Weekend Action
Traders were eagerly anticipating the weekend¡¯s G7 meeting, specifically any comments made regarding the Japanese Yen and its continued weakness. The G7¡¯s failure to comment specifically on the Yen¡¯s situation was seen as an indication that there is no planned intervention from any of the world¡¯s major central banks to increase the strength of the Yen against their respective domestic currencies. To add further fuel to this fire (and the strength of EURJPY) Dutch Central Bank Governor Wellink was quoted as saying ¡°a strong euro is in the interest of Europe¡± which seems to suggest the Eurozone is comfortable with Euro strength against the US Dollar and the Japanese Yen.
Today¡¯s Action
EURJPY continued its recent upward momentum by making new all-time highs. This price action was heavily fuelled by the market commentary as mentioned above. In recent weeks we have seen a return to the popularity of carry trades as speculation increases that the Euro and GBP may benefit from further rate hikes throughout the year while the Yen is unlikely to see any such boost. Today was also a big day for GBPUSD as it made new 15 year highs. Longer term this move is due to potential BoE rate hikes and the likelihood that the US rate will remain at its current level for some while.
Market Focus
Today¡¯s market focus was centred on UK PPI Input (1.2% mom, 0.9% expected, yoy 0.7%) and PPI Output (0.6% mom, 0.3% expected, yoy 2.9% - highest since June 2006) data. The market saw this as evidence of a likely rate hike during Q2 and spurred GBPUSD up to a high of 1.9940. Later in the day we saw stronger than expected US retail figures (Retail Sales 0.7% vs 0.4% expected, Core Retail Sales 0.8% vs 0.8% expected) however Empire State Manufacturing data was seen as disappointing (3.8 vs 7.5 expected). There was a further set of unexpected data from the US as TICs Capital flow made an unexpected fall to $58.1B vs a forecast number of $80.5B.
In Europe we had EUR CPI slightly up on expectations (0.7% vs 0.6% mom expected, 1.9% yoy) and German CPI in as expected at 0.3% mom.
Tomorrow¡¯s Focus
Tomorrow we will see UK yoy CPI data in the front seat with the core figure attracting special attention during the morning session. Later in the day the US releases its monthly CPI figures. There will also be Swiss retail sales (yoy), ZEW Economic Sentiment, US Housing Starts US Industrial Production & US Capacity Utilization to keep traders busy. Over the following night New Zealand CPI data will be closely watched.
Good trading to all tomorrow.
Chart & definitions:
http://www.passion-trading.munbuns.com/ForexDailyMarketReport04-16-2007.htm
David Thorpe is a senior contributor for http://www.passion-trading.munbuns.com a free educational resource centre for traders and investors. The goal of the site is to stimulate the minds of its users, enabling them to achieve a greater understanding the art of trading, thus helping them to become more profitable.
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