DAILY MARKET COMMENTARY
19 June 2008

Thursday

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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 weakened vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.5465 level and was capped around the $1.5585 level.  Technically, today’s intraday low was right around the 23.6% retracement of the move from $1.6020 to $1.5280. Many traders are loath to assume new long euro positions when crude oil sells off.  NYMEX crude oil futures for August delivery were off nearly 1% today to an intraday low of $133.90 following President Bush’s statements yesterday that the U.S. should tap domestic sources of energy to reduce its dependence on foreign oil.  Data released in the U.S. today saw weekly initial jobless claims decline 5,000 to 381,000 while continuing jobless claims fell 76,000 to 3.06 million.   Treasury Secretary Paulson is today expected to promote additional authority for the Federal Reserve to protect the stability of the financial system.  Paulson added “Our nation has come to expect the Federal Reserve to step in to avert events that pose unacceptable systemic risk.”  Other data released in the U.S. today saw the June Philadelphia Fed manufacturing index fall to -17.1, worse than expected, while the May leading index climbed 0.1%. In eurozone news, German Chancellor Merkel indicated all European Union countries will need to ratify the Lisbon Treaty before it can be accepted and offer greater political integration.  Irish voters decided last week to not ratify the Lisbon Treaty.  Most dealers expect the European Central Bank will lift its main refinancing rate by 25bps to 4.25% in July. 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 ¥107.40 level and was capped around the ¥108.00 figure.  The pair moved lower during the Australasian session but later regained some lost ground.  Data released in Japan overnight saw the April all-industries index rise 0.8% m/m while the tertiary index rose 1.8% m/m.  Capital flows data revealed that foreigners purchased a net ¥732.8 billion of Japanese bonds last week.  Most traders believe Bank of Japan’s Policy Board will keep the overnight call rate unchanged at 0.50% for the foreseeable future.  The Nikkei 225 stock index lost 2.23% to close at ¥14,130.17.  Dollar bids are cited around the ¥103.00/ 101.35 levels.  The euro came off vis-à-vis the yen as the single currency tested bids around the ¥166.75 level and was capped around the ¥167.75 level. The British pound gained ground vis-à-vis the yen as sterling tested offers around the ¥212.80 level while the Swiss franc came off vis-à-vis the yen and tested bids around the ¥103.00 figure. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8776 in the over-the-counter market, down from CNY 6.8821 and the pair’s lowest close since the yuan revaluation of July 2005.  U.S. Treasury Secretary Paulson this week “expressed an understanding and appreciation for accelerating pace of appreciation of the renminbi.”

₤

The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.9725 level and was supported around the $1.9575 level.  Sterling rocketed higher after it was reported that May retail sales notched their largest monthly gain since records began, up 3.5% m/m and 8.1% y/y. Some traders believe these data will render it more likely Bank of England’s Monetary Policy Committee will hike interest rates in the coming months.  BoE today confirmed that Deputy Governor Gieve will leave the central bank next year and that Chief Economist Bean will become a new Deputy Governor, replacing Rachel Lomax who retires at the end of the month.  BoE official Spencer Dale will become the new Chief Economist and Gieve’s resignation will create another vacancy on the MPC.  Chancellor Darling reported the central bank will be provided a new formal legal responsibility for financial stability.  Other data released in the U.K. today saw May public sector net debt and the public sector net cash requirement deteriorate while CML May mortgage lending fell to ₤25.5 billion.  It was also reported that May provisional M4 money supply was up 0.4% m/m and 10.0% y/y.  Cable bids are cited around the US$ 1.9360/ 1.9100 levels.  The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.7855 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 1.0475 level and was supported around the CHF 1.0320 level.  As expected, Swiss National Bank kept interest rates unchanged today but hikes its inflation forecasts for 2008 and 2009.  SNB President Roth reported “We should ... not underestimate the potential for movements in the prices of raw materials to reverse, and inflation pressures to abate in the event of a pronounced global economic slowdown, especially as we do not yet know the consequences of the financial market turbulence. Roth noted the central bank did discuss raising interest rates today before deciding to keep them steady and reported that higher energy prices, a weaker Swiss franc, stronger economic growth, or an increase in inflation expectations would jeopardize medium-term price stability. SNB sees 2008 GDP growth unchanged around 1.5% to 2.0%.  SNB’s Hildebrand said it is premature to give the “all clear” on the overall market environment. Data released in Switzerland today saw the May trade surplus widen to CHF 1.87 billion. U.S. dollar bids are cited around the CHF 1.0250 level.  The euro and British pound gained ground vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.6200 and CHF 2.0620 levels, respectively.

