Monday May 15, 2006 - 10:31:16 GMT
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Mellon Bank Foreign Exchange - https://fx.mellon.com/
Forex: Mellon FX Daily - U.S. EditionKey Points
â€¢ Fragile global markets hurt emerging currencies â€“ offering some support for the USD against the
â€¢ This looks set to continue today, although the actions of â€˜naturalâ€™ USD hedgers will also be key.
â€¢ NY Fed index, TIC portfolio data and NAHB housing index are todayâ€™s features.
After retesting recent lows against the majors in Asia, the USD has recovered in the European session. This is a sign of some unease about holding positions in general given the growing fragility of global markets. Equities, emerging currencies and commodities have all been under the hammer this morning. Risk appetite is being reined in and as noted in this document on Friday this can benefit the USD in two ways. First, by way of a return of emerging flows back in to the predominantly USD investor base and second, the impact that heightened levels of general uncertainty could have on positional appetite of any kind, including being short USDs. If this became really bad there may also be talk of problems on some positions (e.g. commodities) creating the need to close positions elsewhere e.g. USD shorts.
Almost all emerging currencies
have suffered overnight, even those like the KRW that have been at the forefront of the recent move against the USD. If this continues it should provide some further general support for the USD, although much will also depend upon the actions of natural potential hedgers like US asset holders and exporters to the US. If they are spurred into action the USD would probably fall anyway against the majors. This uncertain environment is likely to mean more choppiness on currencies today, but recent USD lows against the majors may well hold for now. The performance of equity and commodity markets over the next few days will be key in determining how risk appetite develops in the short-term.
New Zealand retail sales
were weaker than expected at -1.0%, although this did come after a very strong 1.9% rise in the previous month, so the data seems to be exhibiting volatility more than anything else. The NZD
has weakened with other peripheral currencies this morning. In fact it has outperformed the AUD
â€“ another sign that this move is all about position cutting (the AUD having been a firm favourite of recent weeks).
the NY Fed survey, NAHB housing market index and the TIC portfolio data for March feature today. The portfolio numbers could cause market reaction, especially if the headline inflow number is much lower than expected. However, flows are likely to have held up well. The NY Fed survey is also likely to be fairly solid. The NAHB housing index is less clear and the market will be anxious to see whether or not last monthâ€™s sharp drop to multi-year lows (see chart) is sustained.
Data/event EDT Consensus*
US NY Fed index (May) 08.30 +15.3
CA Manu shipments (Mar) m/m 08.30 +0.9%
US TIC intl portfolio balance (Mar) 09.00 +$80bn
US NAHB housing index (May) 13.00 50
GB RICS house prices (Apr) 19.30 +14%
Latest data Actual Consensus*
NZ Retail trade (Mar) m/m -1.0% -0.1%
GB Rightmove house prices (May) y/y +5.9% +4.1% last
JP Domestic CGPI (Apr) y/y +2.5% +2.3%
JP Current account (Mar, sa) Â¥1.7trn Â¥1.7trn
JP Machinery orders core (Mar) m/m -5.2% +0.4%
NO Trade balance (Apr) NOK35.8bn NOK32bn
GB ODPM house prices (Mar) y/y +3.3% +4.0%
* Consensus unless stated
ï›™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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