fx market open asia monday night comments

[gbogo]

"Market Maze - - Far East/Europe Markets
€/$ 1.2715… ¥/$ 111.60
DJIA 11,585, +7 points… NASDAQ 2,345, +2 pts
10-yr 5.13%, +2 bp’s
PERSONAL OPINIONS:

Monday has seen a nasty trend correction in the forex markets with the USD trading higher. The correction extends far beyond the USD with oil and the precious metals also turning in corrective performances. Other than some conciliatory noises out of Iran, there appears to be no fundamental reason for the move. Market sources tended to be skeptical about the statements out of Iran in any case. A sudden reversal in trends back higher for the precious metals and energy and lower for the USD would not be a surprise. The markets are setting up for the FOMC decision on Wednesday. Dealers expect the Fed to signal a precautionary pause in tightening after they raise the Fed Funds rate by +25bp to 5.00%.

The comments from U.S. Treasury Undersecretary for International Affairs Adams in India warning against verbal currency market intervention, tended to reinforce the notion that Washington is trying to steer the USD lower into the period leading up to the mid-term elections this fall. The administration would like to signal that it is taking constructive steps to correct its trade imbalances.

No key data are slated for release from Japan on Tuesday. Europe may see the release of German preliminary Industrial output data (see +0.5% vs. +0.8%). U.S. markets will see the release of the usual weekly chain store sales data. At 14:00 GMT (10:00 EDT), March wholesale inventories are seen +0.5% after +1.0%. After the close, the weekly ABC News – Washington Post consumer sentiment survey is due.

Key upcoming items - -
Tues, May 9, 2006 US- Mar Wholesale Trade
Wed, May 10, 2006 US- Energy Inventories, April Budget Surplus, FOMC
Thu, May 11, 2006 US- Wkly Jobs, Apr Retail Sales, Mar Bus inv, Nat Gas
Fri, May 12"

 

[gbogo]

"FX SUMMARY
==========
White House says Iran letter does not address international concerns about nuclear issues
U.S crude oil futures last trade down 44 cents ar $69.75/bbl
U.S Treasury spokesman says believes China commitment to more flexible currency is real
U.S Treasury to issue report on foreign exchange practices on Wed at 4 pm (2000 GMT)
Iran letter to U.S could lead to new diplomatic opening
Garganas - Euro climb not currently a concern, reflects changing rates of return for Euro assets as Fed hikes near end

Garganas - No comment on chance of 50bps June hike, some ECB members have backed 1/2 point rise in past
Garganas - Markets correctly understood May monetary policy statement, ECB strongly vigilant
Garganas - Data suggest EZ economy may be expanding somewhat faster than expected
Trichet says inflationary risks call for very special attention

The USD got some respite as Iran's olive branch to the U.S took the heat off the geopolitical concerns while the USD garnered some support from a less than hawkish remarks on China from the U.S Treasury ahead o the release of the FX Currency Report on Wed. Positions were pared and it led to a period of consolidation and range trading in NY as markets reduced their risks ahead of the FOMC on Wed too.

The Euro shrugged off the hawkish remarks from Garganas and eased off from its high 1.2788 hit doing early London session and weak longs were forced out on the break of 1.2745 and it briefly went to a low 1.2693. However once again sovereign demands below 1.2700 keep the single currency afloat above 1.2700 where it traded for much of the session in late NY.

The USD recovered agst the JPY after the softening stance from the U.S Treasury on China as it affirmed that China was committed to flexible exchange rates, thus taking the sting out of the much awaited FX Currency Report slated for this coming Wed. Nevertheless in relative term , the JPY was still firm across the board as compared to last week. Expect some consolidation for the JPY with bias still for a strong JPY after comments from Fukui over the weekend that BOJ would be removing excess liquidity from the system which would mean higher rates for Japan.

Upbeat UK PPI keep the GBP buoyant but it too gave back its gain as the USD rebounded in later trading but continued to draw support on the crosses on the back that BoE may have to change its current stance from neutral to lean more to a hawkish stance instead.

The reduction in risk aversion, lower commodity prices saw the CHF giving back some of its recent gains . The EURCHF was stuck in its recent trading range 1.5570-1.5635 as bids at 1.5570 helped to give the cross some good underlying support.




ECONOMIC DATA / EVENTS FOR TUES MAY 9TH
=====================================
FORECASTS TIME

========== =====

German Mar Industrial Production M/M 0.5% 10.00 GMT

German Mar Industrial Production Y/Y 7.0% 10.00 GMT

Bundesbank Stark speaks 15.15 GMT

U.S Mar Wholesale Inventory 0.4% 14.00 GMT

U.S Mar wholesale Sales 0.5% 14.00 GMT"

 

[Anonymous1]

Japanese bonds today certainly support your opinions of a stronger yen...looks to me like the market is set up for the worst from the Fed on Wednesday...in regards the "pause"...don't at all buy into the verbal nonsense coming from anybody trying to "talk" the dollar or yen one way or the other...

 

[gbogo]

i dont care for much of what is said in the fx mkt only what people are looking at to trade

the mkt is positioned for the word pause but at same time it will serve to reinforce the trend so 1.25 and 112.50 wud fine plenty of usd sellers

interesting 48 hours ahead

goodluck

 

[Anonymous1]

german industrial production was not good so 1.25 looks real possible in the euro...was interested to see my dealer has uped the premium on the yen to 5.46...yikes that has got to hurt...sure will be interesting to see if bernake can rebound after his lastest attempt to define the feds feelings on rates...likely a slow market through 11:15 am pdt wednesday...gl as well...