WEEKLY MARKET RECAP, WEEK AHEAD, AND SCHEDULE
22 June 2008

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 $1.5650 level and was supported around the $1.5345 level. The pair gained about 280 pips last week.  G8 finance ministers met in Osaka and didn’t address the weakness in the greenback. Traders are scaling back their U.S. rate hike expectations. Richmond Fed President Lacker suggested inflation is more of a threat than an economic slowdown. WSJ sees rates steady until the autumn “unless the inflation outlook deteriorates considerably.” Paulson is seeking a financial stability remit for the Fed.  Fed #2 Kohn said the financial institutions are improving their balance sheets.  The U.S. dollar was off late in the week on downgrades to bond insurers Ambac and MBIA. Israel conducted military exercises for a possible attack on Iran.

ECB’s Tumpell-Gugerell said monetary policy remains “accommodative” and sees a one-off hike in July. Germany’s IW institute lifted its 2008 GDP forecast to 2.5%. The European Commission warned against a wage and inflation spiral. ECB’s Bini Smaghi said a +25bps hike “should be enough” to reduce inflation. ECB’s Stark said May CPI of 3.7% is “unacceptably high.” The German government sees Q2 GDP “dampening.” Euribor interest rate futures are pricing in at least two ECB hikes this year.

Data released in the U.S. last week saw the June Empire State manufacturing index print at -8.68; April net foreign purchases of long-term U.S. securities was US$ 102.8 billion while net buying excluding non-market flows reached US$ 115.1 billion and “monthly net TIC flows” reached US$ 60.6 billion; May producer prices soared 1.4% m/m and 7.2% y/y with core inflation up 0.2% m/m and 3.0% y/y; May housing starts were off 3.3%; May industrial production was off 0.2% with capacity utilization off 0.2% to 79.4%; the Q1 current account goods/ deficit printed at US$ 174.9 billion; the June homebuilders index fell to +18; weekly initial jobless claims were off 5,000 to 381,000 with continuing jobless claims off 76,000 to 3.06 million; the Philadelphia Fed manufacturing index fell to -17.1; and the May leading index climbed 0.1%;

Data released in the eurozone last week saw EMU-15 May HICP printed at 3.7%; the German ZEW June economic expectations index fell to -52.4; the EMU-15 trade balance posted a €2.3 billion surplus; German PPI was up 1.0% m/m and 6.0% y/y; and Italian April industrial orders were up 13.9% y/y.

Technical Outlook

Last week’s high (1) was right around the 50.0% retracement of the 1.6018-1.5283 range and last week’s low (2) was below the 23.6% retracement of the same range.  The 1.5650/ 1.5789/ 1.5854/ 1.5903 levels represent upside resistance targets while the 1.5563/1.5456/ 1.5285/ 1.5164/ 1.4962 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 ¥107.20 level and was capped around the ¥108.55 level.  The pair lost about 90 pips last week. The Nikkei 225 stock index lost 1.33% on Friday to close at ¥13,942.08. Former MoF official Watanabe said intervention is possible if the U.S. dollar’s depreciation is “sharp.” The government reduced its assessment of the economy for the second time in three months, downgrading its view on exports, corporate profits, and industrial output.  PM Fukuda is unlikely to promote an economic stimulus package. Policy Board minutes revealed “both supply and demand” shocks to the Japanese economy. The BoJ Tankan survey of consumer sentiment will be released on 1 July.

Data released in Japan this week saw May Tokyo-area condominium sales were off; machine tool orders were revised to +1.4%; the April tertiary index was up 1.8% m/m and 0.6% y/y; May department store sales were off 2.7%; the April index of leading economic indicators printed at 92.8 with the coincident index steady at 101.7; and the April all-industries index rose 0.8% m/m with the tertiary index up 1.8% m/m.

In Chinese news, the Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8796 in the over-the-counter market, down from CNY 6.9018.  PBoC boss Zhou reported “A weak dollar will inevitably result in a rise in primary products including commodities, including oil. Therefore, the RMB will also face a rising pressure, which will drive up inflation.” Paulson said the U.S. “expressed an understanding and appreciation for accelerating pace of appreciation of the renminbi.” China lifted gasoline and diesel prices by 16% to 18% to reduce oil demand.

