Previous session overview
Currency traders took profits Tuesday on intraday moves ahead of the European Central Bank meeting Thursday. In addition, on Friday, the latest U.S. payrolls report will be released, and economists doubt there will be any positive news, leading traders to hesitate in extending previous gains.
Federal Reserve Chairman Ben Bernanke said U.S. economic growth is likely to resume later this year and said the weakened housing market appears to be reaching a bottom. Moreover, a report on activity in the U.S. service sector shrank less steeply than expected in April.
The euro reached a one-month high in early trading Yesterday, but quickly pulled back ahead of Thursday's ECB meeting. The ECB is expected to cut its main interest rate by 25 basis points to a record low of 1 percent.
GBP ended the evening session slightly stronger, spiking from USD1.5000 to USD1.5160, and settling at USD1.5070. UK construction PMI was a positive surprise.
The yen rose against the U.S. dollar and the euro in Asia on Wednesday, boosted by flight-to-safety moves and a report that Bank of America (BAC) may be forced to raise an additional USD34 billion. The yen, a traditional outperformer when risk aversion hits global markets, was also boosted by uncertainty ahead of the European Central Bank meeting Thursday.
The Australian dollar cooled its heels in Asia Wednesday, falling from fresh seven months highs it set during New York trading as looming results from the U.S. banking stress tests unnerved investors.
Market expectation
European stocks are expected to open lower Wednesday, as concerns regarding the U.S. bank stress tests gather momentum.
The euro, pound and dollar are all lower Wednesday against the yen, which gained after reports that Bank of America may need to raise a further USD35 billion in capital.
Early European dealing sees the EURUSD trying to regain the USD1.33 handle at time of writing. Further stops are placed at risk on the downside through USD1.3230, ahead of bids from USD1.3215/00. Offers seen placed at USD1.3300 now under pressure, more around USD1.3330 with short-term stops through USD1.3335/40.
Euro-sterling continued to trade heavy after Tuesday's slippage to stg0.8828, though the cross did at least manage to hold above, trading in a stg0.8830/525 range. Cable has moved back towards USD1.5050 into the European session, with the cross still holding mid-range. Trend line support from the Feb lows seen under pressure, coming in around the base in the cross, with a break set to expose the April lows at stg0.8787. Cable sees light offers at USD1.5050, stronger at USD1.5080, with bids into USD1.4990 and USD1.4970.
Focus in coming days will be the European Central Bank's policy meeting Thursday, and any hint at quantitative easing or bearish talk on the economy will further cement the risk averse mood.
Analysts will focus on any accompanying statement that will indicate it will keep cutting rates or adopt a different approach like buying securities to stimulate growth. If the ECB indicates they will keep to a much more traditional policy then look for the euro to push as high as the USD1.35-USD1.36 range, said analysts.
Most important events of the day
| 6-May | Count. | Event | For | Unit | Imp. | Act. | Cons. | Prev. |
| 0:00 | US | Chicago Fed 45th Annual conference on Bank structure and competition (6th-8th May) | Low | |||||
| 1:30 | AU | Retail trade | Mar | % m/m | High | 0.5 | -2 | |
| 1:30 | AU | Retail trade | Q1 | % q/q | High | 0.8 | ||
| 1:30 | AU | Trade Balance | Mar | A$ bn | High | 1.7 | 2.1 | |
| 2:30 | US | San Francisco Fed President Yellen will speak on "Issues raised by the credit crunch and recession" at a conference organised by the University of California, Berkley | Low | |||||
| 7:00 | ES | Industrial production (wda) | Mar | % y/y | Low | -19.7 | -22 | |
| 7:00 | CH | SNB Governing Board Member Jordan to speak in Zurich on "Monetary policy in times of financial crisis" | Low | |||||
| 7:00 | EU | European Parliament to vote on bill to boost banks and financial institutions capital requirements, Strasbourg | Low | |||||
| 7:45 | IT | Services PMI | Apr | index | Low | 40.9 | 39.1 | |
| 7:50 | FR | Services PMI | Apr | index | Low | 46.2 | 43.6 | |
| 7:55 | DE | Services PMI | Apr | Index | Low | 43.5 | 42.3 | |
| 8:00 | EU | Composite PMI | Apr | index | Low | 40.5 | 38.3 | |
| 8:00 | EU | Services PMI | Apr | index | Low | 43.1 | 40.9 | |
| 8:00 | GB | Halifax House Price Index (6th-8th) | Apr | % 3m y/y | Low | -17.5 | -17.5 | |
| 8:00 | GB | Halifax House Price Index (6th-8th) | Apr | % m/m | Low | -1 | -1.9 | |
| 8:30 | GB | CIPS Services PMI | Apr | index | Low | 46.3 | 45.5 | |
| 9:00 | IS | Trade Balance (P) | Apr | ISKbn | Low | 8.3 | ||
| 9:00 | EU | Retail Trade | Mar | % m/m | High | 0.1 | -0.6 | |
| 9:00 | EU | Retail Trade | Mar | % y/y | High | -2.6 | -4 | |
| 9:30 | GB | BRC Shop price index | Apr | %y/y | Low | 0.7 | 2 | |
| 9:30 | EU | ECB Executive Board member Tumpel-Gugerell will give a speech on "Euro ten years" at Karlsruhe University of Applied Sciences | Low | |||||
| 12:00 | NO | Norges Bank Interest Rate Announcement; press conference at 12:45 GMT | Low | |||||
| 12:15 | US | ADP Employment | Apr | k | Med | -645 | -742 | |
| 12:30 | CA | Building permits | Mar | % m/m | Med | 2.3 | -15.9 | |
| 13:30 | US | Minneapolis Fed President Stern FDIC Chairman Bair to testify before the Senate Banking Committee on " Regulating and resolving institutions considered 'To Big to Fail'", Washington | Low | |||||
| 14:00 | CA | Ivey PMI | Apr | index | High | 40.8 | 43.2 | |
| 16:15 | CH | SNB Chairman Roth to speak at the Institute for International Research in Zurich | Low | |||||
| 18:10 | SE | Governor Ingves will give an speech on "The current economic situation" (Published at 13:00GMT), Stockholm | Low | |||||
| 21:00 | CA | BoC Governor Carney and Senior Deputy Governor Jenkins to testify before the Senate Committee on Banking, Trade and Commerce | Low | |||||
| 21:30 | US | San Francisco Fed President Yellen will speak before the Australian Business Economist breakfast in Sydney via satellite | Low | |||||
| 22:45 | NZ | Employment Growth | Q1 | % q/q | Low | -1 | 0.9 | |
| 22:45 | NZ | Unemployment Rate | Q1 | % Rate | Low | 5.3 | 4.6 |
