NEWS / Foreign Exchange

U.S. Forex Market Commentary

EURO

The euro gained marginal ground vis-? -vis the U.S. dollar today as the single currencytested offers around the US$ 1.3585 level and was supported around the $1.3550level.  Technically, today??™s intraday lowwas right around the 23.6% retracement of the move from $1.3255 to$1.3635.  Today??™s range was very thin astraders were loath to assume new risk ahead of U.S. economic data.  March existing home sales were off 8.4% to6.12 million annualized units and were off 11.3% y/y.  Also, April consumer confidence fell to 104.0from 108.2 in March. In eurozone news, the EMU-13 headline industrial ordersfigure saw a 0.7% m/m decline whole the ex-transportation component was up+0.5% m/m. Most traders continue to expect that European Central Bank willtighten monetary policy by +25bps in June. ECB member Tumpel-Gugerell reported eurozone growth prospects remain???very positive??? and that inflation should remain below 2% in 2007.  ECB vice president Papademos spoke today andindicated he would not change the market??™s expectations regarding a Juneinterest rate hike.  Euro bids are citedaround the US$ 1.3490 level.

JPN/CNY

The yen cameoff vis-? -vis the U.S. dollar todayas the greenback tested offers around the ??118.95 level and was supportedaround the ??118.25 level.  Technically,today??™s intraday low was right around the 50% retracement of the move from??114.45 to ??122.15.  Data released inJapan overnight saw the March corporate services price index rise 0.6% y/y, thefourth consecutive monthly increase.  TheNikkei 225 stock index lost 0.02% to close at ??17,451.77.  Dollar bids are cited around the ??118.30/117.50 levels.  The euro appreciated vis-? -vis the yen as the single currencytested offers around the ??161.50 level and was supported around the ??160.25 level.  TheBritish pound and Swiss franc gained ground vis-? -vis the yen as thecrosses tested offers around the ??238.00 figure and ??98.55 level, respectively.The Chinese yuan came off vis-? -visthe U.S. dollar as the greenback closed at CNY 7.7261, up from CNY 7.7247. 

STERLING

The British pound came off marginally vis-? -vis the U.S. dollar today as cable tested bids aroundthe US$ 1.9955 level and was capped around the $2.0020 level.  Bank of England Governor King testifiedtoday and indicated he expects the consumer price inflation rate will recedesharply over the next 4-to-6 months. Following the 3.1% increase in March consumer price inflation, mosttraders believe the MPC will tighten monetary policy again in May by +25bps andmany traders also believe another +25bps hike is in the card later thisyear.  Data released in the U.K. today sawMarch public sector net borrowing print at ?‚¤8.5 billion in March. This meansthe U.K.government borrowed less in fiscal year 2006-2007 than it has for three years,underscoring improvements in the government??™s fiscal position.  Cable bids are cited around the US$ 1.9925level.  The euro gained ground vis-? -vis the British pound today as thesingle currency tested offers around the ?‚¤0.6800 figure and was supportedaround the ?‚¤0/6780 level.

CHF

The Swissfranc appreciated vis-? -vis the U.S. dollar today as the greenback testedbids around the CHF 1.2050 level and was capped around the CHF 1.2105level.  Technically, today??™s intradayhigh was just below the 38.2% retracement of the move from CHF 1.2280 to CHF1.2000.  Data released in Switzerlandtoday saw the March trade surplus narrow to CHF 718 million from CHF 1.381billion in March.  Also, the UBS privateconsumption indicator improved to 2.13 points from a revised 2.02 points inFebruary, its highest level since July 2001. Dollar offers are cited around the CHF 1.2140 level.  Theeuro and British pound came off vis-? -vis the Swiss franc as the crossestested bids around the CHF 1.6365 and CHF 2.4100 figures, respectively.

AUD

The Australiandollar pulled back further vis-? -vis the U.S. dollar today as the Aussie tested bidsaround the US$ 0.8235 level and was capped around the $0.8340 level.  Technically, today??™s intraday high was rightaround the 23.6% retracement of the move from $0.8150 to $0.8390. The pair cameoff after Q1 CPI was up 0.1% q/q with the annual rate falling to +2.3% from+2.4%. Traders are paring their expectations that Reserve Bank of Australia willraise interest rates next month following relatively benign produce andconsumer price inflation data. Australian dollar bids are cited around the US$ 0.8205 level.

CAD

The Canadian dollar lost marginal ground vis-? -visthe U.S. dollar today as the greenback tested offers around the C$ 1.1245 level and wassupported around the C$ 1.1190 level.  Thepair continues to orbit the C$ 1.1230 level, representing the 76.4% retracementof the move from C$ 1.1030 to $1.1875.  Asexpected, Bank of Canada kept interest rates unchanged at 4.25% today. BoCreported there is a chance that inflation could remain elevated for longer thanexpected but added the risk of a further economic slowdown in the U.S. Eventhough the statement was generally more benign than expected, the central bankdid indicate there is ???now a slight tilt to the upside??? in inflationrisks.  U.S. dollar bids are cited aroundthe C$ 1.1150 level.