NEWS / Trade Policy

Forex and Commodity Market Commentary and Analysis (1 December 2006)

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The euro appreciated vis-? -vis the U.S. dollar today as the single currency tested offers around the US$ 1.3285 level and was supported around the $1.3220 level. The common currency reached another fresh multi-month high today dating back to March 2005 as traders continue to speculate Europe??™s economy will outperform the U.S.??™s economy in 2007. Traders await comments from many Federal Reserve speakers today including Chairman Bernanke, Philadelphia Fed President Plosser, Chicago Fed President Moskow, and Richmond Fed President Lacker. Data released in the U.S. today saw the November ISM manufacturing survey fall to 49.5 from 51.2 in October while the prices paid sub- little. Additionally, October construction spending was off 1% and September??™s tally was downwardly revised to -0.8%. U.S. economic data as of late are consistent with a decelerating economy and the big questions in traders??™ minds are when inflation will recede and if and when the Federal Open Market Committee will ease monetary policy next month. In eurozone news, the EMU-12 PMI survey fell to 56.6 last month from October??™s 57.0 level, below expectations but significantly above the ???boom-or-bust??? 50.0 level. Also, the EMU-12 October unemployment rate receded to 7.7% from 7.8% in September. Germany??™s PMI survey improved to 58.3 from 58.2 in October. Euro bids are cited around the US$ 1.3200/ 1.3145 levels.

??/ CNY

The yen depreciated vis-? -vis the U.S. dollar today as the greenback tested offers around the ??116.35 level and was supported around the ??115.45 level. Technically, the pair continues to orbit the ??116.15 level, representing the 23.6% retracement of the move from ??118.60 to ??115.40. Many data were released in Japan overnight. First, the October unemployment rate receded to 4.1% from 4.2% in September. Second, October household spending fell 2.4% y/y, the tenth consecutive monthly decline. Third, the October core consumer price index was up a mere 0.1% y/y, less-than-forecast. This increase is important because in many traders??™ minds, it may delay the Bank of Japan??™s next interest rate hike. Some monetary sources have indicated the BoJ will not lift rates from their current 0.25% level until core CPI is at or above 0.5%. The Nikkei 225 stock index gained 0.29% to close at ??16,321.78. Dollar bids are cited around the ??115.20 level. The euro moved higher vis-? -vis the yen as the single currency tested offers around the ??153.95 level and was supported around the ??153.05 level. The British pound and Swiss franc gained ground vis-? -vis the yen as the crosses tested offers around the ??229.05 and ??97.00 levels, respectively. The Chinese yuan depreciated vis-? -vis the U.S. dollar today as the greenback closed at CNY 7.8360 in the exchange-traded market, up from CNY 7.8334.

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The British pound extended its massive appreciation vis-? -vis the U.S. dollar today as cable tested offers around the US$ 1.9745 level and was supported around the $1.9630 level. Today??™s intraday high is less than three big figures away from the pair??™s historical highs from February 1991 and September 1992. Data released in the U.K. today saw the November purchasing managers index fall to 52.6 from a downwardly revised 53.5 in October. Cable bids are cited around the US$ 1.9535 level. The euro moved lower vis-? -vis the British pound as the single currency tested bids around the ?‚¤0.6715 level and was capped around the ?‚¤0.6740 level.

CHF

The Swiss franc appreciated vis-? -vis the U.S. dollar today as the greenback tested bids around the CHF 1.1925 level and was capped around the CHF 1.2005 level. The pair has not been this week since May 2005. Data released in Switzerland today saw Q3 GDP expand a real 0.4% q/q and was up 2.4% y/y. Also, the November PMI survey printed at 67.0 from 62.3 in October. Dollar offers are cited around the CHF 1.2050 level. The euro and British pound gained ground vis-? -vis the Swiss franc as the crosses tested offers around the CHF 1.5900 and CHF 2.3630 levels, respectively.

A$

The Australian dollar gained ground vis-? -vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7920 level and was supported around the $0.7875 level. Today??™s intraday high is the pair??™s strongest showing since March of this year. Australian dollar bids are cited around the US$ 0.7840 level.

C$

The Canadian dollar came off vis-? -vis the U.S. dollar today as the greenback tested offers around the C$ 1.1465 level and was supported around the C$ 1.1370 level. Stops were hit above the C$ 1.1450 level, representing the 61.8% retracement of the move from C$ 1.1770 to $1.0925. Data released in Canada today saw the November unemployment rate rise to 6.3% from 6.2% in October. U.S. dollar offers are cited around the C$ 1.1570 level.

NZ$

The New Zealand dollar gained ground vis-? -vis the U.S. dollar today as the kiwi tested offers around the US$ 0.6870 level and was supported around the $0.6825 level. New Zealand dollar offers are cited around the US$ 0.6895 level.

Gold/ Silver

Gold moved higher vis-? -vis the U.S. dollar today as the yellow metal tested offers around the US$ 649.17 level and was supported around the US$ 643.85 level. The dramatic plunge in the U.S. dollar has pushed the pair to three-month highs. Silver gained ground vis-? -vis the U.S. dollar as the pair tested offers around the US$ 14.00 figure and was supported around the $13.88 level.

Crude Oil

Crude oil weakened vis-? -vis the U.S. dollar today as light, sweet NYMEX crude oil futures for January delivery tested bids around the US$ 62.24 level and was capped around the $63.08 level. Traders are paring back speculation that OPEC will reduce output again when policymakers convene in Nigeria on 14 December.