DAILY MARKET COMMENTARY
10 June 2008

Tuesday

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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 slumped vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.5660 level and was capped around the $1.5845 level.  The common currency extended yesterday’s intraday losses as traders reacted to additional hawkish comments from Federal Reserve Chairman Bernanke who said “The Fed will strongly resist an erosion in longer-term (inflation) expectations.”  Bernanke’s comments suggest the Fed’s rate-easing cycle has likely ended and that the dollar is deriving support from Bernanke’s continued hawkishness. In contrast, Boston Fed President Rosengren was less-than-hawkish today reported “Even if oil prices do continue to rise much faster than U.S. core inflation for an extended period, the experience of the past twenty years indicates that there is a relatively low correlation between oil price movements and the underlying core rate of inflation.”  Treasury Secretary Paulson also made news yesterday when he said currency intervention remains a tool at the government’s disposal.  Data released in the U.S. today saw the April trade deficit increase 7.8% m/m to US$ 60.9 billion, the largest increase since 2005.  In eurozone news, Germany’s DIW Institute reduced its Q2 GDP growth forecast to 0.2% from 0.5%.  European Central Bank member Liikanen hawkishly reported “We have to ensure that inflation expectations remain firmly anchored to the objective of price stability. This is why the Governing Council is monitoring very closely all developments and is in a state of heightened alertness.” ECB President Trichet noted EMU-15 official interest rates may need to increase “by a small amount” from next month.  This comment followed last week’s statement that ECB policymakers discussed a rate hike on Thursday.  Euro bids are cited around the $1.5230 level.

¥/ CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥107.15 level and was supported around the ¥106.25 level.  The pair reached its highest level since 27 February as traders continued to speculate Bank of Japan will not raise interest rates this week.  Also, there is a growing consensus among traders that U.S. interest rates may have bottomed out.  Data released in Japan overnight saw April machinery orders by Japanese companies escalate 5.5% m/m to ¥1.0 trillion with core privates-sector machinery orders up for the first time in three months.  Most economists, however, believe corporate capital spending will weaken further on account of rising materials costs.  Bank of Japan’s Policy Board is expected to maintain a neutral monetary policy this week and comments from BoJ Governor Shirakawa will be closely monitored.  S&P affirmed Japan’s long-term “AA” and short-term sovereign “A-1+” credit rates with a stable outlook overnight.  The Nikkei 225 stock index lost 1.13% to close at ¥14,021.17.  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 ¥165.50 level and was capped around the ¥166.65 level.  The British pound and Swiss franc came off vis-à-vis the yen as the crosses tested bids around the ¥208.60 and ¥102.85 levels, respectively. The Chinese yuan depreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.9255 in the over-the-counter market, up from CNY 6.9230.  A government economist today predicted the Chinese economy will expand about 10% in 2008.

₤

The British pound fell sharply vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.9515 level and was capped around the $1.9755 level.  Technically, today’s intraday low was right around the 23.6% retracement of the move from $2.0025 to $1.9360.  Bank of England announced it will unveil later this year a new liquidity program that will operate under normal and abnormal market conditions.  BoE Governor King spoke today but did not offer new clues about inflation. The BoE has been less vocal about inflation than the Fed and ECB and this has had a negative impact on sterling.  Data released in the U.K. today saw BRC May retail sales climb more than expected.  Also, RICS reported the May house price balance recovered but transactions were at record lows.  It was also reported that April industrial production rose 0.2% m/m and 0.2% y/y.  Cable bids are cited around the US$ 1.9360/ 1.9100 levels.  The euro came off vis-à-vis the British pound as the single currency tested bids around the ₤0.7890 level and was capped around the ₤0.7945 level.

CHF

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0415 level and was supported around the CHF 1.0270 level.  U.S. dollar offers are cited around the CHF 1.0760 level.  The euro and British pound moved higher vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.6120 and CHF 2.0370 levels, respectively.

Technical Outlook at 1230 GMT (EDT + 0400)

             (Bid Price)       (Today’s Intraday Range)                               

EUR/ USD         1.5528                 1.5653, 1.5490
USD/ JPY         106.71                 107.12, 106.23
GBP/ USD        1.9575                 1.9756, 1.9543
USD/ CHF         1.0355                 1.0400, 1.0268
AUD/ USD         0.9495                 0.9524, 0.9465
USD/CAD          1.0299                 1.0321, 1.0215
NZD/USD          0.7539                0.7601, 0.7524
EUR/ JPY         165.66    166.64, 165.55
EUR/ GBP        0.7930                 0.7947, 0.7889
EUR/ CHF         1.6081                 1.6119, 1.6052
GBP/ JPY         208.91                 210.78, 208.59
CHF/ JPY          103.03    103.65, 102.84

Support                        Resistance                   Support                     Resistance

EUR/ USD                                                              USD/ JPY

L1.        1.5225                          1.5645                            101.95                        106.60 

L2.        1.5035                          1.5840                            100.60                        109.95
L3.        1.4805                          1.6020                             98.75             113.30

   GBP/ USD                                                          USD/ CHF

L1.        1.9520                          1.9760                          1.0135                          1.0565

L2.        1.9395                          1.9880                          0.9990                          1.0730

L3.        1.9100                          2.0000                          0.9875                          1.1040

 AUD/ USD                                                           USD/ CAD

L1.        0.9380                          0.9655                          0.9870                          1.0175

L2.        0.9215                          0.9735                          0.9715                          1.0370

L3.        0.9005                          1.0115                          0.9465                          1.0520

 NZD/ USD                                                           EUR/ JPY

L1.        0.7700                          0.8105                          160.60                          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.        0.7740                          0.8120                          1.5975                          1.6250

L2.        0.7555                          0.8310                          1.5855                          1.6470

L3.        0.7440                          0.8570                          1.5730                          1.6760

  GBP/ JPY                                                           CHF/ JPY

L1.        200.60                          208.50                            98.70                         103.30

L2.        197.55                          211.35                            97.00                         105.40

L3.        192.70                          217.15                            95.85                         107.70

SCHEDULE

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

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