Thursday November 4, 2004 - 11:35:56 GMT
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FOREX: US OPEN MARKET POINTS 11-04-04
No Post-Election Rally for the Dollar.
Well it didn’t turn out like 2000 at all. By 2PM EST John Kerry conceded the election and the FX market proceeded to sell USD as all realistic hope of a strong dollar policy was gone. As we noted yesterday, the Administration has implicitly acquiesced to a lower dollar in order to rebalance the staggeringly large Current Account deficit. The vogue word of the day amongst analysts describing this policy is “benign neglect”. Just how benign or how neglectful it will be remains to be seen. However, given Bush Administration’s past record of fiscal profligacy, betting on a dollar decline after yesterday’s election results was certainly one of the easier calls of the year.
Tonight, the euro is continuing its relentless march upward buoyed by better than expected EZ unemployment data. Unemployment rate in the Euro-zone dipped to 8.9% from 9.0% expected remaining little changed for 3 months in a row. This can hardly be viewed as totally bullish news, but dealers are taking the attitude of one must stop the bleeding before a wound can heal. The fact that EZ unemployment has not grown worse despite 58% rise in energy costs, offers some traders hope that Euro-Zone’s chronic unemployment problems may have stabilized if not yet gotten better.
Although the gain in EUR/USD has certainly been impressive, we are cautious about any further thrusts upward in the near term. Our proprietary SSI (Speculator Sentiment Index) Index is fast approaching critical overbought levels and if tomorrow’s NFP report prints near the 175K consensus the pair may retrace some of its recent gains.
FX Spot Overnight
- EUR holds the bid rallying to 2870 in early Euro trade
- JPY comatose as traders await tomorrow’s data
- GBP challenges the 8500 mark as dollar sentiment turns negative
- CHF breaks the 1900 handle despite soft Consumer Confidence data
- 12:00GMT – (7:00 AM EST) GBP BOE Announces Rates Expected 4.75%, Previous 4.75%
- 12:45GMT – (7:45 AM EST) GBP ECB Announces Rates Expected 2.00%, Previous 2.00%
- 13:30GMT – (8:30 AM EST) USD Non-farm Productivity (3Q P) Expected 1.8%, Previous 2.5%
- 13:30GMT – (8:30 AM EST) USD Unit Labor Costs (3Q P) Expected 2.5%, Previous 1.8%
- 13:30GMT – (8:30 AM EST) USD Initial Jobless Claims (OCT 30) Expected 340K, Previous 350K
- 13:30GMT – (8:30 AM EST) USD Continuing Claims (OCT 23) Expected 2805K, Previous 2823K
- 13:30GMT – (8:30 AM EST) CAD Building Permits m/m (SEP) Expected 2.0%, Previous 4.6%
- 15:00GMT – (10:00 AM EST) CAD Ivey Purchasing Managers Index (OCT) Expected 63.0, Previous 66.0
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