Monday October 17, 2005 - 10:35:25 GMT
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Mellon Bank Foreign Exchange - https://fx.mellon.com/
Forex: Mellon FX Daily - U.S. EditionKey Points
• USD bounces back strongly in Europe.
• New storm heading towards the Gulf, although as yet there is little clarity on its likely power or direction.
• Upside bias remains on the USD, although sentiment will be sensitive to data (and weather) developments. NY Fed index features today.
D The USD
bounced back sharply during the European morning after staying on the defensive for much of the Asian session. The latter was probably a follow-on from the retrenchment seen on Friday and also talk about a developing storm in the western Caribbean. Weather fears pushed oil prices up sharply in Asia, although at this stage, while there is some expectation that the storm (now Tropical Storm Wilma) will reach hurricane status, there is no firm indication as yet about how far it will move into the Gulf of Mexico and how strong it will be during that critical period (about Friday).
The USD seems to be following some kind of pattern at the present time. In each of the past two weeks the USD has been strong at the beginning of the week, only to give up ground later on and today’s rally is indeed consistent with that. Short-term direction is now a little unclear and market sentiment will likely remain sensitive to the development of the aforementioned weather pattern and US data releases this week, starting with today’s NY Fed index (see below). However, the overall bias remains to the upside for the USD given the solid interest rate background.
The break below 1.2045-60 on EUR-USD
this morning sets things up negatively for today, although 1.1975 is also significant ahead of 1.1900 and 1.1868. On the topside, the Asian high at 1.2122 is the main marker ahead of the October 6 high at 1.2203. Above the latter is required to suggest a possible shift in short-term directional risk. Cable
needs to get back above 1.7812 (also October 6 high) to suggest a similar shift, while key initial support is at 1.7550-80.
the NY Fed index is the only really data feature today. Last month, this fell back modestly, although not as much as the sharp drop recorded in the Philly Fed. This was a slight cause for concern as the NY Fed index is typically the more volatile of the two and the Philly Fed is a more reliable indicator of what is actually going on. However, given the possible disruption from Katrina there was additional reason to treat all of the data with some caution. Today’s data will perhaps be taken more seriously as it will provide some indication of the situation after Katrina, although a full picture will not be provided until the Philly Fed survey is released on Thursday.
Data/event EDT Consensus*
US Greenspan in Japan (Oct 17-18)
US NY Fed index (Oct) 08.30 20.0
US Fed’s Santomero spks on policy 16.30
US Snow speaks in China 21.00
US Greenspan speaks on energy 21.30
Latest data Actual Consensus*
NZ CPI (Q3) q/q +1.1% +1.2%
NZ CPI (Q3) y/y +3.4% +3.4%
GB Rightmove house prices (Oct) y/y +1.5% +1.6% last
NO Trade balance (Sep) NOK26.5bn NOK30.3bn
* 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.
Ian Gunner 44 20 7163 5996 06.40 EDT Monday May 31 2005
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