Tuesday June 19, 2007 - 10:56:49 GMT
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Forex Research - Mellon FX Daily - U.S. Edition
Mellon FX Daily 06:40 EDT
â€¢ EUR-USD pegged back a little in Europe, but nearterm upside bias remains in place.
â€¢ US NAHB housing index falls further.
â€¢ Downward pressure on JPY to continue.
â€¢ Canadian CPI, US housing starts and building permits feature today.
A weak NAHB housing index (lowest since February 1991) added to the softer tone for the USD against the EUR and GBP in Asia/early Europe, but this was pegged back a little as the European morning unfolded. Part of this was due to weaker than expected ZEW surveys for Germany and the Eurozone, but these numbers are unlikely to undermine perceptions about the strong economic backdrop in the Eurozone. An upside bias remains in place on EUR-USD
after Fridayâ€™s upmove, with room up towards the 1.3485-1.3550 area in the very short-term. US housing starts and building permits are due today.
Japanese finance minister Omi repeated the comments of Friday when he said that he would be watching currencies carefully. This is a slight step-up in rhetoric compared to recent months, suggesting some modest dissatisfaction with the latest weakness in the JPY
but official protests will need to be stronger than this to have any bearing on market sentiment. The JPY continues to face an uphill battle given last weekâ€™s more dovish comments from BoJ governor Fukui, the recent further widening in interest rate differentials and ongoing buoyancy in global markets. JPY bias remains to the downside.
â€“ CPI will need to be weak to dampen expectations about a BoC tightening on July 10. Core CPI has been higher in recent months, although the market is looking for a pullback from 2.5% to 2.3% in this latest data. USD-CAD has been in corrective mode over the past couple of weeks following the May plunge below 1.0930. Excessive USD-CAD short positioning remains a problem in this regard and USD-CAD needs to stay below 1.0775 to avoid further upward corrective pressure in the short-term. In the absence of data disasters an eventual move lower is likely ahead of the July 10 BoC meeting.
â€“ housing starts and building permits feature today. Last month did see a rebound in housing starts after a very weak Q1, although building permits fell to a new low for the cycle.
â€“ the quarterly MoF business survey is out tonight and anything very strong or weak will influence sentiment about the likely outcome of the Tankan survey, due July 2.
Data/event EDT Consensus*
CA CPI (May) y/y 07.00 +2.2%
CA BoC core CPI (May) y/y 07.00 +2.3%
US Chain store sls (w/e Jun 16) w/w 07.45 +1.0% last
US Housing starts (May) 08.30 1472k
US Building permits (May) 08.30 1473k
US Redbook sls (w/e Jun 16) m/m 08.55 -1.0% last
US ABC consumer conf (w/e Jun 17) 17.00 -13 last
JP MoF manu survey (Q2) 19.50 0.1 last
JP MoF all-industry survey (Q2) 19.50 6.2 last
JP All-industry index (Apr) m/m 19.50 +1.2%
JP BoJ minutes (Apr 27 & May 16/17) 19.50
Latest data Actual Consensus*
US NAHB housing index (Jun) 28 30
DE ZEW expectations (Jun) 20.3 29.0
EU ZEW expectations (Jun) 19.0 26.0
* Consensus unless stated
Â©2007, 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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