Wednesday August 11, 2004 - 11:11:23 GMT
Share This Story
DailyFX.com - www.dailyfx.com
US OPEN MARKET POINTS 08-11-04
One of our readers emailed us today with a succinct summary of night activity. “Is the patient dead?” he inquired sarcastically. Indeed looking at FX price action for the past 10 hours one can easily come to that conclusion. With the reflex USD rally caused the FMOC rate hike over for now, order flow seems to have completely dried up as both dealers and customers focus more on their summer vacation plans than trading FX.
The Fed’s FOMC statement yesterday was as unsurprising as it was uninspiring. The Fed chose to chant its mantra of positivism even as eco data continued to show that the economy may be slipping into deflation or worse yet stagflation. The most unintentionally amusing eco news headline of the past 24 hours came from the National Federation of Independent Business which proclaimed that its monthly small business optimism index rose 2.9 points in July to 105.9 – the 2nd highest reading since 1983 – while at the same time noting a full 9% monthly drop in the ability of its members to pass on price increases to their customers. It seems to us that inability to increase prices will greatly hamper ones ability to augment profits but perhaps the business owners will discover that in the next months survey.
In the meantime, the weekly Redbook retail report showed sales to be down by –0.5% from the 1st week of July indicating continued contraction of consumer demand. As we have frequently noted, with wages stagnant the US consumer is tapped out. US businesses may be entering a vicious deflationary cycle as more goods chase fewer dollars. This dynamic is aggravated by rising oil prices which reduce discretionary income even further. Indeed, the 17MM unit run rate in auto sales in July was achieved mainly through $6,000 per car incentives. The business process in the US today seems to have been reduced to -- let’s manufacture sales by giving product away for free.
Against this backdrop, Fed’s Pollyanna act, based on nothing more than pure hope of eventually lower oil prices leading to a robust pick up in business activity, may be wearing thin with the market as traders begin to view additional rate hikes more as a death knell for the economy rather than support for the dollar. There are no news releases today, but tomorrow’s Retail Sales report becomes the central data point for the week, as it offers USD bulls one final chance to prove the “its only a soft patch” thesis. If the report prints materially above expectation it may put a temporary bid into the greenback, meanwhile tight range trading seems the order of the day.
Key Overnight Developments
- AUD Westpac Consumer Confidence Index for August rises by .1% to record high 119.6 off strong AUD and Gov’t payments
- GBP In BOE Inflation Report King notes that housing may have peaked, oil won’t be a big inflationary burden and overall UK growth may slow to 2% in 2 years – all dovish comments leading traders to conclude that future rate hikes may be capped
FX Spot Overnight
- EUR flutters down to 2210 but finds support as bids accumulate around the 2200 level
- JPY capped at 111.50 by exporters but still victim to oil rather than its own data
- GBP holds 8250 but King’s dovish comments make the cross heavy as rate hikes seem to have peaked
- CHF still quiet between 2630-2590
No News Releases Scheduled
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."