Data released in China last week saw May wholesale prices up 9.6% y/y; industrial value-added output was up 16.3% between January and May; and January – May urban fixed asset investment was up 25.6% y/y.

Technical Outlook

Last week’s high (1) was below the 76.4% retracement of the 114.65-95.71 range and last week’s low (2) was below the 61.8% retracement of the same range. Upside resistance targets remain the 108.56/ 110.18/ 112.66/ 114.65 levels while downside support targets remain the 106.27/ 105.18/ 103.44/ 102.42/ 100.18 levels.

₤

The British pound appreciated vis-à-vis the U.S. dollar last week as cable tested offers around the US$ 1.9790 level and was supported around the $1.9455 level.  The pair gained about 290 pips last week.  BoE is unlikely to cut rates and the chances of 2 or 3 rate hikes this year have fallen.  BoE will unveil a new liquidity program later this year.  CBI’s 2009 GDP forecast predicted a slowdown. BoE reported high inflation may “materially” become engendered in inflation expectations over the medium-term.  BoE Governor King wrote a letter to Chancellor Darling because U.K. CPI was more than 100bps above the 2.0% target. King sees CPI well above expectations well into 2009. June MPC minutes saw an 8-1 vote to keep rates unchanged with Blanchflower favouring a 25bps cut. Policymakers acknowledge the economy may need more slack “to ensure inflation returns to target.” Deputy Governor Gieve is leaving the central bank next year. Chief Economist Bean is being replaced by Spencer Dale and is Bean is assuming Lomax’s deputy governorship from 1 July.  Darling is giving the BoE a new financial stability remit. Gieve reported “risks to both the upside and downside remain large.”

Data released in the U.K. last week saw May CPI at 3.3%; the June CBI industrial trends had a balance of 28% of manufacturers who saw higher prices in the next three months; May retail sales were up 3.5% m/m and 8.1% y/y; May public sector net debt and the public sector net cash requirement fell; CML mortgage lending fell to ₤25.5 billion; and May provisional M4 money supply growth was +0.4% m/m and +10.0% y/y.

Technical Outlook

Last week’s high (1) was just above the 23.6% retracement of the 2.1159-1.9336 range and last week’s low (2) was above the 23.6% retracement of the 1.3682-2.1159 range.  Upside resistance targets include the 1.9877/ 1.9999/ 2.0033 while downside support targets include the 1.9602/ 1.9395/ 1.9336/ 1.9117/ 1.8631 levels.

CHF

The Swiss franc appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the CHF 1.0305 level and was capped around the CHF 1.0520 level. The pair lost about 125 pips last week.  SNB kept interest rates unchanged and hiked its 2008 and 2009 inflation forecasts. SNB chief Roth reported the central bank considered a rate hike and sees the potential for upward pressure on inflation rates.

Data released in Switzerland last week saw April retail sales climbed 2.4% y/y; Q1 industrial production was up 4.3% y/y and off 9.3% q/q; the June ZEW indicator for economic expectations fell to -63.8 from -60.4 with the current economic situation sub-index falling to 53.2; the May trade surplus widened to CHF 1.87 billion; and May producer and import prices were up 1.2% m/m and 3.9% y/y.

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 1.0393/ 1.0623/ 1.0850/ 1.1134 levels while downside support targets include the 1.0314/ 1.0250/ 1.0106/ 0.9647/ 0.9605/ 0.9535 levels.

CAD

The Canadian dollar appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the C$ 1.0100 level and was capped around the C$ 1.0295 level.  The pair lost about 105 pips last week.  Finance minister Flaherty reported the C$ has “borne one-third of the brunt of the depreciation of the U.S. currency.”

Data released in Canada last week saw April foreign investment in Canadian securities increase C$ 975 million while April Canadian investment in foreign securities rose to C$ 5.99 billion; the May composite leading indicators index was up 0.2%; May headline CPI was up 1.0% m/m and 2.2% y/y with the core rate up 0.3% m/m and 1.5% y/y; April wholesale sales were up 1.4%; and retail sales were up 0.6%.