Technical Outlook at 1230 GMT (EDT + 0400)

             (Bid Price)       (Today’s Intraday Range)                               

EUR/ USD         1.5475                 1.5585, 1.5466
USD/ JPY         107.95                 107.96, 107.41
GBP/ USD        1.9699                 1.9724, 1.9576
USD/ CHF         1.0461                 1.0473, 1.0318
AUD/ USD         0.9475                 0.9478, 0.9446
USD/CAD          1.0137                 1.0185, 1.0123
NZD/USD          0.7581                0.7591, 0.7565
EUR/ JPY         167.10    167.77, 166.77
EUR/ GBP        0.7854                 0.7946, 0.7853
EUR/ CHF         1.6192                 1.6202, 1.6072
GBP/ JPY         212.68                 212.74, 210.78
CHF/ JPY          103.18    102.31, 101.73

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

Thursday, 19 June 2008

all times GMT

(last release in parentheses)

N/A       Australia           Q1 quarterly wage agreements

0100     Australia           Q2 Westpac industrial trends

0400     US                    Treasury Undersecretary McCormick speaks

0615     CH                    May trade balance (CHF 1.57 billion)

0730     CH                    Swiss National Bank interest rate decision

0800     Italy                  Q1 unemployment rate

0830     Italy                  April current account

0830     UK                    May retail sales (-0.2% m/m)

0830     UK                    May retail sales (4.2% y/y)

0830     UK                    May public sector net cash requirement (-₤1.0 billion)

0830     UK                    May public sector net borrowing (-₤500 million)

0830     UK                    May M4 money supply (0.6% m/m)

0830     UK                    May M4 money supply (11.1% y/y)

0830     UK                    May M4 sterling lending (₤27.9 billion)

1100     Canada             May consumer price index (0.8% m/m)

1100     Canada             May consumer price index (1.7% y/y)

1100     Canada             May Bank of Canada consumer price index, core (0.3% m/m)

1100     Canada             May Bank of Canada consumer price index, core (1.5% y/y)

1230     US                    Weekly initial jobless claims (384,000)

1230     US                    Continuing jobless claims (3.139 million)

1230     Canada             April wholesale sales (0.6% m/m)

1400     US                    June Philadelphia Fed survey (-15.6)

1400     US                    May leading indicators (0.1%)

1830     US                    Federal Reserve Vice Chairman Kohn testifies

Friday, 20 June 2008

all times GMT

(last release in parentheses)

N/A       CH                    May M3 money supply

0600     Germany           May producer prices (1.1% m/m)

0600     Germany           May producer prices (5.2% y/y)

0645     France              Q1 wages (1.1% q/q)

0700     Japan                May convenience store sales (-0.2% y/y)

0715     CH                    May producer and import prices (0.7% m/m)

0715     CH                    May producer and import prices (3.6% y/y)

0800     Italy                  April industrial orders (-0.8% m/m)

0800     Italy                  April industrial orders (-3.7% y/y)

0800     Italy                  April industrial sales (-1.6% m/m)

0800     Italy                  April industrial sales (-4.3% y/y)

0800     Italy                  May trade balance

1230     Canada             April retail sales (0.1% m/m)

1230     Canada             April retail sales, ex-autos (0.0% m/m)

1430     Canada             May money supply (7.3% y/y)

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.