DAILY MARKET COMMENTARY
11 June 2008

Wednesday

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

Fundamental Outlook at 1400 GMT (EDT + 0400)

€

The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.5545 level and was supported around the $1.5445 level.  Technically, today’s intraday low was right around the 23.6% retracement of the move from $1.6020 to $1.5280.  The common currency moved to intraday highs in the North American session after a larger-than-expected draw in EIA crude oil inventories.  European Central Bank member Noyer reported “I remain confident about the fact that the rise in prices should slow progressively in the second half and at the beginning of next year, as long as we continue to avoid the development of second-round effects.” Noyer added “We have signaled that we are in a state of advanced alert and although we have decided (up to now) to maintain our rates at an unchanged level, we don't exclude moving rates a little at our next meeting. I believe the market understands well the signal given about the possibility of a rate increase next month.” Many traders believe ECB President Trichet has adequately signaled the possibility the main refinancing rate will increase to 4.25% next month. ECB’s Stark reported the ECB is not contemplating a series of rate hikes.  Data released in the eurozone today saw French May consumer price inflation rise 0.5% m/m and 3.3% y/y.  EMU-15 CPI data will be released on Monday and could show inflation running around 3.6%. In U.S. news, mortgage application volume was up 10.9% during the week ending 6 June. Traders continue to monitor comments from Federal Reserve officials, especially Chairman Bernanke who has recently been quite hawkish and dollar-supportive in his comments.  Euro bids are cited around the $1.5230 level.

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥106.90 level and was capped around the ¥107.75 level.  The pair reached its highest level since 26 February before profit-taking ensued. Many data were released overnight. First, the May domestic corporate goods price index was up +4.7% y/y, compared with +3.9% y/y in April and this represented its fastest pace in 27 years.  Second, real gross domestic product for the January – March period was upwardly revised to +1.0% q/q from +0.8% q/q on account of higher corporate capital spending. On an annualized basis, the economy expanded +4.0% and this represents the economy’s fastest rate of growth since January – March 2007. Third, the April current account surplus was off 29.6% y/y to ¥1.381 trillion.  A senior Ministry of Finance officials said foreign exchange is unlikely to be put into the Group of Eight communiqué when officials convene this week.  Bank of Japan’s Policy Board will convene this week and is not expected to change the overnight call rate from 0.50%.  The Nikkei 225 stock index climbed 1.16% to close at ¥14,183.48. Dollar bids are cited around the ¥103.00/ 101.35 levels.  The euro weakened vis-à-vis the yen as the single currency tested bids around the ¥165.65 level and was capped around the ¥166.95 level.  The British pound and Swiss franc weakened vis-à-vis the yen as the crosses tested bids around the ¥209.50 and ¥102.85 levels, respectively.  The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.9814 in the over-the-counter market, down from CNY 6.9255 and the pair’s lowest close since the yuan revaluation of July 2005.  Data released in China overnight saw the May trade surplus print at US$ 20.21 billion, up from US$ 16.68 billion in April.  Also, May producer price inflation was up 8.2% y/y.

₤

The British pound appreciated sharply vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.9655 level and was supported around the $1.9490 level.  The pair retraced some of yesterday’s sizable intraday losses.  Data released in the U.K. today saw the May claimant count of jobseekers rise 9,000, above expectations while April’s claimant count was upwardly revised to 11,200.  Also, headline average earnings including bonuses were up 3.8% in the three months to April, down from 4.0% in the previous three month period.  Additionally, NIESR reported the U.K. economy “scarcely” grew in the three months to May and warned it may slow further.  Additionally, it was reported the U.K. April trade in goods deficit widened to ₤4.3 billion from ₤3.8 billion.  Cable bids are cited around the US$ 1.9360/ 1.9100 levels.  The euro gained marginal ground vis-à-vis the British pound as the single currency tested offers around the ₤0.7940 level and was supported around the ₤0.7900 figure.

CHF

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0325 level and was capped around the CHF 1.0445 level.  The pair erased some of this week’s earlier gains.  U.S. dollar bids are cited around the CHF 1.0250 level. The euro and British pound depreciated vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.6060 and CHF 2.0285 levels, respectively.

A$/ NZ$

The Australian dollar gained marginal ground vis-à-vis the U.S. dollar today as the greenback tested offers around the US$ 0.9485 level and was supported around the $0.9435 level.  Data released in Australia today saw the June consumer sentiment index print at -5.6%, a fifteen-year low.  Australian dollar bids are cited around the US$ 0.9280 level. The New Zealand dollar gained ground vis-à-vis the U.S. dollar today as the kiwi tested offers around the US$ 0.7580 level and was supported around the $0.7515 level.  New Zealand dollar bids are cited around the $0.7380 level.

C$

The Canadian dollar appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the C$ 1.0150 level and was capped around the C$ 1.0245 level.  Data released in Canada today saw Q1 capacity utilization fall to 79.8% from 81.8% in Q4 2007. Also, April new house price growth moderated to +5.2% y/y.  U.S. dollar offers are cited around the C$ 0.9960 level.

Technical Outlook at 1230 GMT (EDT + 0400)

             (Bid Price)       (Today’s Intraday Range)                               

EUR/ USD         1.5497                 1.5520, 1.5445
USD/ JPY         107.27                 107.76, 107.17
GBP/ USD        1.9577                 1.9616, 1.9491
USD/ CHF         1.0393                 1.0447, 1.0377
AUD/ USD         0.9462                 0.9486, 0.9433
USD/CAD          1.0181                 1.0245, 1.0159
NZD/USD          0.7547                0.7578, 0.7517
EUR/ JPY         166.22    166.95, 165.88
EUR/ GBP        0.7915                 0.7938, 0.7906
EUR/ CHF         1.6105                 1.6156, 1.6103
GBP/ JPY         209.94                 210.62, 209.59
CHF/ JPY          103.18    103.41, 102.87

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

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

Click here to ***.