Monday July 12, 2004 - 10:50:42 GMT
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Forex: US OPEN MARKET POINTS 07-12-04
The Week of Range or Trend?
In July not one major piece of US economic data exceeded consensus expectations. From disappointing payrolls (which actually reported end of June) to lower PMI, to recent retail warnings from Wal-Mart, Target and the autos USD bulls have had little reason for cheer. The one positive data point- last week’s substantially smaller unemployment claims (310K vs. 345K expected) – was quickly quashed by comments from the Labor Department that seasonal aberration may have skewed the data. The USD now stands at a critical juncture having reached its range limits against the EUR (1.20-1.25) GBP (1.80-1.85) JPY (108-112) and CHF (1.23-.1.27). The key question facing FX traders this week: will USD slip into a sustained downtrend as these price points break or will the pressure on USD bulls recede as better than expected US eco data brings the dollar back into range?
This week ‘s economic calendar consisting of Current Account data, Retail Sales, PPI and CPI numbers may be a mixed bag. CALYON research calls for CA and retail data to disappoint while PPI and CPI may come in bullish showing a slowdown in inflation. Easing of geo-political tensions may be another possible benefit to the dollar. Over the week-end the DUMA (Russian Parliament) voted to insure all bank accounts thus preventing further runs on the ruble, no additional acts of pipeline sabotage occurred in Iraq and Yukos offered to settle its tax bill problems with Russian government. Should oil now trade below $40/bbl it may offer just enough support for USD bulls to keep the dollar in its range. If however, this week’s eco data continues to materially disappoint, the market may push the greenback into a sustained slide much to the displeasure of both BOJ and ECB whose export driven economies will begin to suffer.
Key Overnight Developments
- JPY LDP manages to hang on to power but does not win enough seats for clear majority in Upper House (60/121)
- DEM CPI lower (1.7% vs.2% expected) on cheaper cost of oil
- GBP PPI lower but Housing Prices print above expectation (12.2% vs. 11.3% expected) spurring possible hikes from MPC
FX Spot Overnight
- EUR regains 1.24 handle on good DEM CPI data
- JPY slightly below 108 as market digests LDP’ s narrow win
- GBP breaks through 86 as lower PPI and strong housing create the possibility of low inflation/high rate environment
- CHF again approaches 22 handle on persistent USD weakness
No USD Economic Releases Scheduled
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