Friday May 16, 2008 - 09:36:54 GMT
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FX Blog- Market Snapshot Europe Mid-Session 16 May 2008
GVI Market Snapshot- Europe Mid-Session for May 16, 2008
- Short-term market sentiment for the USD remains in flux as the EUR/USD pivots the 1.55 line. Some who had been targeting EUR/USD 1.50 by month end are now starting to revise their targets to 1.5500. They are saying that Europe is not weakening as fast as expected, and that the ECB is extremely worried that, despite the economic slowdown, institutionally driven wage increases are likely to continue to pass through the system. This suggests that the ECB might not have the room to ease monetary policy as fast as it has been done in more open economies.
- Frankly, We feel this revised view of the European economy overlooks the extent of its recent sharp weakening.
- As the EUR/USD to pivots 1.55 line. Its position relative to that level has been setting the tone of the markets.
- Today the U.S. will release Housing Starts/Permits on the open. Also the University of Michigan Sentiment index is due.
What the Market Prices are Indicating:
Forex and Commodities:
- The USD is lower vs. the EUR. The GBP is up modestly from late Thursday. The EUR/GBP cross is a bit firmer.
- The carry-trade driven currencies (AUD, CAD and NZD) are trading higher vs. the USD. Gold and oil are higher.
- The carry trade financing currencies, JPY and CHF, are firmer vs. the USD. EUR/JPY is higher. The EUR/CHF is steady. The CHF is higher vs. the JPY
Equities and Bonds:
- The Shanghai Composite closed lower, while the Hang Seng gained. The Japanese Nikkei closed lower. 10-yr JGBs closed at 1.68%, 0bps.
- Key European bourses are trading higher. Eurozone benchmark bond prices are weaker.
- U.S. equities are seen opening higher later. U.S. bond prices are weaker.
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