Friday October 14, 2005 - 10:53:21 GMT
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Mellon Bank Foreign Exchange - https://fx.mellon.com/
Forex: Mellon FX Daily - U.S. EditionKey Points
• Outside chance of further end-of-week pullback today, although overall upside USD risk remains in
• Refco situation is raising some question marks about market dislocation.
• US data could be influential today – retail sales, CPI, industrial output, capacity utilisation, Michigan sentiment and business sales/inventories feature.
The USD bounced back during the European morning after trading softly earlier on and in Asia. There is an outside chance of a further end-of-week pullback today and potential triggers for such a move would be above 1.2055 on EUR-USD, 1.7580 on cable and 114.20 on USD-JPY. However, the overall risks remain to the upside for the USD going into next week and the mass of US data this morning (see below) may influence how things turn out today. 115.00 remains key on USD-JPY, even though it was briefly breached yesterday, while 1.1900 is the main barrier on EUR-USD ahead of the 2005 low at 1.1868. Below 1.1950-70 would signal the likelihood of a fresh test towards 1.1900. The most favourable outcome for the USD would be strength in data like retail sales rather than core CPI. Fed tightening purely because of CPI strength is not necessarily positive for the USD.
Also keep an eye on developments regarding the Refco situation. The temporary closure of their capital markets unit has raised some element of apprehension about market dislocation with regard to the closure of outstanding trades in a variety of markets. It is not necessarily a USD negative, but it may have some minor influence on positional appetite in the very short-term. In Japan,
the Upper House passed the postal privatisation law, although this did not generate much impact on the JPY as the outcome had been well expected.
a whole load of data from the US today, including retail sales, CPI, industrial output, capacity utilisation, Michigan sentiment and business sales and inventories. Key focal points will be retail sales, core CPI and Michigan sentiment, while the business sales/inventory mix will also show the state of markets for the business sector (which in recent months have been good). Given the recent step-up in anti-inflation rhetoric from the FOMC the core CPI could generate market impact, more so on bonds and equities perhaps than the USD. Weekly consumer sentiment numbers have only stabilised modestly so a major bounce in Michigan sentiment appears unlikely. The retail sales data is the most important today as an indication of demand post-Katrina and the number excluding autos and gas station sales will be the cleanest measure the market should be looking at (higher fuel prices will boost gas station sales).
Data/event EDT Consensus*
CA Manu shipments (Aug) m/m 08.30 +0.8%
US CPI (Sep) m/m 08.30 +0.9%
US CPI core (Sep) m/m 08.30 +0.2%
US Retail sales (Sep) m/m 08.30 +0.4%
US Retail sales ex-autos (Sep) m/m 08.30 +0.7%
US Ret sales ex-auto & gas (Sep) m/m 08.30 +0.5% last
US Ind prod (Sep) m/m 09.15 -0.5%
US Capacity utilisation (Sep) 09.15 79.4%
US Michigan sentiment (Oct, prel) 09.50 80.0
US Business inventories (Aug) m/m 10.00 +0.2%
US Business sales (Aug) m/m 10.00 +1.1%
US Fed’s Poole speaks on Fed’s monetary role 12.00
Latest data Actual Consensus*
NZ Retail trade (Aug) m/m +0.2% -0.6%
JP Domestic CGPI (Sep) y/y +1.7% +1.7%
JP Ind prod (Aug, final) m/m +1.1% +1.2%
* Consensus unless stated
2005, Mellon Financial Corporation Note: Although obtained from sources believed by us to be reliable, Mellon Financial Corporation and its affiliates cannot guarantee the accuracy or completeness of the information upon which this report is based. This report does not purport to disclose the risks or benefits of entering into particular transactions and should not be construed as advice in any specific instance. The views in this report constitute our judgement as of this date and are subject to change without notice.
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