Wednesday August 6, 2008 - 11:55:53 GMT
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Forex Research - Euro Lower As German Factory Orders Drop, Will Trichet Alter His Bias?
- Japanese Yen: Government Acknowledges Country Probably In Recession.
- Euro: Falls Below 1.550 As Services And Retail Sales Decline
- British Pound: Mixed Data Reverses Earlier Losses
- US Dollar: MBA Applications on tap
The Euro was weighed
below 1.5470 as German factory orders unexpectedly fell 2.9% in June,
dragging the annualized rate down 6.1%. German factories saw demand
from abroad declined 5.1% as a strong Euro has made their goods less
competitive. EURUSD steadily gave back gains following the Fedâ€™s rate
decision throughout the overnight trading sessions, as expectations
that Trichet may acknowledge the growing downside risks to the regions
economy. The ECB is anticipated to keep their benchmark rate unchanged
at tomorrowâ€™s rate decision at 4.25%.
Despite the Fed changing its language following yesterdayâ€™s rate hold
with statements regarding growth less optimistic than those following
the prior meeting, the dollar has strengthened erasing earlier losses
against the major currencies. The outlooks for Europe, Britain and
Japan have significantly worsened since the last rate decision and have
kept the greenback firm. Central banks across the world are
anticipated to begin easing policies by yearâ€™s end or the first half of
2009, with the RBNZ already cutting rates and the RBA indicating that
they will soon follow. Expectations are increasing that ECB President
Trichet and BoE Governor King may start changing their biases.
The dollar had its biggest overnight gain against the Yen rising above
108.60, as the Japanese government acknowledged that the countryâ€™s
economy is deteriorating and has entered a recession. Companies are
seeing their profit margins continue to shrink as they battle rising
costs for energy and raw materials, while exports fall as global demand
declines. Indeed, the leading indicator index fell to 91.1% from 91.2%
in May, highlighting the dimming outlook.
MBA mortgage applications is the only economic release on the U.S.
docket. The slumping housing market is of great concern and a
significant move in either direction could provide event risk for the
greenback. However, this second tier indicator will most likely have
minimal impact on the dollar as the BoE and ECB rate decisions loom.
However, another strong day for equities could see the dollar continue
to strengthen against the Yen as carry trade flows increase.
Has the EUR/USD Peaked? Join us in EURUSD Forum
Have comments or questions on this or other articles authored by John? E-mail him at [email protected]
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