Sunday 

_____________________________________________________________________
GCI Foreign Exchange Research:        www.gcitrading.com/fxnews/
FX Research Desk:                                fxnews@gcitrading.com
_____________________________________________________________________

€

The euro appreciated vis-à-vis the U.S. dollar last week as the single currency tested offers around the $1.5750 level and was supported around the $1.5365 level.  The pair gained about 180 pips last week.  Bernanke broke new ground by verbally intervening to support the dollar saying “We are attentive to the implications of changes in the value of the dollar for inflation and inflation expectations and will continue to formulate policy to guard against risks to both parts of our dual mandate, including the risk of an erosion in longer-term inflation expectations.” Paulson said the government will work to “ensure that the dollar remains a strong and stable currency.” Rumours abound that Lehman Brothers is in financial trouble. Fed #2 Kohn sees “weak bank earnings and further asset valuation writedowns.”

ECB officials remained hawkish with Trichet saying Europeans “fully support” the ECB’s price stability mandate. ECB’s Liebscher said the ECB will do what it takes to contain inflation while Stark seeks inflation back below 2.0% in the “medium term.” ECB’s Wellink warned against “second round effects.” European officials do not have a consensus on the French plan to cap oil taxes.  ECB kept its rate unchanged at 4.00% and Trichet reported the ECB is “in a state of heightened alert” with a number of policymakers making the “case for raising rates.” A hike on 3 July cannot be ruled out. The ECB now sees 2008 inflation growth around 3.4% with GDP growth around 1.8%.  Buba lifted its 2008 inflation and GDP growth forecasts to 3.0% and 2.0%, respectively.

Data released in the U.S. last week saw ISM May manufacturing improve to 49.6 from 48.6 in April; April construction spending improved to -0.4% from March’s -0.6% level; April factory orders were up 1.1% with the ex-transportation component up 2.6%; ADP May private sector jobs growth printed at 40,000; Q1 non-farm business productivity was upwardly revised to an annualized 2.6% and 3.3% y/y; unit labour cost growth was unrevised at 2.2% q/q and 0.7% y/y; Challenger May jobs layoff plans rose 15% m/m; the May ISM services index printed at 51.7; weekly initial jobless claims were off 18,000 to 357,000 with continuing claims off 16,000; May non-farm payrolls were off 49,000 with the unemployment rate rocketing higher to 5.5%; and May average hourly earnings were up 0.3% m/m and 3.5% y/y.

Data released in the eurozone last week saw EMU-15 May manufacturing PMI fall to 50.6; German final May manufacturing PMI improved to 53.6; German April new orders for machinery and industrial plant were up 35% y/y; Q1 GDP growth was upwardly revised to 0.8% q/q from 0.7% q/q and 2.2% y/y; the EMU-15 April producer price index was up 0.8% m/m and 6.1% y/y; EMU-15 April retail sales were off 0.6% m/m and 2.9% y/y; EMU-15 May services PMI was unrevised at 50.6 from 52.0 in April; German final May services PMI rallied to 53.8; German April manufacturing orders were off 1.8% m/m; and German April industrial output fell 0.8%.

Technical Outlook

Last week’s high (1) was above the 23.6% retracement of the 1.4309-1.6018 range and last week’s low (2) was right around the 38.2% retracement of the same range.  The 1.5789/ 1.5854/ 1.5903/ 1.6072 levels represent upside resistance targets while the 1.5650/ 1.5563/ 1.5456/ 1.5393/ 1.5164 levels represent downside support targets.

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the ¥103.85 level and was capped around the ¥106.40 level.  The pair lost about 15 pips last week. The Nikkei 225 stock index gained 1.03% on Friday to close at ¥14,489.44.  The government reported “inflationary pressures are certainly growing” in Japan now. Ikeo foresees “flexible” policy if elected to the BoJ’s Policy Board. Finance chief Nukaga said the government is “closely monitoring foreign exchange and U.S. economic developments.

Data released in Japan this week saw the GDP gap improve to +0.7% in the January – March quarter from +0.3% in the October – December quarter; the May monetary base slid 0.9% y/y; Q1 combined capital investment was up 4.9% y/y; and Japan’s foreign reserves fell to US$ 996.97 billion at the end of May.