Technical Outlook

Last week’s high (1) was above the 23.6% retracement of the 0.9818-1.0321 range and last week’s low (2) was below the 38.2% retracement of the same range.  Upside resistance targets include the 1.0202/ 1.0378/ 1.0439/ 1.0797 levels while downside support targets include the 1.0069/ 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$ 0.9565 level and was supported around the US$ 0.9370 level.  The pair gained about 150 pips last week. RBA board members concluded on 3 June that rates are appropriate to deal with inflation.

Data released in Australia last week saw Q1 housing starts fall 3.3% q/q; the April Westpac leading index was up +2.8%; May merchandise imports were up 7.0%; and the Westpac industrial trends composite index fell to 53.9 in Q2.

Technical Outlook

Last week’s high (1) was above the 23.6% retracement of the 0.8952-0.9653 range and last week’s low (2) was below the 38.2% retracement of the same range.  Upside resistance targets include the 0.9648/ 0.9920/ 1.0053 levels while downside support targets include the 0.9487/ 0.9302/ 0.9263/ 0.9120/ 0.9003/ 0.8887 levels.

SCHEDULE

Sunday, 22 June 2008

all times GMT

(last release in parentheses)

2301     UK                    June Rightmove house prices (1.2% m/m)

2301     UK                    June Rightmove house prices (2.2% y/y)

2350     Japan                Q2 BSI large manufacturing (-12.9% q/q)

2350     Japan                Q2 BSI large manufacturing (-9.3% q/q)

Monday, 23 June 2008

all times GMT

(last release in parentheses)

0300     NZ                    May credit card spending (8.3% y/y)

0500     Japan                May supermarket sales (-0.8% y/y)

0545     CH                    June SECO 2008 economic forecasts

0700     France              June PMI, manufacturing (51.5)

0700     France              June PMI, services (50.5)

0730     Germany           June PMI, manufacturing (53.6)

0730     Germany           June PMI, services (53.8)

0800     Germany           June Ifo, business climate (103.5)

0800     Germany           June Ifo, current assessment (110.1)

0800     Germany           June Ifo, expectations (97.3)

0800     Eurozone          June PMI, manufacturing (50.5)

0800     Eurozone          June PMI, services (50.6)

Tuesday, 24 June 2008

all times GMT

(last release in parentheses)

N/A       US                    Federal Open Market Committee meeting begins

0610     Germany           July GfK consumer confidence (4.9)

0645     France              May housing starts

0645     France              May housing permits

0645     France              May consumer spending (-0.8% m/m)

0645     France              May consumer spending (0.4% y/y)

0650     France              June business confidence (102)

0650     France              June production outlook (-15)

0730     Italy                  June consumer confidence (103.2)

0800     CH                    May UBS consumption indicator (2.179)

0830     UK                    May BBA loans for house purchases

1230     US                    Former Federal Reserve Chairman Greenspan speaks

1300     US                    April S&P/ Case Shiller home price index (172.2)

1400     US                    April house price index (-0.4% m/m)

1400     US                    June Richmond Fed manufacturing index (-3)

1400     US                    June consumer confidence (57.2)

2350     Japan                May merchandise trade balance (¥485.0 billion)

2350     Japan                May corporate services prices (0.5% y/y)

Wednesday, 25 June 2008

all times GMT

(last release in parentheses)

N/A       Germany           June CPI (0.6% m/m)

N/A       Germany           June CPI (3.0% y/y)

N/A       Germany           June CPI, harmonized (0.7% m/m)

N/A       Germany           June CPI, harmonized (3.1% y/y)

N/A       UK                    June Nationwide house prices (-2.5% m/m)

N/A       UK                    June Nationwide house prices (-4.4% y/y)

0500     Japan                June small business confidence (42.2)

0800     Italy                  April retail sales (-0.5% m/m)

0800     Italy                  April retail sales (-1.0% y/y)

0900     Eurozone          April industrial new orders (-1.0% m/m)

0900     Eurozone          April industrial new orders (-2.5% y/y)

1000     UK                    June CBI distributive trades report

1100     US                    MBA mortgage applications (-8.8%)

1230     US                    May durable goods orders (-0.5%)

1230     US                    May durable goods orders, ex-transportation (2.5%)

1400     US                    May new home sales (526,000)

1400     US                    May new hone sales (3.3% m/m)

1815     US                    Federal Open Market Committee interest rate decision

2245     NZ                    Q1 current account balance (-NZ$ 3.41 billion)

2350     Japan                Foreign purchases of Japanese equities and bonds

2350     Japan                Japanese purchases of foreign equities and bonds

Thursday, 26 June 2008

all times GMT

(last release in parentheses)

