Thursday September 2, 2004 - 09:58:05 GMT
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INVESTICA Ltd - www.investica.co.uk
Payroll tensions build
The run of disappointing data will unsettle the US dollar, but the employment report tomorrow will continue to overshadow near-term activity. The net risks are marginally dollar negative with speculation over a weak figure tomorrow and some concern over a fresh rise in oil prices. Nevertheless, the Euro is likely to be held in a 1.2150-1.2225 range. The ECB should keep rates unchanged.
The dollar weakened to a low of 1.2220 after a brief security scare, but the US currency was generally trapped within a 1.2150-1.2200 range as caution remained the dominant influence.
The US economic data remained disappointing with the ISM index for the manufacturing sector dropping to 59.0 in August from 62.0 in July. Orders weakened slightly and there was also a drop in the employment component. Last month, a decline in the employment component was followed by a weak payroll report and there will be some nervousness that this Friday's US employment report will also be weak.
The Friday report will remain the dominant market influence with markets expected a 160,000 increase. The jobless claims figures will be monitored today and, although a substantial reaction is unlikely, the dollar will be slightly vulnerable on a weak figure as this would raise doubts over the employment report tomorrow.
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