DAILY MARKET COMMENTARY
21 May 2008

Wednesday 

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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 appreciated sharply vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.5775 level and was supported around the $1.5630 level.  The common currency reached its highest level since 24 April as traders reacted to a new all-time high in crude oil futures with the July NYMEX futures contract trading as high as $132.08.  The high correlation between the pair and oil continues and a further spike in energy prices could see the common currency push higher towards the psychologically-important US$ 1.60 figure.  The pair also gained ground after the German Ifo business climate index rose to 103.5, defying expectations of a lower print.  These data contrast sharply with yesterday’s German ZEW sentiment survey that saw a decline to -41.4.  The Ifo expectations index improved to 97.3 from 96.8 in April.  In other German news, Germany’s HWWI institute sees German GDP growth moderating over the coming months following its robust results in Q1.  In U.S. news, traders await the release of minutes later today from the Federal Open Market Committee’s policy deliberations.  Dealers are especially interested to see how hawkish some Fed policymakers remained and whether or not any clues will be revealed as to the Fed’s current thinking about monetary policy.  Euro bids are cited around the US$ 1.5230 level.

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥103.05 level and was capped around the ¥103.70 level. Technically, today’s intraday low was right around the 38.2% retracement of the move from ¥98.55 to ¥105.70.  Nikkei reported the Japanese government will keep its economic assessment unchanged for May, reinforcing the view that the economic recovery has paused.  The government’s assessment is due overnight along with foreign purchases of Japanese equities and bonds data, the March all-industry activity index, and the merchandise trade balance data.  The Nikkei 225 stock index lost 1.65% to close at ¥13,926.30.  Dollar bids are cited around the ¥103.00/ 101.35 levels. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥163.15 level and was supported around the ¥161.55 level.  The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥202.60 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥99.45 level.  The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.9597 in the over-the-counter market, down from CNY 6.9735 – 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$ 1.9610 level and was capped around the $1.9695 level.  Technically, today’s intraday high and low were right around the 50% and 38.2% retracements, respectively, of the move from $2.0025 to $1.9360.  Many data were released in the U.K. today. First, CML April gross mortgage lending was up from March’s levels.  Second, April public sector net borrowing registered a surprise surplus of ₤500 million, defying expectations of a deficit. Third, the April M4 money supply was up 0.7% m/m and 11.2% y/y.  Minutes from Bank of England’s May Monetary Policy Committee meeting were released today in which policymakers voted 8-to-1 to keep the headline repo rate steady at 5.00% with Blanchflower voting for a 25bps reduction.  The BoE Agents’ summary of business conditions report for May was released today and evidenced a gloomy outlook for the U.K. economy on account of tighter credit conditions, diminishing investment intentions, and property market weakness.  Cable bids are cited around the US$ 1.9360/ 1.9100 levels.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.8035 level and was supported around the ₤0.7945 level.

CHF

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0275 level and was capped around the CHF 1.0390 level.  Technically, today’s intraday high was right around the 23.6% retracement of the move from CHF 0.9645 to CHF 1.0620.  Data released in Switzerland today saw the ZEW May economic expectations indicator improve to -60.4 from -71.4 in April.  U.S. dollar offers are cited around the CHF 1.0760 level.  The euro and British pound weakened visa-a-vis the Swiss franc as the crosses tested bids around the CHF 1.6200 and CHF 2.0190 levels, respectively.

Technical Outlook at 1230 GMT (EDT + 0400)

             (Bid Price)       (Today’s Intraday Range)                               

EUR/ USD         1.5747                 1.5773, 1.5630
USD/ JPY         103.43                 103.69, 103.04
GBP/ USD        1.9644                 1.9694, 1.9623
USD/ CHF         1.0301                 1.0390, 1.0275
AUD/ USD         0.9627                 0.9650, 0.9556
USD/CAD          0.9845                 0.9925, 0.9818
NZD/USD          0.7786                0.7807, 0.7725
EUR/ JPY         162.88    163.15, 161.57
EUR/ GBP        0.8015                 0.8021, 0.7947
EUR/ CHF         1.6219                 1.6280, 1.6201
GBP/ JPY         203.10                 204.10, 202.62
CHF/ JPY          100.36    100.44,   99.44

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

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.