Thursday July 10, 2008 - 09:49:59 GMT
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Forex Research - Pound, Euro Data Miss Again - Surprise From the BoE?
EZ and UK data once again missed expectations continuing the two week pattern of weaker than forecast economic results.
â€¢ Japanese Yen: spurts through 107.00 on early European demand
â€¢ Australian Dollar; Employment blows past expectations as demand remains strong
â€¢ Euro: French IP contract sharply nn high euro, oil
â€¢ British Pound: Halifax falls twice as much as forecast
â€¢ US Dollar: Jobless claims on tap
Pound, Euro Data Miss Again â€“Surprise From the BoE?
EZ and UK data once again missed expectations continuing the two week
pattern of weaker than forecast economic results. In the EZ, French
Industrial Production contracted sharply dropping to â€“2.6% from â€“0.6%
projected as higher exchange rates and higher oil prices decimated
demand. The print was the worst reading in nearly three years and
pulled the EURUSD off its session highs of 1.5762. The unit however
found support near the 1.5700 and continues to build a base there.
There appears to be two reasons why EURUSD is maintaining it bullish
bias. First, oil has corrected but not crumbled refusing to break below
the $130/bbl level. Tensions in the Persian Gulf, with Iran continuing
to test fire its missiles are keeping crude well bid providing no
relief from inflationary pressures which in turn is seen as euro
bullish. Two, some market players believe that Mr. Trichetâ€™s neutral
stance to the contrary, the ECB may have one more rate hike left in its
arsenal before the year end, especially if headline inflation remains
at these elevated levels. Euro therefore continues to attract
speculative flows as the yield story is revived. The danger to that
view of course is that the slowdown in the EZ will become progressively
worse as the summer turns to fall curtailing any further tightening by
Mr. Trichet and company.
In UK signs of a slowdown are becoming much more prominent with the
Halifax house survey just the latest piece of evidence to show that the
country is teetering on the verge of a recession. Prices fell by â€“2.0%
versus -0.5% forecast as the UK housing sector continues to collapse.
At this point there is no argument that UK economic growth has declined
significantly. The only question for the market is whether the BoE
will begin to tackle these issues or will continue to stubbornly focus
on inflation at the risk of tipping the country into an actual
recession. Todayâ€™ s BoE rate decision is expected to produce no change
in policy, but the MPC may surprise the market with post announcement
communiquÃ© perhaps addressing some of these lingering concerns.
The one exception to the downcast mood is Australia where employment
data once again managed to surprise to the upside producing 28K jobs
versus 10K forecast. After last months shocking â€“19K loss, many market
observers believed that the boom Down Under was coming to an end.
However, the rebound in labor demand suggests that the Aussie economy
is maintaining momentum and given the underlying strength of the job
market the RBA is unlikely to even consider any easing until 2009 at
Meanwhile the North American session once again sees very little event
risk with only the jobless claims on tap. That report however could
prove damaging to the dollar especially if it prints once again above
the psychologically important 400K mark. Unlike the NFPs which are
subject to numerous revisions and derisions by many market
participants, jobless claims leave no room for doubt as to the stare of
the labor market and an upward climb in that report does not bode well
for the US economy.
Will EUR/USD Trade Back to 1.60? Join us in EURUSD Forum
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