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The euro gained ground vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4165 level and was supported around the $1.4055 level.  The dollar was given today after J.P. Morgan Chase reported stronger-than-expected second quarter earnings results of US$ 2.72 in net income, equivalent to 28 cents per share.  Modest gains in U.S. equities markets also resulted in further pressure on the dollar on the premise that global risk appetites are improving.  Traders are also digesting market chatter that CIT Group may file for bankruptcy following an apparent decision by the Obama administration that it is not going to bail out the commercial lender.  U.S. Treasury Secretart Geithner spoke optimistically about U.S. credit and financial markets, reporting “We're seeing life start to come back into these markets that basically shut down at the end of last year.  We're going to make sure that we do enough to help reinforce and sustain that process."  Data released in the U.S. today saw the July Philadelphia Fed manufacturing survey decline to -7.5 from -2.2 in June.  In eurozone news, U.S. and French officials are trying to work out some disagreements regarding the implementation of Basel II Capital Accord revisions. European Central Bank official Constancio today indicated some banks in some eurozone counties will need more capital and he added “doubts remain” about where the capital will come from.  He also added “serious aspects” of the financial crisis have stabilized.  The ECB is currently fighting an Italian initiative to tax Bank of Italy’s gold reserves.  Data released in the eurozone saw June consumer prices up 0.2% m/m and down 0.1% y/y with core CPI up 1.4% y/y.  Euro bids are cited around the US$ 1.3435 level.

¥/ CNY
The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥93.25 level and was capped around the ¥94.45 level.  Bank of Japan Governor Shirakawa yesterday indicated the central bank is eyeing an exit strategy from its quantitative easing programs around the end of the year.  The central bank extended some emergency credit programs until December instead of six months and Shirakawa said a further improvement in financial conditions would likely result in an end to the programs.  BoJ lifted its economic assessment for the third consecutive month, citing an increase in factory output and exports.  BoJ reported “Japan’s economic conditions have stopped worsening.  Japan’s economic conditions are likely to turn upward over time.”  The bank also indicated business sentiment has stopped worsening.  Data released in Japan today saw the May tertiary index decline 0.1% m/m.  The Nikkei 225 stock index climbed 0.81% to close at ¥9,344.16.  U.S. dollar offers are cited around the ¥104.15 level.  The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥131.60 level and was capped around the ¥133.20 level.  The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥153.00 figure while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥86.70 level. In Chinese news, the U.S. dollar weakened vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8303 in the over-the-counter market, down from CNY 6.8308.  Data released in China today said saw second quarter economic growth expand 7.9% y/y, more-than-expected.  The government said China’s first half economic growth may help China reach its goal of 8% economic growth this year.  Also, a government spokesman reported China wants to “see prices at reasonable levels.”  China’s June consumer price index was off 1.7% y/y, the fifth consecutive monthly decline, while June’s producer price index was off 7.8% y/y, the seventh consecutive monthly decline.

₤
The British pound appreciated marginally vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.6475 level and was supported around the US$ 1.6355 level.  Prime Minister Brown downplayed perceived differences with Bank of England Governor King and said the BoE, Financial Services Authority, and U.K. Treasury “have got to work together.”  BoE Monetary Policy Committee member Barker reported results from quantitative easing have not yet “resulted in terms of banks being in a better position to start to lend.”  Barker added the BoE expects the economy to begin growing by the end of 2009.  Cable bids are cited around the US$ 1.6185 level.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.8610 level and was supported around the ₤0.8575 level. 

CHF
The Swiss franc came off marginally vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0790 level and was supported around the CHF 1.0700 figure.  Data released in Switzerland today saw the July ZEW investor confidence survey decline to 0 from 9.7 in June.  Swiss National Bank reduced interest rates to a record low of 0.25% in March and is not expected to change interest rate policy anytime soon.  There is ongoing speculation that SNB may be selling the Swiss franc through intervention to try and bolster economic growth.  U.S. dollar offers are cited around the CHF 1.0975 level.  The euro gained ground vis-à-vis the Swiss franc as the single currency tested offers around the CHF 1.5190 level while the British pound moved higher vis-à-vis the Swiss franc and tested offers around the CHF 1.7675 level.

SCHEDULE

Thursday, 16 July 2009
all times GMT
(last release in parentheses)

0645 France  June consumer price index (0.2% m/m)
0645 France  June consumer price index (-0.3% y/y)
0645 Italy  June CPI, harmonized (0.1% m/m)
0645 Italy  June CPI, harmonized (-0.3% y/y)
0800 Italy  May trade balance
0900 CH  July ZEW survey, expectations (9.7)
1230 US  Weekly initial jobless claims
1230 US  Continuing jobless claims
1300 US  May net long-term TIC flows (US$ 11.2 billion)
1300 US  May total net TIC flows (-US$ 53.2 billion)
1400 US  July Philadelphia Fed manufacturing survey (-2.2)
1700 US  July NAHB housing market index (15)

Friday, 17 July 2009
all times GMT
(last release in parentheses)

0130 Australia Q2 import price index (-2.8% q/q)
0130 Australia Q2 export price index (-4.6% q/q)
0500 Japan  May coincident index (86.9)
0500 Japan  May leading index (77.0)
0800 Italy  May industrial orders (-3.7% m/m)
0800 Italy  May industrial orders (-32.2% y/y)
0800 Italy  May industrial sales
0900 Italy  May current account
0900 Eurozone May trade balance (€2.7 billion)
0900 Eurozone May construction output (0.6% m/m)
0900 Eurozone May construction output (-4.7% y/y)
1100 Canada  June consumer price index (0.7% m/m)
1100 Canada  June consumer price index (0.1% y/y)
1100 Canada  June Bank of Canada CPI (2.0% y/y)
1230 US  June housing starts (532,000)
1230 US  June building permits (518,000)
1230 Canada  June leading indicators (-0.1% m/m)

DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be used as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.