Wednesday April 27, 2005 - 10:38:03 GMT
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FOREX:US OPEN MARKET POINTS 04-27-05
Euro and Pound Lose Ground
No mercy for euro bulls or cable longs tonight, as both currencies continued their slide in European trade. The euro has now decisively broken key 1.3000 support and hovers near the 1.2900 level with real possibility of testing its intermediate support at 1.2750 if US eco data continues to shine. Yesterday’s surprising rise in New Home Sales to record levels of 1.4M unit per year was strong slap in the face to all those analysts (including your truly) who’ve have been predicting the demise of the housing market for the past six months. Though not usually newsworthy to the FX market, the housing numbers stood in stark contrast to the barrage pf dour data from Eurozone, which last night included the downward revision of German GDP estimates. In short, the housing data helped to tilt market sentiment towards dollar longs.
For the time being the dollar rally appears to have further room to run, especially after yet another woeful batch of data from the Eurozone tonight which includes news that French Business Confidence hit an 18 month low, printing at 97 versus expectations of 100. Not even the fact that the Russian Central Bank intends to expand its euro reserves by an additional 10%, could drive EUR/USD higher in tonight’s trading. The market clearly feels that continued US growth and therefore additional Fed rates hikes are a much stronger possibility now than even a week ago. Of course a week is a lifetime in FX markets and we will have to watch carefully the US GDP data on Thursday as well as the Personal Spending and Personal Income numbers on Friday for confirmation of this view. However, at present the battle in the EUR/USD is dollar bulls to win or lose as EZ eco data is unlikely to provide any serious support to euro longs unless German unemployment figures surprise to the upside. But given the glacial pace of growth in EZ economy that would be a tremendous surprise indeed.
Meanwhile in UK, housing continues to generate strong demand as the latest BBA Mortgage Approvals numbers rise by 39% registering the best result since July of 2004. The news may be sweet music to cable longs who are still hoping for one more BOE rate hike, but the market appears far more skeptical as the currency trades within a whisker of the 1.9000 figure and seems destined to break it. One key reason for pound weakness, is that while some recent data from UK (most notably CPI and housing numbers) has been hawkish, data from other sources such as UK Retail Sales and especially yesterday’s CBI Industrial Trends survey has been far weaker than expected. Overall, this paints a mixed picture of the UK economy and suggests that BOE policy will remain unchanged.
FX Spot Overnight
- EUR finds temporary support at 2920
- JPY retraces slightly to 106.20
- GBP weakens to 9000 though BBA data supportive
- CHF at 1950 following euro
- 12:30 GMT – (8:30 AM EST) USD Durable Goods Orders (MAR) Expected 0.3% Previous 0.3%
- 12:30 GMT – (8:30 AM EST) USD Durable Goods Shipments (MAR) Expected 1.0% Previous -1.6%
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