BillyT's Forex Daily Currency-Trading Reviews for 2 August 2007

BillyT's Forex Daily Currency-Trading Reviews for 2 August 2007

EURO:

The euro lost marginal ground vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3650 level and was capped around the $1.3680 level. Today’s range was relatively thin absent many economic data. As expected, European Central Bank kept its main refinancing rate unchanged at 4.00% today but surprised the markets with a statement from ECB President Trichet wherein he stated “strong vigilance is of the essence to ensure that risks to price stability over the medium term do not materialize.” Based on the ECB’s past use of similar statements, most traders believe the ECB will tighten monetary policy by +25bps in September. Data released in the eurozone today saw EMU-13 June producer price inflation up 0.1% m/m and 2.3% y/y. In U.S. news, weekly initial jobless claims were up 4,000 to 307,000 while continuing jobless claims were off 16,000 to 2.53 million, Also, June factory orders were up +0.6%, an improvement over May’s -0.5% level. Tomorrow’s July non-farm payrolls number will be closely watched by the markets and estimates have been scaled down on account of yesterday’s weaker-than-expected ADP payrolls report. Euro bids are cited around the US$ 1.3555 level.

YEN:

The yen weakened vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥119.25 level and was supported around the ¥118.35 level. A late-day rally in U.S. equity markets yesterday saw diminished demand for yen as traders bargain-hunted and early yen gains in the Australasian session reversed course overnight. A Japanese Ministry of Finance official anonymously reported that most yen carry trades are “resistant to exchange rate fluctuations.” Data released in Japan overnight saw the July monetary base fall 2.3% y/y, down for the seventeenth consecutive month, while foreign investors were net sellers of Japanese equities for the first time in five weeks, selling ¥291.1 billion last week. The Nikkei 225 stock index gained 0.67% to close at ¥16,984.11. Dollar bids are cited around the ¥117.25 level. The euro gained marginal ground vis-à-vis the yen as the single currency tested offers around the ¥163.00 figure and was supported around the ¥161.55 level. The British pound and Swiss franc came off vis-à-vis the yen as the crosses tested bids around the ¥240.15 and CHF 98.30 levels, respectively. In Chinese news, the yuan’s central parity rate was set at CNY 7.5723 vis-à-vis the U.S. dollar, up from CNY 7.5660.

BRITISH POUND:

The British pound lost marginal ground vis-à-vis the U.S. dollar today as cable tested bids around the US$ 2.0280 level and was capped around the $2.0330 level. Today’s range was relatively thin following yesterday’s late-day price activity. As expected, Bank of England’s Monetary Policy Committee kept the main repo rate unchanged at 5.75% and offered no policy statement. Most traders believe the MPC will lift the repo rate by +25bps to +6.00% in September or October and then possibly another +25bps by the end of the year. Data released in the U.K. today saw IDS median pay settlements at 3.5% in the three months to July, unchanged from the end of June. Also, Halifax July house prices were up +0.7% m/m and +11.2% y/y and July construction PMI rose to a seven-year high of 61.8. Cable bids are cited around the US$ 2.0135 level. The euro gained marginal ground vis-à-vis the British pound as the single currency tested offers around the £0.6735 level and was supported around the £0.6720 level..

SWISS FRANC:

The Swiss franc lost marginal ground vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2085 level and was supported around the CHF 1.2025 level. Technically, today’s intraday high was right around the 23.6% retracement of the move from CHF 1.2470 to CHF 1.1960. Data released in Switzerland today saw the July purchasing managers’ index rose to 63.0 from 62.8 in June. Most traders believe Swiss National Bank will tighten monetary policy by +25bps in September. Dollar offers are cited around the CHF 1.2155 level. The euro and British pound appreciated vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.6505 and CHF 2.4550 levels, respectively.

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