Friday July 21, 2006 - 10:43:44 GMT
Share This Story
Mellon Bank Foreign Exchange - https://fx.mellon.com/
Forex: Mellon FX Daily - U.S. EditionKey Points
â€¢ EUR-USD currently testing resistance at 1.2660-80.
â€¢ Equities give up some gains, emerging currencies holding their ground.
â€¢ Calmer Fed sentiment remains intact for now.
â€¢ UK GDP just ahead of market expectations.
â€¢ Canadian CPI features today.
Global equity markets have given up some of the gains seen following Wednesdayâ€™s testimony from Bernanke, although emerging currencies have remained generally well supported. Not much has changed. Yesterday, Bernanke largely repeated the message from Wednesday and a similar theme was also conveyed in the minutes of the June 29 meeting. However, while markets have been comforted by the Fed signals of this week, there remains some uncertainty about what will happen at the August 8 FOMC meeting and this will pose a constraint on the extent to which higher risk assets advance over the next couple of weeks.
In such an environment, major movement in currencies seems unlikely, although overall, a softer USD
remains the most likely outcome in the short-term unless there are any worrying signs in the data that would upset the prospect of a calmer Fed policy backdrop. There is no data due today to offer such disruption, while next week sees the release of consumer confidence, existing and new home sales, the Beige Book for the August 8 FOMC, durable orders, the 1st estimate of Q2 GDP/core PCE prices, the Q2 employment cost index and Michigan sentiment. Monthly core PCE prices, ISM surveys and the employment report are due the following week. The immediate barrier for EUR-USD
is at 1.2660-80 and it has been testing this area throughout the European morning. This should be broken in the short-term.
Also, as noted yesterday, there is a better chance of some individual themes emerging, e.g. a stronger AUD on the basis of the expected RBA rate hike on August 2. A break above resistance at 0.7570 is favoured in the short-term. Intermediate resistance is at 0.7535.
More stronger than expected data out of the UK, this time in the form of a +0.8% q/q advance in Q2 GDP. After recent modest upward revisions the last three quarters combined have been the strongest since Q403-Q204 and this will maintain market suspicions about the risk of a rate hike later this year. However, amongst other things, some evidence of further strength in retail sales will be required in the next couple of months to turn this into a reality and that is by no means assured. EUR-GBP should retain good support ahead of 0.6810-15.
â€“ June CPI data will be significant to see whether there is any further advance in the BoCâ€™s measure of core CPI after last monthâ€™s jump to +2.0% from +1.6%. This number was doubly shocking on account of the period of stability that had preceded it - the y/y rate having been either +1.6% or +1.7% in each of the previous nine months. The primary reason for the May rise was a spike in electricity prices. The BoCâ€™s particular core measure excludes what they consider to be the eight most volatile items in the CPI as opposed to a blanket exclusion of all food and energy items. However, the CPI ex-food and energy also showed some strength, jumping to +1.8% from +1.6% previously. The market is looking for a further advance in the CPI (ex-eight items) to +2.1% from +2.0%, but it will need to be a lot stronger than this to fuel suspicions about a resumption of BoC tightening. The BoC statements last week suggested they are currently quite satisfied that the current level of interest rates will achieve their growth and inflation goals and other data released last week (e.g. exports) backed up their growth moderation scenario. USD-CAD remains set in a 1.1250-1.1400 range for now, although there could be some activity today if CPI is unusual â€“ 1.1300-1.1360 are interim levels of minor significance.
Data/event EDT Consensus*
CA CPI (Jun) y/y 07.00 +2.8%
CA CPIX (Jun) y/y 07.00 +2.1%
Latest data Actual Consensus*
JP All-industry index (May) m/m -0.2% -0.4%
FR Hâ€™hold consumption (Jun) m/m +1.7% 0.0%
IT Consumer confidence (Jul) 108.7 107.6
GB GDP (Q2, 1st est) q/q +0.8% +0.7%
IT Retail sales (May) m/m -0.1% +0.2%
* 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
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."