In Chinese news, the Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.9230 in the over-the-counter market, down from CNY 6.9400.  PBoC will maintain a tight monetary policy to prevent rapid credit growth. Goldman Sachs sees China’s May CPI growth near a one-year low. Financial official Zhu said China wants the U.S. to pursue a strong dollar.

Data released in China last week saw the CLSA May PMI measure fall to 54.7 while the CFLP May PMI measure weakened to 53.3.

Technical Outlook

Last week’s high (1) was below the 61.8% retracement of the 114.65-95.71 range and last week’s low (2) was below the 50.0% retracement of the same range. Upside resistance targets remain the 105.70/ 106.77/ 107.41/ 108.63 levels while downside support targets remain the 103.44/ 102.42/ 100.18/ 98.00/ 95.04/ 94.41 levels.

₤

The British pound depreciated vis-à-vis the U.S. dollar last week as cable tested bids around the US$ 1.9525 level and was capped around the $1.9775 level.  The pair lost about 120 pips last week.  News that U.K. mortgage giant Bradford & Bingley Plc is issuing a major profit warning sent sterling tumbling. A rift may have developed between BoE’s King and Chancellor Darling on naming Bean or Tucker to a deputy governorship. BoE’s MPC kept its headline repo rate unchanged at 5.00% with minutes due 18 June.

Data released in the U.K. last week saw April mortgage approvals fell to a record low and mortgage lending fell to its lowest level since November 2004; CIPS May PMI receded to 50.0 with output prices up for the 34^th consecutive month; April M4 money supply growth was downwardly revised; CIPS May construction PMI fell to 43.9; May Nationwide consumer confidence fell to its weakest level since May 2004; May services PMI fell to 49.8; BRC May shop price growth accelerated to an annualized 1.8%; and Halifax May house prices were off 2.4% m/m and 3.8% y/y.

Technical Outlook

Last week’s high (1) was right around the 23.6% retracement of the 2.1159-1.9336 range and last week’s low (2) was below the 38.2% retracement of the 1.7060-2.1159 range.  Upside resistance targets include the 1.9767/ 1.9877/ 1.9999/ 2.0033/ 2.0248 while downside support targets include the 1.9767 1.9602/ 1.9395/ 1.9336/ 1.9117 levels.

CHF

The Swiss franc appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the CHF 1.0205 level and was capped around the CHF 1.0520 level. The pair lost about 190 pips last week.  SNB’s Jordan said recent central bank policy may have contributed to moral hazards and increased inflationary pressures.

Data released in Switzerland last week saw Q1 GDP growth was up 0.3% q/q and 3.0% y/y; May PMI fell to 55.7 from 56.7 in April; the May consumer price index was up 0.9% m/m and 2.9% y/y; and KOF sees 2008 GDP growth and unemployment at 2.0% and 2.6%, respectively.

Technical Outlook

Last week’s high (1) was below the 50.0% retracement of the 1.1594-0.9647 range and last week’s low (2) was below the 38.2% retracement of the same range.  Upside resistance targets include the 1.0250/ 1.0391/ 1.0620/ 1.0850/ 1.1134 levels while downside support targets include the 1.0106/ 0.9647/ 0.9605/ 0.9535 levels.

CAD

The Canadian dollar depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the C$ 1.0220 level and was supported around the C$ 0.9925 level.  The pair gained about 250 pips last week.

Data released in Canada last week saw April building permits climb 14.5% m/m; the April Ivey PMI survey improved to 62.5 from 57.6 in April; the May unemployment rate was unchanged at 6.1%; and May net jobs growth increased 8,400.

Technical Outlook

Last week’s high (1) was right around the 76.4% retracement of the 1.0378-0.9709 range and last week’s low (2) was below the 38.2% retracement of the same range.  Upside resistance targets include the 1.0220/ 1.0378/ 1.0439 levels while downside support targets include the 1.0122/ 1.0044/ 0.9965/ 0.9867/ 0.9752 levels.

AUD

The Australian dollar appreciated vis-à-vis the U.S. dollar last week as the Aussie tested offers around the US$ 0.9640 level and was supported around the US$ 0.9635 level.  The pair gained about 45 pips last week. RBA kept its official cash rate unchanged at 7.2% and maintained a tightening bias.

