Euro Falls on Profit-taking; Investor Focus Shifts to U.S. Economic Data
The U.S. Dollar is gaining back a little of yesterdayâ€™s loss
in light, overnight trading. Volume continues to be down because of the
week-long Chinese holiday celebration. Investors seem a little reluctant to
take on risk ahead of todayâ€™s U.S.
economic reports. Early in the session, traders will be focusing on U.S.
Housing Starts and Industrial Production Reports. Later in the day, their focus
will shift to the FOMC Minutes.
U.S. Housing Starts are expected to show an annual pace of
580K. This is up from last monthâ€™s 557K.Building Permits are expected to drop to 620K from 653K.Despite the mixed news, homebuilders remain
Industrial Production is expected to show a 0.6% rise.Capacity Utilization should come in at 72%.
Traders will be watching to see if manufacturing shows an increase after a
Both the Housing Starts and Industrial Production reports
could underpin the Dollar today if they come in better than expected.
The key report to watch today is the late session FOMC
Minutes. Todayâ€™s economic reports represent stale data while the FOMC minutes
will offer traders an outlook for future policy moves by the Federal
The FOMC Minutes are expected to say the U.S. economy is
recovering. The focus, however, will be on the comments from Federal Reserve
Bank of Kansas City President Thomas Hoenig.
At the last Fed FOMC meeting Hoenig was the lone dissenting
vote. He basically wanted the Fed to change a portion of the language of the
report to represent a more hawkish attitude. His premise for the change was
based on his perception of a much higher inflationary outlook. He also felt
that the government should cut spending and increase revenue to stave off the
next crisis. Investors will be looking to see if any other Fed member feels the
same way about the economy.
Investors will also be looking to see if the Fed stands
ready to absorb excess liquidity in the market.Look for the Dollar to gain if the message indicates a strengthening
economy. If the Fedâ€™s message is too optimistic then the Dollar may weaken
against commodity related currencies because of increased appetite for risk.
The EUR USD is trading lower on profit-taking and some light
new short-selling pressure. Yesterdayâ€™s rally was most likely short-covering
rather than new buying as traders continue to take a wait-and-see attitude
toward the developments between the European Union and Greece.
A huge amount of short Euro traders continue to dominate the
market. On Tuesday, some of those shorts lightened up their positions after
Greek Finance Minister George Papaconstantinou said that the nation will not
need a bailout.Some traders feel that the
worst of the Greek deficit situation has passed and that a floor has been put
in the Euro market.
The GBP USD is under pressure overnight. The release of the
dovish Bank of England minutes helped trigger a sell-off early in the trading
session. British Pound investors remain bearish on the currency because the BoE
recently voted to suspend its asset purchase program, kept interest rates low
at 0.50%, and felt there was â€śno immediate needâ€ť to expand monetary policy
further as the economy emerges from the recession.
The outlook for the economy remains bleak. The BoE said the U.K. economy is
â€śrecovering, but weaklyâ€ť. It also emphasized the economy faces â€śconsiderableâ€ť
headwinds as they expect credit conditions to remain tight â€śfor some
timeâ€ť.Finally, the BoE sees no
â€śoverwhelming riskâ€ť from inflation to undershoot the 2% target and that
inflation may also be temporarily higher because of the stimulus measures.
The poor economic outlook is the driving force behind a
weaker British Pound over the long-run. In addition, traders remain pessimistic
budget issues. A rally in the Euro may trigger a short-covering rally over the
Expectations of solid U.S. economic data this morning is
helping to support the USD JPY.Commodity-linked currencies such as the Canadian Dollar, Australian
Dollar and New Zealand Dollar are showing mixed results. Gold and Crude Oil
should be the catalyst behind the moves in the Canadian Dollar.Australian and New Zealand Dollar traders
will be focusing on greater demand for higher yielding assets and the strength
or weakness in the U.S.
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Mon 10 Sep 2018 AA 08:30 GB- GDP, Trade, Output Tue 11 Sep 2018 AA 08:30 GB- Employment Decision A 09:00 DE- ZEW Survey Wed 12 Sep 2018 A 12:30 US- PPI A 14:30 US- EIA Crude A 18:00 US- Beige Book Thu 13 Sep 2018 A 1:30 AU- Employment AA 11:00 GB- Bank of England Decision AA 11:45 EZ- European Central Bank Decision A 12:30 US- Weekly Jobless AA 12:30 US- CPI Fri 14 Sep 2018 A 08:30 GB- GDP AA 12:30 US- Retail Sales A 13:15 US- Industrial Production AA 14:00 US- prelim University of Michigan
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