Wednesday August 23, 2006 - 10:46:31 GMT
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Mellon Bank Foreign Exchange - https://fx.mellon.com/
Forex: Mellon FX Daily - U.S. EditionKey Points
â€¢ EUR-USD steadier in Europe, but market will remain wary of EUR ahead of tomorrowâ€™s IFO.
â€¢ US home sales data today will be significant
â€¢ Japanese trade data shows continuing export strength.
has managed to stabilise a little in Europe this morning, although market caution about the EUR will likely persist ahead of tomorrowâ€™s German IFO outcome. This will be critical in determining how seriously the market then views yesterdayâ€™s ZEW weakness and whether there is any further impact on ECB rate hike expectations - specifically the 25bp rate hikes pencilled in for Oct and Dec. It will also be significant for EUR-USD direction, at least within the current range â€“ 1.2700/1.2950-1.30. Support for today comes in at 1.2780, while resistance should be fairly solid at 1.2840-60. Todayâ€™s US home sales data (see below for preview) will be significant in determining which end of this range is tested.
Yesterdayâ€™s comments from Moskow (currently not a voting member of the FOMC) were clearly aimed at suggesting to the market that it is too early to call a peak in US rates and that a tightening bias is still in place. While he did express confidence in the notion that inflation should eventually move back into a more acceptable range, he said there were costs of the Fed waiting too long for this to happen. However, the basic premise of data dependency remains intact.
Japanese trade data
was fairly close to market expectations and included another decent rise in exports. As one can see from the chart, exports continued to strengthen in trend terms and for the time being at least this will offer comfort to those concerned about Japan being affected by weaker growth in other countries. However, the immediate concern for the JPY is Fridayâ€™s CPI data and the market will remain edgy ahead of this release.
â€“ existing home sales will be closely watched given the current focus on the status of the housing market as a key factor for the consumer going forward. Pending home sales have been generally soft and over the past couple of months existing home sales have also started to soften after the volatility seen in Q4 and Q1. The immediate trend in existing home sales is now clearly to the downside, although this is a volatile series and anything can happen on a m/m basis.
Data/event EDT Consensus*
CA Leading indicator (Jul) m/m 08.30 +0.2%
BE Business confidence (Aug) 09.00 5.4 last
US Existing home sales (Jul) 10.00 6.55m
NZ Trade balance (Jul, nsa) 18.45 -NZ$450m
JP CSPI (Jul) y/y 19.50 0.0%
AU House prices (Q2) q/q 21.30 +1.2%
Latest data Actual Consensus*
US ABC consumer conf (w/e Aug 20) -14 -15.0 last
JP Trade balance (Jul, sa) Â¥750bn Â¥800bn
GB CBI manu orders balance (Aug) -8 -11
* 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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