Friday July 25, 2008 - 10:41:23 GMT
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Forex Research - Euro Rebounds as Safe Haven Bid Returns - Will US Data Disappoint?
EURUSD stabilized and regained its footing in early European trade retaking the 1.5700 level after falling sharply yesterday.
â€¢ Japanese Yen: falls through 107.00 as equities dive
â€¢ Euro: rebound above 1.5700 on safe haven flows
â€¢ British Pound: GDP lower but in line with expectations
â€¢ US Dollar: Durable Goods U of M on tap
EURUSD stabilized and regained its footing in early European
trade retaking the 1.5700 level after falling sharply yesterday.
Yesterdayâ€™s horrid IFO results drove the pair to within 20 points of
the 1.5600 figure in late North American trade, but the overnight
weakness in global equities and rumors of central bank buying reversed
the decline, as the unit continues to attract safe haven flows.
The economic data in the EZ shows incontrovertible signs of a slowdown,
but the news from the other side of the Atlantic is not much better.
Yesterdayâ€™s US jobless claims climbed above the key 400K barrier while
Existing homes sales slowed more than forecast. Thus the race between
the euro and the dollar these days is not a measure of who is better
but rather a question of which economy is performing worse. Add to that
equation the recent negative correlation between the EURUSD and global
equities and it is easy to see why the unit rebounded tonightâ€™s trade
as all the major stock indices fell by more than 1%.
Meanwhile cable also roared back trading above 1.9950 as UK GDP data
printed in line with expectations. UK GDP fell sharply from the period
prior expanding only at 1.6% annual rate, but the markets were relieved
to see that the reading was not worse given the recent weakness in UK
economic data. As a result, the consensus assumption that UK rates will
be 5% for the rest of the year remained in place and traders pushed
sterling back towards the 2.000 level.
In North America session the focus will once again turn to consumer
demand as Durable Goods, U of Michigan survey and New Home Sales will
be scrutinized by the market. The expectations are for lower readings
across the board but the impact of FX trade may depend on the degree of
the decline. With markets already so preconditioned to bad economic
news from the US, the greenback may not weaken much further unless the
data shows substantial deterioration from the prior month.
Will EUR/USD Trade to 1.65? Join us in EURUSD Forum
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