Friday October 21, 2005 - 10:35:12 GMT
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Mellon Bank Foreign Exchange - https://fx.mellon.com/
Forex:Mellon FX Daily - U.S. EditionKey Points
• EUR-USD steadier while above 1.2000-25.
• Strong Japanese data and weakening oil prices offer hope for the JPY – but 115.00 needs to break.
• UK GDP in line with expectations.
• Canadian retail sales feature today.
DJapanese activity indices
came out stronger than expected and the Japanese economic recovery seems to be progressing well (see chart). This provides one avenue of eventual support for the JPY, although in the meantime, with rate expectations with the US still diverging and the break above 115.00 still intact, upside risk remains in place on USD-JPY. However, this could be put to the test today if the USD weakens further against European currencies. A further fall in oil prices could also support the JPY, but a close back below 115.00 is needed.
moved above 1.2000-25 in the US afternoon, around the same time as US equity indices were breaking sharply lower. This sensitivity to equities suggests that equity market performance may have a further influence today. As it currently stands there is near-term upside risk on EUR-USD while it stays above 1.2000-25. This is the third week running that EUR-USD has tested lower and failed to break key levels. The pullback after the first attempt was to 1.2203, while the second reached 1.2120 and they are now the key levels alongside the o/n high at 1.2078. Overall downside risk remains in place though.
The first estimate of UK Q3 GDP
came out in line with market expectations and consistent with the lacklustre performance over the past year. However, last week’s minutes suggest that the MPC does not have full confidence in this data at the present time, which is a clear cause for concern given that GDP is one of the key pillars of the CPI forecast they prepare for the Inflation Report.
retail sales data is due and in recent months this has been fairly strong, so even a softish number today is unlikely to detract from current BoC tightening expectations. The current headache for the CAD is the fall in energy prices, although while this is a potential short-term negative, it will also enhance BoC rate hike expectations, as it will make the BoC more confident about the future evolution of global demand.
Data/event EDT Consensus*
CA Retail sales (Aug) m/m 08.30 -0.4%
CA Retail sales ex-autos (Aug) m/m 08.30 +0.6%
Latest data Actual Consensus*
JP Tertiary index (Aug) m/m +1.7% +0.9%
JP All-industry index (Aug) m/m +1.1% +0.8%
FR H’hold consumption (Sep) m/m -0.6% -1.2%
IT Retail sales (Aug) m/m +0.6% +0.1%
GB GDP (Q3, 1st est) q/q +0.4% +0.4%
* 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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