Data released in Australia last week saw companies’ Q1 gross operating profits up 2.2% q/q; April retail sales fell 0.2% m/m to A$ 20.07 billion; the RBA May commodity price index was up 6.1%; Australian May PMI fall to 51.2; April building approvals were up 7.8%; the Q1 current account deficit printed at A$ 19.49 billion; Q1 GDP was up 0.6% q/q and 3.6% y/y; the April trade balance printed at –A$ 957 million; and May construction activity worsened.

Technical Outlook

Last week’s high (1) was near a new multi-decade high and last week’s low (2) was right around the 23.6% retracement of the 0.8511-0.9653 range.  Upside resistance targets include the 0.9648/ 0.9920/ 1.0053 levels while downside support targets include the 0.9487/ 0.9312/ 0.9263/ 0.9120/ 0.9003/ 0.8887 levels.

SCHEDULE

Sunday, 8 June 2008

all times GMT

(last release in parentheses)

N/A       NZ                    May REINZ house sales (-45.5% y/y)

N/A       NZ                    May QV house prices (4.9% y/y)

2350     Japan                May M2+CD money supply (1.9% y/y)

2350     Japan                May broad liquidity (2.8% y/y)

2350     Japan                May bank lending (1.2% y/y)

Monday, 9 June 2008

all times GMT

(last release in parentheses)

N/A       Japan                Q3 manpower survey (22)

N/A       Japan                May machine tool orders (0.4% y/y)

0430     Japan                May bankruptcies (8.3% y/y)

0500     Japan                April leading economic index (18.2%)

0500     Japan                April coincident index (30.0%)

0545     CH                    May unemployment rate (2.6%)

0600     Germany           April trade balance (€16.7 billion)

0600     Germany           April current account (€17.2 billion)

0700     Japan                May economy watchers’ survey, current (35.5)

0700     Japan                May economy watchers’ survey, outlook (36.1)

0830     Eurozone          June Sentix investor confidence (3.5)

0830     UK                    May PPI, input (2.4% m/m)

0830     UK                    May PPI, input (23.3% y/y)

0830     UK                    May PPI, output (1.4% m/m)

0830     UK                    May PPI, output (7.5% y/y)

0830     UK                    May PPI, output core (1.0% m/m)

0830     UK                    May PPI, output core (4.6% y/y)

1215     Canada             May housing starts (213,900)

1400     US                    April pending home sales (-1.0% m.m)

1615     US                    New York Federal Reserve President Geithner speaks

2100     US                    Federal Reserve Chairman Bernanke speaks

2100     US                    Boston Fed President Rosengren speaks

2301     UK                    May BRC retail sales monitor

2301     UK                    May RICS house price balance (-95.1%)

2315     US                    Federal Reserve Chairman Bernanke speaks

2350     Japan                April machine orders (-8.3% m/m)

2350     Japan                April machine orders (-6.2% y/y)

Tuesday, 10 June 2008

all times GMT

(last release in parentheses)

0130     Australia           April home loans (-6.1%)

0130     Australia           April ANZ job advertisements (3.1% m/m)

0130     Australia           May NAB business confidence (-8)

0130     Australia           May NAB business confidence (7)

0130     Australia           April investment lending (-7.2%)

0645     France              April industrial production (-0.8% m/m)

0645     France              April industrial production (1.0% y/y)

0645     France              April manufacturing production (-1.5% m/m)

0645     France              April manufacturing production (0.4% y/y)

0800     Finland  European Central Bank member Liikanen speaks

0800     Italy                  April industrial production (-0.2% m/m)

0800     Italy                  April industrial production (-2.5% y/y)

0830     UK                    April industrial production (-0.5% m/m)

0830     UK                    April industrial production (0.2% y/y)

0830     UK                    April manufacturing production (-0.5% m/m)

0830     UK                    April manufacturing production (0.6% y/y)

0830     UK                    April DCLG house prices (5.2% y/y)

0830     UK                    April average earnings (4.00%)

0830     UK                    April manufacturing unit wage costs (0.80%)

0830     UK                    April total trade balance (-₤4.031 billion)

0900     Italy                  Q1 GDP

1230     US                    April trade balance (-US$ 58.2 billion)

1230     Canada             April international merchandise trade balance (C$ 5.5 billion)

1300     Canada             Bank of Canada interest rate decision

1600     US                    European Central Bank member Orphanides speaks

2200     NZ                    April tax receipts

2245     NZ                    Q1 terms of trade index

2301     UK                    May NIESR GDP estimate (2.9%)

2350     Japan                Q1 nominal GDP

2350     Japan                Q1 GDP deflator (-1.40% y/y)

2350     Japan                May domestic corporate goods price index (0.60% m/m)

2350     Japan                May domestic corporate goods price index (3.70% y/y)

2350     Japan                April trade balance (¥1.25 trillion)

2350     Japan                April current account (¥2.882 trillion)

Wednesday, 11 June 2008

all times GMT

(last release in parentheses)

