Fundamental Outlook at 1400 GMT (EDT + 0400)

Fundamental Outlook at 1400 GMT (EDT + 0400)

€

The euro extended yesterday’s losses vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.5520 level and was capped around the $1.5615 level. The common currency reached its lowest level since 24 June as traders continued to price in the likelihood of a further slowdown in the eurozone economy. Traders also increased their exposure to the U.S. dollar after ADP private sector jobs unexpectedly increased 9,000 in July, defying expectations of a sizable decline. Some economists are upwardly revising their forecasts for the July non-farm payrolls report that will be released on Friday. In other U.S. news, the Federal Reserve announced actions to enhance its existing liquidity facilities including an extension of the Fed’s Primary Dealer Credit Facility and Term Securities Lending Facility through 30 January 2009. The Fed noted there remains “continued fragile circumstances in financial markets” and the Fed will also launch an 84-day Term Auction Facility from 11 August, complementing the 28-day facility it already offers. The European Central Bank and Swiss National Bank reported they are planning to extend the maturity of their liquidity operations, essentially availing U.S. dollars to European banks over a longer period of time. In eurozone news, EMU-15 July economic sentiment fell to 89.5, its worst level in more than five years. Some traders believe the ECB will reduce its assessment on economic growth at next week’s Governing Council meeting. Banco de Espana reported the eurozone faces higher upside inflation risks. Other data saw German June new machinery, plant orders off 5.0% y/y while EMU-15 retail PMI improved to 46. Euro bids are cited around the $1.5585/ 1.5230 level.

¥/ CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥108.35 level and was supported around the ¥107.70 level. The pair reached its highest level since 25 June as traders continued to speculate the Japanese economy will weaken further. Most traders believe Bank of Japan’s Policy Board will keep the overnight call rate unchanged at 0.50% for the foreseeable future. Data released in Japan overnight saw June industrial output fall 2.0% m/m, worse-than-expected, and was up 0.2% y/y. Traders are waiting for this week’s likely cabinet shuffle by Prime Minister Fukuda to see if decision-makers at the finance and economy ministries are replaced. The Nikkei 225 stock index gained 1.58% to close at ¥13,367.79. Dollar bids are cited around the ¥106.40 level. The euro came off vis-à-vis the yen as the single currency tested bids around the ¥167.95 level and was capped around the ¥168.60 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥214.35 level while the Swiss franc came off vis-à-vis the yen and tested bids around the ¥102.85 level. The Chinese yuan depreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8272 in the over-the-counter market, up from CNY 6.8264.

₤

The British pound moved higher vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.9845 level and was supported around the $1.9745 level. Technically, today’s intraday low was just below the 23.6% retracement of the move from $2.1160 to $1.9335. Traders are awaiting details of a possible government-sponsored program to swap mortgage assets for gilts. Cable bids are cited around the $1.9360 level. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.7850 level and was capped around the ₤0.7875 level.

CHF

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0520 level and was supported around the CHF 1.0440 level. The pair traded at its highest level since 13 June. Data released in Switzerland today saw the KOF leading economic barometer fall to 0.9 in July from a revised 0.99 in June, its lowest level in give years. U.S. dollar offers are cited around the CHF 1.0515/ 1.0625 levels. The euro and British pound gained ground vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.6335 and CHF 2.0785 levels, respectively.

Technical Outlook at 1230 GMT (EDT + 0400)

(Bid Price) (Today’s Intraday Range)

EUR/ USD 1.5541 1.5615, 1.5521
USD/ JPY 108.25 108.33, 107.68
GBP/ USD 1.9770 1.9843, 1.9745
USD/ CHF 1.0505 1.0520, 1.0439
AUD/ USD 0.9423 0.9527, 0.9410
USD/CAD 1.0258 1.0268, 1.0218
NZD/USD 0.7325 0.7400, 0.7314
EUR/ JPY 168.25 168.61, 167.94
EUR/ GBP 0.7861 0.7878, 0.7857
EUR/ CHF 1.6328 1.6333, 1.6285
GBP/ JPY 214.00 214.18, 213.24
CHF/ JPY 103.00 103.40, 102.87