Wednesday October 13, 2004 - 11:21:21 GMT
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FOREX: US Market Points 10-13-2004
Euro, Yen, Pound Consolidate
Quiet Asian and European sessions tonight as markets absorb yesterday’s drubbing in the euro, while the yen begins to trade once more off its fundamentals as hopes of a quick Chinese revaluation of the yuan fade. In Asia the dollar finds a bid tone as the pair moves back to the 110 level. The Japanese Current Account figures reported better than expected results (Y1754.2Bn versus Y1350Bn consensus) indicating that Japanese exports to US and China are still growing handsomely, but the market is discounting the news anticipating a slowdown in global demand as oil continues to set record highs. Indeed, the Japanese Industrial Production numbers which missed tonight (0.1% vs. 0.3% expected) are forecasting exactly such a dynamic and the market is taking its cue from that release rather than the Current Account numbers.
In Europe, Italian Industrial Production contracts far more than expected (-0.8% versus 0.1% consensus) and new car registrations decline for a third month in a row. Like everywhere else oil is taking its toll on European producers and consumers. Producers are caught between higher input costs and slowing demand while consumers are retrenching in face of escalating unemployment numbers. Thus, after yesterday’s 100 point decline the euro bounce is anemic at best as eco data offers no support to the unit. With US calendar again empty today, the pair will most likely tread water awaiting The US Trade Balance on Thursday and Retail Sales on Friday.
“If you are interested in the future path of interest rates, don't read my lips, read the economic data!”, says Mervyn King the President of Bank of England. Recent economic data has shown a rapid deceleration in British Industrial Production quashing all hope of additional BOE rate hikes. Even with tonight’s solid employment data ( 16th straight decline in unemployment rolls, fastest pace of wage gains in 2 years, etc.) the market sees little possibility of further BOE action this year. Indeed, Mr. King himself discounts the seemingly good report by noting that ,” What is clear is that the combination of low and stable inflation and continuously falling unemployment must come to an end at some point, and may already have done so. Starting, as we do now, with little if any spare capacity, it is unlikely that we can expect unemployment to fall indefinitely.” No wonder then that the pound bounce is short lived as the unit struggles to hold on to the 1.79 handle in range-bound, consolidating trade.
FX Spot Overnight
- EUR falls through 2300 handle eco data disappoints all around
- JPY trades back to 110 on USD strength
- GBP loses the 7900 handle as inflation data is extremely mild
- CHF trades in tandem with euro taking out the 2600 handle
14:30GMT – (10:30 AM EST) GBP Leading Indicator Index m/m (AUG) Expected , Previous -0.1%
14:30GMT – (10:30 AM EST) GBP Coincident Indicator Index m/m (AUG) Expected , Previous 0.1%
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