
USD/CAD          0.9932                 0.9998, 0.9923
NZD/USD          0.7744                0.7772, 0.7704
EUR/ JPY         162.05    162.52, 161.79
EUR/ GBP        0.7977                 0.7979, 0.7949
EUR/ CHF         1.6308                 1.6337, 1.6273
GBP/ JPY         203.12                 204.07, 203.04
CHF/ JPY            99.36      99.58,   99.22

Support                        Resistance                   Support                     Resistance

EUR/ USD                                                              USD/ JPY

L1.        1.5545                          1.6020                            94.20                          105.55 

L2.        1.5320                          1.6125                            88.75                          106.95
L3.        1.5260                          1.6650                            85.25                          108.60

   GBP/ USD                                                          USD/ CHF

L1.        1.9605                          2.0395                          1.0105                          1.0375

L2.        1.9395                          2.0525                          0.9990                          1.0565

L3.        1.9100                          2.0885                          0.9875                          1.1040

 AUD/ USD                                                           USD/ CAD

L1.        0.9145                          0.9550                          0.9960                          1.0370

L2.        0.9005                          0.9735                          0.9715                          1.0520

L3.        0.8750                          1.0115                          0.9465                          1.0745

 NZD/ USD                                                           EUR/ JPY

L1.        0.7800                          0.8105                          161.85                          166.65

L2.        0.7595                          0.8420                          158.35                          167.75

L3.        0.7275                          0.8665                          154.80                          168.95

  EUR/ GBP                                                           EUR/ CHF

L1.        0.7825                          0.8120                          1.6450                          1.6760

L2.        0.7625                          0.8310                          1.6255                          1.6955

L3.        0.7440                          0.8570                          1.6100                          1.7180

  GBP/ JPY                                                           CHF/ JPY

L1.        197.20                          209.90                            97.00                         103.30

L2.        186.75                          215.50                            95.85                         105.40

L3.        172.35                          226.75                            92.15                         107.70

SCHEDULE

Sunday, 18 May 2008

all times GMT

(last release in parentheses)

2301     UK                    May Rightmove house prices (-0.1% m/m)

2301     UK                    May Rightmove house prices (1.3% y/y)

Monday, 19 May 2008

all times GMT

(last release in parentheses)

N/A       Japan                Bank of Japan Policy Board interest rate decision

0000     NZ                    April performance of services index

0130     Australia           April balance of payments imports (1.0% m/m)

0530     Japan                April Tokyo department store sales (-0.7% y/y)

0530     Japan                April nationwide department sales (-1.2% y/y)

0630     France              April Bank of France business sentiment (105.0)

0900     Eurozone          March construction output (1.2% m/m)

0900     Eurozone          March construction output (4.3% y/y)

1400     US                    April leading indicators (0.1%)

2350     Japan                March tertiary industry index (-1.7% m/m)

Tuesday, 20 May 2008

all times GMT

(last release in parentheses)

0130     Australia           Reserve Bank of Australia May board meeting minutes

0500     Japan                March coincident index (33.3%)

0500     Japan                March leading economic index (20.0%)

0600     Japan                Bank of Japan monthly report

0600     Germany           April producer prices (0.7% m/m)

0600     Germany           April producer prices (4.2% y/y)

0700     Japan                April convenience store sales (-0.6% y/y)

0715     CH                    April producer and import prices (0.6% m/m)

0715     CH                    April producer and import prices (3.9% y/y)

0800     Italy                  March industrial orders (2.0% m/m)

0800     Italy                  March industrial orders (14.3% y/y)

0800     Italy                  March industrial sales (0.8% m/m)

0800     Italy                  March industrial sales (9.0% y/y)

0900     Germany           May ZEW survey, current situation (33.2)

0900     Germany           May ZEW survey, economic sentiment (-40.7)

0900     Eurozone          May ZEW survey, economic sentiment (-44.8)

1230     US                    April producer price index (1.1% m/m)

1230     US                    April producer price index (6.9% y/y)

1230     US                    April producer price index, ex-food and energy (0.2% m/m)

1230     US                    April producer price index, ex-food and energy (2.7% y/y)

1230     Canada             March international securities transactions

1230     Canada             March wholesale sales (-1.8% m/m)

1300     US                    Federal Reserve Vice Chairman Kohn speaks

1700     Eurozone          European Union’s Alumnia speaks

Wednesday, 21 May 2008

all times GMT

(last release in parentheses)

