NEWS / Foreign Exchange

U.S. Forex Market Commentary

EURO

The euro lost ground vis-? -vis the U.S. dollar today as the single currencytested bids around the US$ 1.3590 level that was capped around the $1.3650level.  Technically, today's intraday lowwas right around the 61.8% retracement level of the move from $1.3540 to $1.3680.  The common currency erased some intradaylosses after the release of U.S.economic data that saw March personal spending increase +0.3%, the slowest pacesince October 2006.  Adjusted forinflation, personal spending fell 0.2%, the lowest reading since September2005.  March personal income gained +0.7%while the all-important core personal consumption expenditure price index wasflat, taking the year-over-year reading lower to +2.1% from February's +2.4%reading.  The pullback in core PCE willprovide the Federal Reserve with a little bit of satisfaction but the readingremains above the Fed??™s perceived +2.0% comfort level.  Last week??™s U.S. GDP data printedweaker-than-expected and if this Friday??™s April non-farm payrolls report is onthe weak side, the U.S. dollar could be pressured. The Chicago PMI survey camein on the soft side at 52.9, down from 61.7, and March construction spendingwas up +0.2%, down from February??™s +1.5% gain. In eurozone news, EMU-13April provisional harmonized consumer price inflation fell to +1.8% y/y from +1.9%y/y in March.  Most traders, however, arespeculating the European Central Bank will raise interest rates by +25bps inJune. Additionally, German March retail sales were off 0.7% m/m and up 0.5% y/ywhile March new orders for plant and machinery gained 47% y/y.  Also, EMU-13 April industrial confidenceimproved, consumer confidence was unchanged, and the overall economic sentimentindex ticked down marginally. It was also reported that the EMU-13 March M3money supply expanded +10.9% y/y, up from +10.0% in February. Euro bids arecited around the 1.3575 level.

JPN/CNY

The yenappreciated marginally vis-? -vis the U.S. dollar today as the greenback tested bids around the ??119.15 leveland was capped around the ??119.75 level. Liquidity was reduced during the Asian session on account of theJapanese market holiday and will be lower all week on account of other Japaneseand Chinese market holidays.  Technically,today's intraday low was right around the 38.2% retracement level of the movefrom ??114.45 to ??122.15. The yen gained some ground as traders reduced exposureto short yen carry trades after political tensions mounted in Turkey betweenthe government and military concerning the country??™s next president. Spreads inthe emerging markets widened on account of this tension and some traders areconcerned that growing risk aversion could result in reduced demand for yencarry trades.  Dollar bids are citedaround the ??118.75 level.  The euro came off vis-? -vis the yen asthe single currency tested bids around the ??162.40 level and was capped aroundthe ??163.05 level.  The British pound and Swiss franc weakened vis-? -vis the yen as thecrosses tested bids around the ??237.75 and ??98.80 levels, respectively.  TheChinese yuan appreciated sharplyvis-? -vis the U.S. dollar as the greenback closed at CNY 7.7039 in theover-the-counter market, down from CNY 7.7135 ??“ a fresh post-revaluationclosing low.  People??™s Bank of Chinaannounced that it is raising commercial banks??™ reserve requirements by 50bps to11.0% as of 15 May. Many traders believe the central bank will continue totighten monetary policy throughout the year. Chinese financial markets will beclosed for the next several days.

STERLING

The British pound weakened vis-? -vis the U.S. dollar today as cable tested bids aroundthe US$1.9890 level and was capped around the $1.9970 level. Technically,today's intraday high was right around the 38.2% retracement level of the movefrom $2.0130 to $1.9865.  Data releasedin the U.K.today saw Hometrack April house prices climb +0.7% m/m, a deceleration inresidential real estate prices. Also, BBA reported that March mortgageapprovals fell to 75,098 from 85,098 one year ago. Also, the GfK/ NOP Aprilheadline U.K.consumer confidence index improved to -6 from -8 in March. Most traders believeBank of England's Monetary Policy Committee will raise interest rates inMay.  Cable bids are cited around the US$1.9860 level.  The euro came off marginally vis-? -vis the British pound as thesingle currency tested bids around the ?‚¤0.6815 level and was capped around the?‚¤0.6835 level.

CHF

The Swissfranc lost ground vis-? -vis the U.S. dollar today as the greenback testedoffers around the CHF 1.2100 level and was supported around the CHF 1.2030level.  Technically, today's intradayhigh was right around the 38.2% retracement level of the move from CHF 1.2280to CHF 1.1995.  Swiss April PMI data willbe released on Wednesday.  Dollar offersare cited around the CHF 1.2155 level.  The euro and British pound depreciated vis-? -visthe Swiss franc as the crosses tested bids around the CHF 1.6415 and CHF 2.4020levels, respectively.

AUD

The Australiandollar gained marginal ground vis-? -vis the U.S. dollar today as the Aussie tested offersaround the US$ 0.8305 level and was supported around the US$ 0.8255 level.  Technically, today's intraday high was justabove the 38.2% retracement level of the move from $0.8150 to $0.8390.  Data released in Australia today saw March privatesector credit growth up +1.1% m/m and +14.8% y/y. Also, the April TD Securitiesinflation gauge rose +0.1% m/m and +3.0% y/y. Australian dollar bids are cited around the US$ 0.8240 level.

CAD

The Canadiandollar extended recent gains vis-? -vis the U.S. dollar today as the greenback testedbids around the C$ 1.1090 level and was capped around the C$ 1.1195 level.  Today's intraday low was the pair??™s weakestshowing since 28 September 2006.  Datareleased in Canadatoday saw GDP growth of +0.4% m/m, up from +0.1% in January. U.S. dollar offersare cited around the C$1.1230 level.