Thursday July 22, 2004 - 11:09:55 GMT
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Forex: US OPEN MARKET POINTS 07-22-04
Upping the Range?
In a remarkable display of Fed’s power over the FX market Alan Greenspan’s two day testimony to Congress produced a 400 pip slide in the GBP a 250 drop in the EUR and a 200 pip decline in JPY. The Fed chairman made a forceful case for USD bulls by stating that US economy is strong, inflation is transitory and monetary policy need no longer be accommodative. More astonishing was the markets complete acceptance of his argument, for as we have incessantly pointed out there is little evidence to support such unabashedly positive view. If, for example, the August 6th Non-Farm Payroll number prints materially below 200K base level of job growth, will the Fed still raise rates at the August 10th FOMC meeting? Furthermore, Mr. Greenspan’s “transitory” view of inflation continues to be challenged by headlines as Russian oil giant Yukos is now on the verge of filing bankruptcy which could lead to disruptions from the world’s 2nd largest exporter. With oil stubbornly holding the $40 handle in NYMEX overnight trading inflation could remain a threat.
On the more immediate front tonight’s economic news from the Euro-zone is highly bullish as French consumer spending surged at 10 times expected rate (4.2% vs. 0.4%) and British retail sales climbed to 1.1% from 0.4%. These data points indicate that Europe may have finally revived its domestic demand, while UK maintains its spot as the strongest economy in the G-7 block. In the US the eco data is expected to be lackluster as weekly payrolls are projected to report 345K -- with some analysts even expecting 375K -- and the LEI coming in flat at 0.0% vs. last month’s rise of 0.5%. The contrast of positive Euro data and tepid US numbers may create new support for the majors at higher levels then the previous range lows. Thus, the EUR/USD range may now move up from 1.20-25 to 1.22-26, GBP/USD from 1.80-85 to 1.83-87 and USD/JPY from 108-112 to 107-110.
Key Overnight Developments
- JPY Fukui: BOJ “has plenty of time” to keep easy monetary policy
- GBP Retail Sales spike in June on Euro Cup spending - 1.1% vs. 0.4% expected
- EUR Trade Balance shrinks as euro gain hurts exports
FX Spot Overnight
- EUR recovers from plunge to 22 handle and consolidates around 2250
- JPY moves back to 109 after exporters hit hard the bids around 110
- GBP holds the 8350 level and then surges to 8450 in morning Euro trade
- CHF trades below 2500 in a slow fade after yesterday spike to 2575
12:30GMT - (8:30 AM EST) USD Initial Jobless Claims (Jul 17) Expected at 345k, Previous 3497K
14:00GMT - (10:00 AM EST) USD LEI (June) Expected at 0.0%, Previous 0.5%
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