Thursday May 26, 2005 - 22:17:43 GMT
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Tricom Futures and Foreign Exchange -
Forex: Grab a snorkel, the EUR's heading lower
The USD climbed to a seven-month high against the euro on Thursday, as a rally in the currency gained momentum on news the U.S. economy had grown more vigorously than preliminary data indicated. Regular readers would recall that we have mentioned the gap between EUR/USD and USD/CHF has been narrowing from about 500 points a couple of weeks ago, to just 150 points as I write this report. To the un-initiated, we are referring to the difference between the EUR/USD at 1.2510, and the USD/CHF at 1.2360. When these 2 cross-over we have seen them continue the move for another 400 points or more previously. I anticipate they will cross at around 1.2450, but they may have an initial touch, before moving apart again. Eventually, I can see the EUR/USD going back under the USD/CHF. Whether or not this happens before the US employment data next Friday, or as result of the data, is still to be seen.
U.S. Treasury debt prices fluttered a sliver lower on Thursday as stronger economic growth in the first quarter failed to alter the outlook for further interest rate rises from the Federal Reserve.
The gross domestic product report also showed inflation was rising, but at an acceptable pace, a relief to government debt investors. The government's second look at first-quarter GDP contained upward revisions that were largely anticipated in the market, and therefore had little effect on trade.
The U.S. economy grew at a 3.5 percent clip, just below analysts' median expectation of a 3.6 percent gain, but well above an initial reading of 3.1 percent.
U.S. stocks gained in late Thursday afternoon trading, after the government revised upward its estimate of first-quarter economic growth, which investors took as evidence the economy was growing but not so swiftly as to trigger inflation fears.
Today’s Economic Releases:
· JPN: Retail Trade
· JPN: National Consumer Prices
· US: Personal Income and Spending
· US: Univ. Michigan Consumer Confidence
Today’s Top Trades
· Buy AUD/NZD around 1.0665
. Sell GBP/JPY around 196.76
. Sell EUR/JPY around 135.70
For more ideas send me an email, Abdul.Khan@tricom.com.au
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