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European and US summary

USD Slips, Central Banks Eyed

Tue, May 6 2008, 23:42 GMT
by Korman Tam

Forexnews.com

5/6/2008 2:53 PM: EUR/$..1.5530 $/JPY..104.64 GBP/$..1.9732 $/CHF..1.0494 AUD/$..0.9496 $/CAD..1.0025

USD Slips, Central Banks Eyed

The greenback continues to give back last week’s gains, falling just shy of the 1.56-level and 104 against the yen. The dollar remains under pressure amid soaring oil prices, with crude oil surging to another record above $122 per barrel and fresh calls oil to reach $150 to $200 barrel over the next two years.

Markets will turn to US economic data on Wednesday, which consist of Q1 labor costs, preliminary Q1 productivity and pending home sales.

 
Sterling Recoups Losses

The sterling recovered from its earlier losses bouncing from 1.9638 to climb above the 1.97-level. The catalyst for the initial sell-off was a softer than expected UK services PMI report, in which consensus estimates called for a decline to 51.6 from 52.10 in March, instead falling to 50.4. With the UK economy continuing to struggle we look for the Bank of England to maintain its easing bias with a 25-basis point rate cut in June. We expect the BoE will leave interest rates unchanged when it announces its policy decision on Thursday.

In the coming session, economic reports from the UK will see March industrial output and manufacturing output. The March industrial output is expected to decline by 0.1% versus an increase of 0.3% a month earlier, while the annualized figure is estimated to slip to 0.8% versus 1.3% in the previous year. Manufacturing output is expected to be flat in March compared with a 0.4% reading a month earlier and ease to 1.2% versus 1.9% in the previous year.

Cable holds steady near the 1.9730-level with resistance seen at 1.9760 and 1.98. Additional ceilings are seen at 1.9850, followed by 1.99 and 1.9940. On the downside, support is seen at 1.97, backed by 1.9650 and 1.9620. Subsequent floors will emerge at 1.96, followed by 1.9560 and 1.9530.

Euro Support over Hawkish Expectations

The euro edged higher near the 1.56-level ahead of a key ECB monetary policy meeting this week. The ECB is not seen changing interest rates but is however, expected to maintain its hawkish bias on Eurozone inflationary pressure. The hawkish rhetoric is a sharp contrast to the policy stances in the US and UK, and will likely support the euro over the coming months.

Eurozone data include March retail sales and Germany industrial orders. Eurozone retail sales in March are seen improving to 0.2%, reversing a 0.5% decline in February, while declining by 0.6% compared with a 0.2% drop a year earlier.

Published on  Tue, May 6 2008, 23:44 GMT

Archive

• USD Rallies, Awaits ECB & BoE
  Published On Wed, Aug 6 2008, 22:26 GMT
• FOMC Unchanged, USD Holds Gains
  Published On Tue, Aug 5 2008, 22:47 GMT
• USD Edges Higher Following Jobs
  Published On Sun, Aug 3 2008, 22:08 GMT
• FX Awaits US Jobs
  Published On Thu, Jul 31 2008, 22:57 GMT
• Greenback Relinquishes Gains on Oil
  Published On Wed, Jul 30 2008, 22:45 GMT

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