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Forex Market News - Mellon FX Daily - U.S. Edition
Mellon FX Daily 06:10 EDT
â€¢ Poor US new home sales but market will reserve some judgement for now.
â€¢ German IFO surpasses market expectations
â€¢ Risk to the downside on EUR-USD today unless more weak US data is seen â€“ consumer confidence due.
The USD was undermined by yesterdayâ€™s sharp drop in new home sales,
although the US equity market managed to recoup its initial losses. On the face of it the data does look bad, with sales falling back to levels not seen since August 2000. However, while the market will be left with the suspicion that the housing situation is still a sickly one, there may be a reluctance to buy wholeheartedly into this view. First of all, the new home sales data series is extremely volatile (the most volatile of all the US housing releases). Second, the existing home sales trend looks distinctively different, with sales having turned higher over the past couple of months. The market will reserve some judgement in deciding which is portraying the more accurate picture.
was steady through the Asian session, but rose for a while in Europe following the release of a stronger than expected set of IFO numbers. However, even though we still see the market under pricing rate hike risk in the Eurozone, the IFO survey is unlikely to change this dramatically just yet. How EUR-USD ends today will depend upon the US consumer confidence data (see below for preview), although a weak number may be required to prevent a drift back lower. The window of opportunity for JPY
strength we alluded to on Friday and Monday is starting to close. The JPY has been reasonably stable and the tone of global equity markets and Fridayâ€™s data will be critical for short-term direction. However, in the absence of bad news of this nature the market will increasingly look to the possibility of a weaker JPY once the new financial-year gets up and running next week.
traded lower in Europe following comments from MPC officials (testifying in front of a Treasury Committee) that failed to provide any hints about the possibility of a rate hike at next weekâ€™s MPC meeting. The event risk related to this meeting has been reduced and further GBP underperformance could be seen initially.
â€“ the Conference Board measure of consumer confidence is due and has been showing strong over the past few months, with the latest reading of 112.5 being the highest seen since August 2001 (i.e. before 9/11). With the Michigan measure of sentiment having fallen back mid-month, the market is looking for a decent pullback in todayâ€™s number. Given the heightened focus on the economic data, a weak number today may not be taken too well by the market, although anything above 105.0 would still suggest a reasonably robust confidence backdrop.
Data/event EDT Consensus*
US Chain store sls (w/e Mar 24) w/w 07.45 +0.4% last
US Redbook sls (w/e Mar 24) m/m 08.55 +0.5% last
US Consumer confidence (Mar) 10.00 108.5
US ABC consumer conf (w/e Mar 25) 17.00 -5 last
Latest data Actual Consensus*
JP CSPI (Feb) y/y +0.4% +0.6%
AU New home sales (Feb) +2.9% +5.8% last
IT Business confidence (Mar) 94.9 95.0
DE IFO index (Mar) 107.7 106.5
DE IFO current (Mar) 112.4 111.0
DE IFO expectations (Mar) 103.2 102.3
GB BBA mortgage approvals (Feb) y/y -5% -16% last
* 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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