Wednesday June 1, 2005 - 10:06:26 GMT
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FOREX: US OPEN MARKET POINTS 06-01-05
Much worse than expected manufacturing data from both EU and UK pushed the currencies to new 2005 lows in European trading tonight. EZ PMI data reported at 48.7 vs. 49 expected suggesting that the benefits of a lower euro, have yet to make a positive impact on European manufacturing demand. Meanwhile in UK the PMI Manufacturing registered a reading of only 47.3 – far less than the 49.8 expected and the lowest such number in 22 months.
The Manufacturing data from G-7 countries is clearly signaling contraction, and we would not be surprised if today’s US ISM report misses its mark as well possibly even printing below the 50% expansionary line. The one exception to this trend is Japan which saw its PMI numbers yesterday rise to 53.5. This divergence in data confirms our thesis that Asia is continuously winning greater share of global manufacturing capacity from Europe and North America and is indeed becoming the manufacturing epicenter of the world. This trend should favor the yen in the long run as Japan’s economy is likely to benefit from the country’s primal position as the supplier of manufacturing capacity to the whole Asia-Pacific region.
Turning back to Europe, euro’s woes were not only limited to poor economic data but to rumors that German Finance Minister Hans Eichel and ECB Board member Alex Weber discussed the possibility of “EMU failure”. Both parties quickly denied the reports, but the mere suggestion of the possibility of euro dismantlement was enough to push the already skittish market further down.
The trading in the euro is starting to resemble a “blow-off” bottom as waves of panic batter the currency and speculators try to bail at any price. For the past two weeks the FX market has been focused solely on European economic and political woes. Starting with today’s ISM data and moving to Friday’s Non-Farm Payroll report, attention may shift to US data. If that data does not exceed expectations, some profit taking and short covering may finally offer the euro some temporary reprieve.
FX Spot Overnight
- EUR drops to 2250 as bad eco data and rumors batter the currency
- JPY at 108.50 remains stronger on a relative basis
- GBP dips to 8140 on much worse than expected PMI data
- CHF at 2570 following euro’s collapse
- 10:00 GMT – (06:00 AM EST) CHF SVME-Purchasing Man Index (MAY) Expected 51.9 Previous 52.8
- 13:00 GMT – (09:00 AM EST) USD Construction Spending m/m (APR) Expected 0.6% Previous 0.5%
- 14:00 GMT – (10:00 AM EST) USD ISM Manufacturing (MAY) Expected 52.4 Previous 53.5
- 14:00 GMT - (10:00 AM EST) USD ISM Prices Paid (MAY) Expected 68.9 Previous 71.0
- 14:00 GMT – (10:00 AM EST) USD Domestic Auto Sales (MAY) Expected 5.4 M Previous 5.7M
- 14:30 GMT – (10:30 AM EST) USD Domestic Light Truck Sales (MAY) Expected 8.0M Previous 8.0M
- 16:00 GMT – (12:00 PM EST) EUR Italian New Car Reg y/y (MAY) Expected -- Previous -6.4%
- 23:50 GMT – (07:50 PM EST) JPY Monetary Base y/y (MAY) Expected 2.5% Previous 2.0%
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