N/A       Japan                Bank of Japan Policy Board meeting

0030     Australia           June Westpac consumer confidence (2.70%)

0130     Australia           April lending finance (-3.90%)

0645     France              April current account (-€2.5 billion)

0645     France              May consumer price index (0.30% m/m)

0645     France              May consumer price index (3.00% y/y)

0645     France              May harmonized consumer price index (0.40% m/m)

0645     France              May harmonized consumer price index (3.40% y/y)

0830     UK                    May claimant count rate (2.50%)

0830     UK                    May jobless claims change (7,200)

0830     UK                    April ILO unemployment rate (5.20%)

0830     UK                    April average earnings, ex-bonus (3.80%)

0830     UK                    April visible trade balance (-₤7.437 billion)

1100     US                    MBA mortgage applications

1230     Canada             Q1 capacity utilization (81.80%)

1230     Canada             April new housing price index (0.20% m/m)

1530     US                    European Central Bank member Stark speaks

1615     US                    Federal Reserve Governor Kroszner speaks

1615     US                    Cleveland Federal Reserve President Pianalto speaks

1700     US                    St. Louis Fed President Bullard speaks

1800     US                    Federal Reserve Beige Book

2245     NZ                    May food prices (0.30% m/m)

2350     Japan                Foreign purchases of Japanese equities and bonds

2350     Japan                Japanese purchases of foreign equities and bonds

Thursday, 12 June 2008

all times GMT

(last release in parentheses)

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

0000     NZ                    May PMI (51.4)

0100     Australia           June consumer inflation expectations

0130     Australia           May employment change (25,400)

0130     Australia           May unemployment rate

0800     Eurozone          June monthly report

0900     Eurozone          April industrial production (-0.20% m/m)

0900     Eurozone          April industrial production

0915     Germany           European Central Bank member Weber speaks

1000     Eurozone          European Central Bank member Bini-Smaghi speaks

1230     US                    May import price index (1.80% m/m)

1230     US                    May import price index (15.40% y/y)

1230     US                    May advance retail sales (-0.20%)

1230     US                    May retail sales, ex-autos (0.50%)

1230     US                    Weekly initial jobless claims

1230     US                    Continuing jobless claims

1400     NZ                    April business inventories (0.10%)

2245     NZ                    April retail sales (-1.20% m/m)

2245     NZ                    April retail sales, ex-autos (-0.50% m/m)

Friday, 13 June 2008

all times GMT

(last release in parentheses)

0430     Japan                April industrial production

0430     Japan                April capacity utilization (-3.5% m/m)

0500     Japan                May consumer confidence (35.4)

0600     Japan                Bank of Japan monthly report

0600     Germany           May consumer price index (0.6% m/m)

0600     Germany           May consumer price index, harmonized (-0.3% m/m)

0600     Germany           May consumer price index, harmonized (3.0% y/y)

0630     France              Bank of France business sentiment (101.0)

0800     Italy                  May CPI

0900     Eurozone          Q1 labour costs (2.7% y/y)

0900     Eurozone          Q1 employment (0.2% q/q)

0900     Eurozone          Q1 employment (1.7% y/y)

1230     Canada             April manufacturing shipments (-1.6% m/m)

1230     Canada             Q1 labour productivity (-0.8% q/q)

1230     US                    May CPI (0.2% m/m)

1230     US                    May CPI (3.9% y/y)

1230     US                    May CPI, ex-food and energy (0.1% m/m)

1230     US                    May CPI, ex-food and energy (2.3% y/y)

1400     US                    June preliminary University of Michigan consumer sentiment

1600     Mexico  Former Federal Reserve Chairman Greenspan speaks

DISCLAIMER: GCI’s Weekly Market Recap and Week Ahead 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.