U.S. Forex Market Commentary - EURO
EURO
The euro appreciated vis--vis the U.S. dollar today as the single currency tested offers around the US$ 1.3550 level and was supported around the $1.3485 level. The common currency reached its highest level since 16 May and stops were reached above the $1.3535 level, representing the 50% retracement of the move from $1.3680 to $1.3390. Federal Reserve Chairman Bernanke today indicated inflation expectations are well-anchored, the U.S. economy will likely expand at or below trend-growth levels over the coming quarters, and the U.S. housing sector is likely to remain a drag on economic growth. Bernanke indicated there has been a gradual ebbing in core inflation. Data released in the U.S. today saw the May ISM non-manufacturing index print at 59.7, up from 56.0 in April. Traders are paying close attention to the Group of Eight summit in Germany with some anticipating a communiqu that refers to exchange rates while others believe Chinas exchange rate regime will not receive a lot of attention. In eurozone news, the EMU-12 non-manufacturing PMI survey improved to 57.3 in May from 57.0 in April, above expectations, while the prices charged component fell to 53.1 from 54.4. The decline in the pricing component will likely not alter the European Central Banks expected +25bps monetary tightening tomorrow. Other data in the eurozone today saw EMU-13 April retail sales gain 0.2% from a revised 0.4% in March and 1.6% y/y. Remarks from ECB President Trichet will be closely scrutinized tomorrow. Euro bids are cited around the US$ 1.3465 level.
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