Monday November 1, 2004 - 10:32:49 GMT
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FOREX: US OPEN MARKET POINTS 11-01-04
Wait and See while Oil Weighs
Most of Euro-land is on market holiday for All Saints Day so, the action in EUR/USD was subdued until a series of Italian, French and German PMI reports printed weaker than expected results. The pan-European PMI number also disappointed the market registering 52.4 vs. 53 expected - a new 10 month low for the index. European manufactures are caught between a rock and hard place as the 64% year-to-date rise in oil prices pressures input costs while stagnating global consumer demand slows sales. Unable to pass the price increases to highly reluctant consumers, manufactures are facing a squeeze on their profit margins which does not bode well for future Euro-zone growth.
With the latest IMM data showing that the market is very long euros (the net speculative position in EUR built to 70k contracts from 57k - a new 2-1/2 year high) its not surprising that the weak PMI data triggered a sell-off in the EUR/USD. The pair lost approximately 100 points from its Asian session highs, but is likely to consolidate around the 2700 handle unless US data reports markedly better than expected results and creates further downside action.
Stubbornly high oil prices are also affecting Japan where Labor Cash earnings deceased -0.3% on year over year basis as summer time bonuses fell for the first time in 2 years. The lack of wage growth also hurt Vehicle Sales while declined -7.0%. Every car manufacturer, including Toyota and Honda experienced a retrenchment in their domestic market. In response the USD/JPY climbed back above the 106 handle, targeting the 106.50 level.
While the market reacts to the eco data dealers are keeping one eye on the US Presidential election which is so close that most polls are starting to resemble the currency market by quoting the difference in basis points. Until the election is unequivocally resolved we expect this tense range-bound trading to continue.
FX Spot Overnight
- EUR trades down to 2730 on PMI weakness
- JPY finally responds to weak data as unit retraces to 106.50 level
- GBP holds 8330 as UK PMI firmer than Euro-land
- CHF trades back to 2020 as aftereffects of Friday bad KOF number linger
- 12:30GMT – (8:30 AM EST) USD PCE (core) y/y (SEP) Expected , Previous 1.4%
- 12:30GMT – (8:30 AM EST) USD PCE Deflator y/y (SEP) Expected, Previous 2.1%
- 12:30GMT – (8:30 AM EST) USD Personal Income (SEP) Expected 0.3%, Previous 0.4%
- 12:30GMT – (8:30 AM EST) USD Personal Spending (SEP) Expected 0.6%, Previous 0.0%
- 12:30GMT – (8:30 AM EST) CHF SVME-Purchasing Managers Index (OCT) Expected 53.9, Previous 54.2
- 14:00GMT – (10:00 AM EST) USD Construction Spending m/m (SEP) Expected 0.4%, Previous 0.8%
- 14:00GMT – (10:00 AM EST) USD ISM Manufacturing (OCT) Expected 58.5, Previous 58.5
- 14:00GMT – (10:00 AM EST) USD ISM Prices Paid (OCT) Expected 79, Previous 76
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