Wednesday September 22, 2004 - 10:18:04 GMT
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US OPEN MARKET POINTS 09-22-04
Trend or Range?
Having gained 200 points in the last 36 hours the EUR/USD paused tonight as mixed European data offered little reason for further gains in the pair just yet. Although Italian consumer confidence data reached a yearly high, Italian hourly wages made absolutely no progress in the month of August registering 0% growth. Meanwhile French consumer spending dipped below expectations in July as car sales plunged 8.7% but then rebounded above consensus in August on strong 7.2% year over year jump in Retail Sales. The story of Europe these days can be summarized by mild recoveries of France and Italy and dour stagnation of the continent’s most important member – Germany. The recent election successes of both neo-Nazis and former Communists in East Germany hardly infuse investors with confidence that German economic issues will be resolved any time soon.
Presently, the central debate in the FX market is - did yesterday’s move finally signal a breakout for the euro that could take it beyond 1.2450 and possibly to 1.2900 by year’ s end? Or do we retreat back into range once the market fully absorbs yesterdays relatively placid Fed statement that retained “measured” as the key word? Much as we would like to join the dollar bears we feel that action may be a bit premature. US data has not definitively confirmed a full slowdown in US economy and until it does so, the most likely scenario is the endless back and forth trading that we’ve seen all year. One of the primary reasons for our hesitation is that we have little faith in the euro’ s ability to attract demand on its own merits. As long as it trades as the “anti-dollar” it will be subject to the vagaries of the greenback rather than its own value. Meanwhile, we are carefully watching the existing home sales numbers due Friday. If housing sales decline and US consumer suddenly realizes that his primary source of wealth is no longer increasing in value, the effect on US economy will be enormous and that may indeed create a dollar bearish trend.
FX Spot Overnight
- EUR retraces to the 2300 handle off Asian session highs on mixed eco data
- JPY usual 109.5-110.5 range as importers and exporters trade back and forth
- GBP trades down to 7925 on back of surprisingly dovish BOE minutes
- CHF touches 2550 and trades back 2590
11:00GMT – (7:00 AM EST) USD MBA Mortgage week Sept 17 Expected at --, Previous -2%
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