Tuesday July 27, 2004 - 11:08:25 GMT
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US OPEN MARKET POINTS 07-27-04
In what started out as one of the more listless European sessions in recent memory the majors remained moribund in early trading as dealers focused more on option related price maneuvering rather then any new economic data. However, once the IFO Industrial Survey of German Business Confidence reported a mild surprise to the upside (95.7 versus 95 expected), the euro quickly gained 50 points. Present and future components of the IFO index contained better then expected results as well, indicating that the export led recovery in the Euro-zone may be finally filtering down to the domestic economy. The majors were further aided by strong UK Mortgage Lending data. Mortgages in UK expanded to 18Bn GBP in June from 16Bn GBP in May. The growth in mortgage figures solidified expectations that BoE will raise rates by 25bp at the next MPC meeting making pound more attractive to investors. By year end, some traders now envision BoE rates of 5.25% up from the current 4.5%.
Tomorrow, US Durable Goods Data will be the first key economic statistic released after Mr. Greenspanís upbeat presentation to Congress last week. Should the number print materially worse then the 1.5% expected the dollar may experience a violent sell off as market participants question the veracity of Mr. Greenspanís analysis. However, if as most likely, the data comes in-line then the rest of the week may experience a compression in volatility with positive US data canceling out positive Euro-zone data, forcing bulls and bears to a standstill. Indeed, as we approach August and traders minds turn more to the beach rather than the latest twists of monetary policy, the seasonal summer stall may reduce trading ranges to even tighter channels than we have recently experienced. Of course, summer or not, any unexpected geo-political event would shatter such tranquility in an instant.
Key Overnight Developments
- JPY Nikkei falls 1.15% for fourth session in a row hitting 7 week low.
- EUR IFO surprises to the upside 95.7 vs. 95 as present and future components express more optimism.
FX Spot Overnight
- EUR breaks through 2150 on good IFO data but meets resistance at 2200
- JPY in very tight range between 110-109.50 as Nikkei losses weigh heavy
- GBP rallies to 8440 on Mortgage data but quickly turned back to 8400 handle
- CHF reverses off 2660 back to 2600 traders await KOF tomorrow
14:00GMT - (10:00 AM EST) USD Consumer Confidence (July) Expected at 102, Previous 101.8
14:00GMT - (10:00 AM EST) USD New Home Sales (June) Expected at 1253k, Previous 1369k
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