0030     Australia           May Westpac consumer confidence (-1.3%)

0300     NZ                    April credit card spending (3.5% y/y)

0800     Germany           May Ifo, business climate (102.4)

0800     Germany           May Ifo, current assessment (108.4)

0800     Germany           May Ifo, expectations (96.8)

0830     UK                    Bank of England Monetary Policy Committee meeting minutes

0830     UK                    April public sector net cash requirements (₤12.7 billion)

0830     UK                    April public sector net borrowing (₤10.2 billion)

0830     UK                    April M4 money supply (0.8% m/m)

0830     UK                    April M4 money supply (11.9% y/y)

0830     UK                    April M4 sterling lending (₤17.4 billion)

0900     CH                    May ZEW survey, expectations (-71.4)

1100     US                    MBA mortgage applications (2.9%)

1100     Canada             April consumer price index (0.4% m/m)

1100     Canada             April consumer price index (1.4% y/y)

1100     Canada             April consumer price index, core (0.2% m/m)

1100     Canada             April consumer price index, core (1.3% y/y)

1230     Canada             April leading indicators (0.0% m/m)

1800     US                    Federal Open Market Committee meeting minutes

2350     Japan                April merchandise trade balance (¥1.11 trillion)

2350     Japan                Foreign purchases of Japanese equities and bonds

2350     Japan                March all-industry activity index (-1.4% m/m)

Thursday, 22 May 2008

all times GMT

(last release in parentheses)

N/A       Japan                May monthly economic report

0100     Australia           May consumer inflation expectations (4.3%)

0200     NZ                    Finance minister Cullen delivers 2008 budget

0500     Japan                April supermarket sales (1.4% y/y)

0700     Germany           European Central Bank member Weber speaks

0730     Italy                  May consumer confidence (99.8)

0800     Italy                  March retail sales (0.3% m/m)

0800     Italy                  March retail sales (2.7 y/y)

0830     UK                    April retail sales (-0.4% m/m)

0830     UK                    April retail sales (4.6% y/y)

0830     UK                    Q1 total business investment (1.8% q/q)

0830     UK                    Q1 total business investment (1.7% y/y)

0900     Eurozone          March industrial new orders (0.6% m/m)

0900     Eurozone          March industrial new orders (9.9% y/y)

1000     UK                    May CBI monthly industrial trends

1230     US                    Weekly initial jobless claims (371,000)

1230     US                    Continuing jobless claims (3.060 million)

1230     Canada             March retail sales (-0.7% m/m)

1230     Canada             March retail sales, ex-autos (-0.3% m/m)

1315     US                    Federal Reserve Governor Kroszner speaks

1400     US                    March house price index (0.6% m/m)

1400     US                    Q1 house price index (0.1% q/q)

2350     Japan                Bank of Japan Policy Board meeting minutes (8-9 April)

Friday, 23 May 2008

all times GMT

(last release in parentheses)

0615     CH                    April trade balance (CHF 1.25 billion)

0645     France              April consumer spending (-1.7% m/m)

0645     France              April consumer spending (1.2% y/y)

0700     France              May PMI, manufacturing (51.1)

0700     France              May PMI, services (52.8)

0730     Germany           May PMI, manufacturing (53.6)

0730     Germany           May PMI, services (54.9)

0800     Italy                  April trade balance

0800     Italy                  Q1 2007 and Q1 2008 GDP

0800     Eurozone          May PMI, manufacturing (50.7)

0800     Eurozone          May PMI, services (52.0)

0830     UK                    Q1 GDP (0.4% q/q)

0830     UK                    Q1 GDP (2.5% y/y)

1400     US                    April existing home sales (4.93 million)

1400     US                    April existing home sales (-2.0% m/m)

1430     Canada             April money supply         

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 U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.