DAILY MARKET COMMENTARY
25 June 2008

Wednesday

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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 came off vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.5535 level and was capped around the $1.5615 level.  Most traders expect the Federal Open Market Committee will keep the overnight call rate unchanged at 2.00% today and signal that inflation poses more of a threat than a slowdown in economic growth.  Some traders believe the FOMC will move rates higher this year while others believe the Fed will take a wait-and-see approach before adjusting borrowing costs. The Fed is also expected to acknowledge the beleaguered U.S. housing sector, ongoing credit market dislocations, and weakness in the employment sector. Data released in the U.S. today May durable goods orders unchanged m/m and off 0.1% y/y while the ex-transportation component was of 0.9% m/m. Also, May building permits were revised to -0.4% from -1.3% and May new home sales were off 2.5% to a 512,000 unit annualized pace.  In eurozone news, the European Central Bank announced it will hold a press conference after its 7 August Governing Council meeting.  The ECB traditionally holds a telephone conference after some summer rate-setting meetings and this has led to speculation that the presumed +25bps rate hike to 4.25% in July will not be a one-off move.  ECB’s Wellink reported Dutch inflation may top 3% in Q3 while ECB President Trichet reiterated he does not “envisage a series of increases (in official interest rates).”  ECB’s Noyer reported “Issuance of credit remains dynamic and there is no concrete threat of a (further) credit crunch.”  Data released in the eurozone today saw EMU-15 April factory orders up 2.5% m/m and 11.7% y/y, the fastest growth pace in six months.   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 ¥108.05 level and was supported around the ¥107.65 level.  Traders continued to buy U.S. dollars ahead of today’s interest rate decision from the Federal Open Market Committee.  Technically, today’s intraday low was right around the 38.2% retracement of the move from ¥108.55 to ¥107.10.  Data released in Japan today saw the May merchandise trade surplus shrink for the third consecutive month, printing at ¥365.61 billion and off 7.6% y/y.   Traders are curious to see how these data impact the April – June GDP data that are due in early August.  Other data released last night saw the May corporate services price index climb +0.2% m/m and 0.6% y/y, the eighteenth consecutive monthly increase.  The Nikkei 225 stock index lost 0.14% to close at ¥13,829.92.  Dollar bids are cited around the ¥103.00/ 101.35 levels.  The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥168.45 level and was supported around the ¥167.60 level.  The British pound and Swiss franc appreciated vis-à-vis the yen as the crosses tested offers around the ¥213.20 and ¥103.95 levels, respectively.  The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8653 in the over-the-counter market, down from CNY 6.8699 and the pair’s lowest close since the yuan revaluation of July 2005.  It was reported that China’s foreign reserves totaled US$ 1.76 trillion at the end of April.

₤

The British pound came off vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.9660 level and was capped around the $1.9745 level.  Sterling could not maintain intraday gains notched after it was reported that the CBI June retail sales survey found 39% of respondents said H1 June sales were lower than one year ago while 30% indicated they improved, for an ensuing net balance of -9% - up from -14% in May and better than expected.  These data suggest retail sales remain relatively weak.  Bank of England Deputy Governor Gieve reported he expects a “downturn in economic activity over the rest of the year.”  On the political front, London’s High Court rejected a legal move to force the British government to hold a referendum on the European Union’s Lisbon Treaty.  Cable bids are cited around the US$ 1.9360/ 1.9100 levels.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.7920 level and was supported around the ₤0.7890 level.

CHF

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0435 level and was supported around the CHF 1.0375 level.  U.S. dollar bids are cited around the CHF 1.0250 level.  The euro moved higher vis-à-vis the Swiss franc as the single currency tested offers around the CHF 1.6235 level while the British pound moved lower vis-à-vis the Swiss franc and tested bids around the CHF 2.0470 level.

Technical Outlook at 1230 GMT (EDT + 0400)

             (Bid Price)       (Today’s Intraday Range)                               

EUR/ USD         1.5591                 1.5604, 1.5536
USD/ JPY         107.97                 108.04, 107.65
GBP/ USD        1.9717                 1.9744, 1.9658
USD/ CHF         1.0399                 1.0433, 1.0391
AUD/ USD         0.9560                 0.9576, 0.9546
USD/CAD          1.0181                 1.0134, 1.0105
NZD/USD          0.7564                0.7596, 0.7544
EUR/ JPY         168.34    168.40, 167.62
EUR/ GBP        0.7906                 0.7917, 0.7891
EUR/ CHF         1.6215                 1.6230, 1.6203
GBP/ JPY         212.94                 213.19, 212.14
CHF/ JPY          103.81    103.84, 103.38

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, 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 home 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 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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