Wednesday July 13, 2005 - 11:15:49 GMT
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Euro Hugs 1.2200 Ahead of Trade Data
EUR/USD hovered near the 1.2200 figure in European Trade tonight as traders squared up ahead of US Trade Balance Data due 12:30 GMT today. Earlier in the week, the pair was bid up after China reported its third largest Trade surplus ever in June as exports surged 30% to $66 Billion. Today’s Trade data however will reference May – a month during which oil prices averaged fully $10 less than they did in June and Chinese export growth was more subdued. Therefore, many analysts models predict the Trade balance numbers to match last months -$57 Billion deficit and some even see the figure shrinking marginally to –$55 Billion. It will be interesting to see market’s reaction if the number proves an upside surprise. In recent days there has been a definite shift in sentiment as the euro rebounded off the yearly lows set last week. If the pair manages to hold the 1.2000 level despite dollar friendly data, then it may resume the move towards the 1.2400 level as next week the market confronts the TICS report which will likely bring more dollar bearish news.
Meanwhile in Japan the Current Account unexpectedly widened in May as a dip in oil helped to reduce imports. The surplus rose to 1440 Billion yen from 1304 Billion predicted. The positive effect however was partially offset by the revision in the decline of Industrial Production to –2.8% from –2.3% originally reported. With oil back above the $60 handle the pair is going nowhere fast and remains range bound between 111.00 and 112.50 recent high. If crude begins to stage a meaningful retrace as worries over the supply dissipate while demand cools due to seasonally slow factors, USD/JPY is likely to follow. Until then traders will to keep the pair well bid unless US economic news suddenly turns sour.
FX Spot Overnight
- EUR pulls off the 1.2200 figure in anticipation of better than expected Trade deficit
- JPY back to 111.40 as oil again presses on the unit
- GBP at 7640 as unemployment shows a rise in rate
- CHF bears the 1.2800 figure once again
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