0000     Australia           April leading index (-0.4%)

0130     Australia           May job vacancies (-2.5%)

0600     Germany           May import price index (0.9% m/m)

0600     Germany           May import price index (5.7% y/y)

0645     France              June consumer confidence (-41)

0730     Italy                  June business confidence (89.6)

0800     Eurozone          May M3 money supply (10.7%)

0800     Eurozone          May M3 money supply (10.6% y/y)

0830     UK                    Q1 total business investment (-1.4% q/q)

0830     UK                    Q1 total business investment (3.7% y/y)

1130     Eurozone          Federal Reserve Vice Chairman Kohn speaks

1230     US                    Q1 GDP, annualized (0.9% q/q)

1230     US                    Q1 GDP price index (2.6%)

1230     US                    Q1 personal consumption expenditures (2.1% q/q)

1230     US                    Weekly initial jobless claims (381,000)

1230     US                    Continuing jobless claims (3.060 million)

1400     US                    May existing home sales (4.89 million)

1400     US                    May existing home sales (-1.0% m/m)

2245     NZ                    Q1 GDP (3.7% y/y)

2245     NZ                    May trade balance

2330     Japan                May jobless rate (4.0%)

2330     Japan                June Tokyo-area CPI (0.9% y/y)

2330     Japan                June Tokyo-area CPI, ex-fresh food (0.9% y/y)

2330     Japan                June Tokyo-area CPI, ex-food, energy (0.1% y/y)

2330     Japan                May CPI (0.8% y/y)

2330     Japan                May CPI, ex-fresh food (0.9% y/y)

2330     Japan                May CPI, ex-food, energy (-0.1% y/y)

2350     Japan                May large retailers’ sales (-2.2%)

2350     Japan                May retail trade (-0.1% m/m)

2350     Japan                May retail trade (0.1% y/y)

2350     Japan                May household spending (-2.7% y/y)

2350     Japan                May industrial production (-0.2% m/m)

2350     Japan                May industrial production (1.9% y/y)

2350     Japan                May retail trade (-0.1% m/m)

2350     Japan                May retail trade (0.1% y/y)

Friday, 27 June 2008

all times GMT

(last release in parentheses)

N/A       Germany           June Ifo business climate survey

0300     NZ                    May M3 money supply (4.5% y/y)

0430     Australia           Reserve Bank of Australia Assistant Governor Debelle speaks

0645     France              May PPI (5.4% y/y)

0650     France              Q1 GDP (2.1% y/y)

0800     Italy                  June PMI, retail

0800     France              June PMI, retail

0800     Germany           June PMI, retail

0800     Eurozone          June PMI, retail (53.1)

0800     Eurozone          April current account (-€15.3 billion)

0830     UK                    Q1 GDP (0.4% q/q)

0830     UK                    Q1 GDP (2.5% y/y)

0830     UK                    Q1 current account (-₤8.5 billion)

0900     Italy                  May hourly wages (2.8% y/y)

0900     Eurozone          June business climate (0.54)

0900     Eurozone          June consumer confidence (-15)

0900     Eurozone          June economic confidence (97.1)

0900     Eurozone          June industrial confidence (-2)

0900     Eurozone          June services confidence (8)

0930     CH                    June KOF leading indicator (1.09)

1230     US                    May personal income (0.2%)

1230     US                    May personal spending (0.2%)

1230     US                    May PCE, core (0.1% m/m)

1230     US                    May PCE, core (2.1% y/y)

1230     US                    May PCE deflator (3.2% y/y)

1230     Canada             May industrial product price (1.4% m/m)

1230     Canada             May raw materials price index (5.1% m/m)

1400     US                    June University of Michigan consumer sentiment (56.7)

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.

 Click here to ***.