Friday July 8, 2005 - 04:58:07 GMT
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Tricom Futures and Foreign Exchange -
Forex: Strap in Folks, it's Payrolls Day again
The market's been largely stagnant so far today, following yesterday's tragedy in London, and ahead of tonight's US employment data. I think no matter how the figure comes out, the market will buy the USD.
The pound slumped to a near 19-month low against the dollar after London was rocked by a series of terror-related bomb blasts. Investors are wary that the blasts will hit consumer confidence in the coming days and weak, further denting a fragile economic environment. There’s growing market speculation that the Bank of England will be forced to cut rates to ease pressure if the UK economy does indeed weaken in the wake of the blasts
Though the Bank of England's rate-setting Monetary Policy Committee decided to keep its key repo rate unchanged at 4.75 pct at its meeting earlier today, the markets are pricing in an August cut if not an emergency cut in the days to come.
Elsewhere, the USD remained firm ahead of tomorrow's closely-watched US monthly payrolls report.
June non-farm payrolls are expected to rise 195,000 after the soft 78,000 gain in May which pulled the second quarter average below the first quarter despite a strong April gain. A figure that strong should cement expectations that the US Federal Reserve will continue to raise the cost of borrowing in the months ahead.
The USD, which was in the doldrums for much of the last couple of years due to concerns over the US twin deficits, has surged to the new highs in the wake of the current political crisis engulfing the EU as well as a greater emphasis on developments related to yield differentials. While the ECB is being urged to cut rates from 2.0 pct to help boost anaemic economic growth, and the Bank of England is pressured from a number of sides, the Fed is poised to continue raising the cost of borrowing from the current 3.25 pct in a measured manner.
Today’s Economic Releases:
US: Non-Farm Payrolls
Today’s Top Trades
· Sell EUR/USD strength towards 1.2010-20
. Sell GBP/USD around 1.7450-70
. Buy USD/CHF around 1.2920-00
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