Monday January 31, 2005 - 11:16:15 GMT
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FOREX: US OPEN MARKET POINTS 01-31-05
Peace Prospects Boost the Dollar
The Iraqi vote this Sunday is providing support for the dollar as evidence mounts that despite threats of mayhem and violence close to 57% of the population participated in the vote. Shiites and Kurds appeared to have voted while Sunnis abstained. Nevertheless the initial impression from the markets is that the success of the election should soothe geopolitical tensions and buoy the greenback.
According to a report published last week in the Guardian Donald Rumsfield and UK Defense secretary Geoff Hoon held secret discussions regarding a time table for pull out from Iraq. This Sunday’s election is the first step in commencing this process. As we’ve noted before, the Iraq conflict - like a never healing wound that bleeds the patient dry - is a nagging burden on US both economically and politically. With FX market looking for some credibility from Bush administration with regard to reducing the Federal Budget deficit, the key question for most participants is whether this event will lead to a practical endgame that will allow US extract its forces and to leave the region more stable and secure. If US policy shifts focus to ending rather than perpetuating operations, the concomitant reduction in both geo-political risk and budgetary expenditures will most likely be dollar bullish.
Meanwhile, the night’s economic data offers little tradable action as most of European Confidence indicators print within expectation. Of particular note is the improvement in EZ service confidence from 10.5 to 13 hinting that EZ consumers may be feeling more positive as their strong currency increases purchasing power. However, with most other gauges flat to mildly negative, it’s much too early to proclaim any meaningful pick up in the moribund EZ economy.
FX Spot Overnight
- EUR tests the 1.3000 figure once more on bullish geopolitical news
- JPY continues to weaken at 103.60 as eco data lethargic
- GBP range bound though Consumer data above expectations
- CHF above 1900 on declining geopolitical tensions
- 13:30GMT – (08:30 AM EST) CAD Gross Domestic Product m/m (Nov) Expected 0.2% Previous 0.0%
- 13:30GMT – (08:30 AM EST) USD Personal Income (Dec) Expected 2.8% Previous 0.3%
- 13:30GMT – (08:30 AM EST) USD Personal Spending (Dec ) Expected 0.8% Previous 0.2%
- 13:30GMT – (08:30 AM EST) USD PCE Deflator y/y (Dec) Expected 2.4% Previous 2.6%
- 13:00GMT – (08:30 AM EST) USD PCE Core y/y (Dec) Expected ----- Previous -1.5%
- 15:00GMT – (10:00 AM EST) USD New Home Sales (Dec) Expected 1200K Previous 1125K
- 15:00GMT – (10:00 AM EST) USD Chicago Purchasing Manager (Jan) Expected 59.5 Previous 61.2
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